Resource recovery business models transform waste into secondary raw materials, so they could be re-entered in the value chain and material is used more efficiently. As a consequence, waste increases in value. However, these models show some limitations in areas that are not densely populated or where consumption levels are low. Additionally, companies need to make sure that there is a market for secondary materials and that an adequate volume of waste is generated which can be used.
What is resource recovery?
Resource recovery business models (also known as recycling) involve the production of secondary raw materials from waste, which can be gathered through several pathways, such as collection, sorting, and secondary production (Lacy & Rutqvist, 2015). The first pathway, collection of waste materials, is done via households, businesses, and industry players, which is usually organized by local governments (OECD, 2019). Second, sorting involves the separation of a particular waste category into its different material components by public facilities or the private sector. Third, secondary production involves the transformation of sorted waste material back into finished raw materials, usually by the private sector (OECD, 2019). The secondary (or second life) raw materials (e.g., metals, plastics, paper, etc.) are sold to various manufacturing firms to engage in downcycling, upcycling, or industrial symbiosis. Downcycling involves the transformation of waste into secondary raw material. However, due to the process, the final recovered materials are usually of inferior quality. Upcycling involves the transformation of waste into secondary raw materials to reuse in higher-value applications. Industrial symbiosis (i.e., closed-loop recycling) involves the use of production by-products from one firm as production inputs by another (OECD, 2019).
Chemical recycling of plastic waste involves the recovery of the petrochemical parts of the polymer. This can be used for plastics re-manufacturing or the production of other synthetic chemicals. However, the future potential of chemical recycling depends on economically viable innovative technologies as discussing material substances of plastic (Rizos et al., 2017). Additionally, to the chemical recycling option, the use of biological resources for the production of other products might provide interesting options. Especially when thinking of industrial symbiosis and collaboration between industries, usage of waste caused across value chains and re-entering it in the production of other sectors might provide an interesting option (Rizos et al., 2017).
Several business model patterns can be identified, which overlap with the resource recovery processes, e.g., cascading and repurposing, recycling, and organic feedstock (Lüdeke-Freund et al., 2019).
In which context is resource recovery useful?
Waste is re-evaluated and attributed to a higher value. Raw waste is usually available at little or no cost (OECD, 2019). However, the challenge for firms adopting the resource recovery model is in ensuring that the costs of reusing this waste are causing are sufficiently small relative to the market price of finished materials (OECD, 2019).
There are a number of drivers to adapt resource recovery models, e.g., resource scarcity, more robust business operations, reduced uncertainty about the timing, limiting the mismatch between supply and demand of product returns, reduced environmental impacts, tax reliefs and policy incentives, greater staff commitment and productivity, customer loyalty, competition, value propositions of products/services, reduced costs or increased profits, pressure from customers and societal groups for sustainable resource use and business operations (Velenturf & Jopson, 2019). However, there are also certain barriers that make implementation difficult, such as lack of a financial business case, limited markets, structural barriers external to companies such as renegotiating supply chain responsibilities, dependencies and integrating perspectives of supply chain partners, structural decision-making pathways within companies, and attitudinal issues, such as a lack of understanding of the circular economy or sustainable development and subsequent resistance to change. Additionally, technological aspects, such as quality of recycled materials and logistics of taking back products, skills shortage to manage the radical innovations needed, or lack of collaboration and exchange partners (Velenturf & Jopson, 2019).
What is important to keep in mind when using resource recovery for your business?
First, there needs to be a market for secondary raw materials, i.e., a general willingness of customers to purchase goods based on resource recovery (OECD, 2019). Companies need to be aware of the possible concerns about the quality or composition of these regained materials and how specific resource recovery processes are managed (Singh et al., 2014). Second, a sufficient volume of waste material needs to be generated. This is usually rather difficult in areas characterized by low population sizes or low consumption levels (OECD, 2019).
Singh & Ordoñez (2016) mention that in practice, the current material collection system in place is waste management rather than manufacturing-centred take-back systems. These are potential areas for improvement, which companies need to address. If high-quality recycling can be ensured, recycling can go beyond the recovery of materials and redirect them towards their next lifecycle. Increased recycling rates can unleash cost-effectiveness across industries and decrease dependency on primary materials, which may lead to reduced price volatility related to primary raw materials and dependency on imports (Rizos et al., 2017).