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A Platform to Commercially Scale Plastic Recycling
In Southeast Asia, only 9% of plastic waste is recycled. Extended Producer Responsibility (EPR) regulations hold fast-moving consumer goods companies (brand owners) accountable for a percentage of waste they produce, mainly consists packaging material. In this light, EPR regulations currently demand from brand owners that they recycle 20%-30% of their waste material such as single use plastics. However, current waste management infrastructure is not capable of handling the volumes of this waste material. This either results in organisations getting fined or having to offset their production. Both cost millions of dollars.
Based in Amsterdam and Singapore, the technology owner has developed a digital platform based on blockchain technology to substantially scale plastic recycling capacity in reverse logistic supply chains by unlocking additional commercial value for all value chain players involved. Via the platform, enablers (e.g. NGOs) offer investable projects to set up additional waste management capacity. By investing in these projects, brand owners and their suppliers can demonstrate they are EPR compliant once the infrastructure is operational. With this comes the additional benefit of not having to invest in costly plastic credits anymore to offset production.
The digital platform system leverages a private blockchain network to create an auditable trail of investments, its impact and material flows. This establishes trust between the players in the value chain, as the network offers privacy, security and flexibility by controlling the access to the network, while recording the physical actions and digital claims in a tamper-proof manner. Effectively, this digital platform offers a sustainable option for brand owners to comply with the regulations. The technology owner is seeking industry partners to scale and adopt the technology.
Technology Features, Specifications and Advantages
- By design, blockchain technology excels at data persistence and traceability. Both physical actions and digital claims are verified by actors and recorded on the platform in a tamper-proof manner, mitigating fraud risks and enforcing business logic previously handled by third parties doing manual labor.
- By investing in additional waste management projects, brand owner may get plastic credits in return that offer a massive business opportunity. Prices of plastic credits currently range between US$200-800 per tonne. A ton of segregated plastic waste on the platform currently costs US$50, including the construction of a sorting unit. This already gives a 10x return on investment in an average scenario of US$500 per plastic credit.
- Investments and plastic credits are implemented as tokens, a standardised way of representing tradable assets in the blockchain ecosystem. Specifically, the ERC-1155 standard is used, as it currently outperforms other token standards when dealing with a large amount of unique tokens (materials, in this case).
- Besides the blockchain layer, which is used as the single source of truth, traditional web and server technologies are used to keep the application user friendly and remove some of the complexity required to interact with the chain. This gives the users a familiar interface and increases adoption.
- Core features of the platform include: tokenization of investments and plastic credits, investment impact verification, plastic material traceability, investment management reporting, certificate creation (used for regulatory compliance), plastic credit transfer.
The primary application for the platform is the plastics recycling industry. However, the mechanisms used in the application can be applied in different contexts where:
- Sustainable investments are managed through projects or programs as an incentive mechanism to reach scale and impact.
- The impact of investments needs to be verified by selected stakeholders in the industry.
- Regulatory compliance related to ESG variables are gaining traction.
For the recycling industry alone, McKinsey projects more than 500% growth in plastic waste volumes between 2016 and 2030. Considering the fact that current waste management infrastructure is already not capable of meeting recycling targets, it means that there is a pile of plastic waste potential untapped. Right now, and in the future. On top of this, governments are tightening EPR regulations. Take India for example, where currently only 5% of plastic waste is recycled while a recycling percentage of more than 30% is demanded from brand owners today and regulations adopted to reach 90% within 5 years.
Next to the plastic recycling industry, the same concepts of the solution can be applied in carbon markets, urban mining, battery materials, and/or consumer electronics, to name a few. These markets will all benefit from reduced virgin material usage, increased material recovery from non-virgin sources and higher recycling percentages.
For the use case in the plastic recycling industry the benefits can be explained best per user type on the platform. The following user benefits are identified.
- NGO: Via the platform, NGOs benefit from an increased reach of potential investors and have the ability to scale projects by attracting impact investments that benefit the environment and social conditions of people working in the informal waste sector.
- Brand owner/material supplier: Benefits for brand owners are threefold. First, a 4 to 16 times return on investment (ROI) on plastic credits over an average investment period of 5 years (given the price range of US$200-800 according to the Verra standard). Secondly, being able to comply with globally increasing EPR regulations and thereby secure their license to operate. Lastly, a substantially increased availability of non-virgin feedstock material which is gaining ground in sustainability KPIs.
- Sorting unit: Secure funding to set up proper sorting infrastructure and equip the workforce with handling tools following higher safety measures.
- Recycler: Increased revenue potential through a higher availability of sorted material.