This blog is part five of eight in the scenario analysis series: Circular Economy 2030.

Driving influential factors such as technological innovation or seismic shifts in social, political and economic developments can dramatically impact the future of sustainability. In continuation of exploring probable outcomes for the circular economy of 2030, FutureManagementGroup AG has developed four alternative scenarios that describe significant industry transformation.

The story below, written from a future perspective in the year 2030, is a fictional piece that describes the effects of transformative change.

ALTERNATIVE SCENARIO 1
BREAKTHROUGH IN MATERIAL INNOVATION AND CHEMICAL RECYCLING

Sebastian Fraser is a member of the board at UpChemistry and CTO of its subsidiary UpChem Recycling. He has a background in Sustainable Chemistry and was the former head of UpChemistry’s Department for Sustainability, where he was in charge of leading the company’s efforts in reducing the environmental impact of one of the most notorious industries for environmental pollution. In 2019, UpChemistry made the decision to shift a large part of its funding for the Department for Sustainability to acquire a recycling start-up, which, at the time, was one of the leading companies invested in driving pyrolysis as the future of recycling. Sebastian was asked to take on the role of the subsidiary’s CTO and to oversee the company’s most ambitious “sustainability project” to date. UpChemistry’s decision to acquire a recycling start-up was driven by increasing public pressure and the looming threat of more plastic bashing, raised taxes and further bans. In one of the board meetings leading up to the decision, Sebastian emphasized the need not only for a more sustainable approach to feedstock, but to ensure that material for non-renewable plastic packaging is as circular as possible. He also pointed out that urgently needed infrastructure investments in the recycling industry are getting more expensive, and that UpChemistry, as a globally powerful stakeholder in the plastics industry, has the financial position to take advantage of this. According to Sebastian, taking this path would create potential for a new business field, as technologies in chemical recycling are becoming ever more promising, while the industry is looking for and in need of innovations that have the potential to disrupt and catalyze progress in circularity.

The board was concerned with the competitive character of the recycling industry, as well as the idea’s level of abstractedness from UpChemistry’s core business, but eventually the decision was made unanimously.

With the acquisition of the recycling start-up and large investments in research and development, UpChem Recycling began its endeavor into the chemical recycling business. Meanwhile, buyers of their parent company’s product were periodically updated on the progress of the company’s recycling capability. Across the value chain, Sebastian and his team generated awareness that UpChemistry is no longer just a petrochemical company supplying the feedstock necessary for plastic packaging, but that it is also offering to retrieve certain parts of the end product for recycling and circulating them back into the economy.

Recycled content has been high in demand for many applications and has only grown in past years. Other chemical companies took note and increased investments in researching and developing technology, looking for new applications, types of material and general processes by which packaging could be designed more effectively for recycling. With this growing demand for recycled content, UpChem Recycling’s strategy intended to facilitate a reduction of the carbon footprint while carrying out a forward integration into the value chain. This would lead the company to achieve a greater command and allow them to pioneer the field, creating more transparency and enabling improved circularity efforts.

Within years of UpChem Recycling’s founding, the company made a name for itself and amassed a vast number of waste suppliers that use the company’s recycling services. Due to UpChemistry’s international approach and global network of buyers, it was possible to utilize the company’s scale for expanding recycling operations in developed and developing countries alike.

The beginnings weren’t simple, however. Governments and watchdog organizations monitored these endeavors. Stakeholder skepticism needed to be weakened by measured success in providing recycling solutions that were indeed as environmentally friendly and valuable to the circular economy as promised. The progress in sustainable energy was a beneficial trend that improved the competitiveness of chemical recycling. The high energy demand of chemical recycling has been increasingly met with cheap and abundant solar energy. Thus, once governments recognized the advantages of chemical recycling over mechanical recycling, they began supporting the technology, introducing regulatory measures with a particular focus on recycling and reuse quotas.

Stakeholders realized that some elements in the value chain needed to join together to tackle larger problems – particularly chemical and mechanical recyclers who were urged by policymakers to work more collaboratively and complement each other’s circularity efforts. As a result, joint ventures have become more popular in certain areas.

Generally, higher quality standards in recycling increased complexity. This led to the common understanding and acceptance of future recycling being driven by innovations in materials, additives and chemical recycling. At the same time, however, converter companies turned to increased investments in advanced mechanical recycling. This way, they managed to remain significant in the value chain by actively driving circular solutions that work alongside chemical recycling in complementary and collaborative ways. Despite the fact that civil society’s demand for solving the waste problem has grown over the past decade, and much money has since been put into the circularity movement, the global plastics volume continued to grow significantly faster than the economy over the same period. This had much to do with the fact that in recent years, collection and recycling rates have improved dramatically, a success that has given citizens a sense of control over the waste problem. The common understanding is that the effective management of collection and recycling is in fact reducing the carbon footprint of people, despite the continuous output of plastic packaging volume into household waste, especially because today the production of plastic packaging uses significantly more recycled content.

Across the globe, collection rates have increased to approximately 90% of all plastic packaging waste. In other words, only 10% of plastic packaging ends up on a trash heap. Of the collected waste, half of it is retrieved in mixed waste, whereas the other half is collected separately. This is due to material innovations and improved chemical recycling processes that have diminished much of the need for separation. The quality of waste streams has become less important, as the major concern when sorting now is merely identifying the plastic packaging waste that can be processed chemically, and other packaging waste that must be processed mechanically. Current sorting technology is very much capable of doing so. In this context, deposit systems are not perceived as the most affordable way of retrieving separated waste and have thus become a less popular collection system, only accounting for roughly 4.5% of all plastic packaging waste collection.

As the plastic industry experienced a strong consolidation, with chemical companies often acquiring recycling companies in their ambition to drive innovation and expand a new, profitable and future-robust business field, chemical recycling started to enable a quantum leap in recycling rates.

The shift in the importance of certain stakeholders and in private market dynamics continued to inhibit transparency. Not much has changed in terms of disclosing financial and material flows across the value chain – only what is legally required by governments is revealed.

Despite this lack of transparency, with a global range and strategy, chemical companies and mechanical recyclers enabled 60% to 80% of collected plastic packaging to be recycled. These numbers differ across regions, as developing countries are often still in the process of catching up with the developed world. Industry-wide recycling now occurs in an almost equal balance between mechanical and chemical processes. This means, wherever mechanical recyclers can’t provide the solution, chemical recyclers come into play.

The result was a 20% downcycling rate of all plastic packaging, while close to half of all plastic packaging waste is now being recycled to closed loop. Approximately a third of all produced plastic packaging remains non-recycled, either due to non-circular solutions (landfills, incineration) or due to non-collection.

Due to these great leaps forward in recyclability, renewable sources have lost most of their bearing. Only 5% of plastic packaging originates from such sources. Reuse too – once a strategy gaining in popularity and showing potential for contributing largely to a circular economy, it is now taking a backseat in the fight against plastic waste, with only 5% of plastic packaging being reused today.

This also reflects how consumer behavior has shifted. Material innovations and chemical recycling processes have simplified separation and sorting for the end consumer, allowing consumers to divert their focus away from the waste problem. This means that consumers are not commonly focused on either convenience or priorities and needs other than recycling. As consumer behavior is notoriously difficult to change, UpChemistry demonstrated how the industry’s stakeholders have the means to rethink their business and redefine their identity, turning a risk into an opportunity and improving the ecological footprint.

To read more about the future of circularity in both developed and developing markets, download the TOMRA Circular Economy white paper entitled “Resource Recovery Playbook: expectations for the circular economy of 2030 and the steps required to achieve a sustainable future.” The publication features expectation scenarios from FutureManagementGroup AG based on the expertise of stakeholders, diligent research and interviews with representatives across the value chain.

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Editor:
Enno Däneke | Managing Partner, FutureManagementGroup AG
Enno Däneke consults large enterprises and innovative medium-sized companies on future issues and supports them in developing their long-term strategies. In addition, Enno Däneke is keynote speaker at conferences across Europe and lecturer for business model innovation and future management at several universities.