The closed-loop economy: Going full circle to reduce emissions

Where do German businesses currently stand in terms of achieving a closed-loop or circular economy?
We have noticed that German businesses have made enormous strides in moving toward a circular economy. However, it is still early days. For example, currently we are only managing to recycle about 14 percent of the material we use.

Is there a link between environmental services and climate protection?
Numerous studies indicate that environmental services also benefit the climate. For example, many forms of recycling contribute to significant CO₂ savings.

Please explain the cost advantages of recycling management.
In many cases, it is cheaper to produce recyclate (materials that can be recycled) than it is to mine or process primary raw materials. Moreover, by developing their own material cycles, companies are able to retain ownership of scarce resources. Plus, recycling-based management also reduces carbon dioxide emissions. Today, industries find themselves under growing pressure to act in a climate-friendly manner. Nevertheless, plenty of businesses are motivated to pursue their own environmentally friendly strategies.

But cost advantages do not always apply…
That’s correct. For example, the cost of plastic recyclates always needs to be compared to the cost of primary materials. If the price of a primary source material is very low, due to a collapse in oil prices, for instance, recyclate will have a hard time competing. However, an artificial increase in the price of a primary material, due to the introduction of a CO₂ tax, for example, could make recyclate more attractive. Using theoretical models, we predict that market interventions of this kind could well lead to a higher proportion of recycled material finding its way into manufacturing source materials.

What are some of the unique challenges facing specialty chemicals?
In the business-to-business industrial sector, material flows are relatively transparent, and it is easier to ensure that material properties remain consistent – in contrast to household recycling, where consumers dispose of a broad array of unsorted packaging materials containing various residues. What is more, the long-standing, trust-based supply relationships manufacturers have with one another tend to promote active collaboration between businesses. One problem does occur, however, when information about the availability and quality of materials destined for reuse and reprocessing is lacking. In the plastics industry, it should also be noted that recycling can, among other things, lead to the unwanted generation or concentration of harmful substances. Needless to say, the processes used must also be both environmentally and economically viable. Chemical recycling, which transforms plastics that cannot be recycled using traditional methods into new materials, is an interesting option, but still some distance away.

Can you give an example of a modern, recycling-based business model?
The principle behind most models is to provide services rather than physical products. In practice, this could be a jet engine manufacturer selling flight hours rather than engines, or chemical leasing, whereby a chemical producer sells the use of a given chemical and accepts responsibility for the environmentally appropriate disposal of unwanted residues. Another promising idea is the introduction of a deposit payment system. This would apply not only to the bottle deposit system, which has succeeded in creating a fully functional, clean reusable PET cycle in Germany, but could also be applied to other things such as construction equipment which would be provided on loan for the price of a deposit on return.

What role does digitalization play in the recycling industry?
Above all, it can help to solve a major problem – we currently lack adequate data concerning the quality, quantity, material flows and life cycles of products and still need verifiable information on specific batch processes. Sensor technology and artificial intelligence will help contribute to increasing the purity of recycled materials. New business models will also be established in online marketplaces.

What are the biggest hurdles to overcome?
Miniaturization and growing material diversity make recovering recyclable material more difficult. But I think we can solve this problem. Providing there are customers at the end of the value chain who want to recycle, manufacturers will respond accordingly. By the way, recycling management is not just about recycling. On the contrary, it is also about making products last. It should be possible to repair products repeatedly and to maintain their operability. Here the focus is on updating and upgrading, and not just expensive high-end products. But not everyone is convinced of the viability of this concept, yet.

Why are renewable energies important in the recycling industry?
Renewable energies are a central component of sustainable development throughout. In this respect, they represent another indispensable aspect of the circular economy. In other words, recycling processes that rely on fossil fuels are limited in their potential to provide full sustainability. Conversely, it makes no sense to rely on renewable energy to manufacture harmful products or introduce processes that are detrimental to the environment.

Where is it important for industry and government to take action?
What is important is to take a holistic, systemic approach. The current challenges confronting us – as well as opportunities we face – lie in recycling management, resource conservation, climate protection and digitalization. They are all interrelated. Taking how they interact into account is just as important as identifying partial solutions because their true value can often only be determined when viewed as part of the overall picture. In both business and politics, we have to ensure that sustainability remains the basis of our strategic agenda and not be afraid to make courageous efforts. However, this will require what we at the Wuppertal Institute refer to as the “art of the future”. This is a call to bring new attitudes and perspectives into the debate about sustainability and global environmental change. It also represents a new compass for identifying untested change processes, in order to guarantee the creativity and innovation of the sustainability project, both now and into the future.