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The other 97%: the circular economy opportunity for Ukraine

“Waste” and “business opportunity” rarely find themselves in the same sentence. Typically, when someone says “waste” we think of landfills, rubbish on the side of the street, or over-filled municipal bins. Those images could not be further from the truth.

10.07.2020

“Waste” and “business opportunity” rarely find themselves in the same sentence. Typically, when someone says “waste” we think of landfills, rubbish on the side of the street, or over-filled municipal bins. Those images could not be further from the truth. The circular economy – a growing trend in business which finds commercially valid models to re-use various products – has picked up pace across the world.

A recent study by global consultancy Accenture put the global value of the circular economy opportunity at $4.5 trillion over the next decade.

Ukraine, too, can be part of that opportunity – although this will require new legislation, proper enforcement of that legislation, and additional capital to fully realize the benefits. The growing support to deal with poorly managed urban waste and over-flowing landfills can provide impetus for lawmakers.

But focusing on municipal waste misses the much, much bigger picture. Each year Ukraine produces some 350 million tons of waste – but only around 3% are actually municipal waste.

THE ICEBERG PRINCIPLE

Discussions about waste typically overlook the industrial portion that accounts for 97%. This, however, represents a vast opportunity. Unused industrial products can find a second life in such areas as electricity and heat, metals and mining, and construction materials (particularly for roads).

The global industrial waste management market was valued at $1.3 trillion in 2018 and is expected to reach $2.5 trillion by 2025, growing at over 10% annually. Some 36% of Ukrainian industrial waste can be recycled or repurposed. The most prominent types of waste and by-products come from the mining, heavy industry, agriculture, and energy sectors.

The process to bring about a “circular economy evolution” in Ukraine is currently being driven by the Committee on Industrial Ecology and Sustainability Development. The committee, which is part of the European Business Association, actively provides expertise and advice on creating the right environment and legislative framework for businesses. Currently Ukrainian legislation only provides a broad framework for developing a waste management ecosystem – a lot of legislative initiatives will be needed to develop the laws that will detail out and regulate the industry, which covers an incredibly vast amount of potential products.

Moreover, it is important that oversight and enforcement take place in a market-friendly, and most importantly, predictable way. Importantly, though, government programs aimed at supporting the growth of Ukraine’s waste management industry need to be carefully designed and tailored to local needs (to avoid, for example, the flaws of the government’s renewable energy feed-in tariff program, which was hardly sustainable).

A cleverly designed and implemented program, however, can make a real difference – avoiding lost opportunities for the country. The Committee on Industrial Ecology and Sustainability Development has identified such solutions as: replacing natural materials with secondary resources in road construction projects, introducing norms for public procurement (mandating use of recycled products);  providing tax benefits or preferential loans for companies that use secondary raw materials; modernizing building codes and other state standards with mandatory use of re-purposed industrial waste.

These are but a few measures that can help stimulate demand for re-purposed and recycled products in Ukraine.

SUCCESS STORIES

Over 8 years of working with the country’s waste management industry we have uncovered a number of promising opportunities, as illustrated by our latest work on developing a profitable by-products re-purposing business project from local coke plant materials.

For years crystal ammonium sulphate – a by-product of the work of Ukrainian coke plants that can be turned into fertilizer – was exported to such countries as Turkey, Bulgaria or Serbia to be processed. Then, to satisfy the demands of agribusinesses, the ammonium sulphates would make their way back to Ukraine!  Recycling Solutions built a plant in Kryvyi Rih to process those by-products into a ready-to-use granulated ammonium sulphate (an effective mineral fertilizer). Not only does the plant embrace circular economy values by reusing by-products from an industrial process, but also by reducing resources spent on moving those by-products around the world.

The agricultural segment also presents interesting opportunities. This year we joined a unique project – building Ukraine’s first high-protein feed additives and animal fats production plant, located in Lviv region. It will be the first independent operator in Ukraine to process raw materials from external suppliers and produce high-protein feed additives and animal fats for farm animals and pets.

Other interesting opportunities can be found in biomass and biogas. For example, according to the energy strategy of Ukraine, by 2035 biomass should account for 11.5% of electricity produced. Currently, the share of biomass in energy consumption is 1.78% – showcasing how big of a gap there is for companies with an eye on sustainability.

OPPORTUNITIES TO BE SEIZED

While such projects will remain relatively rare until the systemic changes mentioned previously are introduced, a significant number of low-hanging fruit opportunities are still waiting to be seized.

In order to capture them, a few things are critical: understanding the market opportunity for the end product, identifying reliable suppliers of raw materials (ideally a few, so as not to be overly dependent on a single player), and finding communities that are supportive of such efforts.

Once those are found, experimentation is the name of the game. Since many companies are hesitant to embark on large-scale initiatives before “testing the waters”, trial batches or tolling contracts can be tried, allowing to manufacture “small amounts” (e.g., from 100 till 2000 tons) of product to test if it meets the necessary standards.

In turn, to ensure that incentives are aligned (in fact, forging the strong links on which the circular economy depends), profit- or equity-sharing structures with key suppliers or customers make sure that partners are interested in each other’s success.

If this sounds like something close to the world of IT startups – that’s not by accident. On the contrary, the world of recycling and the circular economy are driven by entrepreneurship.

We can see numerous examples around the world. One British company produces animal feed from household food waste, while its London neighbor transforms surplus feathers from the poultry industry into natural fibers.

So next time you stumble upon a story about waste, don’t think about city landfills. Think about entrepreneurship, and opportunity.

 

Doing Business (by KyivPost) – 10.07.2020

 

Recycling Solutions provides services for the strategic management of by-products and waste. The company was established in 2012 and is part of the UMG Investments company.

Source: https://www.kyivpost.com/