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Circular Reasoning: Why Chemical Manufacturers Are Engaging In The Circular Economy

Why more chemical manufacturers are engaging in the Circular Economy, and how digital technologies can help them capitalize.

As one of the world’s best-known manufacturers of the rolling rubber objects that populate landfills by the millions—automotive tires, specifically—Michelin seemingly was destined for a role in the Circular Economy.

Michelin further embraced that role last October with its acquisition of U.S. specialty chemicals company Lehigh Technologies, which produces a material called micronized rubber powder (MRP) from waste tires. These powders are capable of replacing oil- and rubber-based feedstocks in a variety of applications, including production of high-performance tires. It’s exactly the type of business, and the type of closed-loop, zero-waste process, that manufacturers are pursuing as they move away from the traditional linear “take-make-dispose” model of creation and consumption, to a circular model in which materials are continuously looped back into the value chain for re-use, resulting in less energy and resource consumption.

Chemical manufacturing, and plastics in particular, have emerged as a key target for the Circular Economy movement. And for good reason:

• An estimated 95 percent of plastic packaging material value, or $80-$120 billion in economic value, is lost annually because of a short first use, according to a 2016 report by the World Economic Forum.

• 72 percent of plastic packaging is not recovered, according to the WEF report; 40 percent ends up in the landfill and 32 percent leaks out of the collection system.

• Plastic waste causes $13 billion in damage each year to marine ecosystems, the United Nations estimates.

Although Europe is the movement’s epicenter, the circular economy has become a global imperative. In July, China and the European Union (EU) agreed to cooperate on circular economy initiatives. In the United States, meanwhile, the American Chemistry Council’s Plastics Division this spring committed to a goal of recycling or recovering all plastic packaging used in the U.S. by 2040, and along the way, to make all plastics packaging recyclable or recoverable by 2030.

“Together with our value chain partners we intend to transition to increasingly circular systems for designing, manufacturing, recycling, and recovering our plastic packaging resources,” explained Steve Russell, the ACC’s vice president of plastics.

As the Michelin-Lehigh alliance illustrates, some manufacturers view that transition as an opportunity to cultivate new business opportunities while closing the loop on their products. But the business case for embracing the Circular Economy extends well beyond the creation of new, high-value product applications. It also gives chemical producers an opportunity to optimize their manufacturing processes, to increase vertical integration of the supply chain, reduce resource consumption, and gain greater control over the entire product lifecycle, including the ability to sustainably manage the end-of-life of a product such as tires.

Realizing these benefits takes a creative strategic vision along with a robust digital technology foundation, one that enables a manufacturer to explore, design, and scale up new products and processes quickly and efficiently. Here are several ways technology is positioning chemical manufacturers to capitalize on the opportunities the Circular Economy presents:

• A digital platform can enable rapid development of innovative products and services in a collaborative fashion. Manufacturers can bring together suppliers, customers, and other relevant parties, relying on the “wisdom of the crowd” to design products that fit the tenets of the circular economy: built-to-last, built-to-repair, and/or built-to-recycle products, made from homogeneous materials to facilitate full recycling at end of life. This open innovation could be guided by goals that are commonly agreed-upon via blockchain. During the design process, machine learning tools attached to that platform can predict the environmental performance and impact of a new product, forecasting its carbon footprint along the entire lifecycle.

• Such a platform can enable manufacturers to track and trace production materials (including rare earth and noble metals, etc.) “cradle to cradle,” along their entire lifecycle, using blockchain, allowing them to authenticate the origin of raw materials, which helps to reinforce fair trade and labor practices.

• Digital tools can be the catalyst to optimizing manufacturing and business processes across an enterprise to gear up for the Circular Economy. With machine learning tools, manufacturers can predict new product quality in the manufacturing process while minimizing waste and energy consumption. Additive manufacturing and 3D printing technologies allow manufacturers to explore innovative applications for high-value materials (such as high-performance composites) with little to no waste or inventories, for example.

• An open digital platform can transform a manufacturer into a network orchestrator. For example, instead of funding construction of a new recycling plant, a group of investors could create a collaborative trading platform, enabled by a blockchain, to trade derivatives that represent a physical amount of a chemical product. Once a critical threshold of investment in a buyback program has been reached, initial investors are repaid at a premium for the assets that they currently hold, with compensation being either monetary, or in an equivalent of the chemical product. Platform owners retain full ownership of their business.

• A digital platform with embedded and regularly updated safety and compliance requirements can enable manufacturers to monitor and measure the impact of changes in regulatory requirements on their products and services in real-time, allowing them to design products, formulations, and composites to meet prevailing regulatory standards in specific markets—and to rapidly adjust those products or find acceptable alternatives as regulations change. Using machine learning tools, manufacturers also gain the ability to rapidly simulate the impact of new regulatory policies and laws on sales in certain regions or countries.

Whether the market is Europe, China, the U.S., or elsewhere, digital technologies figure to play a key role in helping chemical manufacturers develop the low-carbon innovations they’ll need to thrive in the Circular Economy. When earlier this year the CO2Value Europe Consortium launched the H2020 BioRECO2VER project to pursue more efficient, sustainable processes for commercially producing platform chemicals like isobutene and lactate from carbon dioxide, it acknowledged facing formidable technical and economic barriers. “To name a few: gas pretreatment costs are still too high, gas transfer in the bioreactors is suboptimal, product recovery costs are still too elevated, and the scalability has not sufficiently been proven.”

Overall, companies setting the foundation now for operating with visibility, focus, and agility through becoming “Intelligent Enterprises” are predestined to gain a first mover advantage in addressing the circular economy and help the world to become a safer, cleaner, and better place

Dr. Stefan Guertzgen is Senior Director, Chemicals, for Global Industry Marketing and Communications at SAP.


Perfect Storm

A confluence of factors is driving chemical companies to invest in the Circular Economy:

• Resource scarcity. Fossil fuel supplies are dwindling while critical rare earth raw materials like titanium, lithium, and cobalt are not only limited in availability, they are either concentrated in countries like China or Russia, or located in politically unstable third-world countries.

• Environmental pollution and waste. Pollution is reaching critical limits. Landfills and recycling facilities are approaching capacity. Plastic refuse is choking our oceans.

• Stricter regulatory requirements. Regulations are becoming exponentially stricter as the environmental impact of emissions and waste become clearer.

• Changing consumer expectations. The consuming public is fast becoming more aware of its plastic intake and as a result, is demanding ecologically friendlier products.

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