Plastic pollution is a unique environmental crisis as it is a global problem with local solutions. That is, if we want to solve it, we need to implement a multi-regional, multi-faceted approach that takes into account the different challenges faced by different parts of the world. We need to inject capital into the local businesses that can help build the local, regional and ultimately global recycling supply chains that are needed.
And we have known for some time that the right recipe in Latin America and the Caribbean (LAC) will go a long way towards solving the global problem. Recycling rates in the LAC region lag far behind the rest of the world. Additionally, according to a UNEP report, Latin America and the Caribbean generate about 10% of all waste generated globally, second only to East Asia and the Pacific. The report also notes that currently only 10% of waste is reused through recycling or other recovery techniques and current waste generation in the region will increase by at least 25% by 2025.
But until now we haven’t really understood how to segment and target the business opportunities to accelerate the development of a circular economy. For more than two years, our team has been working with a range of public and private organizations to achieve just that. That includes institutions like the Inter-American Development Bank, which has loudly pledged to seed the space in the LAC region, and a steering group made up of PepsiCo
With the research in my pocket, I want to summarize some of the insights from this process – based on input from these multinationals and other stakeholders – and how to assess the LAC market in terms of challenges and opportunities.
A quick side note – for those of you following this column, you will know that my expertise in solving and remediating the plastic pollution crisis comes in large part from my company’s experience on the ground in South and Southeast Asia (SSEA). Over the last few years we have worked to prove that you can actually find viable business opportunities and attract corporate and institutional capital to scale solutions.
Latin America and the Caribbean is a region of extremes, and the circular economy is no exception. There are clearly identifiable needs: low overall collection, high level of informality, low level of professionalization and large capital gaps. There are also a number of strengths: world-class recyclers, existing capacity and proven models. In this sense, the starting position in LAC is different than in SSEA and they are ahead in many respects compared to SSEA in many respects. In particular, there are models and evidence on the informal sector of waste collectors in LAC that SSEA can learn from.
However, nothing is that simple when it comes to the circular economy for plastic waste. While business opportunities in traditional finance are often interchangeable, in the circular economy one cannot simply transfer learnings from one region to another and call it a day. Certainly many of the challenges may be similar, but the factors vary greatly by region and even country.
Brazil
A strategy for building ecosystems
We have narrowed our perspective to focus on three core issues:
- Ecosystem development and the networked approach. Flow
RIVER2 of capital is only part of the solution and will only be successful in partnership with other actors. Interested stakeholders need to think about providing capital, scaling and networking, and opening doors for local entrepreneurs with new solutions and technologies to help the region.
- Make sure you have the right tools for the right problems. Punching pros can often suffer from Maslow’s hammer (i.e. when the only tool you have is a hammer, you tend to see every problem as a nail). Delivering value and solutions to the specific problems and goals of the recycling supply chain is critical to ensure the end market is prepared for acceptance.
- Rising Tide Raises all boats. Leverage existing work and best practices to scale faster than any single player could do alone.
Alongside opportunities in well-known technologies and business models, there has also been ongoing pressure from the steering group and stakeholders to move faster and look for leapfrogging solutions such as chemical recycling and other innovative approaches.
Segmentation of the promising LAC marketplace
We see the greatest opportunities in the following three areas:
- Scale recycling supply chains for recycled PET (what water bottles are made of), rPE/rPP (what detergent bottles are made of) and multi-layer plastic (what candy wrappers and pouches are made of).
- reduce plastic pollution and greenhouse gases (GHGs); and
- Increase uptake of post-consumer recycling (PCR) for packaging; and improve livelihoods.
We have divided the continent into two segments: scalable markets such as Mexico, Brazil, Colombia and Chile, and frontier markets such as Peru, Costa Rica and El Salvador.
As a quick snapshot, if we look at these ready-to-scale markets, there are opportunities to deploy solutions faster and at greater scale than other countries. For example, we believe that with PET, the focus should be on scale and vertical integration. It’s not just about building new rPET plants, because some of the best rPET plants in the world are already running here. There are strong models at play that we believe have key elements of integration that can be applied to other underserved markets, which would mitigate risk and increase the likelihood of success. We know there are already strong operators in the market and we believe they can be helped to reach new levels of potency, new resins and also new geographies.
Where to from here?
These types of solutions offer the potential to unleash all sorts of important environmental impacts; plastic pollution of the oceans and vulnerable populations; help create a safer and more stable environment for waste collectors; limit the use of open landfills that create additional health risks, and fuel the next generation of emerging businesses, waste recycling and circular economy companies previously overlooked by institutional capital.
