Top 7 circular economy moments of 2015
At the Closed Loop Fund, we spent most of 2015 investing time and money in the circular economy and recycling. As a $100 million social impact fund that invests in building municipal recycling infrastructure and in sustainable materials and packaging, our retail and consumer packaged goods investors expect us to use our collective capital to make sure their packaging retains the highest value as long as possible
We are constantly looking for ways to deploy capital and scale closed loop business models and technology. We want to ensure that products and packaging are resources that can be returned to the manufacturing supply chain in a financially viable way.
Here are the top seven most noteworthy circular economy moments we noticed in the past year. We can't wait for what 2016 brings.
1. Circular economy becomes a term worth repeating, a lot
It's been 14 years since Ellen MacArthur sailed around the world and five years since she helped coin the phrase "circular economy."Just in the last year, there's been a marked step change in the frequency and volume of the term's use.
There have been high-profile corporate commitments to the concept. We saw Google and H&M both join the Ellen MacArthur Foundation. The Chamber of Commerce Foundation hosted its first Circular Economy event and BSR launched its first new practice in over a decade, focused on the circular economy.
If adding a new term to the sustainability echo-chamber results in more focus and interest in an important topic, it is a huge win — even if it sometimes feels like a fad. Of course, corporations are embracing the idea because the idea is clearly enticing and huge financial value is on the table.
We've seen the macro-economic data and the micro-economic examples, but how will we really shift the global economy? What is the role of retailers, food companies and the recycling industry to enable this shift? All questions that will need to be answered in 2016 if the circular economy is to transition from fad to trend to future.
2. Commodity Prices hit ridiculous lows
A quick Google news search reveals pretty much all you need to know about this:
- "...commodity price index hammered"
- "...commodity prices down 18 percent over a year ago..."
- "...commodity index falls to lowest since June 1999"
- "Weak Commodities Prices Weigh on Global Stocks"
At the end of the day, recycling is a commodities-based business because that's where all the revenue comes from. There may be a future where consumers are willing to pay more for recycled materials in their packages and products, but today commodities are commodities.
The story isn't only that commodity prices have fallen, it's that they are more volatile. According to McKinsey & Company, commodity prices have been more volatile in the last 10 years than they have in the last 100. This is the new normal facing recycling systems.
It has revealed glass as a key choke-point on the recycling system. It seems revenue from selling plastics and aluminum had been covering losses on glass for years. The end markets just don't cover the costs of processing and shipping.
If you believe everything you read on the Internet, you'd expect recycling companies were going out of business across the country. And, in 2015, four Material Recovery Facilities (MRFs) did close their doors. But seven opened in 2015, resulting in 600 tons of net-new capacity. As long as Americans generate waste, they will need recycling.
3. Waste Management pulls back on recycling
For years, Waste Management has been the poster child for recycling advocacy. Surprising and disappointing to many longtime recyclers, this position changed in 2015 with a series of public statements by CEO David Steiner where he proclaimed recycling to be in a state of emergency and signaled his intentions to pull back. WM has reduced investment and head count in recycling to minimal levels.
Why would a company that has staked its corporate reputation on recycling be willing to give it all up? Simple: Waste Management is the largest recycler in the nation and more important, it is the largest landfill operator. As a result, the company always has and always will make more money sending waste to landfill rather than recycling it.
The situation is common among well-entrenched incumbents in industry. Large oil companies always have struggled to make the internal case to invest in renewable energy compared to their bread-and-butter of extraction. Similarly, large retailers have struggled to divert resources from brick-and-mortar operations to digital investments. It opens the market for pure-play companies such as SolarCity and Amazon to disrupt.
4. John Tierney resurfaces after decades of silence
In the 1980s, John Tierney — a self-proclaimed contrarian — wrote a now-discredited piece about why he thinks it makes more sense to landfill garbage than recycle it. Opportunistically waiting until commodity prices are low (see No. 2), he rehashed this piece earlier this year. It was the most shared article that Sunday from The New York Times. Of course, opinion pieces are fact-checked almost as much as blog posts and you can't believe everything you read, even in the Times.
Many folks, including our own organization, chose to point out the surprisingly high number of fallacies, half-truths and misleading statements. At a high level, recycling always saves cities money because otherwise they are paying to landfill it. More important, Tierney fails to understand the shared value created by an optimized recycling system, including the opportunities revealed by circular design, reduction of manufacturing costs by using recycled content and the innovation occurring in recycling (see No. 6).
5. Plastics are taking over the ocean
Waste doesn’t often make mainstream news. But plastics in the ocean seemed to proliferate the news in 2015. The Great Garbage Patch. Beaches covered in plastic. Plastic found inside birds, fish, turtles and whales. According to Science Magazine, in 2010 between 4.8 million and 12.7 million metric tons (that's about 10.5 billion to 28 billion pounds) of plastic entered the oceans. And, the Ocean Conservancy revealed that more than half of that plastic comes from only five countries, opening the way for concrete planning to stop the flow.
Given the attention on solving this global issue, recycling and circular economy have increased in priority as a way to address this health and environmental disaster in spite of the critiques on recycling economic viability.
How will we build robust waste management and recycling infrastructure in the developing world? What should it look like and who will pay for it? It is clear that with our fast-growing plastic streams, recycling and circular models are required to solve this growing global challenge.
When looking at recycling economics, we often look to the past and present. Yet with a fast-changing packaging stream and commodity pricing, we need new models for how recycling makes sense into the future. This year brought innovation in both business models and emerging technologies that will prove to change the way recycling happens into the future. A few examples:
- New Business Models: Plastic Recovery Facilities such as QRS in Baltimore aggregate mixed bails of Nos. 3-7 plastics, making far more cost effective, and therefore likely, to recycle these materials.
- Reimagining how current technology is used: The Material Recovery for the Future, a partnership between major brands and MRFs, is experimenting with using paper-sorting technology to cost effectively sort film and flexible packaging at the MRF, in hopes of increasing recycling of those difficult-to-recycle materials.
- New Technologies: Running a MRF (that sorts recyclables) can be expensive. Emerging robotics technology could make the economics of sortation work far better. AMP Robotics, winner of the third annual recycling innovators forum, are using robots to more discretely separate a wide variety of materials to retain as much value as possible with low labor costs.
7. Investment in recycling
While packaging streams have evolved, recycling has seen very little investment in innovation to keep up with those changes over the years. This has left recycling infrastructure unable to manage the evolving waste streams and challenged profitability. But in 2015 this changed.
Industry — competitors, cross sector, across value chain — collaborated in some of the biggest recycling investments ever made. Over $100 million is being invested in recycling programs over the next five years through the Closed Loop Fund and the Recycling Partnership. The Recycling Partnership, a cross-industry collaboration, gives grants to communities for single stream, curbside recycling carts, while helping those communities learn from existing best practices. The Closed Loop Fund, made up of some of the largest consumer companies in the world, invests via zero and low interest loans to municipalities and recycling companies in collection, sorting and processing infrastructure to help scale economically viable recycling programs, drive system change and prove that recycling and circularity make practical economic sense.