Waste pooling collaboratives for profitable circular economy

  • Articles
  • Apr 19,24
Waste reduction is one of the key steps towards sustainability. Companies opt for recycle, reuse and refurbish waste to create value. Here, R Jayaraman explains the concept of waste pooling collaboratives (WPC) for profitable circular economy.
Waste pooling collaboratives for profitable circular economy

One of the key steps towards sustainability is the reduction of waste. I used my father’s bicycle at IIT. It was at least 40 years old. Life cycle of the product would have been much more, but it got stolen one day, when I left it in a parking lot. My father used the umbrella which was handed over to him by my grandfather. The tradition and culture of using a product till its lifecycle is over is not new to Indian mores. Recycle, reuse, refurbish and use, are all a part of our culture. Now, these practices appear to have been prescient, in that, the sustainability movement has rediscovered them. Better late than never.

Reduction of waste can be achieved in many ways. By using the umbrella and the bicycle till their end of lifecycle, the need for new replacements has been postponed. What was used for maybe 50 years, could have been disposed of after 10 years, and a new one bought in its place. The waste here is the ‘loss of lifecycle’ or a ‘shortened lifecycle’. To promote sustainability, citizens should use goods and services to the optimal. The word ‘optimal’ is used here because, towards the end of the lifecycle, the umbrella and the bicycle could need more maintenance, which would not be needed for the replacements. Thus, there is a ‘tradeoff’ situation. When productivity is increased – land productivity, labour productivity, capital productivity, etc. – more is being obtained from the use of fewer or lesser levels of resources. This is another way of contributing to sustainability. All these are known in the manufacturing industry and being practised in one way or the other. Reduction in waste leads to higher profit, and hence the impetus to the industry to drive this.

Encouraging circularity 
Of late, another aspect of waste reduction has been identified. This is the ‘circular economy’. The distinguishing features of this concept are: closed loop sharing of inputs for creating a finished product between consenting producers/ value adders; inputs should be ‘wastes’ generated in any of the producers; sell the finished products in secondary markets or primary markets as per the usage of the ‘waste’. A good example of a ‘circular economy’ is the one that can be built between automobile companies, scrap collectors, and steel plants. Steel plants produce the cold rolled sheets for passenger vehicles (PV’s). At the end of their lifecycle, PV’s are ‘purchased’ by scrap processors, who separate out the steel metal parts. These are then sold to the steel plants as scrap. The scrap is fed as input to either an electric arc furnace or a blast furnace, for steel making and producing cold rolled sheets. This closed loop system has been in operation for many years. Similarly, car tyre makers also have a tripartite system. It would thus appear that, at the simplest level, there are three players required for the ‘circular economy’ (CE) to become functional. The producer, the user or end customer and the intermediary, which performs as a bridge between the two. 

In another form of CE, computer companies like Dell, Acer, Lenovo, HP sell computers to users. After use, they sell the same to intermediaries. These intermediaries then either refurbish and sell the products in a secondary market, or they completely dismantle the product and sell the parts to various parts buyers, who then proceed to use them in their production, and sell to either secondary or primary markets. 

In yet another form of circular economy, washing machine sellers buy back the used products, refurbish them or dismantle them, and make new products using these, and sell in markets as appropriate. 

Thus, there are at least three types of CE’s: the tripartite, the bipartite and the single party systems. There could be variants of these as well. The point is, the used product is put back to use, into consumption, or, reconsumption, with a bit of value addition. What are the benefits and problems with these systems? And, of CE itself? Is circular economy a sustainable practice? Does it really lead to reduction in waste? Does it lead to sustainability – if yes, then how? 

Let us take an example. Plastic cans are used extensively. Where do they land up? Mostly in the sea. So new demand has to be met by new plastics production, and the same dumping after use will go on. So, in this case, if the used plastic had been given to an intermediary for processing, that party could have processed and sent out at least 60 to 80 percent of the goods received, which would have prevented the production of new plastic. Also saved in the quantity dumped. This CE system results in the reduction of waste to the extent of at least 60 to 70%, depending on the process efficiencies. In the case of cars, there was a time, when, in some countries, the used cars were dumped in the sea. Naturally, the CE in this product will save at least 80 to 90 percent of the waste. One reason for the cars dumping was that technology then prevalent did not allow for producing high quality steel using auto scrap. However, subsequent tech advances have made this possible. Thus, savings in the use of input materials, lower consumption of resources during production due to use of prepared inputs, a lower overall level of transportation due to handling of lower quantity, lower consumption of resources due to a lower level of production quantity are the benefits. 

Waste pooling collaboratives
Sustainability is addressed due to all these lower levels of activities. Lesser resources consumption, lesser waste disposal into the sea etc., which help conserve fossil fuels wherever used, reduced consumption of inputs will lead to a lower level of exploitation of inputs sources. However, the one aspect which works against this whole system could possibly the cost. Wastes are often obtained from retail markets, which means a higher cost of acquisition, costs incurred in homogenization, separation and aggregation, etc. The additional costs incurred need to be compensated for or reduced as much as possible. One way of doing so is to create ‘Waste Pooling Collaboratives’ (WPC).

What are WPC? These are the agencies who undertake the work of aggregation of wastes of different types. Such collaboratives ensure adequate volumes of wastes for processing, which will reduce the cost. Using Industry 4.0 tools and techniques, the cost of such volume operations can be brought down, when compared with individual agencies collecting and processing small volumes. The pooling is a method to increase processing volumes, collaborative means the collection of wastes is done by several independent agencies. Such a collaborative has been seen recently in a Tata Motors facility in Delhi, where used cars will be scrapped. This is the fifth of such a facility of Tata Motors, where the scrap generated will be disposed of suitably. This is an instance of creating a method for making circular economy a viable proposition, and devise a system by which such wastes can be dealt with, to contribute to sustainability. It is suggested that more and more such economically viable systems are created speedily, so that CE can flourish. 

About the author:
R Jayaraman is the Head, Capstone Projects, at Bhavan's S P Jain Institute of Management & Research (SPJIMR). He has worked in several capacities, including Tata Steel, for over 30 years. He has authored over 60 papers in academic and techno economic journals in India and abroad. Jayaraman is a qualified and trained Malcolm Baldrige and EFQM Business Model Lead Assessor. 

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