Getting Goods through the Circular Economy, with Apala Mukherjee

Notable Quotes

• Defining the circular economy: “The term ‘circular economy’ at its basic level is quite simple. It means a system that aims to keep using the resources continuously and eliminate waste. What it does not state is that [these resources have] to be in the same form … Our aim is to convert materials into usable materials by the most efficient process.” (2:22)
• Reverse logistics (i.e., transporting recycled materials back to producers) is essential to the circular economy: “[Reverse logistics] is a key challenge as we build the circular economy. We have had this linear piece that starts with the material producers and ends with the consumers putting [materials] out on the curbside or into the landfill. Now, what we need is for consumers to first do the recycling. We have to make sure that the consumers are educated. We need infrastructure to collect [recyclables], and we need policies around recycling so that it happens with the proper classification. And finally, we need economics to make recycling work.” (9:38)
• European policies facilitate better recycling systems: “There is a huge difference we see in Europe versus the United States, especially in the legislative policies and government mandates that drive business and consumer behavior toward a more circular economy … That is not to say that we are not growing in the United States in terms of circularity … There is significant innovation that is happening here, despite fragmented legislation and [a lack of] very good infrastructure around recycling.” (22:35)

Top of the Stack

• The Circular Economy Handbook by Peter Lacey, Jessica Long, and Wesley Spindler
• “Breaking the Plastic Wave: Top Findings for Preventing Plastic Pollution” by Simon Reddy and Winnie Lau

The Full Transcript

Kristin Hayes: Hello, and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host, Kristin Hayes. My guest today is Apala Mukherjee, circular economy leader and director at BASF Corporation. BASF is one of the largest chemical companies in the world and is one of many companies worldwide which are considering how to best reduce waste, both for sustainability reasons and for cost-reduction reasons. But as noted on BASF's own website, the concept of a circular economy isn't just about waste reduction, and Apala is joining me today to help define the term, explain what it means in practice at a large multinational firm like BASF, and describe some of the remaining implementation challenges facing businesses who are committed to circular economy principles. Stay with us.

Apala, it's a pleasure to have you here with me on Resources Radio. Thank you so much for coming on the show. And I wanted to start by asking you to tell our listeners about your background, including how long you've been in your current position as a circular economy leader.

Apala Mukherjee: Hi, Kristin, it's a pleasure to be here. I have a very traditional chemical industry background, as a polymer chemist with an MBA, and I've been working in the industry for over two decades in various technical, commercial, and management roles. But what is more interesting is the range of industries I've interfaced with throughout my various roles, be it in health and nutrition, packaging, paints and adhesives, automotive, or consumer goods. Over the years I've seen shifts in all of these industries to move to a more circular mindset, albeit at different rates. But now it is accelerating and I'm very excited to be leading this effort for BASF in North America since this year.

Kristin Hayes: Fantastic. Well, let's start with some definitions then. I think it's always great to have kind of a baseline understanding of terminology. So can you start by defining the term circular economy for our listeners? And in particular I'd love to hear where there's kind of relative agreement on that definition and where it might mean different things to different people?

Apala Mukherjee: Absolutely. Happy to do so. So the term ‘circularity’ or ‘circular economy’ at its basic level is quite simple. It means it is a system that aims to keep using the resources continuously and eliminate waste. Circular, by definition, means keeping materials in the economy and not putting it in the environment. What it does not state is that it has to be in the same form. That's where the difference lies. That's only a starting point. So we would want to keep, definitely keep materials you can transform efficiently to the same form, which is great, but not all of that can be. Our aim is to convert materials into usable materials by the most efficient process.

Kristin Hayes: That leads me to another kind of big picture question. Can any product be recovered? Can any product be fit into a circular economy model? And if not, are there some that are easier to fit into that now, versus ones that might need quite a bit of innovation to get there?

Apala Mukherjee: Yeah, that's a great question, Kristin. We like to think that it can be—and it should be—but it requires different processes and techniques. Some of them have been existing for quite some time, right? For example, we know glass and metals can be recycled and they have been recycled for quite a long time. So the other side of it is that glass and metals have a higher carbon footprint when transportation is included, right? Plastics are a different category. They're not one material. For example, plastics like PET (polyethylene terephthalate), which you see in water bottles. It's number one when you see the recycle symbol, or number two HDPE (high density polyethylene). They are quite easily recyclable, but some plastics are not, which go into making composite materials or mixed materials.

Take for example your sneakers, right? You wear them every day, but they actually are a mixture of various types of polymers. BASF have actually worked very closely with Adidas to make this multi-material shoe into one material shoe made of thermoplastic polyurethane. Now this shoe can be recycled numerous times. So essentially you can own only one pair of shoe material and you can go through it throughout your life, but that requires design thinking and innovation, and it is not as easy as you may lose performance. So that's where we have to think about innovation and systems design constantly.

Kristin Hayes: So what would you say are the products that people are most focused on innovating around? You gave a great example about some types of plastics, and maybe harmonizing across the types of plastics that are included. Are there other products where a lot of attention is focused, just given the sheer volume of those products that we use?

Apala Mukherjee: Yeah, sure. Plastics, packaging, and tires are absolutely the starting points. When you talk about plastics, it's not just about packaging though. So as I said, plastics go in all sorts of applications, cars, shoes, electronics, textiles, appliances. We use a lot of them quite a lot, and we don't have a good recycling program there. So customers, when they see it in different industries, they're coming up to us with this challenging question and saying, "How can we solve this issue? Not just for plastic packaging and tires, which we see mountains of in the landfills, but rather in the other areas." So that's where I think we are able to bring partnerships across the value chains to solve it. And I would also mention in this current environment of COVID-19, there is a lot of personal protective equipment (PPE) that is being discarded, and none of these are being recycled, and that actually is posing a huge environmental challenge. And that needs to be sorted out as well.

Kristin Hayes: Yeah. That's very true. I feel like the number of single use products has increased in some marked ways, even as it's decreased in other ways. But you know, sort of communal ketchup bottles for example are no longer in use in restaurants. And certainly as you mentioned that PPE is a big contributor there. Well, it would be great to hear a little bit more about what circular economy means in practice for BASF and so I wanted to ask how are your operations, your supply chains, influenced by these circular economy concepts that you've been sharing with us?

Apala Mukherjee: Sure. So BASF invented the Verbund concept in 1910, and it started to convert emitted processed heat from one plant into steam to use in another plant. So for 110 years, we have used this concept and now we have globally six Verbund sites, and we’re building two more in Asia. But we also operate this Verbund concept in 20 mega plants. So we have had this mindset that less waste is better, not only for the environment, but better for society and the bottom line. Verbund is truly a sustainable concept, meaning no waste. And the circular economy is not new to us and BASF. And we are always looking for ways to enhance it in our supply chain and operations. We have multiple projects that are ongoing, to not only bring efficiency to our plants, but we're also targeting our customer's plants to make them more efficient and also sometimes partnering with our suppliers to ensure that they are reducing their footprint as well and sourcing responsibly.

So it's not just us within our fence lines. We go across the value chain to help in terms of process. Now, the end product is where we are seeing challenges in the circular economy and that's where the reverse logistics come into play. And we are figuring out: How do we make sure that we bring in these materials in the most efficient way that is not only cost-effective and benefiting the environment, but also has benefits to society as a whole?

Kristin Hayes: So can you say a little bit more about reverse logistics? I have a mental image of what that would mean. I think of logistics as being the process of getting products out to consumers. And I would guess that reverse logistics would be somehow getting those back so that they can be put back in the circular economy, for lack of a better term. Am I right that that's what you mean by reverse logistics? Is there anything more that you could say about that?

Apala Mukherjee: That is exactly what it is. It's a key challenge as we build the circular economy. So we have had this linear piece that we take, make, and dispose of, and it starts with the material producers and it ends with the consumers putting it out on the curbside and it going into the landfill or the materials recovery facility (MRF). Now what we need is for consumers to first do the recycling. So we have to make sure that the consumers are also educated. We need infrastructure to collect it, and we need policies around recycling so that it happens with the proper classification. And finally, we need economics to make recycling work.

In the current environment, there is a lack of direct legislation, and there are varying recycling structures, which poses a pretty big problem in North America compared to Europe. And you couple that with long distances that materials may have to go from the collection to the conversion, meaning that the infrastructure setups cannot be centralized. It has to be actually decentralized and localized. This means there's opportunity for innovation around processing and availability of materials and different business models may be at play, but with reverse logistics, we have to always remember that it starts with the consumer. Right now, where we are at, it's primarily collected through the curbside pickup. And oftentimes it doesn't go to the MRF, and it ends up in the landfill, especially if it's difficult-to-recycle material.

In COVID times, we have also seen as budget cuts have happened, that there is more of a collection of everything together in the name of efficiency. And we have also seen that consumers are generating more waste. So it's difficult for individual cities who are perhaps cash-strapped to bring those materials to MRF. So you're seeing more and more materials now which can be recycled going into landfills, which is exactly the opposite of what needs to happen in order to bring the circular economy to a fruition.

Kristin Hayes: Right. And MRF stands for?

Apala Mukherjee: Materials recovery facilities.

Kristin Hayes: Oh okay, materials recovery facilities. And sort of a spontaneous question for you too.

Apala Mukherjee: Sure.

Kristin Hayes: BASF as a chemical company is producing inputs into a tremendous number of products. But ultimately my understanding is that, as you mentioned in your partnership with Adidas, what you're doing is working with another company that kind of produces the end product that actually goes to consumers. So how do you think about which products should go back into your circular economy processes versus which ones should a company like Adidas be handling? Or how do you think of your company's role in the circular economy, given that you're not always the one producing the product that is being recycled?

Apala Mukherjee: In terms of BASF, BASF not only makes materials; we are also in the process of working through different partnerships, we don't oftentimes make the end material that you see. But we have products that actually make something that is more recyclable or it degrades better. For example, we don't make the paper cups, we are not into that, but we are trying to make sure that the paper cups that hold your very hot beverages are recyclable, right? So we are not making the actual structure, but we are actually looking at how do we make the internal lining, which is now made of polyethylene that makes these paper cups very difficult to recycle, to convert it to something that allows it for recycling. We actually came up with a product, which not only allows for the functionality to hold the hot beverages, gives the recyclability, but it's also cost-effective.

So that's a material that we provide to our converters. That's a traditional model. What I talked about in Adidas was a very close partnership where we came up with this—how do we bring something together in terms of a product design? We have design fabric. We enable our customers to completely rethink the way the product is working and the materials that are needed to make sure that it's working better for them.

The other piece is that we oftentimes provide services as I say to our customers. So we may not be making the product, but we actually have a catalyst that controls the reaction of that material. We provide that catalyst, and that actually enables the process to move more efficiently. And we through some digital capabilities enable the customers to better monitor when does the catalyst need to be changed to ensure that the process is not becoming less efficient.

BASF has various business units, and not one business unit has just one selling products. We try to make sure that we are coming to the customer with a complete solution around what we can do to help them. Different customers come with different issues and different challenges, and it depends on the industry. For example, we are lightweighting the customer's vehicles in the traditional sense with plastics and composite materials. And we are also looking at not only catalytic converters for the traditional vehicles, how to make them more efficient, but also we're disrupting ourselves by bringing in battery materials to our customers for the next generation of electric vehicles. So we try to make sure we are ahead of the trend. We look at constantly what the consumer demands are, and we try to make sure that we bring those solutions and work on the solutions for our customers.

Kristin Hayes: Well, and as you're talking through this too, I'm very much reminded of how intertwined these industries are and how collective this process of building a circular economy ultimately needs to be. No individual company can manage every piece of this, given how interconnected supply chains are and how dependent companies are on each other's materials. This is another spontaneous question for you, but when it comes to either cross company or cross sectoral collaborations around circular economy, what are some of the forums by which companies can make those links and figure out better ways to work together?

Apala Mukherjee: Sure. So BASF is already part of certain forums. The Ellen MacArthur Foundation is a fantastic place to convene. There are many conventions that are coming up as well. As an industry we convene at the AEPW, the Alliance to End Plastic Waste. We now have expanded it to other areas. We are constantly looking at areas where we can not only partner effectively, but really bring in solutions to solve these issues. I think there are a lot of forums that are forming right now, Kristin, and there's a lot of talking heads. The question is: What are we going to do? And BASF is into the doing part. So, we are trying to make sure we engage in forums that have a broad-based direction that doesn't deem plastic as an evil, but as a necessary thing that needs to be managed better.

We are also trying to make sure we engage in areas where there's advocacy, there is legislation that we can influence, but also get some projects done. Be it education, be it infrastructure, be it actually building something on the circular piece as I talked about together with our customer, like the polyethylene lining for paper cups—or with Adidas for a completely recyclable shoe.

Kristin Hayes: Yeah, and I guess I did want to ask too. You've articulated a number of the challenges to successfully building this closed loop waste cycle. And they start with infrastructure as you mentioned, around just how do we get these materials back to places that can handle them, with consumer education, with policies to drive these. But are there other challenges that you are very aware of? I'm thinking in particular that I would guess that a number of products come back contaminated or in ways that make them difficult. Or are there limits on the number of times that certain classes of products can be broken back down? Does it differ across products?

Apala Mukherjee: Yeah. Actually contamination is quite a big issue in getting products recycled. But depends on the type of contamination and the processing in terms of to use. For example, if you think about just mechanical recycling. Oftentimes contaminated plastics or even mixed material plastics cannot be recycled. Instead, they're landfilled or incinerated. There've been improvements in the mechanical recycling areas, but it can only take care of very clean, single stream, plastic waste.

Mixed materials is a concern because there is some cross-contamination it cannot handle. So the other pieces that, if you think about mechanical recycling, there's only so many turns that are plastic and go through before it starts to degrade. Because it's a polymer. In the end it will, you'll see when you put your plastic Tupperware in the microwave for a certain period of time, at some point it starts to have some of these bumpy things and it doesn't look like new, right?

So we want to make sure that there are alternatives to mechanical recycling. And mechanical recycling will definitely not be suitable for plastic food packaging. Like your yogurt cups, you don't want to contaminate or have things leaching into it. So that's where you see advanced recycling come in and it actually takes it back to its feedstock. It can take contamination, it can take mixed materials. The number of turns is not a limiting factor, and you can do it over and over again. We are seeing a lot of progress in advanced recycling to process highly contaminated and mixed plastic waste and BASF has also invested, and will continue to invest, in this area to produce recycled content from them.

That's about plastics. There's also paper, right? And that recycling differs quite significantly, because you have to re-pulp it, you have to de-ink it, it requires a lot of water as part of the influence stream.

Having said that, the recycling rates of paper are much higher than that of plastics at this time. But you want to make sure that everything in paper can be recycled. And as I gave you an example about the hot beverage cups—if you put in mixed material with paper, then it becomes unrecyclable. So you have to always keep in mind that a single material is the best for recyclability. Take it through the turns as many times as you can without polymer degradation based on application. When it cannot be recycled anymore through mechanical recycling, we have to find alternatives like advanced recycling, to make things work and bring it back. So different hierarchy and different processes that are required.

Kristin Hayes: Apala, another kind of broad contextual question for you, but something I'm curious about. So you mentioned early on some differences between the United States. and Europe. I'm sure there are many. BASF is a German company, and I imagine therefore has a very valuable perspective on the differences between those two markets, whether it's consumer demand, whether it's policy related to the circular economy. So can you just say a little bit more about your experience of how the United States and Europe potentially differ on the range of issues that we've been talking about?

Apala Mukherjee: This is a hot topic all the time, internally as well. I think we have to address this not only inside of BASF, but rather globally. There is a huge difference we see in Europe versus the United States, especially in the legislative policies and government mandates that drive business and consumer behavior towards a more circular economy. So there's an economic incentive. There's policies that actually push that, which are not present in the U.S. Combined with a uniform recycling structure, the circular economy has been growing quite fast in Germany especially. I would say it's true also for the Western European block, as we look across the region. The circular economy is also accepted in all the three sectors as a way for them to move forward: in public, private, and civil.

It is not to say that we are not growing in the United States in terms of circularity. But what we're seeing in the United States is that the organizations are ramping up their circularity approaches. It's a key differentiator for the brands to both consumers and shareholders. And there is significant innovation that is happening here, despite I would say not a lack of legislation, but fragmented legislation, and not a very good infrastructure that is present around recycling.

Kristin Hayes: Would you say that the policy drivers have on some level made most of the difference in terms of the European versus US perspective? Are there different economics at play? And I feel like I should have asked you earlier about the economics of circular economy, but is there an easy business case to make, or is that business case improving as time goes on? That was about nine questions packaged into one, but yeah. Any of those that you'd want to respond to?

Apala Mukherjee: To the consumers, I think economics is very important. When you talk about reverse logistics, you want to make sure that the consumers are educated about recycling and that there is an infrastructure for them to bring it back and there's an incentive for them to bring it back. So we have to make it easy. We have to make them more educated as well as we want to make sure that they do bring it back. In terms of the MRF, the material recycling facility, we see that there is a problem in the United States that it doesn't get into the MRFs. It goes into the landfills because it is difficult to sort; it is very expensive. Europe has made it so that the consumers are incentivized to bring it back. So they have that five cents deposit, but it's not just that. You actually can get penalized in certain countries for not recycling. Your garbage is actually weighed. If you put out too many recyclables that can be recycled instead and you put it in the garbage, you're actually penalized. We are seeing that also in certain cities in the United States.

So there are incentives that you can put in place for the consumers to have the right behavior. So that's a starting point. But there is also the economic incentive of the municipalities to bring the materials not to a landfill, but to an MRF. And right now there is an economic difference in bringing it to an MRF versus taking it to landfill to the benefit of the landfill. So we need to balance that out better, both in terms of the collecting point from the consumers, but also bringing it to the right sorting facility. MRFs are not making that much money right now from the bales that they sell.

In order to bring it back, it has to make economic sense. Couple that with the very cheap feedstocks that are coming from the virgin materials, like oil and natural gas. In North America especially, it becomes a little bit of an economic challenge to switch it around. That’s why I think we need to not drop the word economy from the circular part. A lot of people call it circularity. I would say, let's keep the economy part, because unless there is economic incentive, you cannot make this work. And there are coalitions and partnerships that are forming that are really looking at: How do we change this economic balance? And more to come. It's not an easy nut to crack. As you can see, there's multiple facets in this challenge, and we want to make sure that it is all covered. Finally, there's also responsibility from the material producers, as well as the brand owners as part of the EPR responsibility.

Kristin Hayes: Fantastic. Well, Apala, this has been really interesting. I really appreciate you taking the time to share with us both your own experience within again a large international company and to just generally ground our listeners in these issues, I feel like some of the issues we talk about on the podcast feel a little bit distant. I think this one feels very familiar to many people, to all of us proudly. And as you point out, especially during the pandemic when we're not just putting our waste in a company's trash bin that gets taken away before we know. We actually are much more sort of visibly aware of the waste that we produce. So I really appreciate you taking the time to talk through this with us.

Well, and I wanted to close with our regular feature, Top of the Stack. And so I'd like to ask you, Apala if you have any more good content that you might recommend to our guests. It can be related to the topic that we've been discussing. It might be something different. It can be in any format, but I'd love to hear, Apala, what's on the top of your stack?

Apala Mukherjee: So right now on the top of my stack is, as you can imagine, is The Circular Economy Handbook by Peter Lacy, Jessica Long, and Wesley Spindler. It's a wonderful book, which actually details out some case studies and what business models would look like. The prelude to that was from Waste to Wealth, also by Peter Lacy. I think there are a lot of really good reads out there on circularity. And the other article that I would like the listeners to pay attention to is “Breaking the Plastic Wave,” which came out recently.

Kristin Hayes: Great. Well there will be links to those from our webpage too. We always like to include some easy access to the Top of the Stack recommendation. So thank you very much for sharing this. Again, thank you very much for taking the time. We really appreciate it.

You've been listening to Resources Radio. Learn how to support resources for the future at rff.org/support. If you have a minute, we'd really appreciate you leaving us a rating or a comment on your podcast platform of choice. Also, feel free to send us your suggestions for future episodes.

Resources Radio is a podcast from Resources for the Future. RFF is an independent, nonprofit research institution in Washington, DC. Our mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. The views expressed on this podcast are solely those of the podcast guests and may differ from those of RFF experts, its officers or its directors. RFF does not take positions on specific legislative proposals. Resources Radio is produced by Elizabeth Wason with music by Daniel Raimi. Join us next week for another episode.