Innovative Business Models in Ocean-Bound Plastic Recycling

Abstract

Problem definition: About 30 million tons of plastic waste reach the oceans each year, most from low- and middle-income coastal countries. We study novel business models of firms aiming to reduce ocean plastic pollution with a triple bottom line (TBL) objective-a weighted sum of profit, environmental and social impacts. These firms sell (a) plastic offsets and (b) segregated plastic. 

Methodology/results: We develop and analyze models where a firm partners with a local plastic recycling supply chain to sell (a) or (b) or both via collecting and recycling ocean-bound plastic. Considering additionality, i.e., that the firm can only sell plastic offsets based on recycled plastic that is additional to the plastic recycled without the firm's presence, we solve the equilibrium outcomes by maximizing the firm's TBL objective.  

For the special case of a for-profit firm, we show that additionality can decrease the firm's social and environmental impacts when selling (a) only or when selling both (a) and (b). Additionality may also alter the effect of the local recycled plastic market (i.e., the number of collectors and the recycled plastic price) on the firm. We find similar insights under the TBL objective via a numerical study calibrated with real data. 

Managerial Implications: When firms decide whether to integrate and promote additionality, they must be careful since it may not only reduce their profit but also their social and environmental impacts.  Moreover, we find that selling both (a) and (b) can generate a much higher TBL objective value than selling either one alone. We also find that firms employing a TBL objective can generate much larger environmental and social impacts with a slight reduction in profits than profit-maximizing firms.   Our model and results provide insights into new initiatives for tackling ocean plastic pollution.

Keywords: Sustainable operations, business models, ocean-bound plastic recycling, triple bottom line (TBL)