Chris Cui, Director of China Programs, builds bridges between the U.S. and Asia in order to advance the circular economy. She brings 13 years of cross-sector experience in financial service and philanthropy sectors in Asia, Europe and the U.S., advising Fortune 500’s emerging market strategies to capture growth potential from Asia.

The U.S. as well as other developed countries were taken by surprise when the Chinese government implemented a ban on the importation of recyclables on January 1, 2018. However, the Chinese government had been sending signals for the past decade of their future plans around both the importation of recyclables and the development of domestic recycling infrastructure.

Eight cities in China were selected as pilot cities for pilot recycling programs as far back as 2000 in order to study the most effective programs. Recycling gained significant attention in June 2019 when Chinese President Xi stressed the importance of cultivating the good habit to improve the living environment and to contribute to green and sustainable development.

“Trash classification is related to the people’s living environment and the economical use of resources. It is also an important embodiment of the level of civic-mindedness. Extensive education and guidance should be carried out to make the people realize the importance and necessity of garbage sorting.”

Chinese President Xi

It’s very rare that the top leader, rather than the Ministries in charge of the industry, make such strong statements about recycling.

Importantly, it demonstrates the priority that China has placed on the development of its own domestic recycling programs and infrastructure, as part of its effort to combat environmental issues that threaten the health of its 1.4 billion citizens. It also explains why China carried out the ban in the first place; they are continuing to shift their focus to developing domestic recycling infrastructure to feed their massive manufacturing base. Xi has made clear that the public sector will support the private sector to develop infrastructure to turn “waste” into opportunity.

So, what does this look like?

The Chinese government aims to increase recycling rates to 35% for residences by 2020, they’re building basic trash sortation systems and starting to charge waste management fees for both residential and commercial waste for 46 major cities by the end of 2020. They’re also expanding their trash classification system to all cities by 2025.

The four new trash sortation categories in China.

Image source here.

Case Study: Shanghai

Shanghai is one of the first cities to start responding to the policies from Central Government. Twenty-three million people must learn to sort their trash according to four labels – recyclables, dangerous goods, kitchen waste and other waste – under a mandatory sorting scheme starting on July 1. Misclassification will result in a fine of up to USD 30 for individuals, USD 7,200 for commercial entities and USD 70,000 for recyclers (and the potential revoking of their licenses). How to sort trash correctly is not just in the news, it’s the talk of the town and it’s even included in exam questions for schools.

For individuals who fail to sort their trash, their social credit rating, which not only determines their mortgage rate and insurance premium, but also their eligibility to purchase flight tickets and even send their kids to public schools, will be lowered.

Unsurprisingly, these new developments in recycling bring challenges, particularly around education and infrastructure. The Shanghai government has hired 1,700 instructors, conducted 13,000 training sessions, and created an app to handle enquiries to help citizens meet the requirements.

Meanwhile, the policy highlights the current lack of infrastructure for this kind of scheme. There needs to be significant investment from both the public sector and private sector to sufficiently grow the collection and sortation capabilities of the country. This especially applies to rural regions, which constitute a large proportion of China and lack the necessary infrastructure to deal with trash, especially tricky waste such as fertilizers and pesticides.

Yet all of these shifts have culminated in, and created, a significant business opportunity. Recycling needs investment now. China’s planned economy means that every five years, the central government will create an economic development plan for the country for the next five years. Key sectors that are targeted in the five-year plan will receive support, from specific policies to financial subsidies, that attract significant interest from the private sector. The recent emphasis on the recycling sector is a good example of this and, importantly, sends a positive signal to the market.

Residents in Shanghai search the internet for guidance on how to sort trash correctly.

Image source here.

The Business Opportunity Is Vast and Growing

At Closed Loop Partners, we know that keeping valuable commodities circulating in supply chains is good business. The current developments in China are spurring interest, excitement and investment in the space, which will continue to grow. There is room for both startups and bigger companies, domestic as well as foreign players, traditional players in the recycling industry and new players from other sectors like tech, marketing or consumer goods companies; all of whom are ready to innovate and embrace the change.  We’re seeing a new structure of supply and demand around recyclables worldwide. Shanghai is just the beginning; more cities and business opportunities will arise in the coming years as a result of the combination of favorable factors:

The public markets are all in
With preferential policies and hundreds of billions of dollars to support the campaign, stocks have been rising for companies that supply equipment, chemicals and other services related to recycling.

The private sector is paying attention
More and more startups are emerging to solve the waste management problem in China, with some managing to raise money from mainstream VCs such as Alibaba, Baidu and Tencent. Robots for sortation, like AMP Robotics, or mobile apps for smart recycling stations or second hand mobile phones are just some examples of the innovations applicable in the field.

Demand for recycling related equipment and services is growing
As more cities follow the example of Shanghai and start mandatory urban trash recycling, related sales will jump significantly; sales of the smart trash bin on JD.COM soared by 613% between June 1-13 and it’s estimated that Shanghai residents bought 12% of the smart trash bins sold nationwide.

Sustainable packaging will be encouraged
Innovations in sustainable packaging will be welcomed by brands. Policies have been drafted on EPR in China for the packaging industry.

Opportunities for completely new business models are emerging
Challenges in the enforcement of trash classification means there are opportunities for entirely new business models to solve for the new pain points. For example, startups are offering online booking services for on-demand trash pickers and sorters that will come to your home.

If you’re interested in learning more on this topic, get in touch with Chris Cui and join us at these upcoming events:

• 14th China International Plastic Recycling Conference & Exhibition 2019, Sep 25-27, Shanghai, China. Closed Loop Partners is a co-organizer and will give the keynote.
• The Fortune Global Sustainability Forum 2019, Sep 4-6, Yunnan, China. Closed Loop Partners will be speaking on a panel.

It was a momentous moment in Minneapolis last week as more than 800 people convened for Circularity 19, the largest conference in North America devoted to advancing the circular economy. In acknowledging the world’s finite resources and increasingly volatile supply chains, transitioning to a system that keeps valuable materials in circulation at their best and highest use has become a no brainer. In fact, it’s what many companies have been doing for a long time; Caterpillar has been remanufacturing products since the nineties.

Although not an entirely new concept, supporters of the circular economy are now reaching a critical mass. Consumers and companies alike want a more sustainable economic model. Now we have the appropriate framework: the circular economy. This doesn’t predicate itself on infinite resources; it reduces costs, creates jobs and protects our environment. From large brands like Google and 3M to students, NGOs, financiers and community activists, there was significant momentum behind Circularity 19.

Together, conference attendees watched startups pitch circular solutions such as reusable cup systems, explored the potential of materials marketplaces, and learned about transformational technologies that turn waste plastics back into the building blocks for new materials. All of these examples demonstrated the benefits of keeping valuable materials in circulation.

What was clear was that the circular economy isn’t a nice to have, it’s a need to have. Companies and individuals can’t afford to throw away the valuable rare earth elements in their phones or to ignore the intrinsic value of waste plastics that can reduce our dependence on oil extraction.

An overarching theme of Circularity 19 was around the power and responsibility that inevitably comes with advancing any new system; the importance of making sure the circular economy doesn’t suffer from the same ailments of the past linear “take-make-waste” system. Three areas in particular continued to come up in conversation:

The need for a just and equitable circular economy from the start
There needs to be a greater focus on the social elements of the circular economy; historically underrepresented groups, particularly lower income communities of color, are often disproportionately affected by environmental injustices. In a panel on Power, Privilege and Bias in a Circular Economy, speakers highlighted the importance of including everyone at the table from the very beginning, flagging the need for awareness and intentionality around what signals are being sent when developing a new system.  There is also a need for thinking about how the success of circularity is measured from both a business and social standpoint; defining shared metrics for a truly regenerative, healthy, circular society is critical.

The importance of healthy materials and safe chemistry in the circular economy
It’s simple. In a circular economy valuable materials are kept in play, cycling in perpetuity, so the materials of choice must be safe and high quality. What does this really mean? Materials must be evaluated, tested and designed with their next life in mind – what happens when these materials come into contact with your skin? What about with the soil? If something is comprised of mixed materials, for example treated for flammability to serve a particular purpose in their first life, can these materials ever be food grade quality in their second life? These are the kinds of questions that were facilitated and fostered at Circularity 19, helping attendees to think through unintended consequences.

The urgent need for industries to collaborate outside of their comfort zones
A common thread throughout Circularity 19 was the need for unlikely bedfellows in order to achieve systemic, circular change. It takes more than just one industry. For example, the fashion industry can and must learn from the chemicals industry. The technologies emerging from the latter have important applications for the former, including chemical recycling technologies to process polyester garments at the end of their first life. Similarly, the tech industry has spent years investing in the development of RFID technologies and other tracking systems for the digital economy. But not enough organizations are applying these learnings to fashion. There is huge potential for weaving RFID technologies into garments so that stakeholders can keep track of their products’ lifecycles.  Scanning tags and seeing that a garment is made of 100% linen and from a certain brand is valuable information that can influence the next life of a product – is it best for resale? Or is it best to recycle the product into fibers to create a new garment?

Throughout Circularity 19, it was encouraging to see how much progress has been made on circularity, as well as important to see how far we still have to go on this journey. By sharing knowledge and continuing to have productive conversations with diverse stakeholders, the conversation can be pushed forward. It was heartwarming to be a part of Circularity 19 this year and we look forward to Circularity 2020 in Georgia.

With only 9% of the world’s plastics getting recycled and global plastics demand forecasted to triple by 2050, we’re in desperate need for tangible, investable solutions to avert a crisis. Where ten years ago, the urgent need to broach this subject was met with resistance, today the conditions are altogether different.

Across the globe, movements such as Break Free From Plastic and legislation like the EU’s Circular Economy Action Plan have galvanised the public. Shocking images of sea turtles maimed by straws or statistics about there being more plastic than fish in the sea by 2050 have struck a chord.

It’s clear we must rethink our current leaky, linear system and shift to something more circular. We need a system that’s consciously designed to use less materials in the production and delivery of products and that keeps materials in circulation at their highest value for as many generations as possible, if not infinitely. This way we can reduce our waste and our extraction of raw materials.

Sometimes plastic is the most appropriate material to serve a purpose, given its particular properties, other times it’s not. There is no silver bullet approach.   We need to invest in both near term solutions and long term solutions with clear paths to scaling to tackle the problem of ocean plastic pollution and reduce overall environmental impacts.

The good news: we’re already seeing clear, investable solutions that can shift us in the right direction.

There are at least 60 technology providers developing transformational technologies that purify, decompose, or convert waste plastics into renewed raw materials in North America, representing a $47 billion opportunity in North America alone. Many of these technologies mean there is no limit to the number of times plastics can be recycled, thereby helping us to shape a more circular economy for plastics.

Other companies are exploring innovative new delivery models or alternative materials science. Their outputs could supersede the need for plastic packaging altogether, whether through vending machines that dispense exact amounts of product into reusable containers like Algramo, new feedstocks replacing styrofoam packaging like TemperPack or through hyper-compostable, edible straws made of sustainably harvested seaweed like Loliware.

Large banks and brands are getting on board too, recognizing the need for change. Institutions like Goldman Sachs, Citi, Comerica Bank and Engie have co-invested in our funds in order to catalyze the development of the circular economy.

If we’re to stem the tide of plastic pollution in our oceans, it’s critical that we invest across the value chain and in companies that are rethinking the system for a more sustainable future. With the current enabling conditions, from policy to consumer engagement, now is the time to do it.

This blog was inspired by the discussion in Confluence Philanthropy‘s webinar on Exploring Investor Solutions to Restore the Ocean, which I participated in with Mark Spalding, President of The Ocean Foundation, Conrad MacKerron, Senior Vice President of As You Sow, and Angela Howe, Legal Director of Surfrider Foundation.

It’s Earth Day 2019 and it’s time to celebrate one of our best traditions: recycling. There’s a lot happening in our industry today: from new robots that sort recyclables to technologies transforming recycled plastics into valuable commodities. Other big themes to celebrate: opportunity and profit.

Last year, Closed Loop Partners, and firms that co-invested with us including Goldman Sachs, Citi, Google and Engie, invested over $210 million dollars in companies that are building a circular economy. The world’s largest consumer goods companies are on board too, many making public commitments to use recycled content ratios of up to 50% in their products.

Why? Because they see opportunity – and value. Natural resource extraction is expensive and landfills are unsustainable. As we shift towards a regenerative, circular economy and unlock the embodied $1 trillion value, we know that recycling is a crucial piece of the puzzle.

Today of all days, let’s take a minute to appreciate the true value of recycling in America – and let’s commit to keep going. Here’s what you need to know to celebrate recycling when talking to friends, family, and colleagues:

Recycling is Profitable: It’s good for taxpayers, municipalities, manufacturers, and investors

The recycling industry is an economic engine, providing over 500,000 jobs in America and creating more than $100 billion in revenue. The metal, paper, plastics, electronics, textiles and glass in the recycling stream are inherently valuable. While commodity markets do fluctuate, most of our waste still commands high prices, especially materials like PET, used in water bottles, which sold for $309 per ton, or clear HDPE, used in milk jugs, for $734 per ton, on average in 2018. Let’s think about the alternatives. If these materials end up in landfills, it’s taxpayers’ money that foots the bill. With a national average disposal cost of more than $50/ton, communities would have to pay over $3 billion annually in additional landfill disposal fees if these materials weren’t recycled.

Case in Point: Lakeshore Recycling Systems (LRS), Illinois. LRS serves greater Chicago and Northern Illinois, providing residential and commercial collection of recyclables, single stream recycling and construction and demolition processing services. LRS has been so successful in the past 5 years that Goldman Sachs is now their biggest investor. In their Heartland facility in 2018, they achieved revenues of approximately $65/ton and now they employ over 150 people. This best in class operation is the manufacturing feedstock for circular supply chains.

Recycling Reduces Costs & Volatility: That’s good for business

With scarce resources and increasingly volatile markets, many of the world’s largest corporations are shifting toward circular supply chains that are stable, protect the environment and reduce costs.  In doing so, they avoid the volatile extraction costs embedded in manufacturing materials, like plastic. The demand for recycled materials is growing.

Case in Point: Public commitments by 37 major corporations. Thirty-seven of the world’s largest consumer brands and retailers, including Coca-Cola, Danone, Nestlé, PepsiCo, Unilever, Walmart, and others have made public commitments to use recycled plastics in their packaging within the next 10 years. Current projections indicate new real demand in North America of 5 million to 7.5 million metric tons annually by 2030. Even better? There are technologies transforming plastics waste into the building blocks for new materials that are ready to meet this demand. As these scale, a potential revenue opportunity of $120 billion in the U.S. and Canada awaits.

The Industry is Growing Here at Home: The opportunities are endless

When China stopped importing foreign scrap, the recycling industry was shaken. Business as usual no longer sufficed. But this wasn’t an end to the industry, it was a wake-up call. It pushed us to invest in domestic infrastructure, process our own waste and deliver higher quality bales of recycled materials. Materials Recovery Facilities (MRFs) that were already doing this, like Eureka Recycling in Minnesota, were less vulnerable to China’s bans. The residual contamination rates of their operations are less than 8 percent and 90 percent of their recovered material goes to markets in the state, supporting regional growth. MRFs are now identifying opportunities to up their game and invest in new equipment and technologies to enhance their performance.  Innovative companies like AMP Robotics are gaining traction; they use AI and robotic arms to effectively sort materials. More and more investment opportunities are materializing. Global companies like Nine Dragons, one of the largest paper manufacturers in China, are now investing hundreds of millions of dollars on recycling infrastructure in the US.

Case in Point: Pratt Industries, Georgia. Pratt Industries is the world’s largest, privately-held 100% recycled paper and packaging company, headquartered in Georgia. This year they’re opening a new paper mill outside of Columbus, Ohio, and also opened a paper mill in Indiana. They’ve also relocated some of their MRFs to larger facilities to accommodate high demand and have pledged to invest $2 billion in the company’s U.S corrugated box manufacturing. Pratt Industries also pays New York City for all of its recycled paper and cardboard in order to meet restaurants’ demand for pizza boxes made from these recycled materials.  The City of New York generates revenue of approximately $15/ton for cardboard while reducing waste, landfill costs, and greenhouse gas emissions.

Our message this Earth Day? Keep recycling as a simple way to support a circular economy.

It’s good for the planet, it’s good for cities, and it’s good for business.

Learn more at: www.closedlooppartners.com

New Report Shows Tremendous Value to be Captured…. When We Stop Throwing Plastics in the Trash

The U.S. and Canada send over 34 million tons of plastics to landfills or incinerators each year. Following current trends, global plastics demand is forecasted to triple by 2050. And even more troubling, mismanaged waste leaks into our environment – there may be more plastics than fish (by weight) in our oceans by 2050.

But what if we could change that? What if we could use innovative chemical recycling technologies to purify, decompose, or convert waste plastics into the building blocks for renewed raw materials instead of discarding them after one use?

What if we could also reduce the world’s reliance on fossil fuel extraction, reduce landfill disposal costs for municipalities, decrease marine pollution, and generate billions in new revenue?

We can.

Investors and brands have an opportunity to influence and accelerate transformational technology solutions that repurpose plastics waste and keep materials in play in circular supply chains.

There are at least 60 technology providers developing these transformational technologies that purify, decompose, or convert waste plastics into renewed raw materials. This report proposes accessible, shared language to use to define and talk about each of these processes going forward:

Purification involves dissolving plastic in a solvent, then separating and purifying the mixture to extract additives and dyes to ultimately obtain a “purified” plastic. Purification processes make it possible to safely transform carpet into yogurt cups — greatly increasing the value of plastics waste. PureCycle Technologies will do just that when it opens its Ohio facility in the next year.

Decomposition is a process that involves breaking molecular bonds of the plastic to recover the simple molecules (“monomers” or “intermediates”) from which the plastic is made. In other words, plastic doesn’t just have to go back to plastic – it can become a valuable raw material to be used again. Loop Industries decomposes PET into its monomers and, with its partners, aims to produce a Loop-branded recycled PET pellet.

Conversion is similar to decomposition in that the process involves breaking the molecular bonds of the plastic. A key difference is that the output products from conversion processes are often liquid or gaseous hydrocarbons similar to the products derived from petroleum refining. These raw materials may enter different supply chains, such as fuels for combustion, and/or petrochemicals that can be made into intermediates and monomers for new plastics. Agilyx, based in Oregon, uses both decomposition and conversion technologies that can produce a variety of products, including naphtha, jet fuel, synthetic crude oil and styrene monomer, depending on the feedstock.

Through these technologies, it’s possible to recycle plastic back into plastic, AND to create valuable upstream products that keep materials in play.

The technology is possible. The question now is: How fast and how far can we go?

Every sector of society is engaged in the broad challenges of climate change and the visible problem of plastics waste. Many of the world’s largest and most influential brands are taking ownership of the problem and looking at their own supply chains. The Center for the Circular Economy at Closed Loop Partners is creating a roadmap for how to build on this momentum by unifying the diverse actors in this space and accelerating collaborative investment to bring solutions to scale.

Demand for plastics is strong and growing, yet the supply of recycled plastics available to meet demand is stuck at 6%. Options for recycling plastics today don’t capture the full opportunity: with current infrastructure, a small portion – less than 10% – of plastics waste from many consumer packages and products is recovered and recycled. Current mechanical processes and infrastructure aren’t enough to support the publicly stated goals of many global brands who have committed to use more recycled plastics in their products and packaging, or to achieve the zero waste goals of our major cities.

We surveyed more than 60 technology providers – broadly categorized as using one (or more) of three processes described above – nearly all of them at least at the lab stage of maturity, with significant potential to grow and scale. More than 40 of these solution providers are operating commercial scale plants in the U.S. and Canada today, or have plans to do so within the next two years.

But of the technology providers surveyed, it has taken them 17 years on average to reach growth scale. That’s not fast enough. More investment is needed now to accelerate these solutions – to go from “possible” to “probable”.

That’s why we are calling on investors, brands, and industry to join us in: investing to bring solutions to scale; increasing awareness of how these technologies apply to different supply chains and waste streams, including adopting the shared language from this research; and collaborating on partnerships with technology providers.

If these technologies are understood more broadly – and are more widely adopted and scaled – tremendous economic value can be realized. According to our analysis, if these technologies can meet market demands for plastics and petrochemicals, they have a potential addressable market of $120 billion ($47 billion for polymers) in the U.S. and Canada alone.

We need to stop thinking of plastics as waste, and start treating it as a resource. Until we do this, we are taking tons of value – and throwing it in the trash.

We hope you will take the time to read the full report: “Accelerating Circular Supply Chains for Plastics”. You can also see the overview of our key findings and recommendations for next steps here.

Join us: If you are interested in participating in our ongoing research, convening, and investment in this area, we encourage you to introduce yourself to the Center for the Circular Economy: [email protected].

We look forward to working together to accelerate solutions to plastics waste and circular supply chains.