One of the last holdouts of digitalization: Waste

In our latest blog post, we cover one of the often forgotten industries: Waste

Venture Capitalists are known to focus on industries with a lot of change potential, but despite the huge impact that the industry has on our daily lives and economic powerhouse industries, the waste industry has gotten minimal exposure to the Climate Tech investment upswing of the past few years. Research shows that as the number of total investments grew 5x in the past five years, capital deployed to waste management technology and circular/recycled/efficient materials grew unsteadily, making up of around 2. 5% of total deployed capital between H1 2021 and H1 2022. The problem and change drivers are clear, but the use-cases and target technologies lack innovativeness or they face challenges in scaling.

One thing is clear: the waste industry is subjugated to a huge push towards change. Decreased supply of oil will push the price of virgin plastics closer towards that of the premium price of recyclates. Today, the recyclate market cannot support the increased demand, which is already outstripping supply by various industrial accounts. A first major change in the industry occured, when mixed waste export to Asian companies was dramatically reduced by their national governments around 2010, forcing European companies to become more efficient in their waste systems, and increase their capacities.

In Germany, this means that the waste industry had to consolidate, with a smaller number of players in the value-chain becoming more efficient. By merging waste streams from a larger geographical area economies and efficiencies of scale set in. In Germany, the 63% decrease in the number of waste centers (MRFs) since 2000 allowed for 1 million more tons of waste to be processed as their average annual capacity grew from 40kt to 120kt. Europe’s response to the first wave is nowadays leading the way globally in terms of recycling targets and achieved quotas.

But so far the EU has been reluctant to set any waste recycling or pre-preparation targets close to 100% and the highest goal related to recycling is the EU Circular Economy Action Plan goal to recycle 55% of packaging generated waste by 2030. The general reluctance to set high goals indicates a resistance towards restructuring the waste industry and how materials are processed. Its flagship Single-Use Plastics Directive, introduced in 2021, focused on a framework for recycling 10 consumer waste items and labelling pictographs for consumer packaging for proper disposal. Increasing product lifespan, optimizing material usage in terms of weight and shape, and making sure of product quality and durability are certainly important to a circular economy, but they are unlikely to lead us towards recycling quotas of 100% and an absence of virgin materials

If you are interested in learning more about why venture capitalists should look more into this area, what market dynamics evolve and what exciting opportunities there are in the space, feel free to read more in our Medium blog post.