When Silicon Valley meets plastics recycling

Plastics recycling is perhaps not the first thing to come to mind when thinking about Silicon Valley. As the birthplace of the innovation economy, however, its platforms offer a model for development in sectors beyond just the information technology industry. Recycled plastics, for example. Sustainable Plastics talked to Ian Arthurs, founder of Circular.co, about the platform he has launched as a marketplace for recycled and sustainable plastics. 

A veteran of Silicon Valley, Ian Arthurs has always been really interested in supplying demand and finding easier ways to connect buyers and sellers to what he described as ‘typically non liquid areas of the world’. After working for companies such as Google, Airbnb and TaskRabbit (a handyman site currently owned by IKEA), he has now opted to put his long years of experience in building marketplace style platforms to good use with the development and launch of Circular.co.  
His idea was to bring Silicon Valley thinking to manufacturing ‘in a really positive way’. 

After a year of research, working in collaboration with a venture capital company, he identified an opportunity that, while relatively well-known, is still unexplored from a technical perspective: the gap between supply and demand in recycled and sustainable plastics.
Arthurs discovered that for brand manufacturers, procuring the materials they want, with the required technical specifications and consistency, at the right price, was extremely challenging. He reasoned that technology could offer a solution by offering a way to connect recyclers, plastic waste collectors, buyers and manufacturers across all industries ‘to create positive economic opportunity that in turn would stimulate supply’.  

“This would allow us to find solutions where solutions may not have existed before,” he explained.

“We’re a platform that really is intent on helping brands and manufacturers find the recycled or sustainable materials they need to meet their sustainability goals. And we offer all of the things that the best of Silicon Valley platforms offer to do that,” he added. “From efficient online contracts and trading, all the way through to shipping, logistics and payment, supported by a concierge and accessible market data. We feel that our platform reflects the way that plastics are bought and sold today - but made much easier.”

How does it work in real life?
Right now, manufacturers must spend vast amounts of time to find suppliers who can provide the sustainable or recycled materials they need, in the volumes they need. Some have even been forced to rethink their sustainability targets. 
“And the reality is, there is material out there. It's just hard to get because the price is too high, or the mechanism to actually get it is too hard; the market is opaque,” said Arthurs. “And now, we can help them. We put everything online. A manufacturer can go to circular.co, become part of our vetted community and then put a purchase order into our platform, and we match that demand order to existing or future available supply  - contractible supply, not just spot market. This reflects the reality of this industry.”

Buyers will usually see multiple options, each of which can be explored, in order to locate the best match in terms of colour, technical specifications and availability. Once a match is found, the parties enter into communication with one another, arrange for sampling - all on the one platform. 

“Next, our concierge will create a proposal. So, let's say our buyer is interested in buying a  million pounds of PET at a dollar a pound, but the seller wants $1.05, there will be negotiation and sampling, all managed online,” said Arthurs. “Once agreement is reached, it then goes to contract  - again, online. Payment is made easily online, as are the shipping arrangements. The entire transaction is on one platform, which makes life simpler for both buyers and sellers, we found.”

The platform went live in June 2022 after a period of testing with industry partners and early customers, and today is getting very good traction – “We have tens of millions of pounds of recycled plastic, mainly PET, HDPE, PP where the highest demand is, that can be contracted on a monthly basis today. And we are in the middle of long-term contract discussions with a number of very large brands,” Arthurs said.

Going global

Circular.co originally targeted the market in North America, said Arthurs.  The idea was to reach a certain amount of product market fit and then to go international, perhaps even expanding into other markets such as glass and aluminium  - ‘or even into concrete: anywhere where there's a supply-demand gap in  sustainably sourced materials that will positively impact our planet; that's where we see our platform can be applied’.

Very quickly, however, the platform was pulled into international markets as well, as the majority of brands have global manufacturing operations. 

Moreover, the United States has historically been an area in the world that has lower recovery rates and higher prices, he explained. 

“Continental Europe has some of the highest recovery rates for plastics in the world, and therefore some of the best supply as well. Asia has a lot of the supply but it tends to be lower or unknown quality. We found that when working with global manufacturers, they were interested in sourcing material from around the world, not just in North America. And connecting with global suppliers meant we very quickly became global.” 
That approach also fits with the kind of customers Circular.co is aimed at.  

“The model is to really start with where the money is; innovation follows economic opportunity. We use that unmet demand to stimulate more supply. Primarily we work with big brands, and brands that have sustainability commitments that they are struggling to meet. We're now working with a number of manufacturers, who are looking to source material at the same time in North America, Europe and Asia.”

Making connections

Circular.co is all about making connections and its network is across the entire value chain. In other words, it goes beyond simply supplying recycled resins. 

In the United States, for example, big plastics waste collectors and recyclers, manufacturers and brands have joined the platform, as well as a number of small local collectors. “We found a niche that I really didn't think about when we first started the company, of smaller growth brands that don't have the market scale to command huge contracts. They are typically niche and maybe sustainability focused, maybe launched in the past five years, but that are growing. For these companies, we found it is very difficult to find materials they need, because they can't command the market size that is interesting to recyclers,” said Arthurs.

On the brand side, the primary source of demand is mainly consumer goods companies, who tend to be the most verbal about their sustainability commitments, although now, too, automakers and apparel companies are displaying an interest. 

“It's a mix of end-users, whom we connect to the recyclers, and we connect the recyclers to the collectors. Part of our value proposition is that even if the material that the brand is looking for isn't currently being processed, because we have such a large network,, we can connect the recycler and the collector to create an opportunity specific for that end user,” he pointed out.

Circular.co also works with the manufacturers and co-manufacturers  - the actual processors producing the products - of the brands, although typically, it is the brands making the strategic decisions who guide the purchasing choices of the co-manufacturers. 

For the time being, too, most of the platform’s customers are interested in the output from mechanical recycling. While chemical recycling has generated much interest and discussion, it is still a very nascent industry that at this point is not yet able to provide the volumes needed for customers who have not entered into supply contracts. “In fact, most chemical recyclers have pre-committed their output to brands , they’ve pre-sold their resin and are looking for input feedstock. So that's what they are on our marketplace for,” Arthurs added.

Regulatory tailwinds

He also noted that the times were auspicious for a platform like Circular.co. “Legislative tailwinds are very helpful,” said Arthurs. “I mean I don't think I'd ever build a business that is based solely on legislative action - you can never tell which way legislation is going to go - but the ongoing regulatory and legislative developments in, for example, Europe, and California, are extremely helpful. We have a customer, a big brand, who is now changing their entire production line for California law, whom we are helping. And another company that produces in Canada, as well. They are struggling with the same thing.”

Making the difference
Circular.co is not the first platform of this kind in the market. But Ian Arthurs sees a difference in the way his platform has been set up than earlier attempts by others. 
“What we’ve heard from the suppliers we work with is that there seems to have been a wave early spot markets  founded on a format almost like that of Airbnb or TaskRabbit for recycled plastics, where a supplier would have a bale or a truckload, ready to go right now,” he said.
That model, however, does not reflect the reality of an industry that deals with long-term contracts, for many tonnes of material  of a consistent quality that needs to be at a certain technical specification and volumes over time in order to meet manufacturing needs. 

According to Arthurs, there are currently very few contract-based platforms or marketplaces that function efficiently as intended. 
“There are a couple in Europe and there's one in the UAE as well, and hopefully there are a few more to come. Because ideally, what we really want is more circularity – and more options for buyers and sellers. Obviously, I'd like them to come to our platform, but our goal is more circularity, more liquidity. And as more competitors emerge, the bar is raised a little bit each time. And I think it's really healthy for the industry to show that there is this level of opportunity that we can apply very well-known technology to, to create more liquidity in an industry that badly needs it.”

He added that in working with the industry, he has found that the green premiums that had long been obstacles for investment in the recycling industry are now shrinking ‘to the point of nothing’. Recycling, he said, is profitable for the first time in a long time in North America  - and the current drop in prices means that PCR is now equitable to virgin resin.

“It's opening up to the demand side and the supply side at the same time, which gives us two economic opportunities, and that, we think, is going to drive a lot of more demand. And we are providing people with an easier, accessible solution that wasn’t there. It’s an exciting place to be in the industry right now.”