Partnering for plastics circularity refers to the collaborative efforts of stakeholders across the plastics value chain to create a more sustainable and circular approach to plastic production, consumption, and disposal. With increasing concerns about plastic pollution and its impact on the environment, there is a growing need for companies, governments, and individuals to work together toward a circular economy that promotes the reuse, recycling, and responsible disposal of plastics.
In this week’s podcast episode, Victoria interviews industry insiders Dave Andrew, Vice President of New Market Development with ExxonMobil, Bill Cooper, Sr. Vice President of Corporate Strategy and Development at Cyclyx, Gulay Serhatkulu Sr. Vice President of Performance Materials at BASF, North America, and Jeremy Wallach, Partner with McKinsey.
Previously recorded at the AFPM IPC, Victoria and panelists discuss how they are partnering with consumer brands, recycling consortiums, and others in the plastic value chain, who are working to accelerate a more circular economy for plastics.
Topics discussed in this week’s episode:
- Partnering for plastic circularity
- Has circularity changed the customer-supplier relationship?
- Various stakeholders in this journey of the chemical industry
- The biggest hurdles in trying to build plastics circularity in the value chain
- Collaboration for the plastic value chain
- Challenges to increase recycling rates
- The demand for circular plastics
- The role of brands in helping expand the recycling activity
- Collaborating with other companies – is it a hindrance or is it a help?
This is surely one of the most exciting episodes on The Chemical Show podcast that you shouldn’t miss. Tune in!
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Partnering for Plastics Circularity – LIVE from AFPM IPC 2023
Thank you for joining us this afternoon. For sure, it has to be a great lineup of panels. First off, I have the honor of introducing our first-time attendee ever here at the event at IPC. It’s an episode of The Chemical Show podcast. It will be recorded live on stage momentarily. The Chemical Show is a podcast that focuses on the business of chemicals. Today’s discussion will include industry insiders, talking about how they are partnering with consumer brands, recycling consortiums, and others in the plastic value chain, who are working to accelerate a more circular economy for plastics.
As a regular listener of The Chemical Show, I’m certainly looking forward to hearing this panel of experts, discussing advances in recycling technologies, the challenges and opportunities that face the development of a circular economy for plastics, and how AFPM members are making the products that society needs in a more sustainable way. Please welcome our moderator, Victoria Meyer, the host of the chemical show and business-2-business strategy and marketing expert and founder of Progressio Global.
Dave Andrew is the Vice President of new market development with ExxonMobil. Bill Cooper’s Sr. Vice President of corporate strategy and development at Cyclyx. Gulay Serhatkulu is the Sr. Vice President of performance materials at BASF, North America. Jeremy Wallach is a partner with McKinsey. Welcome our panelists, and we look forward to a great conversation.
Thank you, Rob, for the kind introduction and for inviting us to be part of the AFPM program. As Rob already talked about The Chemical Show podcast, two years ago, really with an intent to provide great stories from great leaders across the industry talking about topics that we’re each facing in our businesses on a daily basis. Rob was actually a guest on the podcast at Episode 52. So go check it out. And Gulay has also been a guest on the Podcast. So go check out those episodes. And if you are not currently subscribing, go find the podcast on your podcast player, either Apple podcast or Spotify, and start following and listening to some great stories.
We’re here today to talk about partnering for plastic circularity. It’s obviously a hot topic across the industry. We will go through a series of questions that really just helped define what it is, how companies are approaching it, how we’re partnering together, and what we can do as an industry. Jeremy, I’m gonna ask you to answer their first question. We’re using the term circular economy quite a bit. And I think not everybody is fully clear on what that is. So, can you define circularity and in particular for the plastics economy, and what that looks like?
Thanks, Victoria. I think we’re gonna hit that in just a second. But I just wanted to remark on having been to a whole series of sessions here at AFPM IPC. Every single session has touched on sustainability, and obviously, this one as well. I think the jumping-off point that maybe we would all agree on is that plastics are essential to everyday life, to consumer goods, to food, to durables, to the energy transition, and yet, we’re all dealing with this issue around plastic waste. And I think that some of the context, and within that, would define circularity as taking material, typically post-consumer, and reusing it. Make it into new material. And I think the nuance there is increasingly the focus is on high-quality materials. We’re using it in packaging. We’re using it in consumer durables, and not so much as it was at one point off-grade flowerpots and drainage pipes.
Dave, has circularity changed the customer-supplier relationship? When you’re thinking about relationships in the value chain, how are you looking at that today?
I don’t think it’s the customer-supplier relationship anymore. I think it’s the customer-supplier, supplier-customer relationship. You really need to go back up the value chain and down the value chain. And I think that’s the hallmark of the circular economy. Traditionally, we sell our plastics to converters, buy globally in the end course of the world, and sell them on to the brands. And quite frankly, our relationship with the brands historically was not as strong as it needs to be. The brands, whether it be Procter and Gamble, Unilever or Nestle, or Mars, they’re the ones that are setting the demand for circular products.
And today, that demand far exceeds the supply. We need to understand how they’re going to represent the circular products to their consumers, what products they need, and what certifications they need. And so that’s introduced a whole new dialogue, but at the same time, we got to figure out where the raw materials come from. When I started my career, I didn’t think I’d ever be talking to waste management companies as a source of feedstock. And yet, we’re doing that every week now. I think that’s the hallmark of this circular economy. New relationships are popping up right across the value chain. No relationships that we didn’t have to nurture before.
That’s interesting. I think we’re on a journey. We’ve talked a little bit about the journey that we’re on and that circularity is a journey. How far are we?
Jeremy, are we still at the beginning? Do we have the map and we start to make our journey management plan? Are we further down the pike? Where do you see this evolving in terms of where we are?
I’m sure we’ll all have different views. I think we might start with something like if you pick baseball, we’re somewhere in the middle of the third inning. I think we have a sense of what the game is. I think we have a sense of aspiration. But there’s a great deal more to do. And if you step back, you say sort of what’s clear, I think, as a society, we’ve made a commitment to addressing this. You’ve mentioned the brand owners. They’ve made commitments to using recycled content. We’ve seen a variety of governments make commitments or requirements around recycled content.
And at least from where we sit, consumers are starting to pay attention. I mean, I go to the store. I notice when you see labels that say, the bottle is 100%. recycled. That’s part of the brand promise. The economics have moved to a point where they’re quite favorable. In a number of these spaces, we have premia that can be as high as 100%, or more just speaking to published data. We’re seeing a lot of investment. By our count, we have announced an advanced recycling capacity investment north of 4 million tons. And a little bit to Dave’s point, we’re beginning to see more activity across the value chain in terms of coordination, and activity. But there’s a lot more to do. With the technology, the scale is small. If you look at advanced recycling compared to a cracker, there’s an order of magnitude difference. The feedstock supply isn’t there yet. The recycling rate hasn’t moved the way we’d like it to yet. And there’s still risk in the economics.
There are a lot of great points and we’re going to be covering more of that as we go along. We were talking about partnering. And there are a lot of stakeholders in this journey that we’re going through to achieve circularity.
Bill, can you walk us around that circle and just describe the various stakeholders, including your own company’s role?
As we view circularity, we view plastics recycling and the changes that we feel need to take place in order to see a material increase in volumes. You mentioned feedstock availability. It is incumbent on behavior change. It’s behavior change at corporations. Its behavior change at the consumer level. And its participation, we feel the whole value chain of plastics. So you talk about the value chain. It’s the converters, it’s the brands, the product, the companies, and the retail that interface with consumers. It’s the consumers themselves, and then you get downstream into the waste and recycling companies.
And it’s not incumbent on any one of those positions within the value chain to change the recycling paradigm. It’s really when we feel cooperation of the whole value chain of the brands and what they present and the consumers and how they understand and how we educate them, and bringing more material back to the resin producers. So they can get these circular products or recycled content and the certified circular polymers that are enabling increases in recycled content.
Where Cyclyx fits in, they are looking at new ways to aggregate plastic that’s currently going into the landfill. building out the infrastructure to process more plastics, more complex plastics into feedstocks that aren’t a particular piece of plastic, a PET bottle, or an HDPE jug, but into combinations of plastic that meet the chemical and the physical specifications of advanced recycling. So it gets more challenging. We’re trying to get more and more plastic in at the back end of that value chain and bend that linear value chain into a circular value chain.
Plastics Circularity: Hearing this panel of experts, discussing advances in recycling technologies, the challenges and opportunities that face the development of a circular economy for plastics, and how AFPM members are making the products that society needs in a more sustainable way.
I think it’s all hard. Let’s be honest, it’s all hard. But where do you see the biggest hurdles in trying to build that piece of the value chain?
I think the hurdles fall into maybe four categories. One, how do you interface with communities, with corporations with consumers, to educate them on what is possible and start them thinking differently about plastic recycling, thinking if I have this chip bag, or if I have this single-use packaging, it actually can be recycled? So let me take pride in doing something with it. That will happen. So that’s just the start. In parallel, you need new supply chains.
So you can bring back in all plastic stream because it’s not necessarily material that is suitable for morphs, then you need new infrastructure to process an all plastic stream. It’s a one-through-seven stream. It’s a stream with films, with foams, and with rigid. It takes a different approach. So you’re looking at it multiple things, new aggregation, new supply chains, and new infrastructure, all of which are challenges. And on top of that, you need education. So everyone understands what’s possible. So those are the four main challenges. I see.
Gulay, when you think about collaboration for the plastic value chain, and how BASF is approaching this, what is collaboration look like? And do you have any examples that you can share?
I can say there are two types of collaborations. One is our traditional model. You work with your customer and then figure out which supplier is going to be providing you with the feedstock. And now you process and qualify the product with your customer. It’s quite linear, I will say in a way. But if you look at the circular, the collaborations are also changing. And you can see the chemical companies all of a sudden have partnerships with waste collectors or sorting companies. The linear model is today very successful. We have successes in BASF. All the other companies also have successes. Find the raw material, if it’s pyrolysis oil or mechanically recycled products, and then qualify with your customers. They are very successful models. However, they are not enough because I think, in the documentaries, they mentioned feedstock availability.
In the chemical industry, if you do not know anything, you know how to solve problems because most of us are engineers. So what we recognize all of a sudden is that it’s okay. This is great. I qualify and my customer wants it. But then we realize that oh, hold on a minute, the pyrolysis oil, for example, in order to produce it, we don’t have enough feedstock, and all of a sudden, we have to solve that problem. Then we go into the different partnership models that is beyond our usual partnership models, and you see in the chemical industrial news that these kinds of things are happening. Also, technologies are new.
So if it’s mechanical recycling, I mean, I think that we know how to manage that. It’s quite established and accepted by the stakeholders. However, there are new technologies for recycling plastics That’s pyrolysis and gasification, depolymerization and there are new technologies. So you see many technology partners or universities, and research institutions coming into the place for the partnerships as well. So I think that we will see in the coming days many more of those different types of unusual partnerships, I will say, to secure the circular business models.
Are you seeing the same thing, Dave?
Yeah! We’ve got a number of collaborations underway. And I think that’s the name of the game right now on the space. Right from, as Gulay was saying, the beginning of the value chain, Bill and I were talking, about what was it two years ago, about setting up site clicks. We made the investment and contributed to the formation of what we thought was a missing link in the supply chain. This translation between what the chemical companies want, and the way some companies speak waste ease. And those two are different languages. How do you match the specs?
And I think of Bill as our Rosetta Stone on that, to make sure we’re aligned on specs, and understand the sorting things. We got a fantastic collaboration going on right now in the city of Houston, actually. In the community of North Kingwood, if you know where that is, with Bill’s help, we’re collecting all plastics. We need simple solutions in this space. We’ve gone into a community and said, if it looks and feels, don’t taste it, but tastes like plastic, then put it all in a bag. We don’t want to educate people to be material scientists out there. It needs to be simple, clear messages to consumers.
So there’s one-through-seven stuff. It’s helpful to a certain extent until it’s not. And it’s not what confuses customers and consumers. And so in that pilot, we’re saying put all your plastics in a bag, bring it to the drop-off, and we’ll handle it. And I think we’re up at two or three times the collection rate since we launched the program, one small program, but how many times can we duplicate that across the country? The other part of this is policy as well. I mean, we need to get to good policy. Across the country, we have 50% of the population doesn’t even have access to a recycling bin. I don’t know, if you’re in a multifamily residence in Houston, you have no recycling.
We can’t get feedstock if there’s no basic infrastructure to collect the stuff in the first place. And then on top of that, there are probably 5000 different recycling programs across the country. We need some consistency. We need access at a population level, and we need clear education, what consumers respond to, and I think, as one company, we’re trying to participate in that, together with others, and through collaborations. And it’s a bit more uncomfortable because I think, as large chemical companies and petrochemical companies, we haven’t been used to engaging directly with the public, and some of these issues. And so that’s an area where we’re starting to learn.We can't get feedstock if there's no basic infrastructure to collect the recycled product in the first place. Click To Tweet
Recycling is such a challenge. In fact, as I was reflecting today, as we were getting ready for this, even just looking around the conference today, I mean, how many people have been recycling their plastic water bottles versus leaving them on the table or throwing them in the trash? I think this system needs to be easier to your point and that’s probably the biggest thing. What other hurdles do you see to increasing recycling rates?
One of the biggest challenges, especially as it relates to advanced recycling is we’re going after material that isn’t collected today. It’s not the material. It’s a multilayer film. It’s the packaging that isn’t PET, maybe it has an oxygen barrier on it, maybe it’s not natural in color, even the black plastics, but it’s those plastics that don’t fit. I want the PET drink bottle or I want the HDPE jug. So as you start looking for those plastics, they’re not in the recycle stream. We need to expand the collection.
And in doing so, it needs to be done with a very simple message. And that’s the focus of our branded 10 to 90 initiatives that Dave mentioned. We’re rolling out in Kingwood all plastics, bag it and bring it. If it’s plastic, put it in a bag and bring it. We now have with the advances and sortation technologies, optical, and other things The ability to move that decision of what piece of plastic goes where downstream to automate its infrastructure. We no longer have to rely on the consumer to say, does it go in this bucket, or does it go in that bucket? We can simplify everything and push that processing downstream.
As I see that, there’s still a lot of activation energy needed. So when I think about curbside recycling, we’ve already said a lot of people don’t have that as an option. That’s the easiest if I can just roll it out to my curb. But when I have to package it and bundle it and take it someplace, we’ve now introduced a challenge.
A number of the initiatives were focused on making that easier. Utilize corporate take-back programs, and work with corporations, so employees can bring the material back to a corporate location, aggregate that material, and work through retail. We recently announced initiatives with the Houston school district to work not just on aggregating plastic from the schools, but on the education of the children, and in turn education of their parents, and in the communities. We can start bringing back material to support education, structured as a fundraiser for the schools, but make it easy for people to participate both in the decisions they have to make and the ability to drop it off.
We’ve already talked about that there’s demand for circular plastics that have recycled content, or companies and consumers willing to pay yet. What are you guys seeing from this?
I actually just want to add a little bit to what Bill was saying about recycling rates. There’s a lot of conversation about the headline plastic recycling rate, which in the US in 2018, was about 9%. But if you decompose that, it actually varies quite a bit. If you look at plastic bottles, it’s about three times higher. That recycling system works. It’s not great, but it works. And it’s on the same order of magnitude as glass bottles or aluminum cans are a little higher, but they’re mostly beverages. They get more refunds, so we’re not really fixing that part of the system. We’re fixing the part of the system that has the low single-digit recycling rate, like the films, flexibles, carpets, and that sort of thing.
I think some of that, at least for us, just helps to contextualize some of the conversations we just had. I know we need to be careful about pricing, but there are published series for recycled plastic. And we often look at those published series. The most interesting example that we find is for high-density polyethylene. There’s a series for mechanically recycled natural, which is the milk bottles. In the world of mechanical recycling, that’s the best you can do. That is going at a premium of about 100%, and it’s been going that way since about mid-2019. So we’re three and a half four years into a period of very significant premia that we think have a meaningful impact on the value chain.
Awesome! I think there’s a lot of talk about consumers and consumer brands. What role are they playing? What role is the brand playing in helping us expand that recycling activity, and the recycling content? What do you see though?
We see a growing interest in the brands. The brands, perhaps historically, have tried to distance themselves from plastic. It’s a product we use, but it’s not our fault. As we started talking about the value chain, we start talking about everyone working together in collaboration. The brands are beginning to come into that. From a consumer standpoint, single-use plastics are used by consumers. Individuals are making the decision at corporations to spend more time focusing on ESG. It’s why we’re here today is because of individuals who are consumers who are making decisions about how you want to deal with plastics going forward. The brands have a voice with consumers. So getting the brands integrated into these collaborations, into the conversation about recycling is is critical both from an influence standpoint, but also they can provide incentives through coupons or others to get people to bring back the material and the packaging of the products that they’re using that are plastics.
Gulay, how about you? Consumer products companies and other companies are pursuing their own path in many ways. Is this a hindrance, or is this a help? Is there an opportunity to really collaborate and team up together? Is there a receptiveness to this?
I certainly believe this is a help. I think that being in the chemical industry, you usually do business to business. We don’t do business to consumers. So we look for OEM companies to tell us that’s what they need. Then we can put all these investments to create these new chemistries or new products. I don’t see it as an obstacle. I actually see it’s a positive development for the chemical industry. What can be a hindrance is all of a sudden pulling themselves out of those, let’s say plastic. We use these materials, and what we will do is the selection. I believe that they might give it a try, but we all know, plastic provides different properties, and different functionalities than other packaging materials so I don’t think it is going to be a successful adventure. But that could be maybe one hindrance for the chemical industry.
In certain brands, and they tend to be maybe more elite brands, I think of it sometimes as being a rich-person problem. Like it’s okay. you can go to the really expensive product that they only wanted in a glass bottle or it’s only got to be a certain type of recycled plastic. But I also think that ends up, at the moment, being very niche and that the majority of the population isn’t willing to spend the money on. It is happy with where they’re at, etc.
Some of it also is a little bit of marketing. We are not marketing companies. We are engineering and manufacturing companies. And this is what I think our biggest handicap because let’s say paper cups, for example, most of the paper cups are covered with polyethylene, There’s plastic in them but the usual consumers think that they’re using a paper cup, but actually they are not. There’s a plastic layer in the cups for coffee cups, for example. Right now, we are doing a lot of this education.
We did a lot but we didn’t do very well is explaining that once you wake up, in your 24 hours, you touch a lot of chemicals and plastics, and that makes your daily life easy and makes your life modern. And we just didn’t educate the consumers about that. Now, they’re a bit suffering from that because somebody comes and says, let’s ban the plastics and you’re scratching your head. How is it’s gonna even happen? What are you gonna sit on? What are you going to sleep on? What are you going to drive? And what are you going to wear as a contact lens or use a diaper? I mean, that’s what we are struggling against a little bit right now.
Plastics Circularity: Talking about partnering for plastic circularity. It's obviously a hot topic across the industry. We will go through a series of questions that really just helped define what it is, how companies are approaching it, how we're partnering together, and what we can do as an industry.
I think you’re totally right. We have not told our story very well. And we need to continue. I think really working on it. I’ve personally thought really in a grassroots way. People have heard me talk about this. I mean, the chemical industry is not embracing TikTok or Instagram reels. And the reality is that competitors are lesser educated consumers sometimes, it’s the NGOs, and sometimes it’s just the voice, especially the voice of the younger generations. They spend a lot of time on social media, like TikTok, Instagram reels, and stuff. That’s where they get their news and their information, then they come to me and they say, oh, well, this is bad. I’m like, well says who? And oh, by the way, you give me back all my money because that’s how you have what you have.
You talked about it in your last podcast. Over the generations, I also have a son from that generation, and they know that they think differently. They buy different things. They have more consciousness of sustainability, which is a great thing. So they’re gonna be our politicians in a ten-year time frame. They’re gonna be buyers for the companies that are selling today. And I think the face of the chemical industry is about to change and we all know that. This is why this excitement in this conference or others about this educate less, innovate less, do something different less go circular. And I think it’s kind of exciting to be in the industry right now.
I agree with you. And I think that was covered this morning, as well, during the CEO panel. They said this is a great time to join the industry to be part of the solution, the innovation, the growth, etc.
Jeremy, I know, McKinsey’s published a paper recently talking about advanced recycling, and that there were some must-win battles for advanced recycling. So maybe two things, one, give us a brief definition, if you will, of advanced recycling. And then what are those battles? And what’s the outlook for winning that?
Sure! So let me try to hit on both of those. Before we go into that. We talked a lot about the brands, and the brands have made very significant commitments to incorporating recycled content into their products, typically on the order of 15% to 55 0% by the middle of this decade. They’re reporting out every year. And they’re investing real resourcing behind that to make it happen. I think there’s an argument that a great deal of what we’re seeing, doing, and experiencing in the plastics industry to meet that demand is the result of those commitments. So I just kind of wanted to start there. And then if we come to advanced recycling, what is it? It’s different things for different people. It’s probably everything that’s not grinding it up and re-pelletizing it.
There’s a range of technologies that are being developed, more or less at scale today. A few of the more important ones, you can take plastics and go back to what you might call feedstock, which would be like paralysis to go back to a naphtha you can put through a cracker. There’s a range of deep polymerization technologies, where you can unzip molecules like PET or polystyrene. You can take them back to monomers, and then you can re-polymerize them. And then there are some other things being developed with enzymes or with solvents that also have the property of producing a very high-quality output with a range of feedstocks. We are seeing a tremendous amount of investment in the space. And we’re seeing a lot of growth.
We could see by the end of the decade, north of 7 million tonnes of advanced recycling capacity. And so then come back a little bit to your question of what are the battles. I think the first one, which several of my colleagues here have touched on is feedstock. What I think we’ve all learned is that if you want 10,000 tonnes of feedstock, you can get it. If you want 100,000 tonnes or 500,000 tonnes of feedstock, you need to build a system around it. And the industry is evolving in that direction. But it’s taking a lot of work. I think the next one is these partnerships that we talked about. It’s no longer pulling hydrocarbons out of the ground, running it through a machine that you own, and it comes out the other end.
As Dave mentioned, partnerships with the waste industry with municipalities, it’s really this end-to-end collaborations. I think the third one is around the scale. If you look at what’s being done today, at least the advanced recycling projects, we see are often in the range of call it fifteen to five zero 1000 tonnes. And a world-scale cracker is more than an order of magnitude larger than that. And so there’s just a natural scaling and learning curve, which the only reason we haven’t done it yet is that we haven’t done it yet. We just have to build up to it. But it’s going to take some time. And then I think the last one is around economics. We see the economics very much as they are today. And we think it’s been there for the last three or four years. But it depends on a number of things, including the brand owners sticking with these commitments to basically put their resources behind using recycled content. And so there’s a reasonable amount of risk and de-risking that will help accelerate the growth.
How do we scale or how and when do we really start achieving scale? We’ve been talking about this advanced recycling of circular plastics as a pretty small part of the overall pool of plastics. How do we start achieving true scale and what conditions must exist for that to be the case? Can you tackle that?
Jeremy mentioned that 7 million times we’ve seen projections and the 10 to 40 million tonnes by the end of the decade, which is that’s beginning to become a volume of the materials to chemical production. It is big for chemicals, big new for chemicals, but it is huge for waste. There is a very big discrepancy in scale between the waste industry and the petrochemical industry. If you look at waste processing facilities, they’re not billions of pounds a year, especially as you talk about plastic and MurF maybe 100 KTA, but only 10% to 15% of that is plastic. So when you start looking at aggregating plastic to feed 100 or 200-KTA facility, that’s a lot of plastic. It’s a lot of innovation on the front end to aggregate that. It’s a lot of transportation to bring it in where it can all be used. So one, we have to get over the feedstock scale issue in order to get to a meaningful scale for advanced recycling.
When doing advanced recycling, recycled content, and circular polymer, when does become real? I think it becomes real where the consumer actually has a choice in the product. So it’s not just the premium products, but they can see labeling and messaging on a shelf with a choice for them. At that point, consumers will understand its value of it. They’ll see it, and they’ll be able to make choices. Now, between now and the end of the decade, we’re on that journey of investing in infrastructure for feedstock for the downstream advanced recycling processing, and pulling that back into circular products. At some point in the next few years, we’ll start getting to that point. But we still have some work to do and a lot of investment.
But I think that we are forgetting something super important between the two of the lists. Legislations today do not accept advanced recycling as recycling. I think that’s one of the major challenges or hurdles that we have. I was surprised I couldn’t see it on your list. But I think we have to get through that. Today, in the US, 22 states are accepting advanced recycling technologies as recycling. And we have a lot more to go to make this work. So then it’s a big chicken and an egg situation, because without legislation or acceptance, you don’t want to put or invest in the infrastructure, and all that innovation you mentioned, and all that sorting facilities and everything. And then obviously, legislation is not coming without you showing the proof. So it’s a bit of an interesting situation to be in right now.
Yeah, it is a dilemma. I knew that AFPM, ACC, and the industry partners are working actively to try to create that support. There’s the UN treaty on plastics, which is also in play at the moment, and it’s not clear to me how advanced recycling fits into that at all. But I think you’re right, the legislative base is critical.
Building on that point, we need all of these technologies. I think Lark Williams in the previous presentation we were listening to, will lead you as a negotiator on the UN plastics treaty. He said pretty clearly. We don’t want to block the kick of innovation. There are a lot of things that need to be invented here to solve this problem. And picking and choosing winners and losers in terms of technology now, and through legislation is the worst thing we could do. We need to be encouraging legislation that embraces technology so that the chip bag that’s got that aluminum foil on it, can’t be recycled mechanically. Today, it can be recycled because we have the technology to do it.We need to expand the collection. And in doing so, it needs to be done with a very simple message. Click To Tweet
I think it’s a great point. There are steps that are given around the energy transition, and I think circularity. I’ll group it all together that something like two-thirds of the technologies that we need to achieve our ambitious goals have not yet been developed. So we need the space to continue to innovate, to try new things, and to get to the next technology, the next partnership, the next solutions, because we don’t know what the answer really is in 50 years from now. We know what today’s answer is and how we’re going to keep developing it.
I think we have to be careful that we don’t use technology as a crutch here, though, because we do have technologies available today. And we need to get them deployed. I mean, Gulay is absolutely right that if there’s legislation that actively says you can’t use the technology. That’s a big problem because that’s a huge risk to investment. The 22 states that have accepted advanced recycling. Fantastic! But we need to work on the other half of the states that are on the fence or haven’t. And that’s a real priority. But I think it’s really important as an industry that we take action. This can’t be a science experiment forever. We need to build and we need to lead and we need to get technology deployed because we have the capability to do that and create that pool on the supply chain, and create that valorization of the waste so that we pull it through and create these new supply chains.
I think that’s right. There’s a saying that imperfect action beats perfect in action. If we wait till we get to the perfect solution, we’ll never have a solution. So, Dave, ExxonMobil has announced some plans to scale up advanced recycling up to a billion pounds per year. Maybe we’ve already addressed this, but what are the challenges that you see? Is there anything unique that we haven’t yet touched on?
There are a whole bunch of challenges in there. Just to put a bit of context into it. We started up an advanced recycling facility in Baytown, Texas, in December last year, which has got an annual capacity of about 40,000 tonnes, 80 million pounds of plastic and we got that running. That’s successful. We’re very grateful for the feed that we’re getting. But that’s not enough. So we’re repeating that investment around the world. In fact, we’ve got projects across the Gulf Coast and in Beaumont, and Baton Rouge and one up in Chicago, and, kind of Sarnia, Canada, Antwerp, Rotterdam, Singapore, collaboration over in Malaysia, and Indonesia.
So there are about 14 projects that we’ve got in various degrees of development around the world. There’s one in France, as well. We’re also investing in partners that are using conventional pyrolysis oil technology as well. And we’re trying to push that forward. I think my team will kill me for this. But I think the easiest part of that, quite frankly, is the engineering at our sites. We know how to do that. We know how to build reactors. We know how to do the heat material balance around facilities. It’s a bit tricky. It’s a different feedstock, and there are contaminants. But the big challenge is, and we’ve said it a few times is that supply chain into it. It’s not defined. The qualities aren’t defined. We’re having trouble writing the specs, even the contracting practices.
The way that the waste industry contracts is completely different than the way the petrochemical industry contracts. They’re looking for different risk mitigation. We’re starting to learn these things as we go forward. As we’ve looked at it, one of the reasons why we, as a company, have picked, let’s say, 30 to 40k KTA units, is not because we want to be small at that size. If you go much bigger, you just can’t get the feedstock. And if you can’t start with some kind of scale, you’ve got underutilized assets. And that’s not economic. So I think these early stage investments, you see them around that 30-50k KTA region, because it’s a measure of where the supply chain is, it’s not necessarily a measure of where the conversion technology is.
Do you guys find that the waste management companies, they’re not represented here today, but do you find that they have the same sense of urgency that we have in the chemical industry to create solutions to solve this? Are they feeling it as well?
I would say no, not right now. They’re not defending a market. They’re not under fire because they’re producing plastics, and they have to find a solution. Their business model, historically, has been to take something, get paid to take it, and put it in the ground. They generate great returns by doing that. We’re beginning to see investments by waste companies in recycling mechanical and looking at other feedstock, and advanced feedstocks as well. So I think they’re getting there. But I don’t think that they feel the pain and have the sense of urgency that the resin producers do for sure.
I agree. I think there’s a transition there. I think I hold out hope that conversations at least I’ve had in the last few months, let’s say 6 to 12 months, I think it is changing. There’s a business opportunity there. The supply chain is seeing a critical gap in supply and demand. And it’s echoing down the supply chain. We had a great conversation with waste management a couple of weeks ago at the recycling conference in DC. It is very refreshing in terms of their outlook on it, and how they are trying to think about recycling and feeding the advanced recycling industry as an opportunity. And I think that’s great. But I do think it’s a relatively recent phenomenon.
With this idea of a business opportunity at every step of the chain, we see it is absolutely critical. Clearly sitting here in San Antonio and in the petrochemical industry, we know it’s a big opportunity. But it only works if the feedstock arrives, which means the folks that participate in the feedstock need the business opportunity, it’s going to have some implications for the municipalities. It has implications for the brands on the other end. It’s got to make business sense for everybody through the chain, where the chain breaks. And I think collectively, we’re making progress towards some alignment around that. It’s taking time.
Plastics Circularity: Plastics are essential to everyday life, consumer goods, food, durables, and the energy transition, and yet, we're all dealing with this issue around plastic waste. We would define circularity as taking material, typically post-consumer, and reusing it. Make it into new material. The nuance there is increasingly the focus is on high-quality materials.
In some ways, that’s where some of the policy opportunities perhaps fit in. I know, there’s always a variety of things on the table, and we’re not here to debate policy. I’m certainly not in the power to do that. But I think you’re right. There needs to be some structural support, in whatever shape that looks like across the value chain to make sure that the economics are there, across the value chain. If we contrast what we’re doing in the US versus Europe, it often feels like Europe is ahead of the US on these green issues, sustainability, recycling, etc. There’s a perception that perhaps it’s been easier to get permits for advanced recycling in Europe, or it’s been easier to make progress in Europe, just because of the legislative infrastructure there. What lessons can we take? Is that true? How do we learn from what’s happening across the pond and bring it back here?
I think that a year or maybe two years ago, EU Green Initiative is published. It has thousands of ages. When you look at packaging space, what they want to do recently, by 2013 in the Europe Union, every piece of packaging has to be recyclable. That includes all the multilayer films and everything, or it’s gonna be banned. If you’re a plastic producer, you have to make sure that your product is recycled, if you’re an OEM selling food or some different packaging with multi-layer structures, you have to make sure that this is gonna be recyclable. So the pressure is coming from the legislation standpoint. And I think there’s a little bit sense of urgency.
I wouldn’t say that they are ahead of us in the technology, but definitely their sense of urgency to handle that. And this packaging is now going into different industries, as well. If you look at the automotive space, they also expect every plastic material in an automotive that they use to be recyclable. So the design of the automobile has to be done accordingly. But also the parts have to be recyclable. So it’s again, we have to watch very carefully because most of our customers are global. We cannot just ignore what happens in Europe. However, I see more of the government making decisions on behalf of the industry and then putting legislation super strongly with limits and bans, and taxation compared to the United States. You see more of an incentivizing for doing the right thing.
It’s a bit different approach. And I think that we’re all happy to be in the US from that standpoint. What I think it’s going to be critical is that this packaging act in the EU also goes for sensible packaging materials, medical packaging, for example. That requires advanced recycling technologies and a mass balance approach to be accepted as recycling because there’s no way for multi-material plastics to be recycled in any other way than advanced recycling. So it might actually trigger and positive movement or acceptance of mass balance and advanced recycling in the United States.
I think it’s a great point. I think we’ve seen this on a variety of topics that when Europe has led the way in certain requirements, legislative requirements because we are global companies and global businesses that there is a pull-through effect on it. Show me the money. Jeremy started touching on this. At the end of the day, everybody needs to be making money. We all want to make money. Everybody along the value chain wants to make money. Is there actually a financial business case for circularity?
I think in a word, yes, but let me offer a little bit more. First of all, to restate the question, perhaps you need a business case to invest at scale. Otherwise, you’re doing pilot projects. And I don’t think really we’re interested in sitting around doing pilot projects. And I think the good news is that we’ve seen that business case in many places, but not all of them across the chain. And I think if we look that sort of well explains where we are seeing scaled activity. So mechanical recycling has made sense for a while and it continues to work. We’re seeing some pivots within mechanical recycling to higher-value applications to food and to some of the high-value filament flexibles. We’re seeing probably the most activity on pyrolysis and related technologies because there’s a real shortage of high-value recycled polyolefins.
And there’s this huge Premia, I mentioned. We’re seeing some activity in the advanced recycling of our pets. But at least in the published data, the Premia is very modest because mechanical recycling works well. And so that isn’t scaling nearly as quickly. We’re seeing the Premia move back in the chain. If you look at things like bail pricing, which we believe is driving a lot of the activity from the waste companies that Dave and Bill touched on, we would say is good, appropriate, and helpful. And that’s the investment we need. But if you come back to the principle, you say that every step in the value chain needs to have an appropriate economic incentive.
In a lot of places, we are, but I didn’t want to just offer a couple where we’re not which I think still remains a challenge. One is consumer behavior, and the other is access. And on consumer behavior, for most of us, the economic implication of whether we put it in the green bin or not is zero. There are some cities where there is an economic implication, and the results are markedly different. But for many cases, it’s zero. And then for access, you’d say, well, look, plastic is worth more. We should go collect it for more homes, but it’s only 5% or 10% of the stream. And so when you run the economics of the trucks, it doesn’t help enough. Those are two places where it hasn’t quite made it yet.You need to go back up and down the value chain., That's the hallmark of the circular economy. Click To Tweet
That’s helpful. We’ve covered a lot of ground today. We’re kind of approaching the end of our time. So glad everybody’s been sticking with us and appreciate everybody’s point of view and perspectives here today. What’s one takeaway action or talking point that people that are here listening today can do to support the industry, plastic circularity, advanced recycling, etc. Let’s start with Dave.
I go right to the consumer side of this. We’re all consumers. And we all have accountability in this equation to do the right thing when it comes to recycling. My kids teach me most of the time what I’m supposed to be doing because they learn it before I do. In fact, last week, I saw for the first time this thing, a TikTok scientist, I really want to be a TikTok scientist. First, I got to get a TikTok account. So that’s one thing. But I think that we got to learn how to do this right. As I said before, 50% of North American households don’t have access to a recycling program. That’s because the municipality that they’re living in isn’t providing it. So get involved. You’re going to ask for that. Go and get involved with your local community.
This is a very, very local issue. Recycling programs are paid for at the city level and at the municipality level in most places in the country. And it behooves us all as citizens to ask for that, and demand that as a service when we don’t have it. Consumer action, I think, when it comes to our professional lives, as an industry, we’ve got to act. We have got to act, and we’ve got to embrace these trends that we’re seeing our customers are demanding these products from them. And we have got to put our foot forward and start investing and create the pool down the supply chain, and lead, quite frankly, in solving this issue.
One takeaway from this would be to talk about it. Talk about plastic recycling. Education is one of our biggest challenges and education can be overcome through dialogue. We are within the industry. We have perhaps more insights into what’s actually going on. Maybe they’re biased, and maybe they’re not. A lot of the conversations won’t be with people who have the same view. But if we can listen to them if we can share our thoughts, maybe we’ll learn a bit and we’ll start this dialogue about plastic recycling, moving down the tracks, and begin to have more people think if I ask the right question of my municipality of the local waste companies, maybe we can start making a change in plastic recycling.
Other than education, I think it’s a great point, I will say to believe in chemistry. Believe in innovation because the chemical industry solves a lot of problems. And I think that they are being a little bit suspicious. We have nonbelievers. And I don’t know for what reason. We do have critics. And these are all normal. But we all have to believe in the power of chemistry and power of innovation. And if you look at what the chemical industry achieves, and what products they bring to our modern life, these will be just one another, but innovation takes time. So together with that, I think a little bit of patience and a bit of positive thinking will help.
I think at least one takeaway when we look at it, this may be a unique moment in time. This really may be a tipping point. And if you think back to what this state went through a decade ago, it took us two or three years very attractive returns in US Shell gas. From 2009 to 2012, you saw this huge wave of investment. We’re now three or four years in very attractive returns. We’re seeing this wave of investment. And it’s quite possible that we will look back in seven years. And we’ll say 2023 was the tipping point. And that’s really when the industry began scaling circularity.
Awesome! Well, thank you guys for joining this discussion. Thank you, everyone, for listening in and participating. And this will be published in a couple of weeks on The Chemical Show. If you’re not listening, go listen. And my takeaway is to tell your story. That’s what I tell everyone. Tell your story about the benefits of chemicals, about the benefits of the industry, about the opportunity to recycle and make a difference and we need grassroots action. Thank you.
- Episode 52
- Leveraging Partnerships: Innovation And Delivering Solutions With Gulay Serhatkulu Of BASF
About Bill Cooper:
Bill Cooper is the Senior Vice President, of Corporate Strategy & Development at Cyclyx, where he heads strategy, corporate initiatives, and business development. Bill brings over 25 years of senior executive, investment banking, and consulting experience working with a specific focus on growth companies in cleantech and sustainability. He has raised over $6 billion in financings and worked on over $2 billion in merger and acquisition transactions.
About David Andrew:
David Andrew is the Vice President of New Market Development at ExxonMobil. He is responsible for strategic business development, including circularity and plastic waste advanced recycling, new high-value product platforms, and other sustainability-driven business opportunities. He has spearheaded efforts to develop high-impact sustainable solutions for plastic waste and other circularity initiatives. David holds a Ph.D. in chemistry from the University of Western Ontario, Canada.
About Jeremy Wallach:
Jeremy Wallach is a partner in McKinsey’s Boston office. He advises clients in the chemicals, materials, and industrial sectors on topics linked to strategy, growth, M&A, and sustainability. He leads the firm’s work on chemicals and plastics sustainability in North America, including helping clients build businesses and evaluate opportunities in sustainable polymers. He holds degrees in mechanical engineering, materials science, and business administration from MIT and Princeton.
About Gulay Serhatkulu:
Gulay Serhatkulu is Senior Vice President responsible for the Performance Materials business for BASF Corporation in North America. This business encompasses the entire materials know-how of BASF regarding innovative, customized plastics under one roof and is globally active in four major industry sectors – transportation, construction, industrial applications, and consumer goods.
Gulay joined BASF in 2006 as a technical service representative. She has held a variety of roles with increasing responsibility within BASF including product management, marketing, sales, strategy, and most recently procurement. Prior to BASF, she earned two postdoctoral appointments at the University of Nottingham, UK, and Wayne State University in Detroit, Michigan respectively.
Gulay earned and/or did her studies for a Ph.D., MSc, and a BSc degree from the University of Akron, OH, and Hacettepe University, Ankara, Turkey in the fields of polymer science and engineering, and chemical engineering. Gulay was born in Istanbul, Turkey. She is married and has one son.
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