Critical Success Factors of Circular Economy – III. Critical Mass (Curbside collection & Deposit Refund System)

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In the linear economy, the industry focused mainly on the consumer’s buying behavior, but the business models in the perspective of Circular Economy depend heavily on the consumer post-consumption behavior.

Critical mass is, theoretically speaking, a “demand side” phenomenon and derives from a “consumer buying behavior“: people buy something because other people buy the same (or are expected to buy the same).

This is not mindless behavior, but self-serving, to the extent that there are benefits that come from having the same product or service as other consumers. Such benefits will arise when there are strongly installed base effects, host-complement effects, a high cost to time ratio to try the product and high durability.

Over time, some of the requirements of the Circular Economy Directive will definitely impact the consumer’s behavior versus products and services. This includes the behavior related to buying a product, as well as the post-consumption behavior regarding the packaging waste.

If a market has one or more of these characteristics, consumers tend to be increasingly risk averse and ground their decisions (regarding products or services) on what other consumers have done previously.

Let’s extend and analyze the critical mass phenomenon on post-consumption behaviorrelated to packaging waste collection: people do separate collection because other people do the same (or are expected to do the same).

To understand the role and the importance of critical mass for packaging waste collection, it would be useful to analyze the current packaging waste collection models.

The most used packaging waste collection model is curbside collection. The model addresses all type of packaging waste (glass, metal, paper, plastic).

Curbside collection as a business model was design “to solve a market problem” (“market pull”) based on consumer insight. The main driver for curbside collection was “consumer convenience” and the critical mass was generated by a strongly installed base-effect.  

Despite the model long existence and Pay as You Throw (PAYT) programs, the lack of technology adjustments and stagnant operational performance, makes curbside collection to seems overcame by some of the Circular Economy requirements (e.g. 90% recycling target for PET).

In some countries, the curbside collection model coexists with another packaging waste collection model: Deposit Refund System (DRS) for PET, aluminum and glass containers.

Deposit Refund System (DRS) as a business model was design starting from innovation (“technology push”) and was trying to develop an attractive value proposition and fulfil a “need” over time.

The main driver of the model was “incentives for consumers”. If they bring back to shops (or depots) the packaging containers (PET, aluminum and glass) they can receive an incentive or they can recover the deposit value they paid on the purchase of the product.

Despite high technology incorporated, some of the model characteristics (high operational costs, labeling requirements, etc.) and lack of enforcement did not create opportunities for a global development.

Today, however, the Deposit Refund System pivots its “customer target” to national authorities, coming up with a very attractive value proposition: “based on the current performance, only DRS can reach some of the recycling objectives established by the Circular Economy Directive for 2025 – 2030″. Generally, a true statement.

It is well known that, for a critical mass market, early success breeds further success and early failure will breed further failure as customer sentiment switches increasingly to the “early winners”. Considering the current installed base effect of curbside collection, it will be extremely interesting to analyze:

  •  How market will react (including supply chain reconfiguration) and how post-consumption behavior will change when a DRS model will be implemented?
  • How will coexist both models and how will packaging solutions evolve?

Fort both models, the critical mass point will be where “enough” success has been reached by the model to become self-sustaining.

  • How will both models secure a critical mass point (which value, at what costs and in what period of time)
  • The national authorities’ intervention (mandatory provisions) will be enough to secure a self-sustaining situation, generating critical mass for both models?

In the context of today population mobility, reaching a critical mass for packaging waste collection models is very important. However, to understand how robust this outcome is, one needs to know how critical mass was reached. Obtaining this information from complex data analysis is the only way.

Therefore, another critical success factor of Circular Economy will be considered: digital transformation.

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