Waste is raw material in the wrong place – and according to Eurostat, a lot of "raw material" was produced in the countries of the European Union in 2018, with more than 2,3 billion tons. Although this idea is old, structured recycling only found its way into waste management in the 60s and 70s.
Currently, around 39% of waste is recycled. The majority ends up in landfills or is converted into energy through incineration. For plastic, the percentage of recycled products is significantly lower.
We only have one planet Earth, but by 2050 our consumption will reach a level as if we had three of them.
Virginijus Sinkevičius, EU Commissioner
Our economic system is predominantly linear. Virginijus Sinkevičius, the Commissioner for the Environment, Oceans and Fisheries, rightly points out that by 2050, our consumption will reach a level equivalent to having three planets at our disposal. Hence, the transformation to a circular economy is logical.
Waste prevention, recycling, and, where technically feasible, the return of certain waste to its original components are the essential building blocks of a successful circular economy. Neither waste prevention nor recycling, and certainly not the return of their components, are sufficient to implement a sustainable, resource-efficient economic system. Even simply replacing products with other, supposedly more sustainable materials is not the missing piece of the puzzle for transforming our linear economic system into a circular economy. For example, glass or aluminum bottles can represent an attractive alternative to traditional PET bottles, but only if they are made from recycled materials and are not transported over long distances.
To transform our linear economic system into a circular economy, a number of regulatory measures are being implemented, particularly within the European Union. However, for the transformation to be successful, the circular economy must create new opportunities for the economy. Where could these be found?
Three building blocks for a functioning circular economy
- Waste prevention
Waste prevention is the component that we can most influence ourselves and is at the core of regulatory debates. Waste prevention also appears to be the component that is heavily influenced by prohibitions. Certainly, this involves restrictions, be it bans on certain products, but also measures to extend the lifespan of goods. The resulting reduction in product turnover is not always offset by pricing, especially since it is also a result of fads.
This raises the question of how the economy is supposed to benefit from this. The opportunities arise, on the one hand, from advances in materials management and product design, and, on the other, from digitalization and artificial intelligence. The possibilities for advances in materials management and product design arise from the need to adapt products to the requirements of sustainably produced raw materials, to forgo the use of certain materials, or to replace them with other materials. Digitalization and artificial intelligence support the adaptation of production processes, the implementation of design specifications, and resource-efficient production. Digitalization and artificial intelligence also make the needs-based planning of maintenance steps for systems through predictive maintenance possible. The resulting savings can have a positive impact on product margins and cushion any "losses" from products with longer service lives. Certainly, software-based systems and the widespread implementation of IoT concepts increase cost pressure. Finally, IT-based systems must be regularly adapted to new software versions. Modern, digital system components can no longer be used for decades, but often have a significantly shorter service life.
2. Recycling
Recycling is probably the best-known component of the circular economy. Ultimately, however, it's not just about the recycling of plant materials, glass, paper, metals, or PET bottles. Nor is it exclusively about downcycling, in which collected products can only be recycled to a limited extent and are then eliminated from the cycle as waste after a few steps. Another example from the (extended) food industry is the profitable use of by-products for one's own production process or for alternative end products. "Shared services" are ultimately a combination of waste prevention and recycling. Both recycling and shared services require a corresponding logistical concept for the "multiple" use of the product. Potential for the economy arises in design and materials management (product design and concepts to promote recycling or multiple use), in digital concepts (which optimize use for multiple use), and in sustainable logistics solutions (including collection and distribution, preventing misuse of shared services).
3. Repatriation
The third building block of the circular economy is the recycling of materials into their original components. This enables the continuous recycling of materials by mechanically or chemically converting them back into their processable raw materials. Examples of this include the Re-Oil technology used by OMV for plastics or the production of fuels from waste oil. Since this building block is still in its infancy, it opens up unimagined opportunities for the economy. However, innovative solutions are first needed to develop and establish profitable chemical and mechanical technologies. In addition, optimized logistics concepts for the collection and climate-friendly transport of the required raw materials must be developed. Product design is also challenging. Problematic additives must be avoided.
Not isolated solutions, but cooperation is necessary for a successful circular economy.
While each of these elements opens up opportunities for companies, a successful transformation requires the development of a corresponding ecosystem for the circular economy. Economic actors at different stages of the value chain must work together accordingly to optimally align product design, materials management, process steps, as well as collection and transport, with the requirements of the circular economy. Collaborations, not isolated solutions, are necessary for a successful circular economy. This is precisely where ÖBAG is called upon, especially since, with OMV/Borealis, it has a player in its portfolio that can address this topic for the future. Furthermore, Austrian Post, as Austria's largest logistics group, can also contribute to the circular economy; or Telekom Austria, which not only markets short-lived consumer goods in its end customer segment but, as a digital partner, can also support business models in their transformation to the circular economy.
Jürgen Prumetz oversees Verbund and OMV at ÖBAG and has extensive cross-sector transaction and financing experience. Prior to joining ÖBAG, Jürgen Prumetz worked for almost 14 years at Erste Group Bank AG, including more than two years as Head of the Corporate Finance Team in Poland.
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