Disrupt your industry with a circular business strategy

Taxes on packaging are growing in EU to force manufacturers to think circularly as EU has the ambition to be a circular economy in 2050. For example the total packaging taxes in Denmark for 2018 were DKK 702 million. Of this, the taxes on retail sales packages amounted to 52%. These taxes include taxation on packaging for wine, beer, spirits and soft drinks. The charges on disposable tableware as well as bags of paper or plastic, amounted to resp. 21% and 25% of the total packaging taxes. The purpose of the packaging tax is to create an incentive for the collection and refilling of used packaging. The packaging tax thus supports the UN’s world goal 12 on reducing waste volumes.  

If you like to understand more about the Nordic tax regime for packaging material and its impact a tip is to read the report Study on Environmental Taxes and Charges in the EU.  

Why is cutting down our material consumption so important? 
According to EU Commission, half of the total greenhouse gas emissions and more than 90% of biodiversity loss and water stress come from resource extraction and processing. Therefore, EU launched the European Green Deal, a concerted strategy for a climate-neutral, resource-efficient, and competitive economy. The goal is to scale up the circular economy from front-runners to the mainstream economic players. If EU succeed in making circular business models mainstream, it will make a decisive contribution to achieving climate neutrality by 2050 and decoupling economic growth from resource use, while ensuring the long-term competitiveness of the EU and leaving no one behind.  

Therefore, EU will require 85% of packaging materials to be recycled by 2030 

If we continue reading the Circular Economy Action Plan For a cleaner and more competitive Europe, put forward by EUROPEAN COMMISSION, Brussels, 11.3.2020 COM and that is a part of the European Green Deal we learn that EU will require 85% of packaging materials to be recycled by 2030. 
 
Based on the existing commitment to separate collection for paper and cardboard, glass, metal and plastic, the new rules for separate collection will contribute to increasing the quality and use of secondary raw materials: hazardous household waste must be collected separately by 2022, biowaste no later than 2023 and textiles by 2025.These new legislations provide for more efficient use of economic instruments and other measures to support the waste hierarchy.  

Manufacturers have been given an important role in this transition, for their products even when they become waste. In addition, compulsory schemes for extended manufacturers responsibility for all types of packaging must be established no later than 2024. Our vision at IBM is to reinvent the use of resources. We are helping clients to design and deliver digital transformation that will provide digital identity to reusable materials. One of the projects I’m working on right now, is to create a blockchain solution to the construction industry here in Denmark, that will make all documentation for construction easier to identify and hereby reuse or repair.  

Important to have in mind is that the ability to repair or recycle a product and reuse its components and materials depends largely on the original design of the product. An example that I proudly mention is how IBM work in this field taking this into consideration, from the development of their own products to their contribution by supporting others with the dedicated analytical tools that we have developed for this cause. Following the April-October 2016 eco-design debates, the European Commission reaffirmed the importance of intelligent product design and decided to focus its efforts on the product groups that have the greatest energy and resource-saving potential, and further strengthen the evidence base for regulatory action. It resulted, on November 30, 2016, in the adoption of the Ecodesign Work Plan 2016-2019 as part of the Clean Energy Package for All Europeans. 

Except from making a company more environmentally friendly and complaint, a circular business concept also represents the chance to connect customers closer to the business – if the model is easy to use and the customers experience the competitors as more difficult. 

So, with all of this said, here are some recommended questions one should ask oneself as a management team:  
 
Packaging 

• Can packaging be used repletely if the business gets them back directly from the consumer? 
• Can cardboard boxes be used many times if the activity gets them back directly from the consumer? 
• Can shipping packaging be designed differently so recycling is easier? 

Customer loyalty 

• Can goods come on a subscription plan? 
• Can postal items be organized differently so returning the packaging becomes easy? 
• Can circular use of packaging create the preference of customers? 

Logistics 

• Can management make demands on its suppliers to also recycle the packaging? 
• If the company gets its packaging returned, where should it be treated? 
• If the company gets its packaging returned, where should it be cleaned and made ready? 

And remember, the above new rules do not have to mean an increased cost if you as a company include circular models in your strategy. Since you get materials back to new production or spare parts for after-service there is no need for waste costs to be paid. Why so? Well you then meet the legislation on reduction of trash.