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Closing the loop

9th April 2013 Posted by

The latest addition to the growing literature on the circular economy (Closing the loop: risk or reward?) offers a timely reminder that the waste management industry needs to respond to the fast-changing business environment in which it operates, if it is to retain its relevance. Thus far, the report suggests the industry has not fully grasped the seismic shift within our customer base in attitudes towards resource security. Change has been desultory and a significant slice of the industry is still clinging to the established, but soon to be outmoded, business models.

Is this a fair and accurate portrayal of the industry and its future? The answer, I suspect, is “it depends”. Geographically, waste management practices among Member States are as diverse within the European Union as they are internationally, with a handful of good performers mixed in with a greater number of countries whose waste management structures and practices are evolving more slowly. The UK experience demonstrates that timing is everything – offering a new service that a particular market is not yet ready for, is tantamount to committing commercial suicide. The industry can only move as fast as the underlying market will allow, and that in turn relies on the right supporting policy framework. It is only in the past few years, with an ever-ratcheting landfill tax, that alternative service offers have become commercially viable in the UK.

SITA UK's circular economy model

The waste management industry is hugely diverse, with companies in particular niches of the chain (skip hire, transport, etc) operating alongside full-service companies. In the context of the ‘resource revolution’ described in the report*, the question a company has to ask is where in the value chain it chooses to play. A niche player in the beginning or middle of the value chain would be exposed only to that part of the overall resource cycle characterised by the circular economy, for which a conventional business model would most likely still apply.

Companies operating at the end of the value chain, transforming waste materials and trading in waste-derived products, face a different challenge – whether they can control and manage the back-end of the chain without also having to control the front-end. For these companies, control of supply is likely to be integral to the viability of a trading-based business model. It is here that the report’s message resonates the loudest and where the sector has to forge new alliances with its municipal and commercial customers.

The demise of the waste management industry as we know it has been confidently predicted ever since landfill diversion became a legal requirement and landfill tax developed teeth. In a UK that is increasingly cognisant of the inherent value of its waste, the time has come for the industry to take stock and develop a vision for its future.

* http://www.edie.net/sustainability_report/closing_the_loop_form.asp

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