Leakages due to materials complexity and proliferation
The second substantial leakage point that needs tackling to unlock the full potential of a circular economy at scale is the complexity and proliferation of materials. In pursuit of profitable value creation, companies have broadened the spectrum of materials used in today’s (consumer) products in myriad creative and complex ways. In the world of plastics, the number of new polymers has continued to increase in the past decades, mostly driven by new combinations of existing monomers [Figure 17]. New additives—whether heat stabilizers, pigments, flame retardants, antimicrobials or impact modifiers78—have been the main driver of major innovations in polymer materials science. This has increased materials complexity exponentially within and beyond the four major classes of polymers in use across different industries and applications today. These four categories are polyethylene (PE, with demand at 73 million tonnes in total in 2010), polyethylene terephthalate (PET: 55 million tonnes), polypropylene (PP: 50 million tonnes), and polyvinyl chloride (PVC: 35 million tonnes).79 According to Prof. Dr. Michael Braungart, founder and scientific director of EPEA and others, there are 900 additives used in polypropylene alone.80
Figure 17: New polymers continue to emerge, mostly driven by new combinations of old monomers
SOURCE: Kunststoffe 85 (1995)
Today’s materials complexity compounds the obstacles to scaling up the circular economy. While tools and methods exist to create complex product formulations, it is still devilishly difficult after the fact—even for a manufacturer—to identify and separate materials, maintain quality and ensure purity (including non-toxicity). Without reliable classification, it is hard to collect materials at sufficient scale and robust supply rates to create arbitrage opportunities. Without these, investors do not see potential returns to justify investment in new processes, infrastructure, business models and R&D to close innovation gaps. And without funding, there is no progress.
Leakages due to increased materials and product complexity are vast, as the following examples demonstrate [Figure 18].
Figure 18: Increases in product and materials complexity lead to significant materials losses
SOURCE: World Economic Forum and Ellen MacArthur Foundation circular economy team
- Separation of products and materials represents a key challenge. Linear products—mobile phones and many other consumer electronics products, for example—contain integrated components (such as printed circuit boards) that are made from multiple materials moulded into single functioning units. There is often no cost-efficient way to extract the embedded raw materials using chemical or physical processes without degrading the product, so most of the original value is lost in current smeltering-based recycling processes. (Great progress has admittedly been made in increasing the yield of these processes in recent years.) Currently, three dollars’ worth of precious metals (gold, silver and palladium) is all that can be extracted from a mobile phone that, when brand new, contains raw materials worth a total of US$ 16.81
- Sufficient scale and reliability of supply are important prerequisites for many industrial reverse treatment applications. However, the volume, composition and mix of materials in today’s collection schemes and reverse supply networks are highly variable, making them not always economically viable.
- Purity of materials is increasingly challenging to uphold after many cycles, especially when products from different industries are collected and processed as one stream, as additives used by one industry can be contaminants in others. In 2012, for example, it was reported that some cereal boxes from a leading cereal manufacturer had been found to contain fragments of metal mesh. The metal particles were suspected to have come from printing ink residues in the recycled board used for the boxes. Metal particles migrating into food clearly pose a potential health hazard. While no health issues were reported, the company had to recall 2.8 million boxes of cereals at an estimated cost of US$ 20 – 30 million, in addition to suffering reputational damage.82 Another company affected by purity challenges is the global carpets, carpet tiles and sports pitches company Desso. In their carpet-tile recycling facilities, Desso tries to recover Nylon 6, which is the most valuable material for upcycling into new fibres for new high-quality products.Desso design their carpet tile products so that the yarn and backing can be more easily disassembled for recycling when taken back. However, the company faces the challenge of also having to take back used carpet material originally produced by their competitors, many of whom did not design their products for disassembly. Due to glue or latex that has been used to stick the yarn to the backing, it is more difficult to extract the Nylon 6 and retain its purity. Desso is looking into ways to separate these materials more effectively as well as collaborative initiatives that would encourage improvements in the industry (e.g. the ‘materials passport’ initiative in the Netherlands).83 Regulators have given great emphasis to eliminating toxicity from materials used in production processes, whether the European Commission’s regulations on chemicals and their safe use (Registration, Evaluation, Authorisation, and Restriction of Chemical substances, known as REACH)84 or the US Environmental Protection Agency’s Toxic Substances Control Act.85 Despite this, current regulations do not address the issue of pollutants in existing materials stocks that may enter reverse cycles. A major concern for Electrolux in trying to increase the percentage of recycled plastics it uses is procuring materials that meet the company’s purity requirements. Their list of restricted materials only has limited clout: materials no longer present in current products may still enter the recycling stream in products manufactured before the list—and the corresponding regulations—had been drawn up.86
- Identification of materials is still a major issue for many polymer-based materials. While metals display distinct physical properties—whether density, magnetic properties, melting points or electrical conductivity—that simplify sorting in industrial revalorization processes, polymers are black boxes. They have hardly any differentiating physical properties, but distinct bonding features at the molecular level [Figure 19]. This raises the costs of identification. Polymer blends also result in lower materials quality due to (almost inevitable) contamination. Only a few players (such as Closed Loop Recycling or MBA Polymers) have invested in industrial recycling processes—and only for a few specific sub-fractions of the materials flows. MBA Polymers currently offers high-quality recovered ABS, HIPS, PP, HDPE and filled PP, for instance, while other polymers are offered as mixed by-product plastics.87 Veolia’s Magpie materials sorting system enables swift identification of different types of plastic using infrared and laser technologies. Their new ‘Parrot’ POLY-mer separation facility in Rainham, Essex (UK) has even more advanced sorting technology to separate up to nine grades of plastics, ranging from bottles to yoghurt tubs and food trays, allowing Veolia to process up to 50,000 tonnes of plastics a year. Once separated, clear plastic bottles are sent to UK-based Closed Loop Recycling. Veolia is also building end markets for other materials, such as coloured bottles.88 While progress is visible, current technologies still depend on accurate—often manual—pre-sorting of incoming feedstock, which must meet minimum purity requirements to ensure an economically viable materials yield. Other high-volume materials flows that suffer from similar identification challenges include textile fibres and composite materials.
- Materials quality across multiple cycles cannot yet be maintained at or near virgin level using existing manufacturing and reverse-cycle processes. In paper and cardboard making, the bonding properties of the fibres weaken each time they are recycled, leading to decreased paper strength, especially tensile and burst strength, elasticity and folding endurance. By the sixth cycle, tensile and burst strength have typically dropped by 30% and elasticity by 20%.89 This lowers the paper grade. To raise it, it requires mixing with a larger share of virgin fibres. The situation is similar for cotton, a polymer of cellulose, and many other materials.90
Figure 19: Metals can easily be distinguished by density and other physical properties, while polymers cannot
Source: MBA Polymers, public sources
As materials proliferation continues to increase, so do the challenges. The rapid introduction of new materials often outpaces advances in infrastructure to cope with and accommodate them in reverse chains. In the US, plastic waste sent to landfill tripled to 11.3 million tonnes in 2008 from just 3.4 million tonnes in 1980, whereas total waste shrank by 16% in the same period.91 Plastics and their applications have proliferated faster than recovery systems have adapted.
The compound leakage of economic value because of these challenges is substantial. Even in purer materials streams such as PET and paper pulp, the value loss due to quality degradation and materials loss due to processing is significant. With PET, the current low quality allows no more than 20 to 30% of the recycled material to be used in bottles and 50% in thermoformed products.92 If higher quality could be achieved by improving manufacturing, collection and recovery processes, the amount of recycled content in downstream applications would increase significantly (up to 50% in bottles and 70% in other applications). This would amount to additional materials savings of US$ 4.4 billion per annum [Figure 20]. In paper recycling, up to 30% of fibres are lost during de-inking and removing of fillers and coatings—a materials loss worth US$ 32 billion globally per annum.93
Figure 20: Global PET flow—a large amount of PET collected from bottles is used in other applications
1 PET is grouped into 3 main categories based on IV grade
2 Some speciality films (X-ray films) have a dedicated reverse supply chain
Source: McKinsey analysis; SRI; CMAI; TECNON; expert discussion
Addressing these challenges will require a concerted effort, taking a systems perspective along the entire reverse process. Improvements in one area are likely to entail positive economic benefits in others. As an illustration, Renault has formed a joint venture with a steel recycler to collect materials for recycling from their plants and other sources of end-of-use parts. The JV gives Renault greater control of the materials flow: they know the materials composition from the start, and can thus ensure higher quality. Ricoh, as mentioned, is one of the few companies to operate a closed-loop system at a global level. They start with the design, creating and manufacturing their products with the aim of remanufacturing and recycling. The company can control and manage the five main types of value leakage just discussed as a result, maximizing the efficiency of their resources.94