Insights in the market of recycled plastic, with practical value chain research

Abstract

The European Union (EU) landfilled and incinerated 600 million tons of waste in 2013, which could have been recycled and returned as raw material to the economy. Resource efficiency can regain this value and bring economic, environmental and social benefits. The EU has therefore adapted the Circular Economy Package with targets to stimulate the transition to a circular economy. These targets include reusing and recycling 55% of plastic packaging waste by 2025. Member states act to achieve those targets with subsidies and funding schemes. This enables entrepreneurs to enter the market of recycled plastic with innovations to gain Schumpeterian rent. However, only approximately 50% of starting companies are still operating after 4 years. It is crucial to increase the success rate of turning new technologies into innovations in order to reach the recycling targets. Market exploration and orientation strategies can aid entrepreneurs to gain insight in the recycled plastic market. Globalized value chain research is a commonly used method, but not suitable to address the recycling industry as it is not globalized but restricted by country borders and local governance. Value chain research methodology was used, according to a handbook written by Kaplinsky & Morris from 2001, which refers to and uses globalized value chain research methodology. For the recycling industry a specific selection was made from elements mentioned in the handbook. This enabled the execution of value chain research for the not globalized recycling industry. The interview questions and topics were made based on the required data for the selected elements. This thesis focussed on the biggest market segment of post-consumer plastic packaging waste in the Netherlands. In total 149 compounders, recyclers and converters were included in a database for a selection. Of which seven companies participated, which resulted in qualitative data that gives insight into the industry and enabled answering the research question.What is required from the value chain of the plastic recycling industry to increase the use of recycled post-consumer PPW? Converters must be able to get access to regranulate with stable MFI and crystallization time characteristics in higher quantities. Compounders can initiate this with joint design projects with branding companies thereby highlighting the possibilities of their regranulate. The optimization of the product and process for their regranulate lowers the switching costs for the converter and can bring rent opportunities. It furthermore showed to increase the sales of regranulate. The compounder requests higher quantities of mono streams recycled plastic from the recycler to comply with demand for regranulate to be used for high volume consumer goods. Recyclers however, upgrade their processes to maximize output for the Dutch ‘Raamovereenkomst’, which includes a mix stream next to the mono streams. This mix stream cannot be used by the compounders to make regranulate for the converters. The recyclers claim that they can technically increase the mono streams at the expense of the mix stream, although this leads to lower profits for them. A change is therefore required in the Dutch ‘Raamovereenkomst’ to optimize for mono stream output.