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The potential of India’s circular economy

Tech innovation, finance, policy and behavioural change can create markets where none existed. Leverage it
PREMIUM
Responsibility requires that, by understanding the impact of our choices, we reduce our footprint. Recognising business opportunities could drive efforts that go beyond individual action towards wealth creation from recycling. (Representational image/REUTERS)
Updated on Jul 13, 2021 05:39 PM IST
ByArunabha Ghosh

Can India aspire to build a circular economy unicorn? Some might argue that India is naturally a circular economy. It might seem that we recycle everything. In reality, we are confronted with an exponentially growing waste problem. Herein lies the challenge and the opportunity.

Recycling has three drivers: Need, responsibility, and wealth. In India, we are driven by need — conserve and reuse to save money. As incomes rise, behaviour could tilt towards throwaway choices. Responsibility requires that, by understanding the impact of our choices, we reduce our footprint. Finally, recognition of business opportunities could drive efforts that go beyond individual action towards wealth creation from recycling and reuse.

As economies evolve, we see these different drivers taking hold. For instance, in 2015, India produced 9% but consumed 5% of global plastic (signs of low per capita consumption as well as recycling). But recycling rates for e-waste in 2020 were just 11.7% in largely developing Asia compared to 42.5% in Europe. (Our research finds that 44% of India’s critical minerals could be sourced from e-waste, a multibillion dollar opportunity.) While Europeans are not less consumerist, they have tapped into generating wealth from waste.

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Are Indian companies shifting consumers from an informal reliance on the need to recycle towards a formal leveraging of responsibility, thereby creating wealth? I spoke to three firms, at different scales, to understand the larger economy and policy landscape around the sector.

One, innovation is key, and startups in the circular economy need innovation in product and process. Hyderabad-based Banyan Nation has developed a plastic washing technology using which recycled plastic can substitute for virgin plastic in fast-moving consumer goods (FMCG) industries. This is a change from informal recycling that produces mixed-grade recycled plastic, which companies cannot use. Last year, its product was used to manufacture more than 200 million bottles for a major FMCG multinational company.

Ecoware (with a factory in Greater Noida) treats sugarcane bagasse to make food-grade packaging containers. In its 10-year journey, it claims to have displaced more than 300 million pieces of single-use plastic. Bengaluru-based Bare Necessities, working against the “plastic pandemic”, has converted its minimalist living philosophy into dozens of personal care, home care and lifestyle products, challenging a chemicals-laden industry with alternatives.

In each case, process innovation has been necessary to source raw material, segregate, control quality, or manage delivery logistics.

Two, informing clients is crucial. Each firm invested in educating potential clients and reassuring customers that their products were safe and certified. From explaining what biodegradable means to offering online courses on sustainable living, these startups have tapped into a consumer sentiment that is questioning chemical ingredients and carbon footprint. One entrepreneur observed, “Waste is personal that you have control over.”

One firm developed a data platform, digitising thousands of informal recyclers, to trace its supply chain so that customers could be confident that there has been no polymer contamination. Another saw the opportunity to reach out to hospitals and offer biodegradable medical disposables. In the absence of effective standards in India, these startups must invest in getting certified in developed countries. Although expensive, this is critical for product and quality differentiation.

Three, angels aren’t enough. Tech investors and social enterprise incubators stepped in when they saw promise. Sometimes, it was chance encounters, say when the head of Social Alpha heard the founder of Bare Necessities speak at an event. Ecoware got investor attention when it was recognised by Barclays-backed Unreasonable Impact (it is now exporting to 15 countries). Banyan Nation has scaled to a level where it has already raised several million dollars and is looking for more.

Two challenges persist. One entrepreneur told me, “In India, we have angels and then private equity. We have a void of venture capitalists (for scaling the business before one’s equity gets diluted).” Another complained, “Banks are not in the picture. Loans are too small; it would take weeks to get emergency working capital during the pandemic.” A third said, “Debt is just three years’ balance sheet and collateral.” With no soft loans, startups in the circular economy are excluded from bank credit.

Four, policy isn’t helping yet. The announced ban on single-use plastics has not been followed through. Policy could mandate an increasing share of recycled plastic in FMCG industries (just like policy mandated renewable purchase obligations for power utilities). Mandatory disclosures could ensure that the plastics value chain becomes cleaner. Products face high Goods and Services Tax (GST) rates because there is no distinction between a sustainable product and one with a large environmental footprint. Since agri-waste does not have GST, businesses are unable to offset GST payments further down the value chain. The absence of enabling policies keeps circular economy businesses small-scale, often informal, uncertified and undifferentiated.

And finally, the idea of growth needs redefinition. Rather than repeat sales of unsustainable products to meet quarterly targets, entrepreneurs in the circular economy believe in other definitions of growth: Replicable, scalable models; minimalist lifestyles; women’s entrepreneurship; gender-sensitive employment; and including informal enterprises in formal value chains.

The circular economy cannot be restricted to cocktail conversations. India has immense resources — people, capital, supply chains and scale — to find value in waste. A billion-dollar-valued circular economy unicorn can indeed emerge if technology, finance, policy and behavioural change could create markets where none existed.

Arunabha Ghosh is CEO, Council on Energy, Environment and Water

The views expressed are personal

Can India aspire to build a circular economy unicorn? Some might argue that India is naturally a circular economy. It might seem that we recycle everything. In reality, we are confronted with an exponentially growing waste problem. Herein lies the challenge and the opportunity.

Recycling has three drivers: Need, responsibility, and wealth. In India, we are driven by need — conserve and reuse to save money. As incomes rise, behaviour could tilt towards throwaway choices. Responsibility requires that, by understanding the impact of our choices, we reduce our footprint. Finally, recognition of business opportunities could drive efforts that go beyond individual action towards wealth creation from recycling and reuse.

As economies evolve, we see these different drivers taking hold. For instance, in 2015, India produced 9% but consumed 5% of global plastic (signs of low per capita consumption as well as recycling). But recycling rates for e-waste in 2020 were just 11.7% in largely developing Asia compared to 42.5% in Europe. (Our research finds that 44% of India’s critical minerals could be sourced from e-waste, a multibillion dollar opportunity.) While Europeans are not less consumerist, they have tapped into generating wealth from waste.

RELATED STORIES

Also Read | Waste processing: Awareness drive to promote dumping at recently opened hubs

Are Indian companies shifting consumers from an informal reliance on the need to recycle towards a formal leveraging of responsibility, thereby creating wealth? I spoke to three firms, at different scales, to understand the larger economy and policy landscape around the sector.

One, innovation is key, and startups in the circular economy need innovation in product and process. Hyderabad-based Banyan Nation has developed a plastic washing technology using which recycled plastic can substitute for virgin plastic in fast-moving consumer goods (FMCG) industries. This is a change from informal recycling that produces mixed-grade recycled plastic, which companies cannot use. Last year, its product was used to manufacture more than 200 million bottles for a major FMCG multinational company.

Ecoware (with a factory in Greater Noida) treats sugarcane bagasse to make food-grade packaging containers. In its 10-year journey, it claims to have displaced more than 300 million pieces of single-use plastic. Bengaluru-based Bare Necessities, working against the “plastic pandemic”, has converted its minimalist living philosophy into dozens of personal care, home care and lifestyle products, challenging a chemicals-laden industry with alternatives.

In each case, process innovation has been necessary to source raw material, segregate, control quality, or manage delivery logistics.

Two, informing clients is crucial. Each firm invested in educating potential clients and reassuring customers that their products were safe and certified. From explaining what biodegradable means to offering online courses on sustainable living, these startups have tapped into a consumer sentiment that is questioning chemical ingredients and carbon footprint. One entrepreneur observed, “Waste is personal that you have control over.”

One firm developed a data platform, digitising thousands of informal recyclers, to trace its supply chain so that customers could be confident that there has been no polymer contamination. Another saw the opportunity to reach out to hospitals and offer biodegradable medical disposables. In the absence of effective standards in India, these startups must invest in getting certified in developed countries. Although expensive, this is critical for product and quality differentiation.

Three, angels aren’t enough. Tech investors and social enterprise incubators stepped in when they saw promise. Sometimes, it was chance encounters, say when the head of Social Alpha heard the founder of Bare Necessities speak at an event. Ecoware got investor attention when it was recognised by Barclays-backed Unreasonable Impact (it is now exporting to 15 countries). Banyan Nation has scaled to a level where it has already raised several million dollars and is looking for more.

Two challenges persist. One entrepreneur told me, “In India, we have angels and then private equity. We have a void of venture capitalists (for scaling the business before one’s equity gets diluted).” Another complained, “Banks are not in the picture. Loans are too small; it would take weeks to get emergency working capital during the pandemic.” A third said, “Debt is just three years’ balance sheet and collateral.” With no soft loans, startups in the circular economy are excluded from bank credit.

Four, policy isn’t helping yet. The announced ban on single-use plastics has not been followed through. Policy could mandate an increasing share of recycled plastic in FMCG industries (just like policy mandated renewable purchase obligations for power utilities). Mandatory disclosures could ensure that the plastics value chain becomes cleaner. Products face high Goods and Services Tax (GST) rates because there is no distinction between a sustainable product and one with a large environmental footprint. Since agri-waste does not have GST, businesses are unable to offset GST payments further down the value chain. The absence of enabling policies keeps circular economy businesses small-scale, often informal, uncertified and undifferentiated.

And finally, the idea of growth needs redefinition. Rather than repeat sales of unsustainable products to meet quarterly targets, entrepreneurs in the circular economy believe in other definitions of growth: Replicable, scalable models; minimalist lifestyles; women’s entrepreneurship; gender-sensitive employment; and including informal enterprises in formal value chains.

The circular economy cannot be restricted to cocktail conversations. India has immense resources — people, capital, supply chains and scale — to find value in waste. A billion-dollar-valued circular economy unicorn can indeed emerge if technology, finance, policy and behavioural change could create markets where none existed.

Arunabha Ghosh is CEO, Council on Energy, Environment and Water

The views expressed are personal

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