The plastics circular economy is not fulfilling its promises, analytics firm Wood Mackenzie has said in a new report
In ‘Waste to wealth: unlocking circular value chains’, the company said that despite the rising tide of corporate commitments and regulatory targets, ‘the global economy remains wedded to an extractive, rather than circular, model’.
The report follows several announcements from brands moving their sustainability goal posts, including Shell and Unilever. Shell has said its goal to turn 1 million tonnes of plastic waste into pyrolysis oil by 2025 is ‘unfeasible’. Unilever acknowledged it will not be able to cut its virgin plastic use by 50%, having only achieved a 18% decrease so far.
The root cause of broken promises, according to WoodMac, is lack of coordination along the supply chain.
“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,” said Guy Bailey, vice president of oils & chemicals research at Wood Mackenzie. “The successful negotiation and introduction of the United Nations Plastic Treaty 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,” he added.
The report says that petrochemical companies, technology companies, and waste management firms currently all operate with different assumptions about what a ‘fair’ allocation of value looks like. Without a route to profitability for all value chain participants, WoodMac argues, technological adoption and investment in the necessary infrastructure is slower than anticipated.
An appropriate framework for a robust supply chain involves integrating partnerships, creating joint ventures, and becoming vertically integrated by acquiring suppliers or distributors for greater control over the supply chain, the report says.
WoodMac highlighted LyondellBasell as an industry player whose ‘enthusiasm for joint ventures’ has seen subsequent investments in waste management and technology companies. LYB has a 50-50 joint recycling venture with French waste management company Suez since 2017, which has since then made several acquisitions and partnerships along the value chain.
“A circular value chain is only as strong as its weakest link,” WoodMac said. “If one company has no incentive to participate, the whole value chain can break down.
To fix that, the firm recommends that companies change their target-setting strategy. In particular, they should switch from what they want to achieve to how they will bring about the value-chain transformation that will help them to deliver what they want.
It will also be important to ‘make the case for patient capital’, as investments in the circular economy will take their time to pay off, WoodMac recommended, adding that companies must also build relationships with consumer brands to improve their value-chain competence.
“Embracing this systemic thinking at the heart of corporate strategy is difficult and uncomfortable, but essential if progress is to be made,” the report concludes.