Circular economy and global secondary material supply chains

Globe and circle

The idea of “Circular Economy” is rapidly landing on the world of waste and resources management, becoming a mainstream concept, at least on the rhetoric level. At the same time, a surge of publications and initiatives draws our attention to the globalised dimension of resource recovery from waste. Here, we outline and explore the interface between the two: circular economy and globalised waste management flows.

Circularity aspirations

Simply put, circular economy advocates the returning of used resources that would otherwise become wastes back into the economy. Rather than just managing the end-of-life of waste before an environmentally sound disposal, waste becomes a transient phase, a step in an ideally perpetual utilisation cycle in the anthropogenic economic activity, before the inevitable but far off final dissipation of matter into energy, as dictated by the laws of physics.

So, is circular economy simply traditional recycling by another name? Whereas recycling remains a core element, there is more to it. Many other prevailing or emerging ideas strongly relate to the circular economy. To name just a few, resource recovery, resource efficiency, resource effectiveness, sustainable consumption and production, systems of provision, industrial symbiosis, urban metabolism, zero waste, eco-design, materials criticality, design for recycling, upcycling/down-cycling and cascade models, remanufacturing, waste prevention and minimisation, and not least, good old overall sustainability: it is beyond the scope to consider their interrelationships here. However, it seems that circular economy, while not emerging from mainstream economics, brings aboard a markets and business dimension, often missing from other related visions.

Coupled with the notion of discrete technical and biological ‘nutrients’, as established by the inventors of cradle to cradle, the idea is to keep separate the engineered materials such as fossil-based plastics from, for example plant-based materials such as food residues, and reprocess each of them to secondary resources. Indeed, this is an idealised description, championing the idea of ‘closing the loop’ of material cycles.

The sheer appeal of circular economy is reflected in the July 2014 European Commission (EC) landmark communication entitled Towards a Circular Economy: A Zero Waste Programme for Europe (COM(2014)398). While this document mainly sets the basis for the future solid waste management in Europe, aspiring to lead the way in the relevant developments, it was withdrawn, partly to have its scope extended to cover upstream economic activities, such as manufacturing and retail – the most fiercely debated document currently in the EU waste industry. China introduced a law on circular economy in 2008 (Circular Economy Promotion Law of the People’s Republic of China), but its meaning is different from the recent circular economy developments in Europe, focusing more on the so-called 3R approach (reduce, reuse, and recycle) championed in Asia.

The simple and straightforward question in recovering resources (technical engineered materials, bio-based materials and nutrients, and energy) is ‘how?’. How involves a long chain of collection, transportation, and material processing, with the final aim of replacing primary resources with waste-derived ones; and replacing occurs where the manufacturing and/or energy production occurs, but this ‘circle’ is often global, more than ever.

Global secondary material supply chains

Over the last decades, manufacturing and production, where raw materials are needed, have shifted towards Asia, following affordability but also emerging region’s middle classes with increased purchasing power. A gigantic global commodities trade was established, for example, from China not just to Asia but also to the affluent consumers in the Global West/North. Now, what we call ‘recycling’ in everyday life is often just collection with the intent of recycling: Indeed, recycling should be interpreted as the entire process, from the point of waste arising to the eventual transformation into secondary raw materials replacing primary ones, while delivering equivalent functionality. This closing of the loop starts within a country, but increasingly materialises elsewhere, often in China, or India. A global trade of waste material collected for recycling is the necessary condition, and a reality for most dry recyclables: metals, paper, and plastics. In some sense, there is nothing much new there: used metals and rags/paper globalised markets have existed for centuries. 200  years ago dust-yards of London’s shifted out fine dust from coal ashes – the main component of municipal solid waste (MSW) at the time – and such material was even shipped to Russia for brickmaking (Velis et al., 2009). Interestingly, dust-yards developed into the first material recycling facilities (MRF) as early as at least the 1880s.

Take, however, plastics in Europe: as a recent (September 2014) International Solid Waste Association (ISWA) report of the Globalisation and Waste Management Task Force reminded us, EC-27 exports almost half (46% wt.; 2012 Eurostat and PlasticsEurope data) (Velis, 2014) of the post-consumer waste plastics, that are ‘recycled’. The vast majority of them (87% wt.) was exported to China mainland, directly or through the Hong Kong Special Administrative Area – China. Similar high dependences are evident for the US and Japan.

So, the circular economy of plastics in Europe and Global West/North has largely to materialise via international shipment, reprocessing, secondary plastics production, and product manufacturing in China. This raises a series of questions regarding the environmental performance of such circularity. One can bypass the emissions from international transhipment, assuming that the containers are transported via ships on their way back to Asia, and it would be needed to be loaded with ballast anyway, if they were not containing scrap to be recycled. The critical question is the environmental, occupational, and public health conditions under which plastics are reprocessed. Whereas the Chinese government is trying to reduce reliance on unregulated, small-scale low-tech reprocessing operations, operated without health and environmental considerations, these were a major reality until very recently, as documentaries have vividly presented. Still there is no reliable evidence on where the imported plastic scrap ends up and what is the value delivered to the world via this operation: however, there are hopes that it is at least actually recycled, because the plastic recyclates collected domestically are, or are perceived to be, of inferior quality. That said, nobody knows the level of material substitution actually occurring and what the value truly delivered is, inherent or market-defined. The reality and volume of international trade by no means suffices to quantify the sustainability, environmental, and overall societal benefits associated with recycling. Hence, they remain perceived rather than actual, and as such they have to be addressed with caution.

Volatile markets

The transboundary trade of recyclates, having undergone different degrees of reprocessing, is a highly complex and volatile system. Logistics, geographies, export/import regulations, governmental policies (e.g. subsidies/taxes), environmental targets (e.g. EU recycling targets), quality standards, degree of law enforcement, lack of transparency, and asymmetry of information between the players, innovation (e.g. biopolymers), and above all primary raw material and energy prices volatility, all impact on viability of markets (Velis, 2014).

In the last decade, we have already experienced three major disruptions to the circular economy: (i) the credit crunch of 2008; (ii) the February 2013 Green Fence Operation (GFO) when increased custom controls at the Chinese borders were implemented, enforcing strict quality criteria to imports; and (iii) the ongoing collapse of crude oil prices. In all three cases, the prices of plastics scrap was severely affected and so too the profitability/financial sustainability of upstream operations (collection, reprocessing in MRFs, and exporters). These crises are major threats to the established resource recovery systems, but can also serve as an eye opener, forcing us to reflect upon the necessity for resource recovery: if there is no (constant) need, then should we allow the decline and flourish of the resource recovery as they may occur, or intervene? But, do we understand the global recycling systems well enough to intervene in an effective manner and do we all agree on what we should be trying to achieve?

Least and best environmental standard pathways?

To rephrase the last question, we anticipate benefits from circular economy, but for whom? A couple of examples of global waste material flows come handy here. Waste electrical and electronic equipment (WEEE – or e-waste) often are illegally exported or legally exported as used functional equipment, just to end up in some of the most polluted places in the world: being reprocessed under lax or no regulations to recover value via acid leaching and burning, results in public health disasters and extensive environmental pollution in West Africa and South-East Asia. End-of-life ships are sometimes broken down for metals scrap in low-income countries, under despicable working conditions.

Academics have put forward the hypothesis that for such recovery of resources, the least environmental standards and lowest wages global pathway may materialise (Crang et al., 2013; Velis, 2014). Lack of environmental considerations and/or enforcement, absence of occupational health and safety, and exploitation of the workforce can be necessary conditions in situations applying to part of today’s global circular economy. Some of the most contaminated places in China are entire villages where reprocessing of plastics from the Global West/North has been taking place. This is far from the sustainability paradigm we would envisage for our world, and cannot be acceptable.

Such sub-standard global supply chains are a reason why the waste hierarchy is possibly an outdated, or at the very least insufficient, concept when it comes to today’s global systems of resource recovery. Secondary and energy material savings, actual or perceived, cannot be at the cost of certain communities. Alignment of local and global sustainability can and should be perused.

The recent massive export of refuse-derived fuel (RDF) from the UK to be combusted in energy-from-waste (EfW) combined heat and power (CHP) plants in The Netherlands, Scandinavian countries and Germany where spare capacity is available, is hotly debated for its overall impacts. But, in contrast with for example e-waste, it could be seen as an environmental best practice of an international secondary fuel supply chain, because alternatively the material would have been disposed of in landfills in the UK, whereas now is recovered to generate electricity and heat in energy efficient (R1 compliant) EfW plants, and with advanced environmental protection in place (air pollution control and management of ashes). Indeed, circular economy should not ignore the benefits from the recovering of energy and/or heat from the non-sustainably recyclable, combustible part of MSW, however big or small that fraction is.

Informality and circularity

The so-called informal recycling sector, from completely unregulated to sometimes organised (quasi-or fully-formalised), is the major or often sole recycling and reprocessing activity in low- and middle-income countries. It can be speculated that the number of urban poor involved in such resource recovery activities is comparable with the employees of the formal industry worldwide – the order of magnitude is tens of millions (ca 0.5% on average of urban populations found to be working in informal sector recycling, times 3.9 billion of urban population in 2014 in the world, is ca 20 million people). Recycling rates, counting actually recovered materials (not just collected with the intention to recycle), for some low income country cities can be in the region of 20–30% wt. of MSW arisings (Wilson et al., 2013). This forms a solid basis for building further circularity, but the socioeconomic challenges involved with informal sector recycling have to be addressed through a gradual inclusion/formalisation. The collaboration of multinational companies with informal sector associations in Latin America, so that the latter recover secondary material for the product manufacturing by the former, is the most interesting development on the ground, opening up new avenues for a transformed role of initially informal systems into a circular economy. Yet, it is unclear if and how these, initially local, recycling systems integrate with the global supply chains, but are at a minimum affected by globally defined primary material prices. These great challenges are already on the radar of the European Union, attempting joint research innovation programmes with Africa.

Way forward: Prioritising tangible benefits

Despite that Europe (EU-27) needs to export to China almost half of the waste plastics collected for recycling, this corresponds only to 6% wt. of the post-consumer plastics arising in Europe (Velis, 2014). To materialise much higher collection for recycling levels, new markets have to be identified and established, hopefully corresponding to actual societal needs. Societal needs can be widely defined, even to include down-cycling and counterfeit products, possibly manufactured without the strict material quality controls, such as meeting the Registration, Evaluation and Authorisation of Chemicals (REACH) regulatory standards.

The scientific and engineering community is often preoccupied with technological innovation: it is indeed a prerequisite to recovering resources – closing of the loop. But, can we please dare ask ourselves, what is the fundamental need for this? And how do we obtain optimal value in doing so? Value (in secondary resources) is multifaceted, and facets are interdependent, and hence complex; some value to the society is inherent, but needs to be measured, quantified, and become tangible through a transparent and robust evaluation, otherwise the vision is just words or even a Chimera.

We desperately need an informed and evidence-based transition to optimally efficient resource recovery within the realm of circular economy, along with other related concepts. The essentially global interface and system boundary within which circular economy may materialise, increases the complexity, and forces us to come up with novel and more effective approaches in assessing the value of resource recovery activities. By doing so, we will hopefully verify this instinctive predisposition we have willingly persuaded ourselves about: ‘resource preservation through circularity is fundamentally good and necessary (for the humanity)’ – or reconsider, becoming more informed and sophisticated about what works and what does not. It is never too late.