Circular economy not fulfilling promise
18 July 2024 - 6:45PM
UK Regulatory
Circular economy not fulfilling promise
The circular economy, a critical strategy for delivering a
lower-emission, more sustainable future by reusing materials and
minimising waste has made disappointingly little impact on the
global plastics industry in the last decade as it struggled to
navigate traditional value chains and business practices according
to a new report by Wood Mackenzie.
The July Horizons report: ‘Waste to wealth: Unlocking circular
value chains’ states that despite the rising tide of corporate
commitments and regulatory targets, progress of the circular
economy model has been extremely slow. While there are profits to
be made in circular value chains, the fundamental problem remains
ensuring these are shared fairly across complicated, fragmented
value chains.
“The circular economy model has not made the impact many plastics
industry observers predicted when it was first mooted, but there
are some exciting initiatives underway that could change that,”
says Guy Bailey, Vice President of Oils & Chemicals Research at
Wood Mackenzie. “The successful negotiation and introduction of the
United Nations Plastic Treaty [a legally binding agreement that
would end plastic pollution] is a necessary starting point, but the
adoption of new business models to drive coordination across the
value chain is the key to real change.”
The report states that currently petrochemical companies,
technology companies and waste management firms all operate with
different assumptions about what a ‘fair’ allocation of value looks
like. Without a route to profitability for all value chain
participants, the result is slower than anticipated technological
adoption and investment in the necessary waste infrastructure. The
report adds with so much added complexity in circular economy value
chains, commodity-producing firms – such as the petrochemicals
sector – must step up to the mark and help drive the necessary
coordination and collaboration through the adoption of novel
business relationships.
These frameworks include partnerships which are suitable for less
complex projects and offer companies the chance to retain autonomy;
joint ventures which are more suited to strategic projects needing
specialist market knowledge and vertical integration which involves
acquiring suppliers and distributors to maintain complete control
of a project.
The report concludes by making a series of recommendations to
ensure that the circular economy model overcomes its initial
teething troubles and lives up to the hype that has built up around
it as a genuine economic system that actually works.
The recommendations include changing strategic thinking to include
how to bring about the value chain transformation needed for
success; encourage investors to acknowledge the long-term benefits
of first mover status in circularity exceed short-term dilution of
profits and for stronger relationships are built with brands to
ensure that the complex value chains required are created.
“The journey to full circularity has not got off to an ideal
start,” Bailey concludes. “But with clear and consistent regulation
and creative collaboration then the circular economy model can
still provide an effective solution to reducing waste and lowering
carbon emissions.”
- Global material consumption