An Affordable Way to Find Circular Economy Profits

You can do a state-of-the-art analysis efficiently and effectively. Focus on only some materials, and use available data.

Dr. Clyde Hull is a Professor of Management at Rochester Institute of Technology.

Would you spend millions to find a million-dollar idea? Probably not.

The circular economy is hailed — rightly — as an important path toward sustainability. But getting involved can be prohibitively expensive.

The circular economy eliminates waste by continually reusing resources. It has economic advantages: opportunities to cut costs, integrate vertically, and even change the market in your favor.

But getting to a circular business model can be hard, and costly. Imagine calling every company around you to see if any of them can use your waste, or have waste products you could use as inputs.

My colleagues and I wanted to find a better way.

We started with material flow analysis (MFA), one technique that can find circular economy opportunities.

An MFA tracks the flow (and existing stockpiles) of materials in a system, which in your case would be the local economy in which you operate. It helps identify linear economy activities that you can replace with circular economy ones. Materials that aren’t getting reused are a potential opportunity.

MFAs are good at finding opportunities that no one else has recognized yet, giving you a chance to be the first to move on them. And despite its complexity, a typical MFA is still more efficient than the brute force phone-call method described above.

But an MFA normally requires extensive information that can be expensive to collect and exhaustive to process. That has meant that an MFA could be done for the City of London, but would be too expensive for a typical manager to use to identify new business opportunities.

Effective? Very much so. Efficient? Not so much.

Stripping Down the MFA

Drs. Sherwyn Millette, Eric Williams and I tried to solve this problem in a project we published this month. We stripped down the traditional MFA approach to make it more efficient and affordable without cutting into its effectiveness.

The stripped-down MFA uses available data instead of making you chase down new data, and it focuses on just some materials instead of all of them. Using such an MFA won’t find every opportunity that’s out there, but if you choose your focus wisely, it should find profitable, sustainable opportunities that fit what your company can do.

The key to doing an MFA that’s efficient enough to be affordable and effective enough to be worth doing is to identify a type of material, like plastic, as your focus. As you do so, there are three factors to bear in mind: (1) data availability, (2) which materials the data show are available (because they’re being landfilled), and (3) which materials you can work with.

Unlike in a comprehensive MFA, you don’t have full data on everything going on in the system. You have what’s available for free or cheaply. Focus on that information. See what materials are getting tossed and appreciate the irony that, in this one context, more waste means greater opportunity.

You will know best which materials you can work with. Plastic, for example, could be a good option. It can be used as fuel, recycled as raw material, and so on.

Testing the Tool

We wanted to test the stripped-down approach. We looked for a setting where getting data wasn’t easy.

Trinidad and Tobago is a developing-economy island nation. Available data were limited, but were adequate for the analysis. Because, MFA is a system-level analysis, our MFA looked at flows and stockpiles through the nation. The results can then be used by companies and other actors to make the system more circular.

Governmental trade statistics were available, so we used them. Looking at the data, we saw a lot of information about plastic. We could track where it was from, what it was used for, which companies on the island could use which sorts of plastic, how much ended up in landfills, and so on. Not only was there a lot of information about plastic, there was a lot of plastic to work with. So we focused on plastic.

Some of what we found was useful to the government. Our results suggested that banning a particular type of plastic would help the environment without hurting local business. The Trinidad and Tobago government has now banned that type of plastic.

Some of what we found was useful for businesses. Almost half of landfilled plastic in Trinidad and Tobago comes from packaging, not from the products themselves. Local companies could use this plastic in their own manufacturing processes. We identified multiple circular economy opportunities that would reduce both local manufacturers’ costs and landfilled waste.

Some plastic could be converted directly to energy for a local cement company, for example, while other plastic could be recycled into new bottles at a local facility for use by local beverage makers. Both of these opportunities meant lower costs and higher profits for businesses, less waste, and a more independent local economy.

Making the Circular Economy Accessible

In Trinidad and Tobago, we did the whole analysis at a cost of less than 50,000 USD.

Is it worth fifty thousand to find an opportunity that can increase your profits by more than fifty thousand, maybe a lot more, while reducing environmental damage? Probably.

Read the article: Millette, S., Williams, E., & Hull, C. Eiríkur. (2019). Materials flow analysis in support of circular economy development: Plastics in Trinidad and Tobago. Resources, Conservation, and Recycling.