It is becoming increasingly evident that the exorbitant amount of waste produced every year has severe impacts on the climate. Currently, we produce 51 billion tonnes of greenhouse gas emissions (GHG) per annum.
Several UN Environment reports have highlighted that 90 per cent of terrestrial biodiversity loss and water stress are caused by material resource extraction and processing. Further, The Ellen MacArthur Foundation estimates that 45 per cent of global emissions are attributed to producing materials, products and food.
To reach sustainability targets of net zero, global supply chains would require critical restructuring in how we make things, from cement production to packaging.
Circular economy models can slow down environmental degradation by reducing demand for virgin materials, protecting natural habitats, and simultaneously allowing businesses to thrive to meet the population’s needs.
Private organisations have excellent means to establish practices that can reduce their sourcing costs, de-risk their businesses and find new revenue opportunities through supply chain bottlenecks by doing one thing differently: re-evaluating their view on waste.
For businesses that are aware of the value of their secondary materials, they can re-categorise their waste into by-products. This offers many advantages – firstly, cost savings by the recategorisation and reallocation of what would be sent to landfill. Secondly, finding new uses for them to be sold on as a new revenue stream that can add value to other industries.
The main differentiation is that relisting items as ‘by-products’ provides room for discovery and external growth, whereas ‘waste’ relays a lower perceived value and assumes disposal is the only option.
Circular business models allow for waste to be a worthwhile consideration, and do not always mean recycling. In fact, they are getting increasingly sophisticated, allowing for a diversity of revenue integrations within supply chains.
For instance, access-based business models allow the leasing of surplus raw materials, such as stainless-steel sheets or PET granules, meaning companies can avail of these materials as a service.
Stainless steel suppliers can lease sheets to car manufacturers to form tubes for a car chassis, for example, where the car manufacturer will be charged to access the volume of materials transformed over a period. At the end of this period, the car will be disassembled to allow the materials supplier to retrieve the component and recycle the materials.
Fundamentally, this creates a new paradigm where ownership structures can be reallocated for materials that would have otherwise been scrapped. With the global shift to renewables and a finite supply of critical minerals to fuel this transition, we may see a future shift in how mining companies operate, leasing raw goods to materials suppliers rather than selling them.
Waste to value practices are by no means new. One of the first known cases of using one industry’s by-products as a valuable feedstock has been cited in 1847 Victorian England, known as the ‘agglomeration of economies’, where companies exchange effluents to lower costs and increase resource productivity.
Today, multinational companies have already absorbed many of the benefits of circular business model integrations. Circular solutions accounted for 16 per cent of Philips’ revenue in 2021, up from 13 per cent in 2019.
In the same year, Caterpillar recollected 153 million pounds of material for remanufacturing.
In the retail industry, multinational giants Nike and Lululemon have encouraged their customers through buyback programs for gently used items that can be resold at a discounted price, rather than being dumped.
Overall, the United States second-hand clothing industry is expected to grow 16x faster than the broader clothing sector by 2026.
However, it is also important to understand that despite the opportunities, there are still obstacles in commercialising these business models.
Firstly, there needs to be a greater understanding of the industrial psychology that inhibits the ways businesses want to view waste. The symbolic classification often holds a strong signal that these materials are unhygienic, or perhaps worthless, but this is often not the case.
History determines that a change in context can unlock the latent value in waste: coal tar wastes from the industrial revolution in England were dumped in rivers until it was (accidentally) discovered that they could be used to produce synthetic dyes. In a more recent example, the growing e-waste trading landscape determines how discarded mobile phones can be repurposed during phases of supply chain bottlenecks and chip shortages.
Businesses that are cognisant of these opportunities have quickly emerged as architects of opportunity in transforming periods of adversity into viable economic opportunities.
What is becoming increasingly evident is that economics may explain the allocation of resources in a world with scarcity, but it does not explain how resources are valued subjectively. If businesses want a deeper understanding of this, we must collectively account for the diverse and unique needs of industrial players, recognising that one firm’s trash could be another’s treasure.
Rana Hajirasouli is the founder of The Surpluss
Read: How trading recycled plastics will help build a sustainable future