Resource Recovery Business Model

Winter Is Here:

The last few weeks have felt like the 7 tracks of Views. Between business stress, hospital visits, constant travelling and a little bit of this and that, June has been an interesting month indeed. I have been cold and detached. People close to me always note that I have a delayed emotional reaction to events, and this month has proven that. All of that to say this: I am sorry for the late post. Everything has been moving either really fast or really slow, and this blog was supposed to be my canvas where I process it all. I did not want to write anything until I was in optimal (or in this case, reasonable) equilibrium.

I saw a post on social media post dating back to March of a polar bear in Canada waiting for the annual freeze where water turns into an ice pathway, allowing the bear to hunt in its ideal conditions. Water turns into ice and attracts ringed seals, the polar bear's favourite prey. Climate change has meant that this event is being delayed by a day on a yearly basis. The bear has now lost approximately a month of hunting. Competitive edge? Lost. Climate change is coming for everything.

Fortunately, there is hope for the economy. Business is responding to the dangers posed by climate change. The circular economy has introduced various solutions to help them maximise on the opportunities presented by a changing environment. (By the way, I am sure the polar bear will figure it out.)

Today's post will give an overview of the Resource Recovery business model. Like the circular supply model, it focuses on the production of consumer goods. Therefore, there will be minor similarities between the two. Resource recovery is the most unimaginative of the business models, but it plays a huge part in aiding the road to a zero-waste society. I will not cover everything that I wish to in this piece, so there might be a part two.

Resource Recovery:

With fossil fuels becoming scarcer by the day, businesses are looking for a competitive edge – and one of the ways to gain that is to protect, recapture and reuse the hidden valuable materials in their production chains. This opportunity birthed the resource recovery business model.

With this model, a company looks for value not just when considering its end products, but all material streams that run through its business. In other words, every by-product and waste stream is optimised to maximize its revenue potential. To date, there is a wide range of companies that have adopted a wide range of recovery strategies. When organisations use shared value and circular economy principles, initiatives such as corporate social responsibility become engraved into the soul of the organisation and are no longer seen as an afterthought.

The Resource Recovery model has a long history and, in a sense, is the latest effort to manage modern society’s excess waste habits. Initial waste-management initiatives concentrated on basic needs for removing waste from city streets to reduce health risks and improve quality of life. Focus eventually moved to creating landfills and, as landfills became crowded, to recycling waste. The Resource Recovery model takes the next logical step: working to make waste itself obsolete. This aligns with the main purpose of the circular economy: creating a zero-waste society. In that regard, Resource Recovery is very different from traditional recycling: It views waste not as an external problem to be dealt with only by legislation or waste-management entities, but as a resource that is fully integrated into the business model. Companies using this model think it is as natural to maximize profits on waste as it is on the products they make and sell.

The Hierarchy Of Waste:

It should come as no surprise that, as an extension of traditional waste management, Resource Recovery has become the most widely adopted business model. Resource return chains transform waste into value through recycling and upcycling (upcycling is the process of converting an old material/product into something more valuable). By using modern technologies and operating a two-way supply chain (takeback loops and reverse logistics), companies can recover almost any resource output to a level that is at least equivalent to their initial investment. Ideally, the recovered resource is used in a way that maintains its highest possible value for the longest duration. Companies should keep in mind the “hierarchy of waste” when identifying ways to create value from end-of-use products. Businesses should aim high, keeping in mind that closed-loop solutions are favourable, although they may be complex and not have a solid business case. In which case, go down the hierarchy. Solutions that reduce material quality should only be considered as a last resort.

The hierarchy of waste from a circular economy perspective.

Closed Loops

How do you know a mafia empire is entering its demise? When the bosses start calling for the tying up of 'loose ends.' By then, it is already too late. Closed-loop systems imply that there is no excess spillage that occurs from business operations. Materials that would have been viewed as waste and taken to landfills in the past are made to serve another purpose of business operations. When done right, this can add tremendous value to a business. Businesses not only generate huge amounts of waste, but they also incur the cost of disposing of it. With legislation pressures and landfills being at capacity, the optimal step is to create closed-loop systems and promote zero-waste initiatives. This is especially prevalent in the consumer goods industry, where large volumes of products are manufactured.

Alerted by the fact they were producing over 1 million tonnes of annual waste, Procter & Gamble launched the Zero Manufacturing to Waste in 2008. By 2018, the company had achieved an 85 per cent zero waste success rate across its global worldwide and had hoped to achieve 100 per cent zero waste by 2020. All manufacturing waste at those sites is recycled, repurposed, or converted into energy. By 2013, they had already generated $1 billion in waste from utilising zero-waste strategies.

General Motors launched a zero-waste programme in 2011. The company now recycles 90 per cent of its worldwide manufacturing waste, and in 2018, they reported to have 145 landfill-free facilities. Metal is naturally the most common material involved in car manufacturing, but it is not the only input material in focus - GM is doing everything from converting wastewater into fertilizer to composting cafeteria waste for one plant’s landscaping. GM reports that it generates $1 billion per annum from by-product recycling and reuse.

In 2012, Walmart reported that more than 80 per cent of its waste was diverted from landfills. That effort returned more than $230 million in value to the business and may have reduced CO2 emissions by as much as 11.8 million tons. Working with its suppliers, the company in one year also turned more than 500,000 tons of recovered cooking oil into biodiesel, soap, and cattle feed supplement.

Charged Up:

Let us talk about battery technology. In a further effort to end the reliance on fossil fuels, batteries have come to play a prominent role in the transition to circular supplies. Although renewable energy has taken the biggest forward leaps (as mentioned in the previous blog post), battery technology has enabled other industries to follow suit. Since Tesla made them prominent when they released the Roadster in 2008, the possibilities around battery technology were reassessed. Manufacturing giants such as VW and Panasonic are investigating ways to make batteries cheaper and more efficient. The great technology issue of our time is energy storage - Whether it is for electric cars or a way to store energy derived from the wind and sun.

Every carmaker now has a plan to manufacture emission-free cars (Volvo, for example, aims to become fully electric by 2030). This is also supported by the fact that legislation has come forward with regulations that promote a climate-neutral economy; for example, India, China and the European Union are set to ban the sale of petrol and diesel cars. Several countries in Europe and across the globe are moving more aggressively than others in this regard, but it is the inevitable destination for all.

Battery technology presents a huge benefit in society being less dependent on fossil fuel, but there is a huge problem looming. Lithium-ion batteries are flammable and toxic – they cannot end up in landfills. The metals and materials used to make batteries hold value even after the end-of-life cycle.

JB Straubel, the co-founder and former Chief Technology Officer of Tesla Motors, left the company to co-found Redwood Materials in an effort to solve this problem. Redwood Materials takes old, depleted lithium-ion batteries from cellphones, laptops and electric cars, scooters and nearly every other lithium-ion battery-using machine. Straubel claims that Redwood Materials recovers 95 to 98 percent of the valuable materials that are found in battery waste. One of the cycles of business at Redwood Materials involves taking the recovered materials to Panasonic, who in turn use them and put them back into Tesla cars. The electric car and e-waste industries will create a huge battery disposal problem, and Straubel saw it coming miles away. It is now up to regulators to encourage manufacturers to recover and utilise their products’ end-of-life use. New policies such as the introduction of Extended Producer Responsibility (EPR) are accelerating this process.

Reverse Logistics and Takeback Loops:

The resource recovery model eliminates material leakage and maximizes the economic value of product return flows, making it attractive to companies producing large volumes of by-product that can be reclaimed and reprocessed at a reasonable cost. For customers, the benefit is clear: new and convenient ways to get rid of unwanted products, including pick-up services, drop-off points, buy-back, and send-back schemes.

This is where reverse logistics comes into prominence. Karen Hawks (2019) defines reverse logistics as “the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal.” Instead of throwing products away or leaving them to rot in the stash cupboard, companies now reward customers for returning these products. Reverse logistics plays a huge role in creating closed loops and is at the centre of the resource recovery model. It hosts the same set of challenges as forward logistics, for example, information, infrastructure, and capacity constraints; high warehousing and inventory costs; last-mile optimisation challenges; and rising customer expectations on delivery speed. Tracking, tracing, sorting and screening has historically been a big challenge – but with new, innovative solutions for take-back and recovery, a company and its customers can now capture hundreds of millions of dollars in material value that would otherwise have been lost.

Source: Business Insider.

Again, policies such as EPR have forced companies to become creative when it comes to recapturing value. EPR requires companies to be responsible for the treatment and disposal of their products, as well as increasing consumer pressure to address waste issues. For their part, businesses need to provide incentives to engage consumers, encourage product returns, and foster long-term behavioural change. The incentives could be financial, such as Apple’s GiveBackprogramme (for electronic products) and the reGAIN App (for clothing), through which customers can turn in their used products for credit and discount vouchers that can be applied against future purchases.

There is a lot to touch on in each of these business models. The economic argument for zero waste is easy. However, for companies to even begin to achieve that goal, they must work closely both internally and with external partners.

But it all starts with design. Reconfiguring products for maximum effectiveness requires understanding all the materials involved and analyzing each step of the production cycle. Disruptive technologies will be a big step in uncovering this. I was pleased when I walked inside the Woolies Food store at Menlyn Maine and was made aware that they did not sell plastic bags. It's the simple things. Design is the first signal of human intention. The primary aim should be to make products that cannot be wasted in the first place.

'Til next time.