The Circular Economy depends on the collection, sortation and re-distribution of society’s discarded materials. Changes in how products are designed, packaged and sold to consumers will reverberate throughout the product’s entire journey from point of purchase to re-manufacturing. Therefore, creating and successfully implementing a domestic circular economy will require disruptions to the current supply chain of curbside collected waste and recyclables.
The dominant market players that control most of these materials in the US are vertically integrated, which means they have ownership over the entire supply chain. From collection of materials to consolidation and/or processing to landfills, or recyclable markets there has historically been little to no incentive for vertically integrated supply chains, regardless of industry affiliation, to seek alternative destinations for materials that are outside of their control. Even if there are cheaper or more environmentally preferable options available to them.
To achieve success with the recycling and recovery requirements in producer responsibility legislation like SB 54 in California, these companies will need to create alternative supply chains toward local circular markets. This would mean creating and managing more of a supply web, requiring collaboration with other service providers and recyclers that are not in their chain of command and control. Outdated solid waste and recycling contracts that govern the flow of recyclable commodities often don’t allow for access to different pathways for potentially recyclable material.
In fact, some of these exclusive arrangements result in monopolization of the market through exclusivity which deters collaboration with other market players. These contracts tend to create an environment where the incumbent is more focused on maintaining their dominant position and maximizing profits rather than investing in innovation. This can lead to rent-seeking behavior, where the emphasis of the business is on extracting economic rent from the market rather than driving innovation and improving products or services.
Progressive policies like Extended Producer Responsibility and mandatory organics recycling are bringing innovators and investors in droves to California but these outdated contracts and systems at the local level can detract millions in potential investment in modern infrastructure.
One of the main arguments for exclusivity of service and flow control of material through aging infrastructure is amortization of assets that help keep rates low. This may have been true when material flow was more linear, but due to increasing diversion requirements developers are willing to invest millions in new public assets like brand new, modern processing and recycling infrastructure that results in less public nuisances and reduced air pollutants at the same or even reduced market rates as the current providers.
Local Governments are the entities responsible for implementing programs to achieve these ambitious climate policies that often come in the form of unfunded mandates. It is important for local governments to see the waste and recyclable material generated within their jurisdiction as an asset which has the power to fuel the local circular economy when directed to its highest and best use. Solid waste contracts must be updated to reflect the demands of the new circular economy and allow for alternative pathways for material and more consumer choice when available.
Innovation is knocking and it is time to remove the brick wall and open the door!
