Let's talk about waste as resource / with Cyril Klepek
ML (Michael Londesborough): Today’s guest is Cyril Klepek, an innovative economist who’s helping many companies transition into the circular economy. He’s also interested in waste management and is the founder of the secondary resource platform Cyrkl.
Many believe that the way toward a sustainable future lies in the shift toward a circular economy. What role do you play in this transition?
CK (Cyril Klepek): I am an innovator who specializes in circular economics and I see enormous potential for many companies in the transfer from traditional business models to more circular ones. As they become aware of the changing economic landscape, many companies are eager to begin the transition. My goal is to help them find suitable new business models and perhaps help them conceive new products, potentially created out of “waste”.
ML: So companies are interested in transitioning to the circular economy but they don’t quite yet know how to do it…
CK: Correct. I’ve had the CEOs of many big companies invite me to discuss potential opportunities for their company within a circular economy model. It’s quite a broad domain and there are multiple aspects to consider, including digitalization, waste, shifting business models and more. A circular economy consists of seven principles and every company can find at least one that they can tailor to fit their needs.
ML: Can we put a monetary figure on the economic potential of a complete transition to circular economy?
CK: According to a study by McKinsey, billions of Euros can be gained from optimizing processes for lower energy usage, new product creation and establishing different business models to generate income. For example, if you have a circular product, you may not sell a new one every year, instead you might lease it and collect an hourly fee. There are various opportunities. We can expect new modes of delivery, millions of new jobs and quite a large sum of money to come along with this transition.
ML: New jobs, new opportunities… new companies as well? Do you expect to see new specialist companies dealing with specific parts of the circular economy?
CK: Absolutely. I’ve already seen specialized startups popping up. Established companies are looking for opportunities in this area as well. Many are looking for ways to create value out of what was previously regarded as waste. Big companies are implementing ways to optimize their business models. There are many opportunities for startups, big companies and middle market companies alike. Every industry is different, so it’s important to deep dive and think within the context of each particular company, but the opportunity is there.
ML: Let’s talk a bit about waste management. In England we say “one man’s trash is another man’s treasure”. An idea which gives value to what was previously deemed valueless really creates a win-win situation. What’s happening in Czech Republic today regarding waste management and what specifically do you do in this area?
CK: The waste management industry is undergoing a transition. Today we generally see waste as a problem and pay quite a lot of money to waste management companies to get away from it. The future will be different- we will think of waste more as a resource.
That’s why I founded the Cyrkl resource platform. Many companies today are shifting their perception of waste and thinking about whether another company can perhaps create something valuable out of their waste material. Hopefully Cyrkl will play a part in this shifting value chain.
ML: So you’ve really created an online marketplace. How does it work?
CK: We match a company that creates waste with another company that can use that waste to make something new. For example, one company may create two tons of plastic waste per month, while another company is looking for plastic material to create furniture. Both parties can come to my platform and I will match them. Company B, which needs the material, finds company A, who creates it as waste, and takes it off their hands. This way we can utilize the material and avoid dumping it in a landfill.
ML: Who sets the price in this market? Is it a free market model where price is determined by supply and demand? Or is someone putting a minimum price to it all?
CK: Today, the two companies have to agree on a certain price level. In the future I hope that there will be one set price for a given material, much like in, for example, the London Exchange Market. The aim is to set a transparent, democratic market, because lack of transparency, especially in waste management, is a problem.
ML: Is the marketplace potentially international? Or is it restricted? What does legislation say about it?
CK: We will be open internationally in the future, but each state in the European Union has different legislature, so that has to come into consideration. It’s also always better to deal with waste on a local level. Delivering waste for example from Prague to Spain would create an unnecessary source of CO2 and other emissions. So the market is local, but socially it is scaled globally.
ML: That’s a good point. While the principle is quite straightforward, in reality there are many aspects that have to be factored in. Things such as transportation, CO2 emissions and other tangential considerations have to be taken into account. You have to really think about how best to make this market work. Is the market meant to generate money and profit or is it meant to support sustainability and the complete circular approach? Who determines the purpose of the market?
CK: It’s not going to be a person; it’s going to be the market. In order to achieve transparent pricing, waste management has to have market behavior. The business today is filled with middle men and an array of different handlers. As a result, the whole business is shady. We want to match these two parties without a middle man and thus increase market transparency.
ML: Let’s return to landfills, an obvious competitor. The question for companies becomes whether to send their waste to a landfill or to your market instead. How easy is it for people to dump their waste in landfills? How irresponsible is that and can we change it?
CK: In the Czech Republic, we produce 34 million tons of waste per year. Regarding municipal waste, we know that 45% of that goes into landfills. Meanwhile, 80% of this material could be recycled and the reason it’s not is the lack of market transparency. We also have very low landfill fees, just 500 crowns per ton, so the easiest way for companies to deal with waste is just to dump it. We need to change that.
ML: How does that compare to our European neighbors?
CK: It varies significantly between the East and West part. In the West, the percentage dumped is almost zero. In the East it’s quite a bit higher.
ML: Is that because landfill dumping is highly taxed and therefore very prohibitively expensive? Is that the key?
CK: That’s one of the reasons.
ML: So is it as simple as hitting a prohibitively high landfill tax and through pure economics, companies decide not to dump? Or are people becoming more aware and want to make that change so they will rather go to recycle?
CK: There are two drivers. One is that we know terrible landfills are. They smell, they pollute our water, they’re simply terrible. I would say that people in the West are more aware of that and they don’t want to have landfills polluting their environment. So that’s one thing- they’re keenly aware of how horrible it is for the environment. The second reason is their landfilling fees are much higher. This motivates the recycling industry to invest into new technologies. If we were to increase the price in Czech Republic from 500 crowns to at least seven or eight hundred, investing into new recycling technologies would also pay off. We need such an increase.
ML: That’s only a six percent increase from the current price. Why aren’t we doing it?
CK: A lot of the companies are ready. The business plans are ready, the technology is ready and they are just waiting for it. The problem is that many waste management companies have found a way to easily generate a lot of profit from landfills. These businesses have a very strong voice in parliament and are thus very effective at affecting policy. We as a society need to unite and make a stand that we don’t want landfills to be a part of our economy and modern society.
ML: Do you feel as if it’s changing? Is there a bright future in terms of recycling in front of us?
CK: I feel very positive. A steadily increasing number of people is becoming aware of the issue, of changes in nature and climate and they want to buy products from recycled materials. It is changing, but it’s changing slowly.
ML: Let’s talk about some specific materials. What materials do you see a very bright future for in terms of recycling? With what materials will it be harder?
CK: It depends on supply and demand. For example, we are currently seeing a shortage of gravel and sand in the construction industry. This material makes up about 60% of landfills so for waste management companies, this is really an opportunity. They’re currently trying to figure out how to extract it so they’ll be able to sell it. So there is tremendous potential for construction materials. There’s also potential with plastic, especially high density polyethylene and other similar kinds of high quality materials. I would say that companies in general are becoming more aware of the potential of these materials, especially once a slowdown happens. At that point, more and more companies will think about being able to sell their waste material instead of dumping it.
ML: So construction material, like sand and concrete, and also plastics. You mentioned high density polyethylene, which has a high value. However, in every cycle, or recycling event, quality of material does go down. Does this market and does this economy understand that? That it will not necessarily get the virgin product material properties and it’ll have to absorb that slight reduction in quality…
CK: We’re aware that virgin materials have a different level of quality than secondary materials. Take the construction business. When building a bridge, there are certain parts in which you definitely shouldn’t use secondary materials. On the other hand, there are other areas, maybe part of a highway, where you can use recycled materials very easily. We also do testing on these materials and we know that the quality is almost the same.
ML: Is legislation prepared for that? For example, recently in Britain there were a couple of unhappy construction projects. In the end it turned out that it was because they used lower quality, low grade materials. Surely there has to be some sort of legislation which provides a framework of what uses are permitted for recycled material and where they have to be of virgin quality.
CK: There is an activity in Czech now called Zelené Zadávání [Green Assignment] which informs municipalities and other big players for what purpose you can use these kinds of materials. We are slowly becoming more aware of the potential positive sides of recycled materials.
ML: Is your marketplace creating new companies that are using these second-hand materials? Are you seeing a lot of users, who are buying this material and doing something innovative with it?
CK: We’ve only been around for a short time, so we’re not at the point of starting new companies yet, but many companies are beginning to think in this way. For example, Brokis is a glass-making company. In the past, they used to dump their broken glass into landfills but now they’ve started a new company called Broken Glass and are creating high- end designer products out of what used to be waste. It’s a brand new concept and the products are quite expensive, but people are buying them because they look fantastic and there is a story behind them. By purchasing the product, you become involved in a story. That’s becoming increasingly important for today’s customers. They’re not just buying stuff; they want to have an experience. They want to be part of a story.
ML: Are you noticing that generally speaking in the market? People are willing to pay extra to be part of a story? To enter into that circular motion instead of just going for the bottom line price?
CK: It is changing. A study that came out a couple of weeks ago concluded that last year, 46% of people bought at least one environmentally friendly product. 68% said they would be willing to pay more for a product which includes this experience and has a positive environmental impact. It’s absolutely changing.