Businesses have been making huge losses by failing to capture the value of industrial waste, but applying circular economy strategies, enabled by new technologies, could create cost-saving opportunities as well as profitable new revenue streams.
The waste generated by residential buildings may seem enormous, but the waste produced by factories is an awful lot more. In Europe, factories produce 46 million tonnes more waste than households every year. Yet, surprisingly, unlike households, they are not as incentivised to reduce and retrieve waste. European Union waste legislation, for instance, contains targets that focus mostly on household waste whilst industrial waste landfilling is still often cheaper than incineration or recycling. In France, for example, the average cost of recycling, excluding taxes, is EUR 144 per tonne compared to EUR 105 for incineration and EUR 68 for landfilling.
Many companies believe their industrial waste management is under control because they have contracted with a waste management company or, perhaps, they have carried out lean manufacturing processes to improve efficiency. But in most cases, businesses fail to retrieve waste in great volume. Even if they efficiently manage standard waste flows, like plastics or cardboard, they overlook others, such as wastewater, spent chemicals, or used equipment. The materials these companies see as waste often contain value that can be recaptured. For instance, most breweries sell spent grains as low-value animal feed while these grains contain high-value components, such as proteins, polysaccharides, and fibres that could be reused as nutritional and pharmacological ingredients. In addition, factories claiming to achieve zero waste to landfill often incinerate most of their waste.
Overlooking industrial waste comes at a cost. In the UK, the actual cost of waste for companies is typically 4% to 5% of turnover and can be as high as 10%. The true cost of waste is not simply the cost of discarded materials, it encompasses inefficient use of raw materials, unnecessary use of energy and water, faulty products, disposal of by-products, waste treatment and wasted labour. Cost of waste is not only high — it is increasing, especially in Europe. In Austria, the landfill tax for industrial waste increased from EUR 3 to 87 per tonne between 1996 and 2014. In France, the General Tax on Polluting Activities is expected to increase from EUR 32 to 65 per tonne for landfill by 2025. In the United Kingdom, the landfill tax has already reached EUR 101 per tonne. For environmental and economic reasons, businesses cannot overlook industrial waste anymore. They need to implement circular economy strategies in order to design out waste and keep materials in use.
Factories should first design out waste, either by adopting new production processes or improving existing ones. For example, by replacing die cutting with cutting technologies that use lasers, Nike intends to minimise the gap between cut parts and, at the end, reduce factory waste by more than 1,000 tonnes annually. Michelin, in 12 years, has succeeded in reducing the quantity of waste generated during the manufacture of tyres by around 27%. Gap, in partnership with Spanish denim mill Tejidos Royo, is implementing a denim dyeing technique that can reduce water and chemical consumption by up to 99% and 89% respectively when compared to the traditional process.
Factories can also switch from buying materials to buying services. For example, automotive, aerospace, and microelectronic industries often purchase chemical management services. These services can encompass all aspects of the chemical management lifecycle, from procurement to end of life management — reducing costs, risks and environmental impacts. The providers of such services, including PPG, Henkel or Quaker Chemicals, are compensated based on the quality and quantity of services provided — not on the volume of chemical sold. This model reduces not only waste, but also chemical use and emissions. In addition, it provides a substantial cost saving — a total average cost reduction of 30% is usually achieved in the first five years.
Turning waste into resources
When waste cannot be avoided, it can often be seen as valuable resources that can be reused in other industrial processes. For example, Denso, an automotive equipment supplier, produces 15 tonnes per year of potassium aluminium fluoride, a hazardous waste. By supplying this waste as a raw material to Mil-Ver Metals, which uses it to produce aluminium alloy ingots, Denso avoids paying GBP 30,000 per year to dispose of it.
Agroindustry, especially, has a major and often under-valued opportunity to convert industrial organic waste into high value speciality products. In Germany, Danone transforms whey, a by-product of cheese production, into lactose for pharmaceutical use. In Manchester, Kellogg’s cereal factory has partnered with UK brewery Seven Bro7hers that uses the corn flakes that do not pass quality control to make beer.
Until recently, matching waste supply with resource demand was often challenging and costly. But new digital platforms, leveraging open data, big data and machine learning technologies, make matching much easier.