SCALING INNOVATIONS for Plastic Circularity with Investment in ASEAN Disclaimer This work is a product of staff at The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. Photos: Unless otherwise indicated, photos were taken by the study team. Design: Sarah Jene Hollis, World Bank Group ii SCALING INNOVATIONS for Plastic Circularity with Investment in ASEAN iii Contents Acknowledgements....................................................................................................viii Executive Summary..................................................................................................... ix Chapter 1. Introduction................................................................................................. 1 1.1. Background and Objectives................................................................................................................................ 1 1.2. Plastic Pollution in the ASEAN Region............................................................................................................... 3 1.3. Innovation and Plastic Waste Management...................................................................................................... 4 1.4. Methodology........................................................................................................................................................ 5 1.4.1. Limitations of the Methodology................................................................................................................ 6 1.5. Stakeholder Consultations.................................................................................................................................. 7 Chapter 2. Overview of the Waste Management Ecosystem and the Key Plastic Waste Types in the Six AMS.......................................................................................... 9 2.1. Evaluation Parameters for Waste Management, Recycling, and Plastic Circularity in the Six AMS.............. 9 2.2. The Country-specific Status of SWM, Recycling, and Plastic Circularity in the Six AMS.............................. 10 2.3. Hurdles to Overcome to Achieve Innovations’ Growth and Scale.................................................................. 16 2.3.1. Lack of Policy and Financial Incentives ................................................................................................ 17 2.3.2. Lack of Organizational Capacity ............................................................................................................ 18 2.3.3. Limited Access to Capital....................................................................................................................... 18 2.4. Innovation Support to Address the Gaps......................................................................................................... 19 Chapter 3. The Innovation Landscape for Plastic Circularity......................................... 23 3.1. Introduction to Innovations in Plastic Circularity in the ASEAN Region......................................................... 23 3.2. Identifying and Assessing the Innovation Ecosystem.................................................................................... 25 3.3. Innovations in ASEAN and other select Areas................................................................................................. 27 3.3.1. Upstream Stage ...................................................................................................................................... 27 3.3.2. Midstream Stage..................................................................................................................................... 28 3.3.3. Downstream Stage.................................................................................................................................. 29 3.3.4. Cross-cutting Stage................................................................................................................................. 30 3.4. Evaluating and Selecting Innovations for Investment..................................................................................... 31 iv Chapter 4. Policy Options to Stimulate Innovations to Advance Plastic Circularity ........ 35 4.1. Overview of the Role of Policies in Driving Innovation and Investment......................................................... 35 4.2. Policy Instruments for Triggering Plastic Innovation...................................................................................... 39 4.3. International Policy Triggers for Plastic Innovation ........................................................................................ 44 Chapter 5. Investment Needs and Opportunities in Innovations for Plastic Circularity in the Six AMS........................................................................................... 49 5.1. Development Profile of Innovations in the Plastic Circularity Ecosystem in the Six AMS............................ 50 5.2. Overview of Investments in Innovations in Waste Management, Recycling, and Plastic Circularity in the Six AMS (2018–2022) ................................................................................................................................... 52 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations .................................................................................... 55 6.1. Scaling Innovations by Stage............................................................................................................................ 57 6.1.1. Value Chain Stage.................................................................................................................................... 57 6.1.2. SWM Ecosystem Type............................................................................................................................. 58 6.2 Supportive Policies and Financial Incentives for Plastic Circularity Innovations........................................... 62 6.2.1. Policy Gaps and Coordination to Address Institutional Failures.......................................................... 62 6.2.2. Financial Incentives to Address Market Failures .................................................................................. 64 6.2.3. Creating Market Demand........................................................................................................................ 66 6.3 Direct Support to Plastic Circularity Innovators................................................................................................ 68 6.3.1. Building Organizational Capacity............................................................................................................ 68 6.3.2. Access to Financing................................................................................................................................ 71 6.4. Regional Cooperation ....................................................................................................................................... 73 6.5. Conclusion......................................................................................................................................................... 74 Appendices................................................................................................................ 75 List of Abbreviations................................................................................................................................................. 75 Appendix 1. Country Profiles for the Six AMS......................................................................................................... 78 Appendix 2. Top 10 plastic circularity transaction by deal value in the Six AMS (2018-9M 2022)..................... 80 Appendix 3. Stakeholder Consultations.................................................................................................................. 81 Appendix 4. Key Types and Sources of Capital in the ASEAN Region.................................................................. 85 Appendix 5. Selected Financing Criteria for Plastic Circularity Investments ....................................................... 89 Appendix 6. Selected Venture Debt Providers and Their Products....................................................................... 90 Appendix 7. Perceived Barriers and Supportive Policies to Drive the Development of Plastic Circularity in the Six AMS........................................................................................................................................................... 91 Appendix 8. Summary of Selected SWM and SUP Policies................................................................................... 93 Bibliography............................................................................................................... 94 v Figures Figure ES.1. Plastic Waste Management Innovation Landscape in the ASEAN Region......................................xiii Figure 1. Losses of Recyclable Material Value in Four ASEAN Member States..................................................... 2 Figure 2. Types of Plastic Pollution in the ASEAN Region....................................................................................... 3 Figure 3. Solid Waste Management Framework to Support Innovation.................................................................. 4 Figure 4. Elements of Plastic Circularity (Plastic Waste Management within Solid Waste Management)........ 10 Figure 5. Key Elements of Plastic Circularity.......................................................................................................... 11 Figure 6. Categorization of Innovations in the Plastic Value Chain....................................................................... 24 Figure 7. Plastic Waste Management Innovation Landscape in the ASEAN Region............................................ 33 Tables Table ES.1. Transitioning SWM from a Nascent to an Emerging Ecosystem in the six AMS..............................xiv Table ES.2. Prioritization of innovation across the plastic value chain in the six AMS.........................................xv Table 1. Nascent Ecosystem: Cambodia, Indonesia, and the Philippines............................................................. 12 Table 2. Emerging Ecosystem: Malaysia, Thailand, and Vietnam.......................................................................... 14 Table 3. Gaps in Solid Waste Management and their Impacts on Plastic Waste Management......................... 20 Table 4. Thematic Innovations to Address Gaps to Improve Plastic Waste Management.................................. 21 Table 5. Readiness of Innovations by Stage........................................................................................................... 33 Table 6. Extended Producer Responsibility Scheme.............................................................................................. 40 Table 7. Potential Sources of Capital for Early-stage Companies......................................................................... 51 Table 8. Investments in Plastic Waste Management, Recycling, and Circularity in the Six AMS, by Stage (January 2018–September 2022)............................................................................................................ 53 Table 9. Number and Value of Plastic Circularity Investments in the Six AMS, by Country (January 2018–September 2022) ........................................................................................................................... 53 Table 10. A Selection of Innovative Plastic Circularity Finance Offerings in Emerging Markets......................... 54 Table 11. Prioritization of Innovation Across the Plastic Value Chain in the Six AMS......................................... 60 Table 12. Prioritization of Innovations Based on a Country’s Stage in the Plastic Value Chain and its Typology............................................................................................................................................................... 61 Table 13. Transitioning SWM Innovations from a Nascent to an Emerging Ecosystem in the Six AMS............. 64 Table 14. Potential Types and Sources of Capital for Innovations Across the Plastic Value Chain................... 72 Table 15. Recommendations and Prioritization for Limited Access to Capital.................................................... 72 vi Boxes Box 1. Stakeholder Consultations during the 7th International Marine Debris Conference (7IMDC)................... 7 Box 2. An Alternative Material Innovation Case – Ecovative.................................................................................27 Box 3. Redesign Innovation Case – Beverage Industry Players (Lotte, Coca Cola & Evian)....................................28 Box 4. Refill/Reuse Innovation Case – Loop................................................................................................................ 29 Box 5. Recycling Innovation Case – Prevented Ocean Plastic (POP) South Asia.....................................................30 Box 6. Operational Platform Innovation Case – Rubicon............................................................................................ 31 Box 7. Using Platforms to Improve Collection Efficiencies......................................................................................... 32 Box 8. IFC Performance Standards on Environmental and Social Sustainability.....................................................37 Box 9. Case study: The Role of Government in Thailand’s Entrepreneurial Ecosystem.......................................43 Box 10. Island Solutions...........................................................................................................................................59 vii Acknowledgements This publication is prepared to enable ASEAN countries in assessing the current innovations supporting plastic circularity and the investment landscape in the region. The analysis identifies key barriers and offers recommendations for stakeholders to address plastic pollution by enhancing innovations through targeted investment, capacity building and cooperation along the plastic value chain. The development of this publication was coordinated by the World Bank’s Environment, Natural Resources, and Blue Economy Global Practice, with funding support from the World Bank Group Korea office. This report was prepared by a team led by Junu Shrestha (Senior Environmental Specialist) under the guidance of Mona Sur (Practice Manager), Jason Allford (Special Representative), and Anna Wellenstein (Regional Director). The core team comprised Hubert Jenny (Senior Environmental Consultant), Elaine Tinsley (Private Sector Specialist), Ann Bishop (Technical Editor), and Sojin Jung (Environmental Consultant). Technical contributions were also made by Rieko Kubota Tasaki (Senior Environmental Specialist), Ravi Gupta (Finance and Innovations Consultant), and Bora Kim (Innovations Policy Consultant). Key research and analysis for the Korean Supplementary Note were performed by Yoon Ju Heo (Senior Environmental Consultant) and Hyunji Roh (Environmental Consultant). The team received operational guidance from Milen Dyoulgerov Vollen (Senior Environment Specialist) and Maria Lourdes Noel (Senior Program Assistant). Anjali Acharya (Senior Environmental Specialist) provided guidance at the initial stages of the project. Sarah Jene Hollis (Design Consultant) did the design layout of the publication. Soyoun Jun (Program Assistant) provided administrative support to the team. The research, preliminary analysis and stakeholder consultations on the innovations were conducted by the consulting firm The Circular Initiative. The team is grateful for the valuable advice provided by the peer reviewers, Delphine Arri (Senior Environmental Engineer), Etienne Raffi Kenchichian (Senior Financial Sector Economist), and Karin Shepardson (Lead Environmental Specialist). The study team would like to especially thank the private and public sector stakeholders in Cambodia, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam who generously provided their insights for this study. The team is grateful to the Korean agencies and private entities who contributed their valuable time and knowledge in preparation of the Supplementary Note on Korean innovations in plastic circularity. viii Executive Summary The member states of the Association of Southeast Asian Nations (ASEAN) recognize the serious problem of plastic waste leaking into the environment at every stage of the plastic value chain, from poor collection and sorting to inadequate recycling and disposal facilities. Rapid urbanization and the burgeoning middle class in the ASEAN Region have resulted in an exponential rise in the volume of plastic waste, and particularly waste from single-use plastics (SUPs). In 2021, a selection of six ASEAN member states (AMS) generated approximately 8.4 million metric tons of mismanaged plastic waste.1 By 2040, the annual flow of waste into the ocean, worldwide, is expected to rise from 11 to 29 million metric tons per year under a business-as-usual scenario.2 It is alarming to note that of the world’s top 10 rivers conveying the highest amount of plastic waste into the ocean, eight are in Southeast Asia.3 In the ASEAN Region, 75 percent of marine plastic pollution comes from uncollected, land-based waste, and about 25 percent from municipal solid waste system leakage.4 Mismanaged plastic waste has significant negative impacts on biodiversity and human health. It exacerbates the inefficient use of raw materials and misses opportunities to create jobs in manufacturing sustainable alternatives to plastics, as well as in reusing and recycling plastics. The environmental, health, and economic cost of mismanaged plastic waste is estimated to be worth more than $100 billion per year,5 which underscores the urgency of finding solutions.6 The potential value from plastic recycling is considerable in the ASEAN Region. An estimated $8.9 billion is lost by four 1 Cambodia, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam 2 The Pew Charitable Trusts and Systemiq. 2020. “Breaking the Plastic Wave.” 3 Meijer et al. 2019. “Over 1000 rivers accountable for 80% of global riverine plastic emissions into the ocean.” 4 UN-ESCAP (United Nations Economic and Social Commission for Asia and the Pacific). 2020. Closing the Loop. 5 All dollars ($) in this paper are US dollars. 6 Minderoo Foundation. 2022. “The price of plastic pollution: social costs and corporate liabilities.” ix Photo: Plastic pellets are sorted into bins at a plastic recycling facility. Shutterstock/ImagineStock. This paper is intended to enable ASEAN countries to take stock of the current innovations that are supporting plastic circularity and the steps needed to encourage additional capital investment by improving policies and building innovators’ capacity. AMS each year due to their failure to recover and reuse framework and enforcement of regulations; and (v) limited 80 percent of their plastic waste.7 This demonstrates that plastic and solid waste-related data. All these gaps hinder solid waste management (SWM) systems are not effectively private sector participation and investment, which results collecting, sorting, and recycling plastics, and, as noted in underdeveloped markets for recycled products and above, the low recycling rate is failing to exploit the economic packaging, despite the AMS generating a large volume potential of plastic waste. of plastic waste. Given the gaps in SWM, plastic waste management is neither adequate nor efficient, leading to In 2021, in response to the growing plastic waste emergency, substantial plastic waste leakage into the environment, the AMS developed the “ASEAN Regional Action Plan (RAP) and limited recycling. for Combating Marine Debris in the AMS (2021–2025).” This ambitious commitment by the AMS is reflected in This paper presents a study that was conducted in six AMS a subsequent document, the “Regional Declaration on and based on an initial assessment of their SWM systems, Combating Marine Debris,” which details actions to reduce these were grouped into two sets of three countries. Three plastic waste, enhance waste management practices, countries (Cambodia, Indonesia, and the Philippines) have and foster innovations to tackle plastic leaking into the a nascent solid waste ecosystem that is characterized by environment. Some AMS have developed national plans some dedicated waste policies and regulations, which are and strategies to improve SWM, promote the circular poorly enforced, with no support and incentives for plastic economy,8 and initiate innovations to reduce, recycle, and circularity; limited or no waste segregation at source; poor reuse plastic waste. Through their collective commitment, collection systems with a low collection ratio; a strong the AMS are endeavoring to address plastic pollution and autonomous informal sector that prioritizes the collection, capitalize on the benefit of increasing recycling, while also sorting, and recycling of high-value plastic; and significant strengthening environmental stewardship and sustainability gaps in the infrastructure for waste recovery and recycling. in the ASEAN Region. A second group of three countries (Malaysia, Thailand, and Vietnam) have an emerging solid waste ecosystem, Given that plastic and SWM are interlinked, strategies with a SWM regulatory framework; incentives for plastics’ targeting plastic waste management can only be impactful reuse; SUPs’ restriction, collection systems, and recycling if they also address the gaps in SWM. These gaps include: facilities in place in major urban centers; and consumers (i) the low rate of solid waste segregation at source; (ii) are educated to segregate their waste at its source. In inadequate collection systems; (iii) the limited number addition, Indonesia and the Philippines are island nations and capacity of sorting and recycling facilities, and heavy that have unique SWM challenges. reliance on the informal sector; (iv) a weak regulatory This paper acknowledges that although there are gaps 7 World Bank. 2021b. “Market Study for the Philippines, Malaysia and in plastic and SWM in the six AMS, these shortcomings in Vietnam: Plastics Circularity Opportunities and Barriers.” 8 “The circular economy is a model of production and consumption, which infrastructure and services should not deter them from involves sharing, leasing, reusing, repairing, refurbishing, and recycling supporting plastic waste innovations, which can enhance existing materials and products as long as possible…This is a departure from the traditional, linear economic model, which is based on a take- plastic and SWM. This paper is intended to enable ASEAN make-consume-throw away pattern.” (European Parliament. Website countries to take stock of the current innovations that accessed on February 25, 2024) x are supporting plastic circularity and the steps needed (iii) potential for scalability. The innovations reviewed and to encourage additional capital investment by improving evaluated were mostly from the ASEAN Region (67 percent) policies and building innovators’ capacity. Thus, this paper and supplemented by some from other developing countries should assist stakeholders in tackling plastic pollution and (24 percent), and some developed countries (9 percent). improving plastic circularity by focusing on innovations The latter were in the upstream stage of the plastic value in plastic circularity and supporting entrepreneurs and chain (alternative materials) and in the cross-cutting stage small and medium enterprises (SMEs). (digital platforms). These innovations are of relevance to AMS but not as common in the region. The selection of The World Economic Forum’s UpLink Platform, the Living some innovations from outside the ASEAN Region was Landscape of Reuse Solutions database, and the Incubator necessary due to the small number of innovations within Network were the sources of innovations analyzed in the the region that were ready to scale. This paper discusses study. In developing this paper for the AMS, stakeholders various innovations and includes a Supplementary Note who are engaged in driving innovation and investing detailing the Republic of Korea’s efforts to create a supportive in plastic circularity were consulted. These comprised environment for innovations in plastic waste management.9 investors, government officials, and representatives from The innovations reviewed span the entire plastic value non-governmental organizations, associations, corporations, chain, from the upstream stage, to the midstream stage, to incubators, accelerators, and other enterprise support the downstream stage, which is before plastic waste either organizations. Initially 262 innovations were selected from leaks into the environment or it is properly disposed of. the three databases, and their readiness to scale was assessed. The latter was based on three key factors: (i) 9 World Bank. 2024. “Innovations for Plastic Circularity in Korea: Enabling Conditions and Solutions: Supplementary Note for Scaling Innovations robustness of the business model, (ii) current scale, and for Plastic Circularity with Investment in ASEAN.” The upstream, midstream, downstream, and cross-cutting stages in the plastic value chain are as follows: • The upstream stage includes the production of plastic materials. Innovations at this stage contribute to source reduction by reducing the production and use of difficult-to-recycle plastic products, such as SUPs. These innovations can be divided into (i) Alternative materials and substitutions, which are bio-based feedstocks that substitute plastic with less harmful plant-derived materials, such as bamboo, coconut, and seaweed; and (ii) Eco-design solutions, which enhance recyclability to optimize materials by improving the yield and value of reclaimed plastics. The upstream stage of the plastic value chain drives the economic and material efficiency of plastic production, and it also fosters the development of advanced materials and sustainable practices that drive plastic circularity. Photo: iStock/Studio Fennel xi • The midstream stage focuses on innovations that minimize the use of plastic products in the product-delivery and consumer-use phases. Midstream innovations act on the critical elements, Collection and Segregation, in plastic circularity, and these are divided into (i) Separation and sorting, which supports segregation at source, increases collection and separation efficiency, and opens up opportunities for businesses in recycling; and (ii) Refill and reuse, which comprises diverse business models that limit SUPs and other plastic products by leveraging business models that target reuse, refilling, or product-as-a-service.10 Examples of this include package-free shops, refill systems that integrate reverse logistics’ operations, capturing and reprocessing containers, and reusable packaging. The midstream stage contributes to environmental sustainability and plastic circularity. • The downstream stage focuses on managing plastics at the end of their usefulness, including reintegrating post-consumer plastic back into the economy. This stage supports all forms of Cycling,11 and especially recycling. These innovations improve the recovery of recyclables through (i) Recovery, which refers to the preparation of plastic waste for recycling, aims to increase the quantity, quality, and economic viability of recovered plastics; and (ii) Recycling, which focuses on converting recovered plastic waste into usable raw materials to close the loop in the plastic value chain. Business models and technologies that enhance the value of plastic through processes such as separation, shredding/flaking, or pelletizing improve the recycling process, and result in higher-quality recyclable materials, reduce contamination risks, and elevate the overall quality of the recycled output. • The cross-cutting stage comprises digitalization and smart systems and data analytics across the plastic value chain.12 Innovations cutting across the plastic value chain provide digital solutions and services that improve plastic waste management; make this more accurate and transparent; streamline operations; optimize resources; enable better decision-making with evidence-based data; and increase efficiency and performance. This stage can also assess citizens’ engagement to measure their compliance with regulations and their impact. Examples of digitalization include digital mapping to track plastic waste and products. Digitalization, in line with waste regulations on extended producer responsibility (EPR), also helps stakeholders to account for their plastic usage; audit and provide accurate data on plastic waste flows; and quantify collected waste. 10 The model shifts the traditional focus from selling plastic products to offering a service that encompasses the lifecycle management of products, including their recycling and eventual disposal. 11 Recycling processes post-consumer plastics to make new materials. Upcycling transforms plastic waste into products of higher quality or value than the original. Downcycling is recycling that degrades the quality of materials and leads to their use in lower-value applications. Closed loop is the optimum recycling process as end-of-life plastic is processed to make the same product again, which maintains its economic and material value. Precycling involves the strategic reduction of waste by preventing the generation of unnecessary plastics. 12 “The Fourth Industrial Revolution is characterized by the convergence and complementarity of emerging technology domains, including nanotechnology, biotechnology, new materials and advanced digital production technologies.” (Lavopa and Delera. 2021. “What is the Fourth Industrial Revolution?”) xii Of the 262 early-stage innovations reviewed in this study, Public sector support is critical for plastic waste management 48 percent were at “concept stage,” 36 percent were and advancing plastic circularity, and many supportive at the “piloting and refinement stage,” and 16 percent SWM policies have already been developed and adopted demonstrated “readiness to scale.” About half of the in the six AMS at the national, regional, and local levels. innovations focused on the midstream stage (especially However, significant policy gaps remain because some in refill and reuse). The other innovations that lagged policies are not implemented and enforced. Accelerating at the upstream, downstream, and cross-cutting stages the adoption of policies could significantly strengthen numbered 25, 16, and 13 percent, respectively. This reflects opportunities for innovation to play a role in tackling the ASEAN Region’s lack of market support for source plastic waste management, recycling, and circularity, as reduction, lack of infrastructure for recovery (material well as supporting SWM. To transition from a nascent recovery facilities), lack of recycling (recycling facilities), to an emerging SWM and plastic waste ecosystem (see and the novelty of digitalization. This study focused on Table ES.1), countries need to strengthen their policies “readiness-to-scale” innovations that were beyond the and regulations by establishing and implementing basic proof-of-concept stage. The innovations that were ready regulatory frameworks and progressing towards complex to scale (16 percent) were further subdivided between policies, such as EPR. This transition fosters a culture of the upstream stage (34 percent), the midstream stage innovation that results when technology and practices in (8 percent), the downstream stage (40 percent), and the SWM improve from basic waste collection and disposal cross-cutting stage (19 percent). Most of the innovations facilities to advanced processing and recycling ones. This were at the “concept stage” of their development and, transition also means expanding stakeholder engagement by therefore, will require strong policy and financial support evolving from engaging with local communities to broader to reach the “readiness-to-scale stage.” The innovation collaboration at a national level that harmonizes regulations landscape in the ASEAN Region is presented in Figure ES.1. and investments, country wide. Figure ES.1. Plastic Waste Management Innovation Landscape in the ASEAN Region Innovation Upstream (25%) Landscape in ASEAN Midstream (45%) 48% Concept Downstream (16%) 36% Pilot & Refine Cross-cutting (13%) 16% Ready to Scale 0% 10% 20% 30% 40% Note: The total does not add up to 100 percent due to rounding of some of the percentages. Source: The World Bank Group xiii Table ES.1. Transitioning SWM from a Nascent to an Emerging Ecosystem in the six AMS INNOVATIONS BY STAGES NASCENT ECOSYSTEM EMERGING ECOSYSTEM UPSTREAM Basic policies and regulations to incentivize the Advanced policies for reducing plastic use and (Policies & Regulations for reduction of plastic use and the development of promoting sustainable alternatives: Source Reduction) alternative materials: • Implement regulations that mandate the • Implement tax breaks or targeted subsidies eco-friendly design of products and packaging, for companies that invest in developing and reduce plastic use from the design stage. environmentally friendly alternatives to materials • Adopt green public procurement policies with virgin plastics. (GPPP) that prioritize products with less virgin • Drive innovations in alternative packaging by plastic, as well as sustainable packaging. enforcing the restriction of SUPs. MIDSTREAM Focus on enhancing the efficiency of the collection Support sophisticated systems for collection and (Collection & Segregation) and segregation of plastic waste: segregation: • Initiate government-supported community • Invest in fully automated waste sorting facilities programs for waste segregation and collection, that use advanced technologies such as and provide resources and training to encourage robotics and artificial intelligence (AI). local innovations. • Implement incentive schemes for households • Integrate the informal sector into government and businesses that effectively segregate their SWM systems. waste. DOWNSTREAM Encourage the development of low-cost recycling Focus on advanced recycling technologies and the (Recovery & Recycling) and recovery processes: development of markets for recycled products: • Provide grants or subsidies to finance • Support advanced sorting and mechanical and communities or the informal sector in operating chemical recycling facilities. “low-tech” sorting and recycling facilities, and • Create policies that promote the market for particularly facilities that can handle low-value recycled materials such as mandatory recycled and hard-to-recycle plastic. content in certain products. • Provide financial and technical support for establishing local recycling facilities. CROSS-CUTTING • Implement digital systems for tracking waste • Implement blockchain technology for tracking (Transparency & flows and improving data collection to support and verifying nascent SWM practices. Accountability) evidence-based policymaking. • Foster international partnerships and adopting • Mandate public reporting on waste management regional and global SWM best practices and by businesses that generate waste. standards. Source: The World Bank Group The ecosystem for plastic circularity innovations is still • Lack of organizational capacity: Early-stage innovations at an early stage of development in the ASEAN Region. are vulnerable to market and policy pressures across Innovations must overcome three main hurdles to attract the plastic value chain. They may suffer from a weak investment and scale: business model, an unclear product-market fit, lack of access to partnerships/networks, inexperienced • Lack of policy and financial incentives: The lack leadership, and more. of supportive policies and the inconsistency in the enforcement of existing policies all work against • Limited access to capital: The investment ecosystem innovations for businesses that are trying to reduce is immature. This means that innovations lack access plastic waste. They also can disincentivize investors to investors or businesses with innovations are not from committing capital to finance innovations. ready to seek funding. In some of the AMS, investment xiv capital is also lacking. Technology-driven solutions are Developing Policies and Financial Incentives the most likely to attract private investors while other for Plastic Circularity Innovations types of innovations have less financing opportunities. This requires analyzing the causes of institutional failures and policy gaps in solid and plastic waste management, Scaling up plastic circularity in the ASEAN Region requires and identifying which regulations and financial incentives identifying and supporting innovations that address critical are needed across the plastic value chain to support gaps in plastic waste management infrastructure and creating markets for plastic circularity innovations. The technology. Innovations in the ASEAN Region have had following policy recommendations are based on this study’s limited ability to scale across the four development stages preliminary analysis; however, further analysis should be of the plastic value chain. Given the extensive leakage carried out at the country level to assess the efficiency of plastic waste in the region, the urgent focus should and effectiveness of these policies. be on midstream innovations, with complementary and Policy and Institutional Gaps to Address Market Failures: progressive focus on other stages of the plastic value Based on the stages of SWM development in the six chain. Based on the current stage of SWM and plastic AMS, policies and practices concerning solid and plastic waste management in the six AMS, the following policy waste management need to progress from a nascent levers are needed to stimulate the growth of innovation. ecosystem to an emerging one (see Table ES.2.). Tailored innovation-related policies are crucial for both nascent and emerging SWM ecosystems so that they address the Scaling Innovations by Stage challenges to circularity along the plastic value chain. According to the typology for the six AMS and the status of These policies should focus strategically on the different their SWM development and capacity, they should focus on stages of the plastic value chain. leveraging additional sources of financing to support the Financial Incentives to Address Market Failures: As scaling of plastic circularity innovations to improve plastic plastic products have traditionally been overused and and SWM. Each country’s approach will be unique as it underpriced, and they have negative impacts, financial evolves with the development of its SWM capabilities and incentives are needed to encourage the development of adapts to the challenges in its environment (see Table ES.2). plastic circularity-related innovations. Table ES.2. Prioritization of innovation across the plastic value chain in the six AMS STAGES NASCENT SMALL EMERGING ECOSYSTEM ISLANDS ECOSYSTEM Upstream: Source Reduction ++ +++ ++ Midstream: Collection & Segregation +++ +++ ++ Downstream: Recovery & Recycling +++ +++ +++ Cross-cutting: Transparency & Accountability ++ ++ +++ Note: + designates the level of importance: ++ important; +++ critical. Source: The World Bank Group xv Creating Market Demand: Shifting from a linear to a circular in Indonesia, the Philippines, Thailand, and Vietnam than in plastic products’ economy in the six AMS will require Malaysia and Cambodia, where little support is available for the harmonization of their regulatory frameworks, and entrepreneurs. ESOs can catalyze and sustain innovations strategically directing them toward creating a market in plastic circularity because their comprehensive approach, for plastic circularity. This comprises formulating policies which encompasses technical support, funding, policy to reduce SUPs, incentivizing the adoption of recycled advocacy, and stakeholder collaboration, contributes to materials, implementing GPPP that will boost demand from transforming the plastic value chain into one that is more the public sector, and developing and enforcing legislation circular and sustainable. that extends producers’ responsibility across their products’ Accessing Finance: If the six AMS are to encourage investment, entire lifespan. There are two fundamental approaches innovative financial mechanisms and borrowing terms must for accelerating market demand: (i) enforcing regulations; be developed to bridge the financing gaps in the innovation and (ii) advocacy from prominent stakeholders. ecosystem. Across the lifetime of innovations, different Developing Public Awareness: In all six AMS, this study financing pools are needed, which range from small grants found that consumers’ awareness was relatively low. Thus, at the concept development stage of innovations to more effective public awareness campaigns are needed to address complex types of government and commercial funding. Impact funds and venture capital firms specializing in debt a number of plastic waste-related issues, including reducing financing could offer viable solutions for growth-stage the demand for virgin plastic, encouraging the demand for innovative plastic circularity businesses in the ASEAN Region. alternatives to plastic, and encouraging the segregation of waste at its source. Part of building the market for plastic circularity innovations requires accelerating demand for recycled plastic products and alternatives to plastic Strengthening Regional Cooperation products. Stimulating demand from large-scale consumers Cooperation at the ASEAN regional level could provide such as governments, universities, corporations, hotels, larger and stable markets for innovations. This study’s and so on, could rapidly increase demand for upstream recommendations for the regional level comprise: (i) plastic alternatives and downstream source segregation. pooling knowledge and best practices to speed up the adoption and replication of plastic circularity innovations; (ii) standardizing practices, requirements, and regulations Direct Support to across the region so that businesses can operate more Plastic Circularity Innovators easily in multiple countries; (iii) collecting and harmonizing publicly available data; and (iv) providing financing. This could be achieved by addressing two of the three major hurdles across the plastic value chain: lack of Since 2022, the Intergovernmental Negotiating Committee on Plastic Pollution has been developing an international, organizational capacity and limited access to capital to legally binding document on plastic pollution that will be support innovations in plastic circularity. completed by the end of 2024. Regionally, financing incentives Building Organizational Capacity: Enterprise support could be strengthened and leveraged through a platform organizations (ESOs) could provide direct support for plastic that is managed by a qualified financial intermediary. This circularity start-ups and be instrumental in addressing the platform could offer both specialized technical assistance rapidly growing challenge of plastic waste management in and financial resources to start-up/early-stage companies, the six AMS. The ESO innovation ecosystem is more robust as well as to later-stage ones. xvi By championing a full suite of policies, from strict waste management protocols to incentives for green entrepreneurship, to consumer education campaigns, the six AMS could set new benchmarks in plastic waste management. Also, these important actions in the six ASM could provide successful, replicable models for how to address plastic pollution, globally. Conclusion To build on the insights provided in this paper, the study team recommends that a more in-depth examination of The severity of the plastic waste challenge within the innovations be undertaken for each country in the ASEAN ASEAN Region has escalated to a critical point that requires region. This could be carried out through country-specific a comprehensive and strategic set of responses, including innovation mapping, which would involve examining leveraging innovations. The complexity of plastic pollution innovation-related policies, industry-specific initiatives, and leakage into the environment, and its negative impacts financial and other incentives, and the support structures on health and biodiversity, require that all stakeholders that foster innovation. By examining these aspects, a more work together—from the policymakers developing and complete and nuanced view of the ASEAN innovation enacting legislation, to the entrepreneurs who are driving ecosystem could be obtained, which would inform the innovation, to the consumers whose choices are shaping development of strategies and recommendations that are market demand. Pending further development of SWM tailored to each country’s innovation landscape. infrastructure and improving SWM services, midstream innovations could assist in filling the current critical gaps Furthermore, in a future study, the transfer of technologies in plastic waste management related to collection and and the adoption of innovations from other countries could recovery, and catalyze the transition toward plastic circularity. be explored, including innovative business models that are both viable and scalable. In this regard, valuable insights By championing a full suite of policies, from strict waste and experiences could be gained from countries with management protocols to incentives for green entrepreneurship, established track records, and this should include both to consumer education campaigns, the six AMS could set developed countries (North-South transfer) and developing new benchmarks in plastic waste management. Also, these countries (South-South collaboration). Cross-border important actions in the six ASM could provide successful, knowledge exchange and technology transfer also have replicable models for how to address plastic pollution, the potential to significantly enhance innovations and their globally. sustainability across the ASEAN Region. xvii xviii Chapter 1. Introduction CHAPTER 1. Introduction 1.1. Background and Objectives The Association of Southeast Asian Nations (ASEAN) Member States (AMS) face serious plastic waste management challenges. As solid waste management (SWM) infrastructure, services, and plastic waste management are interlinked, poor SWM has resulted in the limited recovery of plastic waste, with an estimated 80 percent of it leaking into the environment. Of the world’s top 10 rivers that are known to convey the largest amount of plastic waste to the ocean, eight are in the AMS.13 In 2021, approximately 8.4 million metric tons of mismanaged plastic waste were generated by just six AMS,14 and if the current level of plastic waste mismanagement continues, the volume of plastic waste flowing into the ocean will rise from 11 to 29 million metric tons per year by 2040.15 The negative impacts of plastic waste mismanagement are far-reaching as they increase air and water pollution, reduce biodiversity, and affect human health and wellbeing. For the period from 2022 to 2030, the estimated environmental, health, and economic costs of mismanaging plastic waste are over $100 billion per year,16 which underscores the urgency of solving the plastic waste problem. Also, the failure to properly treat a high percentage of plastic waste is the significant loss of a resource that could be recovered and reused. In most of the six AMS, plastic recycling is a budding industry that could conserve resources and reduce reliance on 13 Meijer et al. 2019. “Over 1000 rivers accountable for 80% of global riverine plastic emissions into the ocean.” 14 Cambodia, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. 15 The Pew Charitable Trusts and Systemiq. 2020. “Breaking the Plastic Wave.” 16 Minderoo Foundation. 2022. “The price of plastic pollution: social costs and corporate liabilities.” 1 Photo: Sorted plastic products baled for offtaking. Shutterstock/Nordroden. Scaling Innovations for Plastic Circularity with Investment in ASEAN Figure 1. Losses of Recyclable Material Value in Four ASEAN Member States 2.9 billion US$ per year or 75% of material value of plastics is lost in Vietnam 4.0 billion US$ per year or 87% of material value of plastics is lost in Thailand 890 million US$ per year or 78% of material value of plastics is lost in the Philippines 1.1 billion US$ per year or 81% of material value of plastics is lost in Malaysia SWM Material Value Loss Not collected and leaked: Material value loss remains locked due to a lack of circularity. Source: The World Bank Group virgin plastic, while also creating a circular economy that of the regulations that are already in place. However, it fosters economic green growth and creates green jobs.17 will take substantial funding, time, and effort to solve The potential value of plastic recycling in the ASEAN Region these problems. Financially supporting innovative new is considerable—an estimated $8.9 billion is lost by four businesses that prevent plastic waste, recycle it, or use new AMS each year due to their failure to recover an estimated materials to create useful products, could be instrumental 80 percent of the material value of their plastic waste in turning the tide on plastic pollution in the AMS. (Figure 1).18 This failure demonstrates that these countries This study presents best practices for developing innovations, face considerable challenges in collecting, sorting, and providing policy support, providing innovations targeting recycling plastic waste. plastic circularity with investment capital, and highlighting Since SWM challenges in the AMS are significant, innovation innovative enterprises from Korea and a selection of could be catalytic to fast-track solutions to addressing other countries that have focused on reducing plastic plastic pollution. Innovative approaches are crucial for pollution.19 This paper acknowledges that although there addressing the solid and plastic waste management problems are deficiencies in solid and plastic waste management in that are due to the significant lack of infrastructure and the six AMS, innovations have a role to play in overcoming services, inadequate regulations, and poor enforcement such shortcomings and helping address the ASEAN Region’s solid and plastic waste problem. 17 Green growth refers to a sustainable development strategy to foster economic growth while minimizing environmental degradation and enhancing social inclusiveness. It involves policies and initiatives that promote resource efficiency, reduce greenhouse gas emissions, and encourage the adoption of clean technologies and renewable energy sources. 19 World Bank. 2024. “Innovations for Plastic Circularity in Korea: Enabling 18 World Bank. 2021b. “Market Study for the Philippines, Malaysia and Conditions and Solutions: Supplementary Note for Scaling Innovations Vietnam: Plastics Circularity Opportunities and Barriers.” for Plastic Circularity with Investment in ASEAN.” 2 Chapter 1. Introduction efficient solid waste infrastructure, rapid urbanization, and 1.2. Plastic Pollution in the growing consumption of plastic products, especially SUPs, ASEAN Region all contribute to the problem of plastic waste pollution in the AMS.22 Not only does this plastic pollution significantly The rapid rise in the consumption of plastic products threaten human health and the natural environment, it across the world has resulted in plastic waste becoming has economic consequences, such as the adverse impact one of the most pervasive and pressing global ecological on fisheries and tourism, and strain on the government’s challenges. In countries in the ASEAN Region, the plastic budget to pay for pollution-related cleanups, remediation, pollution problem is enormous and it is growing rapidly and healthcare, which all divert funding from other crucial from the sources that are presented in Figure 2 development initiatives. In the ASEAN Region, 75 percent of marine plastic pollution Addressing plastic pollution in the six AMS requires a comes from uncollected, land-based waste, and about comprehensive and multi-pronged approach. This study, 25 percent leaks from municipal solid waste systems.20 which focuses on the role of innovations in addressing the Cities generate as much as 60 percent of the plastic plastic waste issue, defines innovation and investment, waste that leaks into an AMS environment.21 The lack of as follows: Figure 2. Types of Plastic Pollution in the ASEAN Region Types of Plastic Pollution in ASEAN Macroplastics Microplastics Large, visible plastic items such as bottles, bags, wrappers, Small plastic fragments (<5 mm) straws and other SUP materials from weathering larger plastic debris, microbeads in personal care products, and synthetic fibers from textiles Leachate Chemicals Nanoplastics Leaching of harmful chemicals from plastic waste such as BPA, Smaller particles (<0.001 mm) phthalates, and other additives formed by the further degradation of microplastics BPA = bisphenol A; SUP = single-use plastic. Source: The World Bank Group 20 UN-ESCAP (United Nations Economic and Social Commission for Asia and the Pacific). 2020. Closing the Loop. 22 Van Trotsenburg and Hoi. 2022. “Turning the tide on plastic pollution 21 Ibid. through regional collaboration in Southeast Asia.” 3 Scaling Innovations for Plastic Circularity with Investment in ASEAN • Innovations comprise technologies, materials, or selected and comprehensively evaluated to ensure that business approaches that are novel in the six AMS, their technology is appropriate and reliable, and that their and address pollution-related challenges along the workers have safe and fair working conditions. Thus, plastic value chain. However, it is important to note that introducing innovations requires a multi-pronged approach the innovations in plastic waste management that are that necessitates the cooperation of multiple stakeholders discussed in this paper have not been tested nor vetted. who are committed to carrying out strategic interventions Thus, the innovations that are presented here are for to improve plastic waste management and, therefore, information only, and this paper does not constitute solid waste management, overall. The SWM framework an endorsement of their effectiveness. typically comprises the key elements presented in Figure 3, which shows where innovations could be introduced to • Investment refers to the allocation of financial resources support improving plastic waste management. with the expectation of generating a financial return. Financial instruments include grants; equity/quasi-equity; As noted previously, improving plastic waste management debt; and guarantees provided through different must be an integral part of improving SWM. Effective plastic approaches such as blended finance, public-private waste management requires a solid policy framework, partnerships (PPPs), and so on. robust infrastructure, and the active participation of all stakeholders. Lastly, plastic waste management requires a similar framework to SWM that focuses on: 1.3. Innovation and Plastic Waste Management • Source Reduction: Practices and strategies to reduce the volume of plastic waste that consumers generate. Each of the six AMS offers a unique context for adopting • Collection and Segregation: An efficient system of plastic waste innovations, which can only be successfully plastic waste collection, with the segregation of plastic integrated if solid waste management, overall, is taken waste at its source into recyclables, non-recyclables, into consideration. Also, innovations should be carefully and biodegradables for easier processing downstream. Figure 3. Solid Waste Management Framework to Support Innovation Education & Waste Generation & Advocacy Segregation at Source Waste Waste Disposal Collection SWM Framework Waste Treatment Waste & Processing Transportation Source: The World Bank Group 4 Chapter 1. Introduction • Recycling: Conversion of plastic waste into reusable developed its ambitious “ASEAN Regional Action Plan (RAP) materials through various technologies and processes. for Combating Marine Debris in the AMS (2021–2025),”23 which recommends policy reforms, research, innovation, With effective plastic waste management, advances can be raising public awareness, building capacity, and engaging made toward plastic circularity, which is an approach that the private sector in promoting the circular economy. One minimizes waste and extends the life of plastic products of the key components of the RAP is Research, Innovation, and packaging. This approach contrasts with the traditional and Capacity-building, which prioritizes the “establishment linear one of “take, make, and dispose,” and it requires a of Regional Platforms to Promote Innovations, Knowledge, shift in thinking about the plastic value chain, as well as and Partnerships for Plastics Circularity.” the collaboration of all the key stakeholders—consumers, manufacturers, waste management services, and policymakers. Target Audience: The target audience for this paper is Critical aspects of plastic circularity comprise: the AMS. It is intended to help these countries take stock of the current innovation ecosystem supporting plastic • Design: Plastic products and packing are designed for circularity; the gaps preventing the ecosystem from scaling durability, reuse, and recyclability. up, especially those related to policy and investment; and • Use and Reuse: Plastic products and packaging are the steps necessary to encourage the provision of additional used and reused to extend their lifespan. investment capital through improving policies, building innovators’ capacity, and developing the knowledge of • Recycling: At their end-of-use stage, plastic products consumers, investors, policymakers, and entrepreneurs. and packaging are collected and recycled. The activities summarized in this paper could support • Infrastructure Development: Robust infrastructure is implementation of the RAP, and more specifically, the design developed to facilitate plastic waste collection, sorting, of a platform for the six AMS that supports alternatives to and recycling. plastics, as well as innovations and investments in plastic waste management. • Policy and Regulation: Strong policies and regulatory frameworks are developed and enforced to support plastic circularity. 1.4. Methodology • Consumer Education and Engagement: Consumers are educated about the importance of plastic circularity The methodology for this study comprised three interlinked and their role in plastic waste management. steps: (i) a review of published information, (ii) an assessment of innovations, and (iii) stakeholder consultations. The key success factors for plastic waste management are A desk review of more than 150 published sources, including appropriate policies; effective waste collection systems; some from the World Bank Group, was carried out for this segregation of waste at source; advanced recycling and study, which focused on: processing technologies; developing the market for recycled materials; and raising consumers’ awareness • Waste and Plastic Waste Management in the Six and their participation in recycling programs. In addition, AMS: Published information on waste and plastic waste to advance toward circularity, a shift toward the use of management systems in the six AMS that provided plastic alternatives and an overall reduction in the use baseline data on the critical waste types and materials of plastic products are both needed. In all these areas, that are most mismanaged (see Figure 2.). This review innovations can provide catalytic support. also offered insights into the country-level context for The AMS have been carrying out important measures to stop 23 ASEAN. 2021a. “ASEAN Regional Action Plan for Combating Marine Debris the leakage of plastic waste into the ocean. In 2021, the AMS in the ASEAN Member States.” 5 Scaling Innovations for Plastic Circularity with Investment in ASEAN innovation, including SWM collection and recycling innovations, and potentially encourage or support infrastructure, local end markets for plastics, national investments in innovations in plastic circularity were and sub-national policies, and the ASEAN Region’s part of this study’s desk review (see Chapter 4). This entrepreneurial support ecosystem. included a broad, non-exhaustive review of policies related to SMEs and early-stage start-ups in the six • Innovations – Collation, Categorization, and Mapping: AMS, as well as policies from other countries to see Innovations related to plastics and plastic waste were if they could provide lessons learned for the six AMS. sourced from the multiple innovation challenges that have been run by the World Economic Forum’s UpLink • Investments in Plastic Waste Management, Recycling, Platform; the Living Landscape of Reuse Solutions and Circularity: As the focus of this study was on database; the Incubator Network; and innovations that identifying investments and potential investors in plastic were recommended by participants in the stakeholder circularity innovations, a comprehensive review of the consultations (see Section 1.5). Selecting from the three investment ecosystem was undertaken (see Chapter databases offered a practical approach for identifying 5). This part of the desk review focused on trends in innovations in the ASEAN Region. By registering to investment, identification of key investor groups, key participate in an innovation challenge, innovators investors’ previous and current investments in plastic indicated their desire to attract more capital and circularity in the six AMS, and the financing tools available scale.24 Of 302 innovations related to plastic waste, for supporting plastic circularity innovations. 262 were assessed based on the adequacy of the data • Identification of Key Stakeholders: The desk review and information provided on them. These were grouped identified potential stakeholders to participate in this according to the four stages of development along the study’s consultations. These comprised consumers, plastic value chain (see Chapter 3 and Figure 6), and innovators, investors, policymakers, and other relevant this was determined by the nature of the innovation. ecosystem participants (see Section 1.4). This analysis used data provided in the three databases discussed above, and it was supplemented, wherever possible, with a review of relevant resources that were 1.4.1. Limitations of the Methodology available online or published. This information commonly The results presented in this paper were affected by the identifies the type of business, its country of origin, or following limitations: where it is operating, and details about funders and partners. Although almost two-thirds (62 percent) of • Selection of innovations: The selection of innovations the innovations reviewed in this study were operating from the three databases provided a practical approach in the AMS, to provide a broader spectrum of plastic for identifying innovations in the ASEAN Region. By innovations, it was important to include innovations registering to participate in a relevant innovation from outside the ASEAN Region, especially from South challenge, an accelerator, and/or an incubation program, Asia (21 percent), other developing countries (3 percent) these innovations indicated their desire to attract more with similar types of plastic and SWM issues, and capital and scale.25 However, engaging with these AMS Western countries (9 percent) that have innovations entrepreneurs face-to-face, in their country, was not in alternative materials and in digitalization—both of possible, as this would have required more funding which are lagging in the six AMS. than what was available for this study. • Policies that Support Innovations and Investments • Evaluation of innovations: The evaluation of innovations in Plastic Circularity: Policies that currently influence was constrained by the scarcity of data. For example, 25 Innovation challenges, accelerators, and incubation programs typically offer 24 Note—innovations that were entirely financed by the owner were excluded mentoring by experts; and access to training, networking opportunities, from this study. and, sometimes, grants, or prize money (usually below $100,000). 6 Chapter 1. Introduction evaluating a business model’s level of robustness typology, as well as the stage of innovation along the required accessing its financial information or other plastic value chain. This study was a first attempt to disclosures, which were not always available. Also, define the policy and regulatory ecosystems for plastic the status of innovations may have changed since they circularity innovations in the ASEAN Region, and, ideally, were evaluated in 2022. In addition, as quantitative its policy recommendations and suggestions about data were not always available or adequate, sometimes various incentives to scale plastic circularity innovations evaluations were based on the authors’ judgment. with investment will provide a foundation for conducting future analytical work. • Qualitative nature of the evaluation: A detailed quantitative or formula-driven approach to reviewing innovations was not always possible, given the limited available 1.5. Stakeholder Consultations data. Thus, assessing innovations required an extensive literature review and multiple stakeholder consultations. Interviewees from 37 stakeholder groups involved in • Stakeholder consultations: This study’s stakeholder the plastic waste ecosystem were consulted for this consultations took place during the 7th International study. These interviewees were drawn from incubators, Marine Debris Conference (7IMDC), which was held in accelerators, ESOs, investors, philanthropists, corporations, Busan, Korea, in September 2022. Because the stakeholder ministries, civil society organizations, consumers, and consultations were limited to this conference, plus some other entities that are currently contributing to tackling follow-up phone interviews, some key stakeholders who the plastic pollution challenge in the six AMS. The topics could have contributed information on innovations or discussed in the interviews included the current range, investments in plastic circularity may have been missed and the state of the innovations tackling the plastic waste as they did not attend the 7IMDC. Also, consumers, challenge; innovations’ stage of development; trends in the informal sector, and other key non-waste actors investments in plastic circularity solutions; barriers to the who were not consulted in this study due to funding growth of innovations and attracting investment; and how constraints, should be consulted in future studies on to overcome these barriers. plastic circularity. Several one-on-one interviews were conducted during • Policy environment: The policy environment and the 7IMDC as well as later over the phone. The conference ensuing recommendations in this study were sorted participants who were interviewed, as well as the other and categorized according to their country profile and interviewees, are listed in Appendix 3. Box 1. Stakeholder Consultations during the 7th International Marine Debris Conference (7IMDC) A panel discussion for this study was held during the 7IMDC on September 20, 2022, with representatives from the Commonwealth Scientific and Industrial Research Organisation, Australia; Ministry of Natural Resources and Environment, Thailand; Center for Southeast Asian Studies; University of Kyonggi, Korea; Philippine Alliance for Recycling and Material Sustainability; and Alliance to End Plastic Waste. The panel members discussed challenges, existing practices, and regional plastic innovation ecosystem opportunities. These discussions shed light on business models and the level of investment needed to scale innovations, and they also highlighted enabling policies that could further catalyze investments in plastic innovations in the AMS. 7 Chapter 2. Overview of the Waste Management Ecosystem and the Key Plastic Waste Types in the Six AMS CHAPTER 2. Overview of the Waste Management Ecosystem and the Key Plastic Waste Types in the Six AMS 2.1. Evaluation Parameters for Waste Management, Recycling, and Plastic Circularity in the Six AMS As indicated in Figure 4, SWM is an integral part of plastic waste management, and the key elements of SWM such as collection, sorting, recycling, and final disposal can be geared toward managing plastic waste to improve recycling and optimizing disposal. This, in turn, creates an opportunity for innovations in plastic circularity through (i) source reduction, (ii) collection and segregation at source, and (iii) recycling. Photo: A man recycles a plastic bottle using a reverse vending machine. iStock/ LordHenriVoton. 9 Scaling Innovations for Plastic Circularity with Investment in ASEAN Figure 4. Elements of Plastic Circularity (Plastic Waste Management within Solid Waste Management) Circularity of plastics is embedded in and reliant upon the SWM system Plastic Circularity > REDESIGN: To increase recyclability and Plastic Waste eliminate excessive packaging Management > SUBSTITUTION: Of single-use plastics with alternative materials Solid Waste > REDUCTION of plastic Management waste at the source > POLICY INSTRUMENTS: To support circularity, • Waste generation e.g., Use & Repair • Collection > SEPARATION of • Sorting > PARTICIPATION: Behavior change that plastic waste reaches a critical mass • Recycling • Disposal > RECYCLING of > INFRASTRUCTURE: To increase feedstock plastic waste and retain material value > RECYCLING: Additional capacities and more advanced technologies Source: The World Bank Group Fully integrating SWM in the six AMS would initiate and of the six AMS. Detailed country profiles on the level of mainstream the key elements needed to support: improving development of SWM, and the key elements of plastic and enhancing source reduction, waste collection and circularity, are summarized in Tables 1 and 2, with additional segregation, and recycling; preventing plastic waste leakage; information provided in Appendix 1. and enabling plastic circularity innovations to take hold • Nascent Ecosystem (see Table 1): In Cambodia, Indonesia, and scale. By identifying their country’s relative strengths and the Philippines, the nascent plastic waste ecosystem and weaknesses, the six AMS should be able to identify is characterized by: a poorly developed SWM policy gaps and continuously improve and integrate innovations framework; lack of enforcement of SWM regulations; that are appropriate for the local context and culture. limited or no waste segregation at source; poor collection systems, which results in a low collection ratio; major gaps in sorting, recovery, recycling, and disposal 2.2. The Country-specific Status infrastructure; a strong autonomous informal sector; of SWM, Recycling, and Plastic and no ecosystem support or economic incentives for plastic circularity. Cambodia’s policies prioritize basic Circularity in the Six AMS waste collection and segregation at source, better SWM, and developing infrastructure that will carry out more The following section presents a qualitative assessment effective recycling. Policies that restrict the use of SUPs of current conditions in the six AMS regarding the key such as plastic bags and straws are being planned, elements of plastic circularity (see Figure 5). This analysis and policies are being considered for a deposit-return assumes that the capacity to design, build, and maintain systems (DRS) for bottles and implementing fines for innovations to tackle plastic waste pollution varies in each improper SWM practices. In Indonesia, 57 percent of 10 Chapter 2. Overview of the Waste Management Ecosystem and the Key Plastic Waste Types in the Six AMS Figure 5. Key Elements of Plastic Circularity Enabling Policy & Regulation Source Reduction Initiating Eco-Design & Production Plastic Enhancing Circularity Consumer Awareness Collection & Mainstreaming Segregation Infrastructure & Recycling Integrating Service Informal Collection Source: The World Bank Group all the solid waste is plastic packaging; more than 60 strong local need, eco-designs and production are percent is not collected; and there is no end market for scarce, so efforts are required to promote these in line recycled plastics. Plastic packaging is also a major issue with planned policies. Thailand is conducting early-stage in the Philippines, where about 70 percent of packaging attempts to develop eco-designs and production, waste in not properly disposed of and leaks into the and the government is supporting alternative plastic environment. An important characteristic of SWM in the technologies that use natural materials. In Vietnam, the Philippines is that awareness about plastic pollution government-driven plastic circulation hub (see Table is relatively high, and although efforts to innovate are 2) benefits from well-organized international support. still at an early stage, they are actively underway. In Given the involvement of Vietnamese SMEs in global all countries leakage plastic waste is significant and supply chains, enhancing eco-design and production informal workers form a key part of waste management. efforts to navigate future trade barriers is essential. In • Emerging Ecosystem (see Table 2): In Malaysia, Thailand, Thailand, outside the capital, innovations that increase and Vietnam, which have an emerging plastic waste the rates of segregation, collection, and recycling should ecosystem, improving management is a priority; there be prioritized due to the limited infrastructure. Given is an emerging regulatory framework that provides the large informal sector, which is primarily focused incentives for plastics reuse and SUPs’ restriction; on PET bottles, options such as promoting the use of collection systems and recycling facilities are in place in plastic bottles without labels would make recycling PET major urban centers; and behavior change campaigns easier and support innovations in recycling. As in other have educated consumers to segregate waste at its countries, the low rates of segregation, collection, and source, as well as reuse plastic products and packaging. recycling impede the development of midstream and downstream innovations. To some extent, as a result of some innovation ecosystem support, innovations in recycling and recovery are available • The island nations of Indonesia and the Philippines in these three countries. However, these countries have unique SWM challenges and, consequently, require continue to experience high rates of plastic packaging smaller-scale SWM solutions as island communities mismanagement, which is the most common type of have limited funding, resources, and SWM expertise. plastic leaking into the environment. In Malaysia, despite Given the islands’ high levels of mismanaged waste 11 Scaling Innovations for Plastic Circularity with Investment in ASEAN and plastic leakage, innovations such as distributed and their reliance on the fishing and tourism sectors, recovery models are suited to their low waste volumes, which both generate plastic waste. mix of materials, and limited SWM capabilities.26 A The Supplementary Note for this paper, which is based World Bank study undertaken in 2022 found that small on Korea’s experience,28 and the various examples within and remote islands carry out no recycling, and they and outside the ASEAN Region that are presented in boxes either deposit their plastic waste in a landfill or burn in this paper, provide examples for the six AMS to use in it. 27 Small islands are particularly vulnerable to plastic addressing their identified gaps. waste problems due to their high coastline-to-area ratio Table 1. Nascent Ecosystem: Cambodia, Indonesia, and the Philippines STAGE CAMBODIA INDONESIA THE PHILIPPINES SOURCE Context for Plastic Waste Context for Plastic Waste Context for Plastic Waste REDUCTION Management: Cambodia generates Management: Indonesia generates 7.8 Management: Plastic packaging (LDPE, (Policies & 4 million tons of waste, annually, and million tons of plastic waste, annually, MLP, PET, PP, and HDPE) is the main Regulations, 20 percent leaks into the environment. and 57 percent is plastic packaging. pollution source. About 33 percent and Plastic packaging—mainly PP, HDPE, Over 60 percent of plastic waste is of plastic is disposed of, 35 percent Eco-design & LDPE, and PET—could be better not collected, and rural areas lack leaks into the environment, 9 percent Production) managed. Around 10 million plastic SWM infrastructure and regulatory is recycled, 2 percent is recovered for bags are used daily, in the capital, enforcement. Plastic bags, sachets, RDF, and 5 percent is exported. Phnom Penh. and SUPs are the primary plastic waste, Policies and Regulations have Policies and Regulations Initiated: but these have low value if they are Expanded: SWM regulations have Phnom Penh has updated its SWM recycled. PE, PP, and PS could be better increased, including the new EPR Law regulations and waste service fees. managed since they are higher value for packaging, but regulations need Eco-design and Production: There is materials for recycling. better implementation and enforcement none. Weak Implementation of Policies: at the LGU level. Nascent ESO: The Ministry of Targets and ambitious plans to High Potential for Eco-design and Environment, with the support of improve SWM have been set, but Production: DOST has developed international agencies, runs innovation these have weak implementation and technologies for plastic alternatives. challenge competitions for start-ups. enforcement. There are some voluntary Alternatives to plastics and the Cambodia faces many ecosystem EPR initiatives, and no tipping fees are recycling of multilayered packaging challenges with regard to science; charged for depositing waste in a SLF. and sachets better match the country’s technology; governance; the large Indonesia aims to divert 70 percent of needs. number of informal businesses; and its waste from landfills by 2025. A well-organized ESO: The the need for a more scientific and Eco-design and Production: Indonesia government provides loans to entrepreneurial culture, and more has some alternatives to plastic and innovators. Although the country has professional skills. solutions to recycle sachets. It also has a strong plastic circularity network, a plastic innovation hub that supports a strong microfinance sector, and an early-stage businesses that reduce, established banking system, SMEs find substitute, or redesign plastic products. it difficult to get commercial financing, An Actively Engaged ESO: NPAP, the and there is little investment in plastic Innovation Taskforce, OPPA, and ESOs waste-related businesses. support innovators and create market demand. 26 Distributed recovery models for plastic circularity typically involve decentralized systems that integrate various recovery methods. These models optimize resource utilization, minimize transportation costs, and enhance the resilience of communities, while also fostering a circular approach. 28 World Bank. 2024. “Innovations for Plastic Circularity in Korea: Enabling 27 World Bank. 2022b. “Technologies and Solutions to Manage Plastic Waste Conditions and Solutions: Supplementary Note for Scaling Innovations in Small and Remote Islands.” for Plastic Circularity with Investment in ASEAN.” 12 Chapter 2. Overview of the Waste Management Ecosystem and the Key Plastic Waste Types in the Six AMS Fully integrating SWM in the six AMS would initiate and mainstream the key elements needed to support: improving and enhancing source reduction, waste collection and segregation, and recycling; preventing plastic waste leakage; and enabling plastic circularity innovations to take hold and scale. STAGE CAMBODIA INDONESIA THE PHILIPPINES COLLECTION Good Collection Ratio: Waste Improved Collection Ratio: 60 Low Collection Ratio: The SWM system & collection is 86 percent in cities, and percent of urban residents have is underdeveloped (about 40 percent of SEGREGATION 72 percent nationally. Large cities access to collection; 55 percent of collection). The highest collection rates (Consumer have formal private SWM collection MSW is managed at a transfer facility; are in Metro Manila, and businesses Awareness, businesses, but municipalities lack a 85 percent of plastic waste in rural have raised consumers’ awareness Informal proper SWM system. areas is collected; 11,330 regulated about the importance of waste Collectors) Segregation of Waste at Source is community-based waste banks operate collection. Not Enforced: Since 2021, residents of and feed waste into recycling systems Segregation of Waste at Source is Phnom Penh must segregate their wet with PSP. The plastic waste collection Not Enforced: RA 9003 requires waste and dry waste, however, this regulation rate is 39 percent. segregation at its source, but there is not enforced. Segregation of Waste at Source is not is little enforcement across the LGUs. Consumers’ Awareness is Limited: Enforced: Most households segregate The 1996 Anti-littering Law needs to be In 2018, the government implemented little solid waste, and instead burn it. better enforced. a tax of $0.10 per plastic bag that is Consumer Awareness is Poor: Given Consumer Awareness is Driven by provided to consumers, however, due the low rate of plastic collection/ Businesses: Various businesses are to lack of enforcement, consumers are recycling, it is likely consumers are raising consumers’ awareness about largely unaware of the bag tax, and are largely unaware of the plastic waste plastic pollution, driving behavior not paying it. problem. change, and reducing SUPs. Large Informal Sector: An estimated Large Informal Sector: Indonesia Large Informal Sector: Informal 3,000 waste pickers collect and sell has about 2 million informal waste collectors collect rigid PET and HDPE/ waste to buyers and recyclers. collectors and recyclers, who focus PP, and 84 percent of waste collectors on higher value materials such as PET sell post-consumer PET and HDPE/PP. bottles, as these have a market. RECYCLING Underdeveloped Infrastructure & Low Recycling Rate with Some Low Recycling Rate with Limited (Infrastructure Immature Recycling: Cambodia has Infrastructure: The plastic recycling Infrastructure: The plastic recycling & Services) high rates of mismanaged waste, and rate is about 10 percent, but this varies rate is 9 percent and focuses on a plastic recycling rate that is below by region (Greater Jakarta = 17 percent; high-value materials (rigid PET, PP, 1 percent. According to stakeholder Bali = 7 percent). There is a relatively and HDPE). About 28 percent of consultations, plastic recycling must robust plastic recycling industry that PET, PP, HDPE, and LDPE/LLDPE was be formalized as it is carried out with processes PET, HDPE, PP, and LDPE. A recycled in 2019. As hard-to-recycle unregulated processes, outdated combination of domestic and imported plastic materials do not have a market, equipment, lack of knowledge, and plastic waste provides the feedstock for they end up in landfills or leak into poor environmental practices. this recycling. the environment. The local recycling industry imports good quality plastic waste. Notes: DOST = Department of Sciences and Technology; HDPE = high-density polyethylene; LDPE = low-density polyethylene; LGU = Local Government Unit; MLP = multilayered packaging; MoE = Ministry of Environment; MRF = material recovery facility; MSW = municipal solid waste; NPAP = National Plastic Action Partnership; NSWMC = National Solid Waste Management Commission; OPPA = Ocean Plastic Prevention Accelerator; PET = polyethylene terephthalate; PP = polypropylene; RDF = refuse dry fuel; SLF = sanitary landfill. Source: The World Bank Group 13 Scaling Innovations for Plastic Circularity with Investment in ASEAN Table 2. Emerging Ecosystem: Malaysia, Thailand, and Vietnam STAGE MALAYSIA THAILAND VIETNAM SOURCE Context for Plastic Waste Context for Plastic Waste Context for Plastic Waste REDUCTION Management: In Malaysia, alternative Management: About 70 percent of Management: In 2018, 72 percent (Policies & disposal methods are needed due to Thailand’s plastic waste is uncollected of Vietnam’s plastic waste was Regulations, unsanitary landfills and waste leaking or mismanaged (for example, plastic mismanaged and leaked. The key and into the environment. SUP packaging bags, snack bags, food utensils, food mismanaged plastic waste types are Eco-design & is the main problem: plastic bags, packaging, and bottles). soft and hard plastic fragments, fishing Production) containers, bottles, cups, and film. The Implementation of Policies gear, plastic bags, and Styrofoam food Updated and Expanded Policies is Slowing Down: Many of the containers. Away from large cities, only and Regulations: Act 672 centralizes agencies involved in SWM have basic SWM infrastructure is available. SWM under the federal government, policies that sometimes conflict. The Waste-to-energy and incineration are and enforcement of the solid waste National Roadmap on Plastic Waste popular municipal waste disposal corporate policy varies: only eight Management 2018–2030 bans some methods. RDF for cement kilns is an states (out of 16) have adopted Act 672. SUPs by 2022, and it requires the emerging disposal method. EPR is a critical part of the Malaysia recycling of 100 percent of plastic Policies and Regulations are Starting Plastics Sustainability Roadmap waste by 2027. While government to Achieve Results: Vietnam’s 2021–2030. Initially, EPR will be efforts are slow, retail groups are government has introduced EPR for voluntary, but it will become mandatory enforcing a partial plastic ban. specific products and packaging. by 2026. The Roadmap Towards Zero Eco-design and Production Have Several new regulations are expected SUP 2018–2030 has been launched. Begun: The government supports the to be introduced, including bans of This is Little Eco-design and bioplastic industry. Innovations with specific SUPs, and in 2025, charges Production: The Malaysia Plastics alternative materials use cassava and will begin to be applied, country wide, Sustainability Roadmap 2021–2030, sugarcane starch. The NIA focuses based on households’ volume of waste. has three innovation strategies: on plastic waste management, the Eco-design and Production are not (i) phasing out some materials, (ii) bio-economy, and circular economy. available. reusing packaging, and (iii) improving Active ESOs: The government focuses Well-coordinated ESOs: MONRE collection. More support is required to on SUPs. The plastic circularity supports the application of promote plastic circularity. There are ecosystem includes the Plastics technologies across the plastic only a few examples of innovations for Institute of Thailand and universities. value chain, and the NPAP connects plastic circularity: Government and the Plastic circularity is not a consistent innovators with potential funders. A private companies, Grab and KLEAN, focus of ESOs. circulation hub supports both upstream operate reverse vending machines;29 and downstream innovations. Several and SICA upcycles plastic waste. ESOs conduct innovation challenge competitions and provide coaching. 29 Reverse vending machines enable users to deposit empty plastic bottles and containers in exchange for incentives such as discounts or vouchers. By incentivizing individuals to recycle their plastic waste, reverse vending machines promote plastic circularity, reduce plastics’ environmental impact, and contribute to resource conservation. 14 Chapter 2. Overview of the Waste Management Ecosystem and the Key Plastic Waste Types in the Six AMS STAGE MALAYSIA THAILAND VIETNAM COLLECTION High Collection Ratio: About 80 Collection Ratio to Improve: In The Collection Ratio is Low: Most solid & percent of urban areas have MSW Bangkok, the waste collection rate waste from formal LGU operations goes SEGREGATION collection services. Rural and is 91 percent, and 70 percent goes into landfills. In cities, the government (Consumer remote areas need more collection into landfills. In other provinces, the collects waste and manages landfills, Awareness, and disposal systems. Many rural collection rate varies from 46 to 91 and pushcarts and garbage trucks and Informal households dump their waste on open percent. Rural areas have the lowest collect solid waste from curbside Collectors) land, bury it in small dumpsites, or collection rate, and a high level of collection points. Regarding access, 40 put it in communal garbage bins with waste is dumped on open land and percent of people in rural areas, and 85 a high potential for leakage in the burned. In 2019, about 22 percent percent of people in urban areas have environment. of solid waste was mismanaged. access to waste collection systems. Segregation at Source is not Uncollected waste results in plastic In rural areas, a high level of waste Enforced: Act 672 requires licensing leakage into the environment. Of is dumped on open land and burned. waste concessionaires and source Thailand’s 2,691 solid waste disposal Most low-value and hard-to-recycle separation. Segregation at source is sites, only 15 percent are sanitary. plastics are not recyclable due to the largely not enforced. Some states and Sanitary landfills are primarily operated lack of market demand. territories have curbside and drop-off by LGUs, while 14 percent are privately Initiation of Segregation at Source: collection programs for solid waste and operated. Starting in 2024, the 2020 Law on recyclables. Segregation at Source is Only in Environmental Protection requires Consumers’ Awareness is Limited: the Capital, Bangkok: Thailand has households to segregate their waste With regard to segregation at source no policy on segregation at source. into solid, recyclable, and food waste. and recycling, consumers’ awareness In 2022, the BMA launched a pilot to Consumer Awareness is Low: Given is low. separate wet organic waste from dry that plastics have a low collection and Large Informal Sector: Almost all (99.9 waste. recycling rate, consumers’ awareness percent) plastic recycling is carried out Consumers’ Awareness is Low: Given of the need for waste segregation and by the informal sector, which diverts that plastics have a low collection and recycling appears to be low. Limited about 28 percent of waste from landfills recycling rate, consumers’ awareness access to MSW collection services and for recycling. Informal collectors pick of the need for waste segregation infrastructure hinder consumers from up higher-value plastics: PET bottles, and recycling appears to be low. In improving how they handle their waste. rigid HDPE, and rigid PP. municipalities, the limited solid waste Large Informal Sector: The informal collection services, and infrastructure sector collects recyclable plastics hinder consumers from improving how in large cities. Craft villages and they handle their waste. family businesses comprise most of Large Informal Sector: Informal the informal, unregulated recyclers. workers buy recyclables from Informal collectors typically target households, and get them from waste plastics that have a known market bins, transfer stations, and landfills. value (PET and HDPE). They prepare materials for recycling by cleaning and removing labels, as this enables them to get a higher price. The informal sector’s waste reduction efforts save the BMA $15.8 million, annually, which is more than two years of BMA spending on waste collection. 15 Scaling Innovations for Plastic Circularity with Investment in ASEAN STAGE MALAYSIA THAILAND VIETNAM RECYCLING Limited Infrastructure and Recycling: The Recycling Rate is Modest Due to A compulsory 10 to 22 percent (Infrastructure Most collected waste goes to landfills Limited Infrastructure and Limited recycling rate for packaging is & Services) and dumpsites, rather than to sanitary Demand: Away from urban centers, expected to be applied in Vietnam in landfills. Private operators run material recovery rates vary due to the 2024. In 2019, the World Bank Group curbside collection programs, MRFs, lack of basic SWM infrastructure, and estimated a 33 percent recycling rate and integrated waste recovery and the modest domestic recycling system for PET, HDPE, LLDPE/LDPE, and PP, recycling facilities for plastic bottles, for PET. Only 17.6 percent of key plastic and this collected-for-recycling rate containers, and films from commercial resins are recycled. Hard-to-recycle is the highest of the six AMS due to and industrial sources. The plastic plastics, such as flexible plastics, are Vietnam’s large number of informal recycling rate is 20 percent, and the not collected or recycled. Thailand’s recyclers. Due to Vietnam’s proximity plastic collected-for-recycling rate is recycling markets are more developed, to China, and the relatively lower cost 28 to 45 percent for PET, and 5 to 15 with several established recyclers, of operating a recycling business in percent for LDPE/LLDPE. The loss of especially ones that recycle PET. There Vietnam, there is a steady demand in material value is due to: (i) the low are 149 recyclers in Bangkok, Chon China for Vietnamese pellets and flakes local demand for recycled plastics; Buri, and Rayong. Some produce both from recycled plastic. The Vietnamese and (ii) the gap in recycling capacities virgin resin and recycled polymers. reclaimers that rely on importing and recyclers’ preference for recycling There is limited local demand for plastic waste, rather than using local higher-quality imported feedstock. recycled plastics, and high-value waste, will be banned from doing so Some plastic recyclers produce food-contact-grade rPET is exported. in 2025. Some Vietnamese companies food-grade rPET. In 2022, this changed, with the are developing collection networks approval of Thailand’s Food and Drug so that they can access the waste Administration. collected by local family businesses. Plastics collected by the informal and formal sectors are purchased by junk shops and aggregators, which resell the materials to craft villages and other recyclers. In 2024, Vietnam had a very tiny domestic market for recycled plastics, which are used, primarily, to produce building materials and small furniture. Notes: BMA = Bangkok Metropolitan Administration; CFR = collected for recycling; LLDPE = linear low-density polyethylene; MONRE = Ministry of Natural Resources and Environment; MRANTI = Malaysian Research Accelerator for Technology and Innovation; NIA = National Innovation Center; PE = polyethylene; PS = polystyrene; rPET = recycled polyethylene terephthalate; SICA = Social Impact Challenge Accelerator; WtE = waste-to-energy. Source: The World Bank Group: Consolidated from various sources • Lack of policy and financial incentives: Lack of supportive 2.3. Hurdles to Overcome to policies, inconsistent enforcement of existing policies, Achieve Innovations’ Growth and the exclusion of innovations, all work against the and Scale innovative businesses that are trying to have an impact on plastic waste, and they discourage investors from The assessment of the status of SWM in the six AMS, which providing capital for innovations. is presented in Tables 1 and 2, highlights gaps in policies; • Lack of organizational capacity: As early-stage infrastructure; and financing for recovery, recycling, and innovations develop, they are vulnerable to market plastic circularity. Innovations can fast-track and enhance and policy pressures, and they can suffer from weak SWM, in general, and plastic waste management, in particular. business models, an unclear product-market fit, lack However, innovations in plastic circularity must overcome of access to partnerships and networks, inexperienced three main hurdles to attract investment, and be able to leadership, and other challenges. scale: 16 Chapter 2. Overview of the Waste Management Ecosystem and the Key Plastic Waste Types in the Six AMS “Innovators in the region are mostly scientists and entrepreneurs who are operating social enterprises, and often they lack the business expertise to make a commercial success of their enterprise. Thus, it is not easy to scale their business or to prove its profitability. Many entrepreneurs only focus on ensuring that their solutions work, rather than on their cashflow and having a sustainable business model.” Impact Investor, Singapore • Limited access to capital: Innovations in the six AMS Lack of implementation and enforcement of laws and may not be ready to raise funding, or they may lack regulations creates uncertainties for innovations: Although access to investors as there is insufficient investment crucial laws and regulations for plastic waste management capital available in their country. While technology-driven are enacted at the national level, sub-national entities solutions are more likely to attract private investors are responsible for implementing and enforcing them. that are seeking commercial returns, other business In Cambodia and Vietnam, stakeholder consultations for models have limited financing options. this study noted the low capacity of local authorities to implement and effectively enforce regulations that require 2.3.1. Lack of Policy and segregation at source. The Philippines has a comprehensive solid waste management law, the Ecological Solid Waste Financial Incentives Management Act of 2000 (RA 9003), but its implementation The lack of policy and financial incentives creates significant and enforcement has been limited. barriers to scaling innovations, and it restricts their access Unless government policies are clear and predictable, investors to financing. will only finance the most profitable and well-established Policies can hinder innovations: Some plastic-related innovations, such as those that are recycling higher-value policies and regulations lack clarity, which discourages plastics, or that use commercial bioplastic technology. innovations; for example, regulations on the use of recycled In Southeast Asia, from the beginning of 2018 up to the plastic in food packaging are a problem in Malaysia. Vague first nine months of 2022, private investors put less than guidelines about using recycled content limit the use of 1 percent of their financing into early-stage innovations for locally produced recycled resin in food and beverage waste management and plastic circularity. As discussed in packaging because there are concerns that the recycled the World Bank report “Where is the Value in the Chain? packaging is not “halal.”30, 31 Also, opportunities for public Pathways out of Plastic Pollution,”32 to reduce the profits of procurement are often not open to start-ups. In Indonesia, linear business models and increase the profits of circular for example, businesses must have three years of audited or green business models, the policy mix must be coherent. financial statements before they can bid on government The overall impact of unclear, unpredictable policies is contracts, and this prevents start-ups from bidding. that they discourage investors. International financial institutions also have requirements Lack of supportive policies undermines innovative businesses regarding businesses’ minimum years of operation, which and limits their market: Lack of SWM policies results in bar start-ups from bidding. under-resourcing of the public and private services that 30 Foods and beverages that are not “halal” are those Islamic teachings bar Muslims from consuming—for example, pork and alcohol. 31 Ministry of Environment and Water (KASA). 2021. “Malaysia Plastics 32 World Bank. 2022a. “Where Is the Value in the Chain? Pathways out of Sustainability Roadmap 2021–2030.” Plastic Pollution.” 17 Scaling Innovations for Plastic Circularity with Investment in ASEAN manage solid waste, including plastic waste. The stakeholders environmental, and the occupational safety and health consulted for this study identified “segregation at source” impact of their products and processes. For example, as a foundational policy and an essential requirement for refill businesses need support to test their business unlocking many innovations. In the six AMS, recycling model, which could be provided by securing a corporate innovators noted their significant challenges in selling partnership to run short-term trials or pilots. recycled packaging because it is more expensive than • Access to early-stage financing from investors to become packaging made from virgin plastic. As of March 2024, investment ready. Advanced recycling businesses need none of the six AMS had supportive mandates requiring substantial capital up front so that they can access reliable the use of recycled content in packaging, which would feedstock and establish and expand their operations. boost the marketability of this packaging. • Market entry support and information about local regulations and stakeholders. Businesses and technologies from 2.3.2. Lack of Organizational Capacity outside the ASEAN Region need support to understand the region’s business and regulatory environment. Innovations in plastic waste management, recycling, and circularity in the six AMS face many of the same ESOs can provide critical mentoring, partnerships, and challenges as social enterprises. During consultations with technical assistance for innovators to help their enterprises stakeholders for this study, investors spoke about plastic to mature. The ESO innovation ecosystem is more robust recycling businesses’ lack of sophistication as they are often in Indonesia, the Philippines, Thailand, and Vietnam than informal, family-operated businesses. In addition, these it is in Cambodia and Malaysia, where little support is businesses have inadequate cashflow and lack concern available for entrepreneurs. about their environmental and health impacts, as well as achieving plastic circularity. 2.3.3. Limited Access to Capital As discussed in this chapter, some ESOs can be found in each of the six AMS, however, these are not focused on the Lack of Capital: Given the early stage of innovations in plastic waste sector, nor do they provide sustained support the AMS, capital investment should prioritize Micro, Small over time. As a result, innovations often lack access to and Medium Enterprises (MSMEs) from concessional34 or the knowledge, resources, and relationships necessary to philanthropic sources. The weak business models of the develop into mature enterprises. High-potential innovators innovators that currently predominate in the six AMS need in the Future of Flexibles Innovation Challenge identified to be more robust to attract commercial investors. These four key barriers to scaling their enterprise:33 investors need to see the potential for innovations to scale. Another constraint is the small size of the investment • Ability to form strategic partnerships with local amounts available for early-stage plastic waste management, manufacturers, global brands, or other actors in the recycling, and circularity innovations (typically less than $1 plastic value chain. For example, to produce at the scale million). Not only is access to capital limited for businesses needed to commercialize their products, businesses from the start-up to the early-growth stage in the six AMS, producing alternative materials require connections so is the pool of potential investors—philanthropists, impact to potential manufacturing partners. investors, and international financial institutions (IFIs). • Technical feedback during product development pilots The Missing Middle and the Mismatch of Innovators and testing. Businesses need more research and testing and Investors: In the six AMS, early-growth-stage plastic to validate their market fit and pricing, as well as the 34 Concessional financing, which is facilitated primarily by international 33 The Incubation Network. 2022a. “2022 Market Insights Report, Future financial institutions, is the provision of loans or grants to eligible countries of Flexibles.” at below-market interest rates, and with flexible repayment terms. 18 Chapter 2. Overview of the Waste Management Ecosystem and the Key Plastic Waste Types in the Six AMS circularity innovations seek comparatively small investments mature after being initiated by nonprofit and corporate (up to $2 million) to enable them to scale and access better actors, and it required multiple rounds of blended investment markets. These enterprises are in the “Missing Middle” to reach commercial scale.36 The government of India category that is common in emerging market countries. introduced EPR policies in 2016, but their implementation This means that enterprises are too large to benefit from arrangements were still not finalized 8 years later in 2024. microfinance, too small or risky for commercial banks to Also, for new technologies, the timelines to scale can support, and they do not offer the prospect of growing be exceptionally long. For example, research shows that returns for investors, or the timely exit opportunities that advanced recycling technologies took 17 years to reach venture capitalists typically seek. Recent research, which commercial scale in developed markets.37 examined climate and sustainability ecosystem-related entrepreneurship in Southeast Asia, including circular economy and waste reduction enterprises, found that 2.4. Innovation Support to over half of the funds available were grants that came in amounts of less than $25,000.35 This research also indicated Address the Gaps that across all sectors, the lack of funding amounts of over $500,000 is due to the substantial risks involved Based on country profiles in the six AMS, the gaps identified with the untested, or minimally tested technology that are a good entry point for each country to initiate and plastic circularity innovations use. scale innovations. Given the ongoing mismanagement and leakage of potentially recyclable plastic waste across the Insufficient Track Record and Financial Transparency: Of six AMS, a standard set of actions and priorities are needed the innovations this study assessed, few had a comprehensive for innovations in collection and segregation of waste, to and well-documented record of both their performance maximize recovery while putting complementary efforts and their finances. This deficient documentation and lack towards source reduction and advanced recycling as well of financial transparency adds to uncertainty about the as disposal of residuals. Tackling plastic pollution in the six ability of innovations and their business models to yield a AMS requires a systems approach that takes a complete life financial return, which thereby increases their risk profile cycle approach to plastic by addressing gaps in ecosystem with potential investors. support, economic incentives, and initiatives to support This study focused on businesses that were participating upstream and midstream innovations. A coherent range in national or regional innovation challenges. There is no of initiatives and policies benefiting multiple stakeholders set of rules regarding how to scale innovations in plastic across the plastic value chain is required to strengthen circularity because there have been very few successes, and “reduce, replace, reuse, and repurpose,” and drive plastic no lessons learned have been documented. As indicated circularity.38 While these challenges and gaps vary between in this chapter, the ecosystem and policy environment in countries in the ASEAN Region, some general recurring each of the six AMS is still at an early stage of development. themes in Tables 3 and 4 highlight how innovations can The hurdles reported in the previous section are significant address these gaps. and must be addressed over time to increase the likelihood that innovations in plastic circularity will be able to attract the investment they need to scale. In other emerging markets, innovations have taken a long time to mature from one stage to the next. For example, 36 Global Plastic Action Partnership. 2022. “Unlocking the Plastics Circular in Mexico, bottle-to-bottle PET recycling took 20 years to Economy: Case Studies on Investment.” 37 Closed Loop Partners. 2021. “Accelerating Circular Supply Chains for Plastics.” 35 Aspen Network of Development Entrepreneurs. 2021. “Ecosystem Snapshot: 38 World Bank. 2022a. “Where Is the Value in the Chain? Pathways out of Climate and Environmental Entrepreneurship in Southeast Asia.” Plastic Pollution.” 19 Scaling Innovations for Plastic Circularity with Investment in ASEAN Table 3. Gaps in Solid Waste Management and their Impacts on Plastic Waste Management GAPS PLASTIC WASTE MANAGEMENT Low Rates of Waste Segregation • Inadequate waste segregation is due to lack of proper facilities and systems for segregating plastic at Source (Limited systematic waste at its origin, including insufficient bins for different types of plastic. segregation of waste at the point of • People’s attitudes and habits do not always support waste segregation at source. origin that is based on material type • There is a lack of economic incentives for segregating plastic waste. Poor plastic waste segregation and potential end-use) hinders the development of a sustainable recycling industry, which results in economic losses, and missed opportunities for green growth and green job creation in SWM. • Poor waste segregation limits recycling potential by reducing the quality and market value of recycled materials. • Mixed and contaminated waste streams from indiscriminate disposal make waste challenging to recycle and reintroduce into the economy. Inadequate Collection Systems • LGUs have varying levels of capacity, capability, and commitment to SWM, including plastic waste (Lack of structured processes management. Also, LGUs’ implementation of waste collection programs is uneven. to gather, transport, and store • LGUs have inadequate equipment and logistics, and especially the facilities for storing collected waste from its point of origin to a plastic waste, and vehicles for transporting it to an MRF or a recycling facility. designated transfer site, treatment • Inadequate collection results in a sizable percentage of plastic waste not being collected, and this is facility, or disposal site) particularly true in rural areas and informal settlements. • Inadequate collection leads to improper disposal practices, including illegal dumping and open burning, which exacerbate environmental and public health issues, and harm land and marine ecosystems. Limited Recycling Infrastructure • Not enough recycling facilities are capable of sorting, recovering, and recycling plastic waste. In the & Capacity (Lack of comprehensive six AMS, recycling relies heavily on the informal sector for manual sorting and rudimentary recycling. systems that are designed to • Carrying out efficient sorting and recycling is hampered by outdated and unsafe technologies. Also, transport recyclables, and convert due to lack of advanced technology for different types of contaminated plastic waste, it cannot be them into reusable products or raw converted into high-quality recycled plastic. Enhancing industrial networks’ synergy is needed so materials) that the waste from one industry becomes a resource for another. Limited basic as well as advanced recycling infrastructure constrains the circular flow of materials. In addition, a significant percentage of recyclable plastics are not processed due to recycling facilities not having the capacity to handle the large and increasing volume of plastic waste generated in urban and rural areas. The inability to effectively recycle plastics means that a significant percentage of valuable materials are lost that could be reused, which results in greater reliance on virgin plastics, and greater strain on the environment and public health. • Poorly developed end markets and limited market demand for recycled plastics make the process less economically viable for waste collectors and processors. Without a strong demand for recycled plastic, the economic incentive to recycle declines, along with the markets for recycled plastic. Also, the opportunities for green job creation and innovation are constrained. • Inconsistent quality standards lead to variability in the quality of recycled plastic products, which affects their marketability and usability. • The fragmented and uncoordinated plastic value chain leads to inefficiencies and missed opportunities for integrating recycling into broader SWM strategies. Weak Regulatory Framework • Stakeholders’ engagement is limited due to a lack of mechanisms for engaging them in the regulatory & Enforcement (An inadequate process, which restricts the scope and effectiveness of regulations. set of formal rules established • Penalties for non-compliance with plastic waste management regulations are inadequate, and so are by government to manage and incentives for compliance, as well as the identification of best practices in plastic waste reduction and oversee SWM) recycling. • Despite some progress in the six AMS, weak regulations and enforcement prevent the development of a circular plastic economy. Policies, such as EPR, DRS, and the restriction of SUPs need to be put in place, and effectively enforced. • The lack of comprehensive SWM policies and standards undermines efforts to achieve plastic circularity, and it prevents a holistic approach to plastic waste management. This, combined with poor enforcement of regulations, exacerbates the waste problem, and impedes recycling. 20 Chapter 2. Overview of the Waste Management Ecosystem and the Key Plastic Waste Types in the Six AMS GAPS PLASTIC WASTE MANAGEMENT Limited Public Awareness and • Limited public awareness about the negative environmental and public health impacts of plastic waste Engagement (Inadequately exacerbates social inequalities, as marginalized and vulnerable communities often bear the brunt of informed and proactive collective poor waste management practices. action by communities) • Communication strategies and SWM educational programs are largely ineffective due to their limited scope and reach, and especially in rural and underserved areas. This results in low participation in recycling programs, inadequate waste segregation at source, and improper disposal. • Consumers have limited understanding of the principles for a circular economy, including the importance and the benefits of plastic waste segregation, reuse, and recycling. • Limited public awareness and engagement constrains the implementation of effective plastic waste management in the six AMS. Community-driven projects on plastic waste management remain the exception, and they do not scale and become mainstream. Deficient Plastic Waste Data • Inadequate SWM data collection results in poor understanding of the scale and nature of the plastic Management & Standards waste pollution problem. (Lack of systematic collection, • Even when data is collected, due to the lack standardization of data collection and reporting protocols, storage, analysis, and reporting of data analysis and utilization are not very effective. The lack of agreed-on metrics for measuring plastic information on SWM) circularity further complicates efforts to track progress and implement effective strategies. Also, the lack of standardized practices for plastic recycling results in products of varying quality. • The ability of stakeholders in the six AMS to conduct informed analysis; initiate targeted interventions; and develop effective, and evidence-based policies and strategies for plastic waste management is limited because data are often not understandable or easy to access. • The lack of accurate and comprehensive data on plastic waste generation, collection, recycling, and disposal in the six AMS limits the markets for recycled materials and discourages investments in recycling technologies. Limited Private Sector • Unclear policy frameworks and low tariffs impact financial sustainability, and the lack of incentives Participation (Limited involvement discourages private investment in innovative waste management solutions and technologies, and of private entities in SWM) especially in waste processing and plastic circularity solutions. • Despite the high volume of plastic waste generated in the six AMS, limited private sector participation results in underdeveloped markets for recycled plastic products. Also, the lack of design for circularity reduces the potential for plastics to re-enter the economy and be reused. • The limited demand for recycled plastic products is due to concerns about their quality, reliable quantities, and recycled plastics costing more than virgin plastics. These factors discourage investment in recycling and limits the viability of recycling programs. • It is challenging for the private sector to scale and adapt to the growing volume and changing nature of plastic waste and SWM. Source: The World Bank Group Table 4. Thematic Innovations to Address Gaps to Improve Plastic Waste Management INNOVATION PLASTIC WASTE MANAGEMENT Technological Artificial intelligence-enabled waste sorting machines significantly enhance the accuracy and efficiency of waste Innovation in Plastic segregation by automating and improving its accuracy, and this results in higher quality recyclables and more of Waste Management them. Advanced recycling technologies, including chemical recycling, handle difficult-to-recycle plastics, which increases overall recycling rates and reduces the volume of waste going to landfills. Mechanical recycling technologies are being improved so that they can recycle mixed and contaminated plastic waste more effectively. Innovative Plastic App-based waste collection services offer flexibility, improve household waste collection services, and reduce Waste Collection and littering and illegal dumping. Sensor-based smart bins and waste collection systems ensure timely waste collection, Segregation Systems and strengthen segregation at source. 21 Scaling Innovations for Plastic Circularity with Investment in ASEAN INNOVATION PLASTIC WASTE MANAGEMENT Product Design Circular design for recyclability, which uses compostable materials for SUPs, or adopts modular designs for easy Innovations repair and recycling minimizes waste generation. Using mono-materials for packaging, minimizing dyes and additives, and incorporating easily removable components creates more accessible products to recycle, reduces contamination, and increases recycling yields. Eco-design lessens the environmental footprint of a product and contributes to its circularity. Digital Innovations The blockchain ensures traceability and accountability along the supply chain by enabling recycled plastics to meet quality standards, and assisting with audits and compliance with environmental regulations. Big data analytics provides actionable insights for use in plastic waste management strategies, while the Internet of Things enhances the real-time monitoring of plastic waste collection and processing. Policy and Regulatory Innovative policies and regulations, such as EPR, plastic taxes, and incentives, reduce plastic waste and promote Innovations plastic circularity. Innovative Business Waste-banking models39 incentivize consumers to segregate and return their waste. Models Waste trading platforms can connect waste generators with recyclers. DRS and other take-back schemes incentivize consumers to return plastic products or packaging after use. Innovative Consumer Apps can be developed that educate consumers about proper waste segregation, offer incentives for recycling, and Engagement Tools provide transparency about the end-of-life stage of their waste. The gamification of waste segregation or recycling through integrating game-like elements, such as point systems, rewards, or competitions, increases public participation in these activities.40 Educational initiatives that use digital platforms and interactive content can raise consumer awareness about the importance of plastic circularity. Source: The World Bank Group 39 Waste-banking models incentivize plastic waste management with financial mechanisms that promote reuse and recycling. For example, when individuals or communities collect recyclable materials, they can exchange them for cash, goods, or services at designated waste banks or collection points. 40 Gamification fosters a sense of responsibility and empowerment in communities and sustains long-term engagement. 22 Chapter 3. The Innovation Landscape for Plastic Circularity CHAPTER 3. The Innovation Landscape for Plastic Circularity 3.1. Introduction to Innovations in Plastic Circularity in the ASEAN Region Gaps in solid and plastic waste management span the entire plastic value chain, from upstream, to midstream, to downstream processes. Innovations can be leveraged to develop effective collection systems, promote waste segregation at source, support advanced sorting and processing technologies, generate better quality feedstock, and develop the market for recycled materials. Integrating innovations at these critical steps could minimize plastic leakage into the environment and recover recyclable plastic waste, which would unlock the economic value of plastic waste. This chapter explores the types of innovations across the plastic value chain that are emerging both inside and outside the ASEAN Region. Innovations in plastic waste are categorized according to the plastic value chain (see Figure 6), which comprises the key elements of the SWM hierarchy for plastic waste management: Source Reduction, Collection and Segregation, and Recycling. The plastic value chain comprises three stages (upstream, midstream, and downstream), in addition to a cross-cutting stage, which are defined as follows: • The upstream stage includes production plastic materials and innovations at this stage contribute to source reduction. Innovations at this stage reduce the production and use of difficult-to-recycle plastic products, such as SUPs. These 23 Photo: Art display made from recycled and upcycled plastic materials. Study team. Scaling Innovations for Plastic Circularity with Investment in ASEAN Figure 6. Categorization of Innovations in the Plastic Value Chain 3 Stages 3 Key Lifecycle Cross-cutting Elements Phases Stage Production: SOURCE UPSTREAM REDUCTION • Alternative Materials • Eco-design Solutions Innovations in the COLLECTION & Use: DIGITALIZATION: Plastic MIDSTREAM SEGREGATION • Separation & Sorting • Refill & Reuse • Smart Systems • Data Analytics Value Chain End of Use: DOWNSTREAM CYCLING • Recovery • Recycling Source: The World Bank Group innovations can be divided into (i) Alternative materials this include package-free shops, refill systems that and substitutions, which are bio-based feedstocks, integrate reverse logistics’ operations, capturing and substituting plastic with less harmful materials with reprocessing containers, and reusable packaging. plant-derived materials, such as bamboo, coconut, and The midstream stage contributes to environmental seaweed; and (ii) Eco-design solutions, which enhance sustainability and plastic circularity. recyclability to optimize materials by improving the • The downstream stage focuses on managing plastics yield and value of reclaimed plastics. The upstream at the end of their usefulness, including reintegrating stage of the plastic value chain drives the economic post-consumer plastic back into the economy. This stage and material efficiency of plastic production, and it supports all forms of cycling, and especially recycling.41 also fosters the development of advanced materials These innovations improve the recovery of recyclables and sustainable practices that drive plastic circularity. through: (i) Recovery, which refers to preparation of • The midstream stage focuses on innovations that minimize plastic waste for the recycling process, and aims to the use of plastic products in the product-delivery and increase the quantity, quality, and economic viability consumer-use phases. Midstream innovations act on of recovered plastics; and (ii) Recycling, which focuses the critical elements, Collection and Segregation, in on converting recovered plastic waste into usable raw plastic circularity and these are divided into (i) Separation materials to close the loop in the plastic value chain. and sorting, which supports segregation at source, increases collection and separation efficiency, and 41 Cycling comprises: Recycling processes post-consumer plastics that have opens up opportunities for businesses for recycling, been collected, cleaned, and sorted to make new materials. Upcycling transforms plastic waste into products of higher quality or value than the reuse etc.; and (ii) Refill and reuse, which comprises original. Downcycling is recycling that degrades the quality of materials diverse business models that limit SUPs and other plastic and leads to use in lower-value applications. Closed loop is the optimum recycling process as end-of-life plastic is processed to make the same products by leveraging business models that target product again, which maintains its economic and material value. Precycling reuse, refilling, or product-as-a-service. Examples of involves the strategic reduction of waste by preventing the generation of unnecessary plastics, and it is usually linked to the upstream stage. 24 Chapter 3. The Innovation Landscape for Plastic Circularity Business models and technologies that enhance the value of plastic through processes such as separation, 3.2. Identifying and Assessing shredding/flaking, or pelletizing improve the recycling the Innovation Ecosystem process, and result in higher-quality recyclable materials, reduce contamination risks, and elevate the overall Innovations for this study were categorized according to quality of the recycled output. the three stages of development between research and development (R&D) and commercialization. After R&D, • The cross-cutting stage focuses on digitalization and early-stage innovations go through the following stages: smart systems that integrate technologies from the Fourth Industrial Revolution and data analytics into the • Creating the concept: This stage is foundational for plastic value chain.42 This stage facilitates the flow of addressing the challenges of plastic waste management. information and materials across different segments This stage determines the subsequent pathways for of the plastic value chain, and innovations provide ideation, research, and the definition of a comprehensive plan outlining the innovation’s objectives and potential digital solutions and services that improve plastic waste impact. management; make this more accurate and transparent; streamline operations; optimize resources; enable better • Piloting and refining: This stage develops and tests decision-making with evidence-based data; and increase prototypes. This stage ensures the practical scalability efficiency and performance. Innovations at this stage and reliability of conceptualized innovations, and it also assess citizens’ engagement to measure their validates the robustness of the innovation’s business compliance with regulations, and the impact. Examples model. of digitalization include digital mapping to track plastic • Ready-to-scale: This stage implements validated waste and products. Digitalization also helps stakeholders innovations on a larger scale. This stage comprises to account for their plastic usage; it enables auditing developing robust strategies for scaling, as well as plans and providing assurance of plastic waste flows; and for market penetration, engaging with stakeholders, it quantifies the collected waste in line with current and addressing the continually changing challenges waste regulations, including those for EPR. of plastic waste management. These stages of development are neither linear nor The roles of government and investors can significantly irreversible. Instead, development is a highly iterative influence the success of early-stage innovations, especially process involving failure, learning, and adjustment that the viability of their business models and their potential shapes innovations into ones that are viable, scalable, for scale and replication. All these roles will be explored and sustainable. The strategic interaction between the in more detail in Chapter 4 on policies and Chapter 5 on three stages of development, which align with the criteria investment. Most innovations occur upstream and have a for the “current scale of operations,” the “potential for cascading impact on the downstream stage. For example, applicability and scalability,” and the “robustness of the refill and reuse innovations reduce the need to produce business model,” confirms that early-stage innovations new plastic products, while innovations in digitalization evolve with a focus on real-world applicability, scalability, can promote recycling, and provide an analytical basis and business resilience that achieves sustainable changes for improving plastic waste management, and related in how plastic waste is managed. decision making. This study focused on innovations at the “Ready-to-Scale” 42 “The Fourth Industrial Revolution is characterized by the convergence and stage, which are beyond the proof-of-concept, piloting, and complementarity of emerging technology domains, including nanotechnology, refining stages. Therefore, each innovation in this study biotechnology, new materials and advanced digital production technologies.” (Lavopa and Delera. 2021. “What is the Fourth Industrial Revolution?”) was evaluated regarding its “Readiness to Scale” and its 25 Scaling Innovations for Plastic Circularity with Investment in ASEAN ability to attract private investment—in other words, this • Current Scale: This was assessed by reviewing a study assessed the strength of the business model, the description of an innovation in the innovation database innovation’s adoption, and its applicability in the six AMS. where it was found, the innovation’s website, and its social media presence. The levels for ranking the current Criteria to Evaluate Innovations for their “Readiness scale of each innovation were the following: to scale:” A total of 262 innovations were evaluated for this study regarding their readiness to scale. This was − Small: The innovation is a local initiative or business, based on the following three key factors that support an it operates in a single location such as a family-owned innovation’s level of development and readiness to scale store, and it has an impact at the neighborhood or as a proxy for investment readiness: village level. • Robustness of the Business Model: Notional, Nascent, − Medium: The innovation is providing a service that or Robust. affects plastic waste generation or management, • Current Scale: Small, Medium, or Large. and it has an impact at the city level (or a substantial part of a city). • Potential for Scalability: Low, Medium, or High. − Large: The innovation is providing a service that The methodology for appropriately rating an innovation impacts plastic waste generation or management at on each factor used objective data and resources, as the regional level (such as a province or a defined much as possible, when these were available (websites, waste shed),43 or at the national level. social media pages, news articles, innovation accelerator/ incubation pages, etc.), and complemented with interviews • Level of Scalability: This is a forward-looking indicator and expert judgement of the technical consultancy firm. of an innovation’s potential to grow and scale, which was based on: information provided in the database where • Robustness of the Business Model: The following the innovation was found; a review of the innovation’s proxies were applied: (i) Is it part of an incubator or website and social media; and the judgment of the authors, receiving financing beyond seed funding? (ii) Does it which was based on the nature of the innovation, the publish data on its funding? (iii) Does the business have market’s needs, and demand for the business’s product a presence and performance record in the market that or service. The level of an innovation’s scalability was shows some uptake? The latter could be considered ranked as follows: instead of financial data. The business model’s level of robustness was classified according to the following: − Low: The innovation is highly localized, such as in a closed community, with a specific site and infrastructure − Notional: Unclear market opportunity, with no that make it difficult to replicate elsewhere. demonstrated business model; no revenues or negligible one; and unlikely to have received any − Medium: The innovation has potential to scale—for third-party financing. example, in settings or market conditions that are identifiable and achievable in the short term. − Nascent: Well-defined market opportunity; a business model that has not continuously earned revenue or − High: The innovation has demonstrated replicability demonstrated the ability to do so; and it is likely to and scalability, which means that its replication has have participated in an ESO program, or a similar one. been publicly reported more than twice. − Robust: Demonstrated business model; recurring revenue streams; and it is likely to have received some third-party financing. 43 A waste shed is a geographic region that has a common solid waste disposal system, or which an LGU has designated as an appropriate area for developing a common recycling program. 26 Chapter 3. The Innovation Landscape for Plastic Circularity tapioca, sugarcane, rice, or sago can be converted 3.3. Innovations in ASEAN and into polymers and blended with petroleum-based other select Areas additives to create “biodegradable” plastics (also called thermoplastic bio-composites). Such examples were The innovations in the study were organized according to found in the ASEAN Region, including an entrepreneur the stages discussed in Section 3.1 and described, further, in Indonesia who produces biodegradable bags using based on the specific innovations that were identified in cassava starch as the main biopolymer. the study under each stage. • By-products: These add value to by-products such as rice straw or crushed sugarcane bagasse that result 3.3.1. Upstream Stage from large-scale industrial manufacturing or agricultural operations. For example, a packaging manufacturer Innovations that support Source Reduction by reducing plastic in Thailand uses rice straw, which is a by-product of consumption, create or use more sustainable materials to rice paper production, to make molded packages for replace SUPs and other hard-to-recycle plastic products. takeaway food. Upstream innovations that use Alternative Materials were • All-natural: These products, which are crafted from identified, and based on their respective raw material, natural fibers and often locally sourced, are typically used which are described below: in food-contact packaging. While there are drawbacks • Synthetic:44 These materials are artificially created or related to food safety, a shorter shelf life, and higher synthesized to replace the plastic materials that are costs, the environmental impact of these products is used in a variety of applications. Many of these synthetic notably low. Examples of the materials used include materials are engineered to decompose naturally or bamboo, banana leaves, coconut husks, and seaweed. under specific conditions, such as industrial composting. Examples of these materials include polylactic acid This study identified two examples of Eco-design innovations: (PLA) plastics, chitosan-based films, and packaging • Design for recycling: By making the materials and made from mushrooms. Also, starch derived from corn, components of their products and packaging more readily recyclable, the overall yield and value of the 44 Oxo-biodegradable additives or bio-additives, which are offered as an recycled plastics increases (providing that proper alternative to films and bags, are among the innovations in the ASEAN disposal, collection, and recycling takes place). Examples Region. However, plastics using bio-additives are not solutions to the plastic waste problem as they produce microplastics. These types of identified in this study include eliminating PVC labels bio-degradants also destroy the integrity of recycled products, which from PET bottles and transitioning from multi-layered impacts their quality and durability. (Biobag. 2017. “Are oxo-biodegradable plastic products environmentally friendly?”) to mono-material packaging. Box 2. An Alternative Material Innovation Case – Ecovative In Western countries, the demand for eco-friendly materials for packaging that is an alternative to traditionally used Styrofoam is growing. Ecovative, a U.S.-based company, produces environmentally friendly packaging materials that are made from mushrooms and are lightweight, durable, and fire-resistant. Ecovative developed a method for growing mycelium (the root structure of mushrooms) in agricultural waste and sawdust, and the company uses this to create a cohesive material that has excellent cushioning properties. Unlike Styrofoam, which takes 500 years to decompose, the mushroom packaging takes 7 days to manufacture, and around 30 days to decompose at the end of its life. In 2021, Ecovative raised $100 million, and by 2024, several global businesses were using its packaging material. 27 Scaling Innovations for Plastic Circularity with Investment in ASEAN • Design for reuse: This business model is often logistics operation that captures and reprocesses complemented by systems that increase products’ containers, and customers are charged a deposit fee lifespan by using more durable materials, as well as to incentivize their returns. Several businesses in the developing consumer loyalty systems that can track ASEAN Region use refill stations to provide drinking the number of times a product has been reused. An water. example is the redesign of refillable jugs for bulk water • Reusable packaging and containers: This study identified delivery in Indonesia. reusable packaging solutions that are: centrally managed, a collective resource, and rely on customers to return 3.3.2. Midstream Stage reusable containers. For example, a start-up in Indonesia provides restaurants with reusable takeaway food This type of innovation reduces SUPs and other plastic containers and cups for hot beverages. Restaurant products by leveraging a variety of business models that are customers must pay a deposit for the containers they concerned with reuse, refilling, and product-as-a-service. use, and they appreciate this sustainable approach. Also included in this category are innovations that support Collection and Segregation—post-consumer use—and that • Retail and online shops (Upstream and Midstream): These increase the potential for recycling. business models offer consumers a way to shop that reduces their waste by selling products in bulk. Several • Collection services: These services and technologies entrepreneurs in Indonesia operate zero-waste bulk offer a solution for emerging markets—for example, stores that are both brick-and-mortar and online stores. a company in India sells a mobile vacuum unit that This model could also enable upstream innovations if collects street waste, including plastic waste, for stores require consumers to bring their own containers further processing. Municipalities in 10 Indian States when purchasing bulk goods. have purchased this novel, high-tech product. • Basic segregation recovers plastics from mixed waste for • Package-free shops: These are retail stores (zero waste recycling. Contactless mixed waste processing separates or bulk stores) that sell products in refillable, reusable, collected waste at source into organic and non-organic or plastic-free containers, or provide refill services when waste (metals and plastics); and separating food waste customers bring their own containers. from its packaging improves plastic recycling. This • Refill systems: Refill systems, which provide an alternative novel and high-tech process targets corporate clients. to purchasing products in a store, integrate a reverse Box 3. Redesign Innovation Case – Beverage Industry Players (Lotte, Coca Cola & Evian) The beverage industry is actively working to reduce its environmental footprint by adopting more sustainable packaging solutions such as label-free PET technology that uses laser technology to improve recycling. In 2020, Lotte Chilsung launched a line of label-free PET water bottles in Korea that uses a unique technology to print labels and designs on its bottles. Despite the slightly higher cost of label-free PET water bottles, an increasing number of consumers are purchasing this type of bottled water because of their concerns about protecting the environment. This environmentally conscious trend has been taken up by other global brands—for example, Evian plans to use 100 percent recycled PET bottles starting in 2025 and the company has launched label-free bottled water. Coca-Cola will change all of its plastic beverage containers to eco-friendly ones by 2025, and the company has already launched label-free bottled water. 28 Chapter 3. The Innovation Landscape for Plastic Circularity 3.3.3. Downstream Stage • Mechanical processing and remanufacturing: Business models and technologies that add value to plastic by The main goal of the downstream stage is to manage separating, shredding/flaking, or pelletizing it, strengthen plastics at the end of their useful life through Recovery and the recycling process, ensure better-quality recyclables, Cycling, which requires constructing MRFs and recycling mitigate contamination risks, and enhance the overall facilities. The Recovery and Cycling innovations identified integrity of the recycled output. In the ASEAN Region, in this study’s analysis include: technologies that produce high-quality, color-sorted flakes or pellets, which are suitable as feedstock for most • Aggregation: These business models and technologies circular “bottle-to-bottle” applications, are still relatively focus on aggregation beyond recovery, which sorts new. Some innovations that integrate the recycling plastics into different resins. For example, vertically process with the production of finished products have integrated aggregation MSMEs that combine small-scale been implemented in India, Indonesia, Thailand, and material recovery facilities (mini-MRFs) with mechanical Vietnam. For example, in India, a company manages processing, are currently operating in India and Indonesia. small aggregation points to recover flexible plastic Reverse vending machines45 are turning recycling into packaging, and it pelletizes the materials to produce a more streamlined and user-friendly process by using carrying bags and films. automation, data acquisition, consumer engagement, • Advanced recycling and conversion technologies: and supply chain integration. Deposit-return systems, These innovations incorporate chemical or thermal which refund a fee when consumers bring back their processing of plastic waste to break the polymer chains plastic items to an authorized collection point for into naphtha, monomers, or other chemical feedstocks recycling, keep high-value plastic products, such as by using pyrolysis, gasification, and leveraging heat PET bottles, separate so they are not contaminated to make specialized materials from plastic. These by other types of waste in a recycling bin. technologies often co-produce fuel or use plastic waste as an energy source. In Thailand, an innovative process converts plastic waste into bitumen for road construction. 45 A reverse vending machine facilitates the collection and recycling of plastic materials. Consumers deposit their used plastic containers (for Businesses outside the ASEAN Region could transfer example, beverage bottles) in a machine in exchange for a reward or other their technology or expand their operations in the region. incentive. The machines automatically sort and compact the deposited items and prepare them for transportation to a recycling facility. However, financial sustainability, the environmental Box 4. Refill/Reuse Innovation Case – Loop Loop is a global start-up based in Canada that works with some of the world’s largest brands and retailers to enable consumers to shop for products in durable packaging that can be reused multiple times. The company collects used packaging from consumers and retailers; returns their deposits; sorts, stores, and cleans the packaging; and provides the hygienically cleaned packaging to manufacturers for refilling. Loop also works with product manufacturers during the design and production stages of their packaging; for example, Loop collaborated with a global ice cream company to design and produce aluminum packaging that is easier to refill and reuse. Loop, which has worked with over 200 consumer product businesses and a dozen major retailers, primarily operates in Western countries, and it has leveraged private investment as well as innovative technologies and concepts. 29 Scaling Innovations for Plastic Circularity with Investment in ASEAN Box 5. Recycling Innovation Case – Prevented Ocean Plastic (POP) South Asia Prevented Ocean Plastic (POP) South Asia is a pioneering plastic recycling company that is developing locally customized sorting and collection infrastructure for underserved communities worldwide. Its business model is based on collecting ocean-bound plastic waste, transporting it, and processing it into recycled plastic pellets to supply the global supply chain. POP South Asia uses advanced technology to produce products from recycled plastic pellets, employs people to collect plastic waste, and has introduced a unique certification method for recycled plastic that is made from marine plastic waste. This raises consumers’ awareness about the marine plastic problem and encourages them to purchase recycled plastic, which creates a virtuous cycle to help solve the plastic waste problem. POP South Asia collects plastic from waste management facilities, as well as low-income collectors. The collectors pick up discarded plastic bottles in areas that are at risk of generating ocean pollution and they take the bottles to local collection centers for payment. The company has set up best-in-class collection and recycling infrastructure for coastal communities across Indonesia, which previously had limited or no collection. This approach is both preventing plastics leaking into the ocean and creating local income generation opportunities. POP South Asia compresses the collected plastic waste, transports it, washes it, and then processes it into flakes or pellets. The recycled plastic pellets are then delivered to global businesses for use in making products or packaging. These high-quality pellets comply with European Union and North American standards, which makes them a sustainable recycled plastic product. One bale of compressed bottles comprises over 10,000 individual bottles, and standard recycling production requires batches of nearly 100,000 bottles. The global outdoor recreation brand, Patagonia, produces sportswear and other equipment with recycled polyester that is made from POP-certified recycled plastic, and in early 2023, Patagonia launched a new line of athletic wear that is made with POP-recycled polyester. impact, and the large amount of energy consumed by • Mobile applications (Midstream and Downstream): these processes are critical considerations in deciding These innovations facilitate convenience, and enable whether innovations should be widely adopted. consumers to recycle through gamification or accessing on-demand collection services. Also, businesses can Note about advanced recycling: Advanced recycling, conveniently track financial transactions within the which is a solution for hard-to-recycle resins, has several plastic recycling process, and these advancements risks and challenges. From a financial perspective, most enable monitoring progress throughout the value chain. advanced recycling technologies require significant capital investment, and enormous scale. Also, the economics still • Technologies for traceability and visibility: Traceability need to be proven, given the need for source-segregated technologies such as the blockchain enhance visibility feedstock with low contamination levels. In addition, across the supply chain. These software systems enable not all advanced recycling technologies have a better the tracking of recycled plastics and clearly show their environmental performance. origins. Analyzing and setting parameters for traceability in plastic recycling provides a high level of assurance and quality control, and it ensures that the resulting 3.3.4. Cross-cutting Stage material meets the necessary quality standards for consumers’ reuse. Blockchain (ledger) technology is The cross-cutting stage engenders transparency across used by the Plastic Bank to track the flow of plastic the plastic value chain. Innovations focused on this stage waste in transparent manner.46 These innovations support real-time monitoring, automation, and consumer indirectly support other activities, such as verifying engagement by using digital technologies that are designed the provenance of recycled plastics. to map and trace the flow of materials, record the location of waste management infrastructure, and provide insights 46 The Plastic Bank is a Canada-based project that established waste collection on waste volumes and composition. Some of the innovations centers in the Philippines and in Indonesia. The project incentivizes waste collectors using blockchain technology by providing them with digital observed in this category include: tokens that can be exchanged for goods and services. 30 Chapter 3. The Innovation Landscape for Plastic Circularity • Data analytics: Digital services provide data collection, analysis, and insights into plastic circularity at the local, 3.4. Evaluating and Selecting national, and global level. Data analytics is a digital Innovations for Investment service that tracks the flow of plastic waste material, conducts material composition analysis, or investigates Based on the methodology presented in Section 1.4, each other aspects, such as investments in plastic circularity. of the innovations in this study was assessed to determine its relative stage of development. Of the 262 early-stage • Accounting and reporting for extended producer innovations reviewed in this study, 48 percent were at responsibility: EPR-compliance services support the concept stage, 36 percent were at piloting and refining execution and roll-out of EPR programs. EPR accounting stage, and 16 percent showed readiness to scale. This includes one or more services that connect waste review of innovations in the six AMS found that about generators with aggregators and recyclers, it tracks half of the innovations focus on the midstream stage, and the origin and flow of plastic waste regarding its EPR especially refill and reuse, which is mainly driven by the monitoring status and targets, and it provides the private sector. This reflects the region’s lack of market regulator with certificates on the disposal of materials. support for source reduction; the lack of infrastructure • Footprinting:47 These innovations compute plastic usage for recovery (MRFs) and recycling (recycling facilities); in an organization across the lifespan of products: and the novelty of digitalization. production, distribution, consumption, and disposal This study focused on ready-to-scale innovations that were or treatment, post-consumption. beyond the proof-of-concept stage. However, as noted above, only 16 percent of the innovations studied could In the absence of more systematic waste collection, Boxes 6 be categorized as ready-to-scale. These ready-to-scale and 7 highlight how platforms are being used to overcome innovations were subdivided into those that were upstream this hurdle. (34 percent), midstream (8 percent), downstream (40 percent), and cross-cutting (19 percent). Most of the 262 47 Footprinting is a comprehensive assessment of the environmental impacts of plastic materials over their entire lifespan. innovations were at the concept stage, or at the piloting Box 6. Operational Platform Innovation Case – Rubicon Rubicon is a U.S.-based leader in the $2.1 trillion global waste and recycling industry. Since 2008, Rubicon has secured over 50 patents for technologies that use AI, computer vision, and the Internet of Things. Rubicon’s cloud-based solutions connect waste collectors, collection trucks, consumers, and other stakeholders in highly fragmented SWM systems. Rubicon charges both collectors and consumers. For collectors, the mobile app lets truck drivers know when to pick up the waste. The app also tracks waste volumes and routes, which effectively manages the collection and movement of waste, while also providing real-time information on trucks’ locations. Consumers can monitor how much of their waste is recycled or disposed of in landfills, and how often their waste needs to be collected. For hard-to-dispose items such as batteries, consumers can purchase disposal boxes through Rubicon’s e-commerce platform. Rubicon works with thousands of recycling and transportation businesses to cut their operating costs and reduce their emissions, and it works with LGUs in more than 20 countries. Rubicon has attracted investments from several venture capitalists and impact investors, it has been listed on the New York Stock Exchange since 2022, and in 2024, it had market capitalization of over $200 million. 31 Scaling Innovations for Plastic Circularity with Investment in ASEAN Box 7. Using Platforms to Improve Collection Efficiencies A relatively new plastic circularity innovation is the use of platforms and apps to connect the different elements of the plastic waste value chain. Regarding digitalization, cross-cutting innovations can help to improve the functioning of plastic circularity markets by connecting stakeholders (for example, consumers, waste pickers, and recycling businesses) to make collection efforts more efficient and provide traceability data to improve recycling performance. Platforms, and particularly those that reward consumers for recycling, utilize corporate partnerships to fund the rewards. However, platforms can also be used as part of an EPR mandate. For example, Kimberly Clark Softex has partnered with Duitin, a waste collection app in Indonesia to collect used diapers, which are a significant source of hard-to-recycle plastic that should be recycled on its own. Duitin also collects single-use chopsticks and other wooden products, which upcycling firms transform into new-end products. Where waste segregation is not fully developed, platforms can be a reliable source of downstream management that can feed into providing better recyclables and plastic waste management, and also incentivize consumers to change their behavior, and raise public awareness about why and how to improve waste management. Of the six AMS, currently, only Thailand and Indonesia have waste circularity platforms. Replicating or developing platforms in the other four AMS countries should be considered as an additional approach to managing plastic waste. However, platforms require adequate scale to succeed. Hence, good marketing campaigns, along with corporate partnerships, are vital. With a proven platform, more EPR activities could be tied to the platform. and refining stage of development, and, therefore, require • Recovery and Recycling and Redesign Innovations strong policy and financial support, as well as capacity were evenly represented across the three stages of building to become ready to scale. Figure 7 shows the development. This could indicate that modest but proportions of the ASEAN Region’s innovations at each sustainable business models can scale under current stage in the innovation landscape. market conditions. Some differences emerged between innovations across the various stages of development: This study found that most upstream (47 percent), midstream (84 percent), and downstream (33 percent) innovations were • Upstream and Midstream Innovations were primarily at at the earliest concept stage. Cross-cutting innovations in the concept stage, with very few businesses demonstrating digitalization were also well-represented in the concept readiness to scale, which indicates the challenges and piloting stages (89 percent of the solutions reviewed they face with their business model, and insufficient across the two stages). As indicated by innovations’ more profitability to scale. significant transactions, downstream innovations for the • Cross-cutting Innovations were Operational Platforms, recovery and recycling of plastic waste were more likely Digital Mapping, and Services for the producers and to be nearly ready to scale (29 percent), followed by those other generators of waste. These were primarily at that were upstream (24 percent). Table 5 summarizes the the piloting stage, which indicates the recent trend to results of this review. monetize sector data, which are lacking in the plastic value chain. 32 Chapter 3. The Innovation Landscape for Plastic Circularity Figure 7. Plastic Waste Management Innovation Landscape in the ASEAN Region Innovation Upstream (25%) Landscape in ASEAN Midstream (45%) 48% Concept Downstream (16%) 36% Pilot & Refine Cross-cutting (13%) 16% Ready to Scale 0% 10% 20% 30% 40% Note: The total does not add up to 100 percent due to the rounding of some of the percentages. Source: The World Bank Group Table 5. Readiness of Innovations by Stage STAGE CONCEPT PILOTING & REFINING READY TO SCALE Upstream 47% 29% 24% Midstream 84% 14% 2% Downstream 33% 39% 29% Cross-cutting 27% 62% 11% Note: The total does not add up to 100 percent due to the rounding of some of the percentages Source: The World Bank Group 33 Chapter 4. Policy Options to Stimulate Innovations to Advance Plastic Circularity CHAPTER 4. Policy Options to Stimulate Innovations to Advance Plastic Circularity 4.1. Overview of the Role of Policies in Driving Innovation and Investment The public sector is a critical participant in managing plastic waste and advancing plastic circularity. Policies and related government actions establish the regulatory framework, infrastructure, and market context in which investments, and the possible scaling of innovations can occur at various stages of the plastic value chain. Also, governments can enable or inhibit plastic waste management, recycling, and circularity innovations.48 This section illustrates how government influences the innovation and investment ecosystems at multiple levels. First, this section discusses national-level policies and institutional arrangements that support plastic waste management by establishing the foundations for innovations in plastic circularity. This section then discusses the various policies, regulations, market-based instruments, direct financial support, and other types of support that specifically target innovations to enhance plastic circularity. This section also examines some relevant experiences with plastic innovations. This section is supplemented by Appendix 7, which highlights the perceived barriers and the associated supportive policies 48 OECD (Organisation for Co-operation and Development). 2021. “Promoting investment for green growth.” 35 Photo: Vending machine and container deposit system. Study team. Scaling Innovations for Plastic Circularity with Investment in ASEAN To ensure sustainability, the policy framework and associated regulations that support investing in plastic circularity innovations must comply with the highest environmental and social safeguard standards. to drive the development of plastic circularity in the six and sectoral strategies that clearly outline the various AMS and Appendix 8, which summarizes selected policies system components, including the stakeholders involved. for SWM and SUP. Scaling innovations is an emerging and unpredictable process of change.50 Adding innovation to the package Innovation requires nurturing and support: With government of solutions could have unintended consequences since assistance, technical and financial capacity building can be innovations can interact negatively, as well as positively, carried out through incubators and accelerators. Although with other solutions, and addressing these consequences not this study’s key focus, this section discusses trade at the market deployment stage is too late. From a policy policies that could facilitate the transfer and adoption of perspective, one practical way to overcome the bottleneck innovations and technologies. is to institutionalize monitoring and evaluation in strategies A sound institutional framework is essential for creating the so that they reflexively promote learning from policies. right environment so that public interventions can deliver Areas for potential policy interventions: In the six AMS, effective waste management policies. To be successful, the line ministries develop regulations and guidelines, this framework requires a set of clearly defined policy while the LGUs are responsible for implementing them. objectives and goals that are shared in strategic documents The overlap in jurisdiction between provincial and LGU (“Goals and Priorities”); enlist public and private actors in authorities often results in gaps in SWM services.51 The the same institutional space (“Roles and Jurisdictions”); sizeable number of informal collectors who are beyond the and enable coordination across different sectors and value government’s reach adds another layer of complexity to chains (“Horizontal and Vertical Coordination”). SWM. At this point, policymakers can decide, for example, Goals and priorities: Governments can drive SWM which actors to include in the core decision-making circle, economies and the private sector to produce public goods and the extent of their inclusion, as well as where and and services. Transformational change can best be achieved, when to increase investments. In Europe, research and strategically—for example, by mainstreaming plastic circularity technology businesses are increasingly embracing the considerations in SWM through sector-wide planning and objectives of achieving social impact and collaborating development. 49 The primary role of government is to set with all the types of innovation actors, including SMEs goals and policy objectives to tackle the challenge of scaling and large businesses.52 innovations for plastic circularity. Through consultative processes, such goals will result in a shared agenda 50 Sartas et al. 2020. “Scaling Readiness: Science and practice of an approach to enhance impact of research for development.” 51 Godlove and Pak. 2020. “2020 Policy Brief: Solid Waste Management in Kep Province.” 52 Larrue and Strauka. 2022. “The contribution of RTOs to socio-economic 49 World Bank Group. 2020. “Mobilizing Private Finance for Nature.” recovery, resilience and transitions.” 36 Chapter 4. Policy Options to Stimulate Innovations to Advance Plastic Circularity Box 8. IFC Performance Standards on Environmental and Social Sustainability Environmental and social safeguards should apply to all investments in accord with a country’s system, including private sector investments in public goods such as plastic circularity. For commercial financing, the Equator Principles have traditionally been a risk management framework for financial institutions to use in assessing and managing environmental and social project risks, including investments in plastic circularity. IFC, which finances investments in the private sector in developing countries, has performance standards on environmental and social sustainability that are designed to mitigate potential adverse impacts. The following table summarizes IFC’s key environmental and social safeguard policies— their purpose, key features, and their relevance and application to private investments in innovations for plastic circularity. IFC PERFORMANCE PURPOSE KEY FEATURES RELEVANCE & APPLICATION TO STANDARDS PLASTIC CIRCULARITY PS1: Assessment Ensures a • Requires clients (investors) to Establishes the foundation for identifying and and Management of structured establish an environmental and social managing E&S risks: Environmental and approach to E&S management system (ESMS). • Encourages private sector investment Social (E&S) Risks and risk and impact • Promotes informed decision-making in technologies and systems that are Impacts management. through stakeholder engagement. environmentally sound and socially inclusive. • The ESMS acknowledges the differing • Assures stakeholders of the responsible risks in diverse business activities and management of plastic waste-related projects. at differing scales. PS2: Labor and Working Safeguards • Advocates non-discrimination, equal Addresses labor concerns in solid and plastic Conditions workers’ rights opportunities, and fair treatment of waste management, especially those concerning and enhances workers. informal sector workers: worker-client • Prescribes appropriate working • Ensures fair labor practices and inclusion of relationships. conditions, terms of employment, and informal sector workers. grievance mechanisms. • Advocates workers’ health and safety. • Prohibits child labor and forced labor. PS3: Resource Advocates • Promotes efficient use of energy, Directly aligns with the principles of resource Efficiency and Pollution sustainable water, and other resources. efficiency, waste minimization, and plastic Prevention resource use and • Aims to reduce green house gas (GHG) circularity: reductions in emissions. • Promotes sustainable production processes pollution. • Guides the prevention of pollution and and reducing virgin plastic production. the management of hazardous waste. • Supports innovative projects along the plastic value chain. PS4: Community Protects local • Outlines measures to prevent or Highlights community safety in SWM & plastic Health, Safety, and communities reduce risks to the local community. reduction initiatives: Security from the • Addresses land and water usage, • Endorses community-based solid and plastic potential adverse infrastructure development, and waste management systems. impacts of potential conflicts. • Ensures that waste-related facilities and project activities. practices do not compromise the local community’s public health. PS5: Land Acquisition Aims to avoid, • Seeks to avoid or minimize physical Ensures that the land used for plastic circularity and Involuntary or, when and economic resettlement. projects is acquired fairly, with adequate Resettlement unavoidable, • Advocates fair compensation, market-based compensation: minimize assistance, and livelihood restoration • Fair land acquisition for new plastic resettlement, for displaced persons. waste-related projects or waste management and ensure facilities. an equitable • Offers protection against projects displacing compensation communities. package. 37 Scaling Innovations for Plastic Circularity with Investment in ASEAN IFC PERFORMANCE PURPOSE KEY FEATURES RELEVANCE & APPLICATION TO STANDARDS PLASTIC CIRCULARITY PS6: Biodiversity Ensures • Highlights protection of critical Protects biodiversity by preventing plastic Conservation conservation habitats. pollution leaking into the environment: and Sustainable of biodiversity • Promotes sustainable management • Supports innovations that prevent land-based Management of Living and sustainable and use of natural resources. plastics from entering marine ecosystems. Natural Resources natural resource • Advocates adopting a mitigation • Advocates whole landscape approaches that management. hierarchy (avoidance, minimization, integrate SWM and plastic waste management restoration, and offset). with biodiversity conservation. PS7: Indigenous Safeguards the • Recognizes and respects the rights, Protects the rights of Indigenous communities Peoples rights, dignity, culture, and knowledge of Indigenous in areas targeted for plastic management and livelihoods Peoples. initiatives: of Indigenous • Requires free, prior, and informed • Ensures that plastic circularity projects do not Peoples. consent for projects affecting infringe upon Indigenous lands or resources. Indigenous Peoples’ lands and • Engages Indigenous communities in resources. decision-making processes. PS8: Cultural Heritage Ensures • Advocates for the protection of Ensures the broader acceptability and conservation and tangible and intangible cultural sustainability of projects, while respecting fair access to heritage. cultural heritage: cultural heritage. • Highlights the importance of • Ensures that SWM or plastic reduction equitably sharing the benefits from initiatives do not harm cultural sites or commercialization. practices. IFC’s Performance Standards provide a comprehensive set of requirements that guide businesses in managing environmental and social risks. By adopting these standards, investors, innovators, and stakeholders in the ASEAN Region plastic value chain can collaboratively drive a sustainable and inclusive shift toward a circular economy for plastics. Source: IFC (International Finance Corporation). 2012. “IFC Performance Standards on Environmental and Social Sustainability.” Policy coordination sheds light on the procedural aspects • Coordination across the plastic value chain is a key of policymaking and implementation: factor in successfully integrating innovative plastic circularity solutions. • Horizontal coordination of policies is required across the sectors that are impacted or influenced by plastic • Coordination of environment, science, and technology circularity—for example, the chemical, food, and policies requires attention—establishing a clear channel energy sectors. Coordination occurs directly through to support business innovations is crucial for identifying inter-ministerial coordination, and indirectly through the policy triggers and levers that can drive successful overarching strategies, such as the “Framework for SWM innovations. Circular Economy for the ASEAN Economic Community.”53 • Vertical coordination at the national and the LGU level To ensure sustainability, the policy framework and associated also needs to be considered. Initiatives created at the regulations that support investing in plastic circularity regional level require two-way coordination to leverage innovations must comply with the highest environmental and generate change at the national and local levels. and social safeguard standards. The International Finance Corporation (IFC) supports and guides investments with its performance standards on environmental and social 53 ASEAN (Association of Southeast Asian Nations). 2021b. “Framework for Circular Economy for the ASEAN Economic Community.” sustainability, which are summarized in Box 8. 38 Chapter 4. Policy Options to Stimulate Innovations to Advance Plastic Circularity In the United Kingdom, manufacturers are taxed if their 4.2. Policy Instruments for products contain less than 30 percent recycled plastics. In Triggering Plastic Innovation contrast, in Spain, products with over 30 percent of recycled content are taxed less, which incentivizes producers to Discussions about each policy instrument followed the increase recycled content.59 stages in the value chain: Upstream, Midstream, and Although not adopted as regulations, countries have Downstream, whenever applicable, to highlight which policy initiated formal discussions on using alternative materials interventions were deemed more important at the various to plastics. The EC has prepared a Plastics Life Cycle stages of plastic circularity. The following sections describe Assessment, which uses the EU Product Environmental these aspects to capture the potential for innovation. The Footprint methodology.60 A World Bank Group tool, The categorization of policy instruments for innovation is based Plastic Substitution Tradeoff Estimator, also evaluates the on “A Practitioner’s Guide to Innovation Policy,”54 but this potential environmental impacts of plastics and compares has been adapted to focus on later-stage innovations. them to the alternatives available.61 Regulations, Standards, and Market-based Policy Instruments: A softer regulatory tool to promote innovation upstream in Regulations set standards for certain products to support the value chain entails adopting green design or eco-design a shift to cleaner alternatives and stimulate innovation. In standards, which is also known as designing for recyclability. 2018, the European Union (EU) published a communication Such policies drive producers to innovate, but these are acknowledging that regulations concerning waste and primarily large brands and their packaging suppliers. chemicals need to be better aligned to be effective in Globally, the most comprehensive framework is the EU’s impacting the uptake of secondary raw materials.55Also, Ecodesign for Sustainable Products Regulation, which in 2018, the EU published technical guidance on waste was updated in 2022, and builds on the EU’s previously characterization and classification, including plastics.56 More published Directive. The updated regulation expands reactive and common types of policies are market-based the scope of the products covered, and it is expected to instruments, such as taxes and fees. Only a handful of formulate regulations that prioritize resource-intensive countries (mainly in Europe) have levied comprehensive sectors, including plastics.62 plastic packaging taxes. In 2018, the European Commission (EC) developed a regional strategy on plastics to make “all Policy instruments closing the loop in SWM and increase plastic packaging on the EU market recyclable by 2030,”57 material circularity: The most notable scheme is EPR, and in 2021, the EC created the plastics own resource, which extends producers’ liability to the end-of-life stage which comprises a national contribution based on the of their packaging by assigning fees based on the volume amount of non-recycled plastic packaging waste.58 Some and type of packaging put on the market. The fees are countries have tied the scale of tax to minimum content eco-modulated, which means that fees are higher for requirements, such as requiring a certain percentage harder-to-manage materials. EPR is a broad suite of policy of recycled plastics in packaging, which creates a level instruments that support plastic circularity (Table 6). playing field across a category of manufactured goods. 54 Cirera et al. 2020. “A Practitioner’s Guide to Innovation Policy: Instruments 59 Government of the UK. 2022. “Plastic Packaging Tax: steps to take.” to Build Firm Capabilities and Accelerate Technological Catch-Up in Peszko. 2023. “Plastic taxes: a guide to new legislation in Europe.” Developing Countries.” 60 EC (European Commission). 2021b. “Life Cycle Assessment of alternative 55 EC (European Commission). 2018a. “Final communication from the feedstocks for plastics production.” Commission to the European Parliament, the Council.” EC (European Commission). 2021c. “EU Commission Recommendation 56 EC (European Commission). 2018b. “Commission notice on technical on the use of the Environmental Footprint methods to measure and guidance on the classification of waste.” communicate the life cycle environmental performance of products and 57 European Parliament. 2018. “European strategy for plastics in a circular organisations.” economy.” 61 World Bank. 2022d. “Plastic Substitution Tradeoff Estimator Technical 58 EC (European Commission). 2018c. “Plastics strategy”; EC (European Guidance Note.” Commission). 2021a. “Plastics own resource.” 62 European Parliament. 2023b. “Ecodesign for sustainable products.” 39 Scaling Innovations for Plastic Circularity with Investment in ASEAN Table 6. Extended Producer Responsibility Scheme TYPE OF COLLECTION MANDATORY EPR SCHEMES VOLUNTARY EPR SCHEMES Street collection Product take-back requirements Product Stewardship Initiatives Advanced Disposal Fees Corporate Social Responsibility Initiatives Combined upstream tax and downstream subsidy Separate collection Deposit-Return System (DRS) Source: Laubinger et al. 2022. “Deposit-refund systems and the interplay with additional mandatory extended producer responsibility policies.” Globally, Deposit-Return Systems (DRS) are some of the developed to provide financial support for businesses most influential supply policies, and their median return rate that contribute to the sustainability of their operations. performance is 84 percent.63 DRS have spurred innovation Loans provided by governments or via intermediaries enable in developing reverse vending machines for collection, and businesses to access capital investment or working capital operational platforms and services that enable traceability. on better terms than what is available in the market. By In the ASEAN Region, this type of initiative still needs to guaranteeing innovations’ financing, governments can become well-established. In 2024, a DRS for beverage support the provision of private financing for innovations, and containers was being considered in Singapore. especially for SMEs that lack collateral. These concessional Of the six AMS, Vietnam and Thailand have enacted loans have longer-term maturity and grace periods and, legislation, but implementation has been delayed, partly thus, they facilitate better opportunities for financing circular due to the COVID-19 pandemic. In 2022, Thailand adopted a business models.65 Across the six AMS, commercial loans do stricter SUP ban and developed tax incentives to encourage not appear to be available for early-growth-stage businesses. recycling that produces domestic waste feedstock. Also, Currently, there are only a few financing products with starting in 2025, plastic waste imports will be banned in underlying Circular Economy metrics, and most are part Thailand.64 Such policies, when implemented carefully, and of more comprehensive initiatives that focus on energy with consideration of the consumers and businesses that efficiency in housing and manufacturing. One successful may be impacted, can drive opportunities for innovative example is Indorama Ventures. This Bangkok-based solutions to scale—for example, ones for takeaway food intermediate petrochemical producer secured the world’s and beverage containers that replace the expanded first “blue loan” in 2020—a financing package of $300 polystyrene with molded fiber alternatives. Several AMS million from IFC, the Asian Development Bank, and Deutsche are considering SUP restrictions in some form, and the Investitions–und Entwicklungsgesellschaft. By 2025, this proliferation of innovations for alternative materials has loan is expected to enable Indorama Ventures to recycle substantial potential to scale if policies are enacted and 50 billion PET bottles per year in Brazil, India, Indonesia, enforced. the Philippines, and Thailand, and effectively divert this plastic waste from leaking in the environment.66 Direct Financial Support Tools: Governments also help innovations to scale through catalytic funding that leverages Credit bonds are issued as alternatives to loans and sold as a broader category of investors. Several policies related debt securities to investors. Some of these bonds address to the plastic waste management ecosystem have been 65 GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH). 63 Reloop Platform. 2021. “Factsheet: Deposit Return Systems – System 2022.“Financing Circular Economy –Insights for Practitioners.” Performance.” 66 Indorama Ventures. 2020. “New Blue Loan to Help Indorama Ventures 64 Office of the Prime Minister (Thailand). 2023. “Thailand prepares to Recycle 50 Billion PET Bottles a Year by 2025.” A blue loan is an innovative implement laws to control plastic waste imports, unlocking problems of financial instrument whereby the funds raised are certified and tracked accepting waste from other countries.” exclusively for projects that support a blue economy. 40 Chapter 4. Policy Options to Stimulate Innovations to Advance Plastic Circularity “For the Philippines, EPR is a good first step, albeit imperfect: The EPR Act highly incentivizes the processing of plastic waste and encourages, but does not incentivize, upstream to midstream innovations. So again, here we [have] a landmark policy which again focuses on incentivizing downstream.” Entrepreneurial Support Organization, Philippines environmental and social issues, and the market for these Innovation vouchers are small grants allocated to green, social, and sustainability bonds (GSSBs) has grown innovative SMEs so that they can purchase advice on remarkably since the World Bank issued its first green business management and how to apply technology. bond in 2008.67 The public sector, including government An initiative to provide vouchers is simple to design and agencies, international financial institutions, and LGUs, implement, with minimal “red tape.”71 Vouchers are also comprised 30 percent of total issuances in 2023.68 However, demand-oriented, which means that SMEs can define the appetite for this type of financing is lower in emerging what they want from advisors based on what they need. markets. In 2023, this comprised only a small fraction However, due to vouchers’ simplicity to execute, this policy (15 percent) of the total amount of financing issued, as instrument runs the risk of being a one-off transaction for investors were more likely to face challenges, such as a businesses, which achieves limited behavioral change. weak regulatory framework, lack of institutional capacity, Equity finance instruments comprise governments taking and a lack of data on potential borrowers. “Greenwashing” equity in small, young, and high-risk innovative businesses. (falsely claiming or exaggerating environmental benefits) These instruments include a government venture capital is another concern, as resources should only be allocated (GVC) fund that collaborates with a private investor to to projects with a significant impact. provide businesses with both capital and advice. GVCs, Sustainability-linked bonds (SLBs) provide a more targeted which are provided in economically lagging regions, run a approach as the financial and structural characteristics are higher risk of political interference, which can significantly based on the issuer achieving environmental, social, and alter the efficiency of the initiatives.72 In 2012, the French governance metrics within a defined timeframe. SLBs are government launched Ecotech, which, as part of the Future more accessible for businesses, as they do not require Investments Program, has a fund of €150 million (~$162 pre-defined eligible projects or heavy capital expenditures.69 million) that targets solid waste management and the The ASEAN Capital Markets Forum, which is comprised of circular economy.73 ASEAN market regulators, developed the ASEAN Sustain- Grants and matching grants for collaboration and infrastructure ability-Linked Bond Standards (ASEAN SLBS) to facilitate development are the direct allocation of funding from public using SLBs to fund businesses that are contributing to agencies to private businesses or other innovation actors, sustainability.70 such as public and higher education research institutions. 67 World Bank. 2022c. “Sovereign Green, Social and Sustainability bonds: Unlocking the Potential for Emerging Markets and Developing Economies.” 71 Cirera et al. 2020. “A Practitioner’s Guide to Innovation Policy: Instruments 68 World Bank. 2023. “Green, Social, and Sustainability (GSS) Bonds: Market to Build Firm Capabilities and Accelerate Technological Catch-Up in Update – January 2023.” Developing Countries.” 69 World Economic Forum. 2022. “What are sustainability linked bonds and 72 Alperovych et al. 2020. “Bridging the equity gap for young innovative how can they support the net-zero transition?” companies: The design of effective government venture capital fund 70 Climate Bonds Initiative. 2022. “ASEAN Sustainable Finance State of the programs.” Market 2022.” 73 Bpifrance. 2023. “Capital Innovation.” 41 Scaling Innovations for Plastic Circularity with Investment in ASEAN Innovations are primarily found in the Midstream and Downstream segments, such as reverse vending machines that automate collecting, sorting, and handling the return of used plastic containers to support a DRS. Increased R&D support has been valuable in countries such and a burden for SMEs since it costs more per worker as Indonesia, the Philippines, and Vietnam, which have due to SMEs’ small number of staff.75 Since 2001, the insufficient support mechanisms for the needs of individual Korea Chamber of Commerce has operated the National enterprises. This approach fosters cooperation between Human Resources Development Consortiums Program, academia and the private sector, and subsidies can play which helps and reimburses SMEs for organizing and a parallel role. After a plastic bag ban was implemented conducting in-service training for their staff.76 in Rwanda in 2008, the government provided subsidies Informal training is becoming more critical because of its for manufacturers of alternative materials and products, effectiveness in enhancing SMEs’ capacities. Trainings are which resulted in the proliferation of small businesses prioritized based on how they directly affect a company’s offering alternative materials.74 Grants are recommended performance.77 Informal training is favored by SMEs because in the development stage of technologies, rather than the it is more cost-effective than formal training, although the commercialization stage, because public subsidies can latter would provide better skills’ development.78 distort the scale-up of markets and crowd out private actors. Technology transfer for SMEs could be implemented Infrastructure development that is specific to SWM and by universities, public research organizations, or larger plastic circularity is often subsidized by the government. businesses. Governments could accelerate this process by This infrastructure is essential for plastic innovation and supporting the successful launch of innovations through is primarily developed in the Midstream and Downstream to commercialization, which would increase businesses’ of the plastic value chain. Lack of infrastructure (MRFs, risk tolerance, and ensure that they have access to the recycling facilities, and sanitary landfills) prevents innovations data, skills, infrastructure, and collaborative networks, across all segments of the value chain. Also, innovations which they need to innovate.79 Some governments have cannot access reliable feedstock from plastic waste. increasingly taken a hands-on approach in supporting Innovations are primarily found in the Midstream and SMEs to develop a bridge between basic research and Downstream segments, such as reverse vending machines commercial applications. In Germany, the federal government that automate collecting, sorting, and handling the return promotes industry-wide joint research with funding of €181 of used plastic containers to support a DRS. From a policy million (~$195 million), which supports higher education perspective, the development of such innovations is institutions and public research institutions in conducting facilitated either by providing grants or, indirectly, by research that has commercial applications.80 providing effective regulatory conditions. 75 Lee. 2016. “Skills Training by Small and Medium-Sized Enterprises: Innovative Other support tools: Other policy instruments support Cases and the Consortium Approach in the Republic of Korea.” businesses by providing non-financial incentives. 76 Korea Chamber of Commerce and Industry. 2023. “SME Training Support Center.” (Korean language) 77 Ibid. Capacity Building and Training for SMEs: SMEs need capacity 78 OECD (Organisation for Co-operation and Development). 2013. “Skills building to foster innovations and help secure skilled human Development in SMEs: Highlights.” resources. In general, training is a resource-intensive activity 79 OECD (Organisation for Economic Co-operation and Development). 2022a. “OECD Reviews of Innovation Policy: Germany 2022: Building Agility for Successful Transitions.” 74 World Bank. 2022a. “Where Is the Value in the Chain? Pathways Out of 80 AiF (Arbeits­gemeinschaft industrieller Forschungs­vereinigungen). 2024. Plastic Pollution.” “Innovative Power Through Collaborative Research.” 42 Chapter 4. Policy Options to Stimulate Innovations to Advance Plastic Circularity Box 9. Case study: The Role of Government in Thailand’s Entrepreneurial Ecosystem Thailand’s GPP Plan is part of the National Economic and Social Development Plan that promotes sustainable consumption and production. The first GPP Plan was implemented from 2008 to 2011, and it resulted in the development of Green Cart Criteria for Office Consumables such as printer paper and toilet rolls; durable goods such as steel furniture; and services such as photocopier rental. A second GPP Plan (2013 to 2016) promoted the initiative from the central level down to local authorities. The Pollution Control Department of the Ministry of Natural Resources and Environment is responsible for executing the GPP Plan, in collaboration with relevant ministries and stakeholders. As a result of this policy, the number of green certification schemes for products and services has increased (for example, the Thai Green Label) and additional support has been provided. The GPP Plan demonstrates the government’s commitment to developing bioplastics, and GPP has expanded the demand for plastic alternatives. The government of Thailand has also introduced various measures to facilitate SMEs’ access to funding and launched capacity-building programs to boost the competitiveness of Thai SMEs. These include the Thai Credit Guarantee Corporation Portfolio Guarantee Scheme, the Business Security Act (B.E. 2558, 2015), the Bank of Thailand’s revision of several financial regulations, and capacity-building programs. To support particularly innovative technologies and business models, the Thai National Innovation Agency and the National Science & Technology Development Agency target the digital economy and innovative start-ups. The Thai Ministry of Industry focuses on three key areas: improving manufacturing processes; increasing waste management, reuse, and recycling; and promoting the growth of circular enterprises. Thailand also has tax incentives to boost the use of more sustainable materials for plastic packaging. For example, from 2019 to 2021, the Thai government provided a two-year tax incentive for businesses that used biodegradable plastics in their packaging, rather than virgin plastics. Also, a tax deduction of 1.25 times the amount spent on purchasing biodegradable packaging was available for buyers of local bioplastics, and this deduction was extended from 2022 to 2024. Source: Switch Asia. 2020. “Thailand steps up with new policy to promote environmentally friendly products and services.” A Technology Protection Program finances protecting SMEs’ Haaga-Heila University of Applied Sciences created the technologies from theft, and it enables SMEs to safely Competence Center for Circular Economy to provide a distribute their technology. This protection is crucial for digital platform that promotes circular business models to providing a safe environment where SMEs can conduct the businesses.81 Similarly, in Switzerland, the Plastic Innovation research necessary to develop their innovations. In Korea, Competence Center was created as a one-stop-shop for to ensure that SMEs are paid fairly for the technologies they industry to address the technological challenges related develop, the Ministry of SMEs and Start-ups supports SME to plastic, and customize solutions.82 Germany has taken innovators’ development of technology, and it punishes a more comprehensive approach by creating a network those who try to steal it. of 26 competence centers.83 Clusters, technology parks, and competence centers: Incubators and accelerators finance early-stage support Creating a physical or virtual space where businesses can for young, innovative businesses by providing them with interact with external actors helps to develop and maintain facilities and mentoring services. Incubators offer businesses an innovative ecosystem that responds to businesses’ physical space on flexible terms, while accelerators are need for knowledge. Also, these spaces enable businesses typically growth-oriented and provide their services through to collaborate with more diverse partners. Science and a highly selective, cohort-based program that can last for a technology parks facilitate businesses’ innovation by providing them with a physical location and infrastructure. 81 Competence Center for Circular Economy. 2023. “The Competence Center for Circular Economy accelerates Finland’s transition to a circular economy.” Many countries operate competence centers that focus on 82 Plastics Innovation Competence Center. 2023. “Offering.” the theme of plastic circularity. For example, in Finland, 83 BMWK. 2023. “What is Mittelstand-Digital?” 43 Scaling Innovations for Plastic Circularity with Investment in ASEAN year.84 For example, the Korea Environmental Industry and post-awarding phase.91 The technical specifications should Technology Institute (KEITI) operates the eTechHiv for green be mandatory and focus on environmental performance businesses,85 and the Indo-Pacific Plastics Innovation Network standards such as the use of sustainable plastic alternatives, (IPPIN), which was set up by Australia’s Commonwealth requirements for recycled content in paper (a minimum Scientific and Industrial Research Organization (CSIRO), content requirement), and certified IT equipment.92 The provides a 10-week plastic circularity accelerator program.86 Dutch Public Procurement Expertise Centre (PIANOo) set up These initiatives target innovations that are beyond the the Sustainable Public Procurement (SPP) website, which proof-of-concept stage, have a viable product, and a is an online portal dedicated to government purchases defined business model. of sustainable products and solutions. This portal runs its own “Criteria tool” that applies the government’s GPP arrangements can help to commercialize and scale environmental criteria, and when proposing solutions, plastic circularity innovations by creating demand.87 bidders are asked to indicate whether their ambition level Environmental agencies are leading GPP, but governments is “basic,” “significant,” or “ambitious”.93 and LGUs are increasingly exploring GPP too, as a tool for green economic growth.88 GPP is often used to leverage Ecolabels require the certification of the environmental reducing plastic pollution; for example, the city of Seoul characteristics of products and services, and they must in Korea used a GPP policy to eliminate 90 percent of make these characteristics public. An important objective disposable plastic by 2020. Countries such as India and of ecolabels is shifting the responsibility for compliance Thailand (see Box 9) have developed GPP guidelines for from users to suppliers. Suppliers are involved in the a variety of goods that range from office paper and carpet certification process, and they must pay any expenses to construction supplies, but only a few guidelines target required to ensure that their products comply with the recycled plastics. In Singapore, the Land Transportation certification standards. Authority recently piloted using materials made from plastic waste in road construction.89 The successful implementation of GPP across the public 4.3. International Policy sector depends on having an enabling framework with Triggers for Plastic Innovation institutional arrangements, regulations, an incentive structure, monitoring, reporting, and capacity building.90 Whether the six AMS achieve plastic circularity through A coherent set of environmental criteria should be used their innovations depends on their national innovation in the contract tendering process to guide producers, and system. Also, the broader context—the international these should include technical specifications during the policy environment—is critical in shaping and enhancing pre-awarding phase, or as selection criteria during the a country’s innovative capabilities. This section discusses the role of trade policies and the international transfer 84 Bone et al. 2017. “Business incubators and Accelerators: The National Picture.” of technologies to enable plastic innovation in the six 85 World Bank. 2024. “Innovations for Plastic Circularity in Korea: Enabling AMS. Economic research suggests that the deregulation Conditions and Solutions: Supplementary Note for Scaling Innovations for Plastic Circularity with Investment in ASEAN.” of foreign direct investment (FDI), as well as the reduction 86 CSIRO (Commonwealth Scientific and Industrial Research Organisation). of tariffs on relevant products leads to improvements in 2024. “Accelerator: It’s time to accelerate your impact today!” 87 The European Union is a leader in integrating environmental considerations into public procurement and defines GPP as “a process whereby public authorities seek to procure goods, services, and works with a reduced 91 Appolloni et al. 2019. “Implementation of green considerations in public environmental impact throughout their life cycle.” (European Commission. procurement.” 2024. “What is green public procurement?”) 92 EPA (United States Environmental Protection Agency). n.d. “Electronic 88 World Bank. 2021a. “Green Public Procurement: An Overview of Green Product Environmental Assessment Tool (EPEAT).” Reforms in Country Procurement Systems.” 93 PIANOo. 2023. Sustainable Public Procurement. https://www.pianoo.nl/ 89 Kok. 2023. “LTA trials use of plastic waste to pave roads.” en/public-procurement-in-the-netherlands/sustainable-public-procure- 90 Ibid. ment-spp 44 Chapter 4. Policy Options to Stimulate Innovations to Advance Plastic Circularity Photo: Waste collection facility labeled for proper waste segregation. iStock/goc. the quantity and quality of domestic innovations and the that such wastes are properly managed.97 The Convention number of patents.94, 95 Such liberalization of trade and was amended in 1992 and 1995 to restrict the export of investment applies across the plastic value chain, but these hazardous wastes from Liechtenstein, countries in the improvements are particularly valuable at the upstream EU, and the Organisation for Economic Co-operation and stage, given the overwhelming contribution that SUPs and Development (OECD). However, as of the first quarter of hard-to-recycle materials make to mismanaged plastics 2024, only four ASEAN countries (three of the six AMS) in the six AMS. Also, implementing trade liberalization at had ratified the amendment.98 Additionally, with regard to the regional level could help to counter the low tariffs that plastic, the Convention was amended in 2019 to provide a virgin plastics enjoy, globally. Notably, substitute products clearer definition of the types of plastic waste that fall under are subject to higher tariffs, which further disadvantages the Prior Informed Consent procedure, which requires that them in comparison with plastic products.96 the exporting parties formally secure the approval of the importing parties before they ship plastic waste.99 The six Trade Agreements: With regard to plastic waste management, AMS have each made efforts at the national level to curb the “Basel Convention on Control of Transboundary plastic imports. Malaysia is the frontrunner, having banned Movements of Hazardous Wastes” (hereafter abbreviated all plastic imports in 2019; Thailand did the same in 2021; as the Convention), which was adopted in 1989, regulates Vietnam will by 2025; while Indonesia, Cambodia, and the cross-border movement of hazardous and other the Philippines are lagging. Tariffs directly affect access to wastes, and obliges parties to the Convention to ensure markets and they have a significant impact on the supply and demand for plastic substitutes. The United Nations 94 Liu and Wang. 2021. “The Impact of FDI on Domestic Firm Innovation: 97 UNEP (United Nations Environment Programme). 2011. Basel Convention Evidence from Foreign Investment Deregulation in China.” on the Control of Transboundary Movements of Hazardous Wastes. 95 Celli et al. 2022. “Better, Faster, Stronger: Global Innovation and Trade 98 Secretariat of the Basel Convention. 2019a. “Amendment to the Basel Liberalization.” Convention on the Control of Transboundary Movements of Hazardous 96 UNCTAD (United Nations Conference on Trade and Development). 2023. Wastes and their Disposal.” “Plastic Pollution: The pressing case for natural and environmentally 99 Secretariat of the Basel Convention. 2019b. “Basel Convention Plastic friendly substitutes to plastics.” Waste Amendments.” 45 Scaling Innovations for Plastic Circularity with Investment in ASEAN Technology diffusion is a critical factor for enhancing efficiency, sustainability, and environmental responsibility. The diffusion process involves technology transfer, but also the assimilation of these innovations by different stakeholders. Conference on Trade and Development (UNCTAD) found through positive productivity spillovers.105, 106 Green FDI is that plastic substitute products usually face higher import increasingly gaining attention through progress in achieving tariffs (5 to 35 percent), while the tariff for plastic is below environmental and climate goals.107 While there is no single 10 percent, and this affects the financial viability of plastic definition for green FDI,108 UNCTAD has emphasized the substitutes worldwide.100,101 Under the Bio-Circular-Green important role of government policies and initiatives for Economy program launched in 2015 by Board of Trade of green sectors; the role of investment promotion agencies Thailand, the government provides corporate tax holidays, in identifying how to maximize FDI in a country’s green as well as import duty exemptions for the machinery used by industry sectors; and the importance of sectors having the producers of certain bioplastics.102 Having encouraged relevant knowledge, and a focused strategy.109 both foreign and domestic investment, Thailand is now Technology diffusion refers to the process through which the world’s second-largest producer of bioplastics, after innovations related to plastic materials, production activities, the U.S.103 recycling methods, and other relevant technologies across Foreign Direct Investment: Technology transfer is a key the plastic value chain are adopted in the country.110 driver in promoting economic and knowledge development Technology diffusion is a critical factor for enhancing worldwide, and this is particularly important with regard to efficiency, sustainability, and environmental responsibility. nascent technologies. Although significant advancement The diffusion process involves technology transfer, but has occurred in achieving plastic circularity, most of the also the assimilation of these innovations by different patented technologies are held by entities in OECD countries stakeholders. Technology diffusion is facilitated by favorable and China (80 percent in 2017), and technology transfer government policies, financial incentives, collaboration among to other countries is limited.104 FDI is the largest source stakeholders, and public awareness about environmental of external finance in many developing economies, and issues. The rate of diffusion is influenced by regulatory it eases capital constraints, contributes to gross output, increases the employment rate, and aggregates productivity 105 Saurav and Kuo. 2020. “The Voice of Foreign Direct Investment: Foreign Investor Policy Preferences and Experiences in Developing Countries.” 106 Liu and Wang. 2021. “The Impact of FDI on Domestic Firm Innovation: Evidence from Foreign Investment Deregulation in China.” 107 Green Invest, UNEP (United Nations Environment Programme), and the Columbia Center on Sustainable Investment. 2017. “Green foreign direct investment in developing countries.” 100 UNCTAD (United Nations Conference on Trade and Development). 2023. 108 Definitions of green FDI include UNCTAD’s definition, “Greenfield FDI “Plastic Pollution: The pressing case for natural and environmentally in renewable energy, recycling activities and low-carbon technology friendly plastic.” manufacturing”; OECD’s definition, “FDI in Environmental Goods and 101 The discrepancy is even more striking between two products that are Services (EGS), proxied by FDI in electricity, gas and water sectors”; functionally identical but are made from different raw materials. Globally, and FDI Intelligence’s definition, “Greenfield FDI in solar, wind, biomass, the average tariffs on plastic and paper straws are 7.7 percent and 13.3 hydroelectric, geothermal, marine and other renewable power generation.” percent, respectively. UNCTAD (United Nations Conference on Trade and Development). 2016. 102 BOI (Board of Investment). 2021. “Investment Support Measures for “The Observer: Promoting Green FDI: Practices and Lessons from the Packaging Business in Thailand.” Field.” 103 Royal Thai Embassy, Washington, DC. 2023. “Thailand is now the world’s OECD (Organisation for Economic Co-operation and Development). 2011. second-largest maker of bioplastics.” “Defining and Measuring Green FDI.” 104 OECD (Organisation for Economic Co-operation and Development). 2022b. 109 UNCTAD (United Nations Conference on Trade and Development). 2016. “Global Plastics Outlook: Economic Drivers, Environmental Impacts, and “Promoting Green FDI: Practices and Lessons from the Field.” Policy Options.” 110 Stoneman and Battisti. 2010. “The Diffusion of New Technology.” 46 Chapter 4. Policy Options to Stimulate Innovations to Advance Plastic Circularity environments, market demands, technological capabilities, One essential and final consideration is ensuring that and socio-economic factors, and therefore diffusion can instruments are well aligned to serve higher strategic vary significantly. SMEs can benefit from spillovers from objectives, and that they are coordinated, holistically, to technology diffusion through technology transfer that create synergies. Holistic coordination of policy measures is enhances SMEs’ operational efficiency, competitive edge, a problem that many countries face in tackling cross-cutting and environmental compliance. However, SMEs tend to be societal challenges. However, some countries can provide worse off when they must compete with foreign businesses the six AMS with a wealth of knowledge and expertise on in the same industry. The long-term benefits of technology coordinated policy measures, and critical insights on how diffusion depend on whether the receiving country has to tackle plastic pollution and increase plastic circularity. the capacity to match the transferred technologies and For example, with its K-Circular Economy, Korea has created skills with local capabilities.111 links between policies and overarching strategies. Achieving plastic circularity is imperative for continuing to By the end of 2024, ASEAN countries may become subject use plastic and minimize its adverse effects. Many policies to a legally binding instrument on plastic pollution, which have already been explored and adopted in the six AMS the UN is currently negotiating. Whether this UN instrument to address this issue from various angles, and at national, is modest or ambitious, it will require both the public and regional, and global levels; however, significant gaps private sectors to act. By developing and implementing remain. Most policies focus on SWM, and how waste can effective policies and regulations that substantially reduce be better managed, and they need to be complemented plastic pollution, the ASEAN Region’s role could be standard by promoting innovations that could transform the plastic setting. economy. Policymakers can best support innovations by addressing the whole value chain, as well as supporting SMEs and markets, more broadly. Accelerating the adoption and implementation of these policies should significantly strengthen the opportunities for innovation to play a role in improving plastic waste management, recycling, and circularity. 111 UNCTAD (United Nations Conference on Trade and Development). 2010. Photo: Oysterable reverse vending machine “Foreign direct investment, the transfer and diffusion of technology, and for collection of recyclables and reusables. sustainable development.” Oysterable. 47 Scaling Innovations for Plastic Circularity with Investment in ASEAN 48 Chapter 5. Investment Needs and Opportunities in Innovations for Plastic Circularity in the Six AMS CHAPTER 5. Investment Needs and Opportunities in Innovations for Plastic Circularity in the Six AMS As this study has highlighted, investors are reluctant to finance plastic circularity innovations due to three main hurdles when trying to scale up (see Section 2.3). In addition, across the ASEAN Region, the funds flowing into innovations that address plastic pollution are insufficient for innovations to scale. To effectively address plastic pollution, the six AMS must support appropriate innovations to mature, targeting the gaps in their solid waste management systems and prioritizing the identification, adaptation, and replication of innovations that have proven successful in other parts of the world, ensuring their integration across the ASEAN Region. Along with developing sustainable materials, these innovations should also implement advanced recycling technologies and waste management systems. In addition, funding mechanisms should support feasibility studies, pilot projects, and technology transfer agreements that facilitate the replication process. 49 Photo: Facility processing plastic waste into recycled plastic pellets. iStock/undefined. Scaling Innovations for Plastic Circularity with Investment in ASEAN To effectively address plastic pollution, the six AMS must support appropriate innovations to mature, targeting the gaps in their solid waste management systems and prioritizing the identification, adaptation, and replication of innovations that have proven successful in other parts of the world, ensuring their integration across the ASEAN Region. as the company, Synthetic). Venture capitalists and 5.1. Development Profile of corporate venture capitalists112 can support early-stage Innovations in the Plastic innovations, and private equity can provide support at Circularity Ecosystem in the later stages. Corporate bonds are also helpful when Six AMS brands and producers want to increase recycled content. In Latin America, for example, such bond issuances have helped to drive the growth of bottle-to-bottle Characteristics of Innovators: As the innovation analysis recycling technologies, and demand for high-quality presented in Chapter 3 illustrated, 89 percent of the recycled PET.113 plastic-related innovations assessed for this paper are at the seed stage of development (the initial start-up • Use (midstream stage): Early-stage support for pilots phase, with little or no revenue generation), or at the of refill/reuse models is provided by donor agencies very early growth stage (when products or services are and ESOs. For example, the 2022 SUP Challenge, being piloted or tested in the marketplace). Only a small which was funded by GIZ’s PREVENT Waste Alliance number of innovations (11 percent) are at the ready-to-scale and local partners in South and Southeast Asia, has or expansion stage, where they are consistently producing accelerated some refill/reuse start-ups.114 However, as revenue. refill/reuse solutions in the six AMS lack a proven track record, they do not appeal investors who are seeking Investment activity and ecosystem by country: Of financial returns. the investors and capital providers already active in the waste sector in the six AMS, many have a presence in • End-of-Use (downstream stage): Depending on Singapore, the ASEAN Region’s financial hub. In addition the downstream solution and the risk-reward profile, to country-specific support in each AMS, this regional hub different investors are involved. Foundations and impact can provide opportunities for engagement with potential funds provide grants and low-interest loans to social investors. enterprises (such as participants in the Incubation Network’s programs). Venture capital providers have Across the six AMS, diverse sources of capital are scaling shown interest in advanced recycling technologies, innovations, and these align with the four innovation stages although not yet in the ASEAN Region. At later stages along the plastic value chain (see Chapter 3). of their development, IFIs and private equity funds have • Production (upstream stage): As discussed in invested in businesses that provide better mechanical Chapters 3 and 4, upstream business models face recycling. For example, the Recycling Modernization challenges unless policies and regulations facilitate further interventions or incentives. A subset of these more disruptive solutions could be more attractive, 112 Corporations with a vested interest in specific industries or technologies. 113 Global Plastic Action Partnership. 2022. “Unlocking the Plastics Circular high-risk/high-reward investment opportunities (such Economy: Case Studies on Investment.” 114 The Incubation Network. 2022b. “The SUP Challenge.” 50 Chapter 5. Investment Needs and Opportunities in Innovations for Plastic Circularity in the Six AMS Fund (RMF) is a national initiative designed by the Australian government to boost the capacity of existing recycling infrastructure and commercialize or scale emerging or trial technologies (early-stage ones) for processing chal- lenging-to-recycle plastics.115 The Plastics Technology Stream established under the RMF receives applications from Australian state and territory governments that have identified prospective projects in businesses, research institutions, LGUs, and NGOs. Also, to subsidize business models, a few downstream solutions (recovery models, in particular) are considering using plastic credit mechanisms.116 • Digitization (cross-cutting stage): Digitization attracts venture capital providers, with notable examples in countries where EPR implementation creates a greater incentive to adopt tools that support mandated participation and accounting. Understanding the relative maturity of each stage provides additional guidance on the types of investment that are most needed to advance innovations to the next stage. Appendix 4 details the type of capital used in the ASEAN Region. Appendix 5 provides examples of financing criteria used by selected investors for plastic circularity investments. Table 7 lists the categories of investors who play essential roles in driving technological advancements and economic growth. Table 7. Potential Sources of Capital for Early-stage Companies TYPE OF STAGE OF DEFINITION FUNDING INVESTMENT Self-financing Funding comes from personal savings, family, and friends. Concept - Pilot Typically, these are the first to provide funding for start-ups and innovative projects. They offer initial capital to help entrepreneurs validate their ideas, develop prototypes, and conduct Seed Investors Concept - Pilot feasibility studies. They also take a relatively high level of risk in exchange for equity in early-stage ventures. High-net-worth individuals invest their personal capital in start-ups and emerging companies. They often provide not only financial support but also mentoring and industry expertise. They Concept - Pilot – Angel Investors typically become involved during the early stages of a company’s development, and help it Readiness to Scale grow and succeed. Institutional investors manage pooled funds from various sources, such as private investors, Venture Capitalists corporations, and government entities. They specialize in investing in start-ups and Concept - Pilot – (VCs) high-growth companies and, typically, at the early to mid-stages of development. VCs often Readiness to Scale provide significant funding, guidance, and connections to help start-ups to scale quickly. Corporations with a vested interest in specific industries or technologies may establish Corporate Venture corporate venture capital arms. These entities invest in start-ups and innovations that align Concept - Pilot – Capital with their strategic objectives. Corporate investors not only provide financial resources, but Readiness to Scale also potential partnerships, distribution channels, and market access. Private equity firms focus on later-stage investments in mature companies. While they Private Equity may not directly participate in the earliest stages of innovation, they often acquire and Readiness to Scale Firms invest in companies with proven technologies or products. Their involvement may include restructuring, expanding, or optimizing the operations of companies. These provide start-ups with funding, mentoring, resources, and a structured program to help Incubators and them develop and grow rapidly. While they may not be traditional investors, they play a critical Concept - Pilot Accelerators role in nurturing innovation, and preparing start-ups for subsequent funding rounds. 115 Department of Climate Change, Energy, the Environment and Water (Government of Australia). 2023. Investing in Australia’s waste and recycling infrastructure. 116 A plastic credit mechanism is a market-based instrument designed to reduce plastic pollution. Plastic credits are awarded when an entity recovers or recycles a certain amount of plastic waste. These credits can then be sold to others such as businesses producing or using substantial amounts of plastic in their operations, and the credits will offset their plastic footprint. 51 Scaling Innovations for Plastic Circularity with Investment in ASEAN TYPE OF STAGE OF DEFINITION FUNDING INVESTMENT These enable individuals and the general public to invest in innovative projects and start-ups. Crowdfunding This funding model is a decentralized approach to raising capital, which is often in exchange Concept Platforms for rewards, equity, or tokens. Crowdfunding can provide early-stage capital and validate market demand for innovative ideas. These manage the financial affairs of wealthy families, and often invest in innovation projects Family Offices and start-ups as part of a diversified investment portfolio. Family offices may take a long-term Concept - Pilot view, and provide patient capital to support innovative ventures. These are established companies that invest in start-ups and innovations to gain access Concept - Pilot – Strategic Investors to new technologies, markets, or talent. Their investments are typically aligned with their Readiness to Scale strategic goals and can lead to partnerships, collaborations, or acquisitions. Government These investors support innovations through grants, subsidies, and research programs, and Public and they often aim to stimulate technological advancements, economic growth, and Sector Investors Concept - Pilot competitiveness in their country. Their funding may target a wide range of innovation (State-owned activities, from basic research to product development. Enterprises) Source: The World Bank Group • Early-stage technology-enabled business models are 5.2. Overview of Investments technology-oriented venture capitalists’ choice of in Innovations in Waste investment. Venture capital businesses have financed Management, Recycling, and a small number of deals in the six AMS, which have Plastic Circularity in the Six focused on technologies for plastic circularity. AMS (2018–2022) • Early-stage innovations, such as digitization and refill/ reuse innovations primarily receive small investment amounts of non-interest paying capital, such as grants Between January 2018 and September 2022, there were or prize money. 88 transactions in the six AMS, which were worth over $1.59 billion (see Chapter 3), including 42 at an early stage • As the value of many transactions is not reported, this of development, with a reported aggregate investment lack of transparency prevents institutional investors of $11.4 million (see Table 8.).117 from analyzing the investments made in the sector. The analysis in this paper reveals some key trends: The limited number of transactions made in the six AMS • Global and regional plastic producers are making since 2018 indicates considerable potential for investors strategic, larger investments in plastic recycling, and to grow and scale innovations in plastic circularity from the particularly in recycling PET (for example, Indorama early stage of the development cycle. Implementation of Ventures PCL’s $300 million blue loan from IFC/ADB/ the recommendations in Chapter 6 could support investors DEG to fund the expansion of its PET recycling capacity in deploying their financing along the plastic value chain. in the ASEAN Region and Latin America). As indicated in Table 9, of the six AMS, Indonesia’s overall start-up financing ecosystem is regarded slightly ahead of the others. As the ASEAN Region’s largest economy, Indonesia rivals Singapore in the average size of its 117 The financing amounts for a sizable number of these transactions were not disclosed. early-stage venture capital investments and Indonesia 52 Chapter 5. Investment Needs and Opportunities in Innovations for Plastic Circularity in the Six AMS Table 8. Investments in Plastic Waste Management, Recycling, and Circularity in the Six AMS, by Stage (January 2018–September 2022) BY STAGE UPSTREAM MIDSTREAM DOWNSTREAM CROSS-CUTTING TOTAL All transactions in plastic waste management, recycling, and circular infrastructure and innovation Number of deals 27 8 41 12 88 Aggregate value 23 1 1,489 77 1,590 ($ million) Number of deals with an 11 4 21 0 36 undisclosed value Early-stage transactions* (subset of total transactions above) Number of deals 20 7 4 11 42 Aggregate value 2.00 0.70 0.22 8.10 11.02 ($ million) Number of deals with an 8 0 2 4 14 undisclosed value Source: Plastics Circularity Investment Tracker 2023 * Early-stage deals included accelerator/incubator financing; angel funding; convertible notes; equity crowdfunding; grants; non-equity assistance; pre-seed finance; product crowdfunding; seed finance; early-stage venture capital; and Series A, Series B, Series C, and Series D funding. Table 9. Number and Value of Plastic Circularity Investments in the Six AMS, by Country (January 2018–September 2022) TOTAL 6 COUNTRY CAMBODIA INDONESIA MALAYSIA THE PHILIPPINES THAILAND VIETNAM AMS All transactions in plastic waste management, recycling, and circular infrastructure and innovation Number of deals 4 38 16 6 9 15 88 Aggregate value 0.05 32 402 0.02 1,074 81 1,590 ($ million) Number of deals 1 18 5 5 2 5 36 (value undisclosed) Early-stage Investments (subset of total investments above) Number of deals 3 24 2 3 2 8 42 Aggregate value 0.05 8.5 0.3 0.02 0.07 2.5 11.4 ($ million) Number of deals 0 11 0 2 0 1 14 (value undisclosed) Source: Plastics Circularity Investment Tracker, 2023 53 Scaling Innovations for Plastic Circularity with Investment in ASEAN has the region’s largest number of “unicorns”.118 This In addition to the relevant issuer’s linkage to the plastic study’s consultations with investors who are interested value chain, the transactions, which are summarized in in plastic circularity investments in the $2 million to $10 Table 10, have two common characteristics: a creditworthy million range, put Indonesia ahead of the other five AMS. borrower and a large amount raised—and, thus, sizeable Thailand and Malaysia were investors’ next choice, followed individual investments. Both factors facilitate the ability by Vietnam and the Philippines. Cambodia, which has of large institutional investors to invest their capital. In a smaller economy, and is not one of the region’s top contrast, in the six AMS, plastic circularity innovations 10 contributors to plastic pollution, did not appear to requiring capital seek smaller amounts of funding and be a target for investors. These choices of investors are have little or no credit history. Innovations that are not broadly reflected in the number and the value of known yet ready to scale are less likely to access capital and transactions. Appendix 6 shows selected venture debt they indicate future capital needs. Engaging investors providers and their products. in the near future will be essential to ensure that future demand is met. Appendix 2 summarizes the top 10 plastic circularity transactions by deal value in the six AMS from 2018 until the first nine months of 2022. Table 10. A Selection of Innovative Plastic Circularity Finance Offerings in Emerging Markets (2020–2022) DATE ISSUER COUNTRY INNOVATIVE FINANCIAL AMOUNT INSTRUMENT March 2020 Indorama Ventures Thailand Sustainability-linked Ninja Loan $255 million August 2020 Coca-Cola FEMSA Mexico Green Bond $705 million September 2021 Coca-Cola FEMSA Mexico Sustainability-linked Bond MXN9.4 billion November 2020 Indorama Ventures Thailand Blue Loan $300 million November 2021 Indorama Ventures Thailand Sustainability-linked Bond THB10 billion July 2021 Duy Tan Plastics Corporation Vietnam Green Loan ~$60 million** May 2021 Natura Cosméticos SA Brazil Sustainability-linked Bond $1 billion Note: MNX = Mexican Peso; THB = Thai Baht Source: Plastics Circularity Investment Tracker, 2023 ** Economist Impact. n.d. “How a green financing deal with HSBC helped a plastics producer open a recycling factory.” 118 In finance, a “unicorn” is a privately held start-up company valued at over $1 billion. 54 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations CHAPTER 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations Significant efforts are required for plastic circularity innovations to attract investors and have a significant impact on circular economy goals, overall. Scaling innovations in plastic waste management in the six AMS requires the creation of profitable and sustainable markets for plastic circularity along the plastic value chain and addressing the three main hurdles identified (see Section 2.3). In addition, in each of the six AMS, SWM is at a different level with regard to implementing innovations in plastic circularity across the plastic value chain (see Chapter 2): (i) Cambodia, Indonesia, and the Philippines have a nascent SWM ecosystem; (ii) Indonesia and the Philippines, which both have thousands of small islands, require special solutions for SWM due to their geographic challenges, and the lack of capacity in island LGUs and communities; and (iii) Malaysia, Thailand, and Vietnam, all of which have large cities and have an emerging SWM ecosystem. 55 Photo: Worker logs in bales of sorted, cleaned and compressed plastic waste. Shutterstock/V.stock. Scaling Innovations for Plastic Circularity with Investment in ASEAN Given the status of individual countries’ SWM, scaling up these would tackle the urgent issues of recoverable plastic plastic circularity innovations in the ASEAN Region requires materials and plastic residue leaking into the environment. identifying and supporting innovations to address the key Also, if policies for innovations in the upstream stage are infrastructure and technological gaps in plastic waste supported, this would provide comprehensive support management. The ASEAN Region’s current innovations for innovations across the whole plastic value chain and have limited capacity to grow and scale across the four help to address the issues of inefficient plastic waste development stages of the plastic value chain. These management and the consumption of SUPs. stages are: (i) Upstream stage innovations that reduce the To scale plastic circularity innovations in the six AMS, regional sources of plastic waste, (ii) Midstream stage innovations cooperation is needed to support a complex endeavor that that collect plastic waste and segregate it at source, (iii) requires sustained effort and the collaboration of multiple Downstream stage innovations that improve the recovery players. This also requires adapting strategies, policies of plastic waste in MRFs and recycling facilities, and (iv) and technological solutions to the unique challenges Cross-cutting stage innovations that provide digital tools and opportunities present in each country. From a policy to improve transparency and accountability. perspective, a practical way to overcome the risk of negative A viable strategy to enable innovations in the six AMS would consequences is to institutionalize monitoring and evaluation be through developing and enforcing effective policies in strategies, and thereby promote adaptive learning. and regulatory frameworks. Based on countries’ plastic The following section presents recommendations that are and SWM status, a variety of policy levers are needed to based on the analysis undertaken in this study concerning stimulate the growth of innovations. how to support the creation of functioning markets for Policies that support innovations in the midstream and plastic circularity. downstream stages should be a focus in the AMS because Photo: Cushion fabric made from upcycled plastic. iStock. 56 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations midstream stage could drive innovations for the collection 6.1 Scaling Innovations by Stage and segregation of plastic waste, as well as innovative business models, such as package-free shops, refill systems, 6.1.1. Value Chain Stage and reusable packaging. Gaps in SWM and the impacts on plastic waste management The downstream innovations analyzed in this study were were identified in Chapter 2, and the types of plastic few, and they were divided across the concept, piloting, circularity innovations across the plastic value chain and ready-to-scale stages. This could be due to the need were detailed in Chapter 3. About 48 percent of the for capital intensive investments in MRFs and recycling innovations were at concept stage, and only 16 percent infrastructure, and in advanced digital technology. Downstream demonstrated readiness-to-scale (see Figure 7). About innovations could produce better feedstock by improving half of the innovations focus on the midstream stage recycling, and digital technology could enhance the efficiency and are increasing collection and separation efficiency of the plastic value chain, and both indicate a need to through refill and reuse. Innovations in the other stages scale innovations in these areas (see Chapter 3). Recovery are lagging, and they reflect the lack of market support for and recycling innovations could lead to better recycling, source reduction, the lack of infrastructure for recovery as well as proper disposal that prevents the leakage of and recycling, and the novelty of cross-cutting innovations plastic waste into the environment. in digitalization. There were only a few crosscutting innovations in this Regarding plastic waste management innovation in the study, which suggests the novelty and the narrow focus ASEAN Region, a sizeable portion of innovations occur in on digitalization or enhancing the efficiency of the plastic the midstream stage of the plastic value chain—collection value chain by applying smart technologies or operating and segregation (about 45 percent). Innovations in the platform-based centralized businesses. With the need upstream stage that achieve source reduction comprise for data to support decision-making, enhance public 25 percent of the innovations reviewed and innovations awareness, and increase private sector involvement, all in the downstream and cross-cutting stages are fewer (16 countries should invest in more and better support for the percent and 13 percent, respectively). innovators that are working on improving transparency and accountability in the waste sector. About 47 percent of upstream innovations are still in the early concept stage. This stage comprises turning ideas In this context, the key components of investment for for products and services into prototypes or business innovations should include:119 concepts, and it precedes the piloting and refining stage. • Expansion of Circular Economy Initiatives: Circular A substantial number of upstream innovations in plastic economy principles lie at the heart of addressing plastic waste management face challenges in progressing to the pollution. Investments should foster the expansion of piloting and the ready-to-scale stages. This suggests that initiatives that encourage the redesign, reuse, and innovations may need more sustained support at the concept recycling of plastic products. This entails promoting stage to validate their prototypes with field testing so that the development of eco-friendly product designs, they can move on to the piloting stage. the establishment of recycling infrastructure, and the At the midstream stage, over 85 percent of innovations are implementation of dedicated plastic waste reducing at the concept stage, and only a very small percentage go policies (for example, EPR). on to become viable businesses. As a result, only 2 percent • Infrastructure Development: Investments to develop of innovations are ready to scale, which indicates that most infrastructure and equipment to collect, sort, recycle, and innovative midstream businesses do not grow beyond the concept and piloting stages. However, supportive policies, public awareness, and public and private investment at the 119 Note: research and development were outside the scope of this paper. 57 Scaling Innovations for Plastic Circularity with Investment in ASEAN manage the disposal plastic waste, efficiently, should 6.1.2. SWM Ecosystem Type comprise developing MRFs, recycling centers, and enhancing solid waste collection and disposal systems. Strategic interventions should prioritize areas where rapid and significant changes are possible, are based on the • Innovation Adoption and Integration: The adoption of country’s SWM status, and on the strategic areas that innovations requires substantial investments in policy address immediate needs, as well as the long-term goals and institutional development, capacity building, and of plastic management. public awareness campaigns. Financial support should Fostering plastic circularity in a nascent SWM ecosystem be allocated to design and implement education and (Cambodia, Indonesia, and the Philippines) requires a holistic training programs that encourage industries to adopt and comprehensive approach across the plastic value chain. sustainable practices and technologies. Also, governments The strategic focus should first be on strengthening basic should collaborate with industry stakeholders to develop policies and regulations to address their limitations and/or comprehensive regulatory frameworks, which incentivize poor implementation. Given the material loss of valuable the adoption of circular economy practices and penalize recyclables, innovations midstream and downstream are environmentally detrimental ones. needed, but they should be upstream as well to reduce • International Collaboration and Knowledge Exchange: sources of plastic waste. These should be supported, Investments should facilitate knowledge exchange and too, by community engagement in waste collection and partnerships with countries that have successfully segregation at source, which would maximize the recovery implemented circular economy strategies. Funding of recyclable products and reduce plastic leakage. As stated mechanisms should support participation in international in Section 6.1.1, countries need to focus on midstream and forums, research collaboration, the establishment of downstream innovations, accompanied by appropriate joint ventures with technology providers, and ensure policies (see Section 4.1). Efforts by government or companies that the six AMS remain at the forefront of innovation to introduce reverse vending machines or upcycling also in combating plastic pollution. need additional support. The relatively high collection ratio, and the prominence of the informal sector, for • Monitoring, Evaluation, Reporting, and Verification: example in Metro Manila in the Philippines, could serve Transparent and accountable mechanisms for monitoring as a foundation for innovation, as has been shown by the and evaluating the impacts of investments are crucial. local companies that have already launched innovative This information, which requires data, is necessary plastic waste management businesses. These SMEs would to enable policymakers and stakeholders to make benefit from government loans, as well as loans from informed decisions, refine strategies, and optimize microfinance institutions and banks. Weak demand for resource allocation. Thus, adequate funding should be recycled plastics, low recycling capacity, and dependence allocated to establish comprehensive data collection on high-quality imported plastics impede innovations’ scale and public reporting systems and carry out impact up, despite the availability of technology that can produce assessments and performance evaluations. food-grade rPET. Thus, additional efforts are required to Strategic interventions should prioritize areas where rapid and significant changes are possible, are based on the country’s SWM status, and on the strategic areas that address immediate needs, as well as the long-term goals of plastic management. 58 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations further enhance plastic circularity through innovations. and implement local regulations that support limiting the latter. (ii) Midstream innovations, such as DRS, or Upstream innovations, such as eco-design and production other business models that provide financial incentives have potential, but they require governments to institute for returning plastic products. This could significantly robust regulatory frameworks and policies. Effective improve collection rates by incentivizing distributors and policies include restricting the use of SUPs through taxes consumers to properly dispose of their waste or recycle and requiring and incentivizing the use of recycled and items of marginal economic value. Small islands should alternative materials. prioritize innovative waste collection systems involving For countries with emerging ecosystems (Malaysia, Thailand, community participation and emphasize refill and reuse and Vietnam), downstream innovations should seek investments solutions for plastic products. Community-led collection to develop more sophisticated infrastructure and technologies centers serve as effective focal points for proper waste for MRFs and recycling. In addition, the recycling market, management and disposal. (iii) Downstream, innovators which currently focuses on PET, could expand, given that should implement innovative, decentralized, “low-tech”, these countries use other recyclable plastics, such as HDPE and cost-effective recovery and recycling technologies that and LDPE. Attempts to innovate could also shift toward are suitable for small-scale, locally managed operations. advanced recycling techniques such as chemical recycling, Low-cost segregation technologies such as simple sorting which would improve feedstock quality. Cross-cutting systems are cost-effective and suitable for island settings initiatives should go beyond digitalization to maximize that have limited resources, while cross-cutting innovations big data, the Internet of Things, cloud management, and could share best practices in waste management and build AI to improve operational platforms so that they achieve regional and international partnerships. transparency and accountability in the plastic value chain. Based on a country’s typology, and the status of its SWM In Indonesia and the Philippines, which are island states, development and capacity, the focus for solid and plastic attention should be paid to research about how to resolve waste management should be on leveraging additional plastic waste issues on small islands. Given islands’ limited sources of financing (see Chapter 5), which can support space for SWM infrastructure, their lack of resources, and and scale plastic circularity innovations. Each country’s their weak technical and financial capacity, Indonesia and approach should be dynamic so that the development of the Philippines should prioritize: (i) Upstream innovations its SWM capabilities adapt to the unique and changing for source reduction to minimize the use of hard-to-recycle challenges of its environment (see Table 11). plastic; reduce use of plastic products and packaging; Box 10. Island Solutions Island economies, such as those in Indonesia and the Philippines, face unique challenges. Although their main cities are large enough to have the economies of scale needed for affordable solid and plastic waste management, less-populated islands cannot afford prohibitive SWM costs. On small islands, reducing upstream plastic use should be a high priority as the ability to process plastic waste is far more limited. Bans of SUPs could expand markets for alternatives, as well as encourage greener tourism. Limiting the availability of plastic, which is easier to do on a small island, could also ensure that the island stays cleaner and more attractive for tourists. Small island economies need more innovative, smaller-scale waste management solutions that are suited to their waste volumes, type of waste, and local management capabilities. At the very minimum, improving collection, and setting up a waste sorting facility would provide the basics to begin properly managing plastic waste. In addition, knowledge sharing at the regional level would facilitate piloting innovations and exchanging information about what does, and does not work. Mauritius is an excellent example of an island nation that has banned SUPs and which encourages refill-reuse solutions. 59 Scaling Innovations for Plastic Circularity with Investment in ASEAN Table 11. Prioritization of Innovation Across the Plastic Value Chain in the Six AMS NASCENT SMALL EMERGING STAGES ECOSYSTEM ISLANDS ECOSYSTEM Upstream: Source Reduction ++ +++ ++ Midstream: Collection & Segregation +++ +++ ++ Downstream: Recovery & Recycling +++ +++ +++ Cross-Cutting: Transparency & Accountability ++ ++ +++ Note: + designates the level of importance: ++ important; +++ critical. Source: The World Bank Group Categorizing innovations across the plastic value chain • Change consumer behavior: New recovery services according to their technology, methodology, and related often require consumers to dispose of their waste policies is crucial so that countries develop effective in the right receptacle for each type of waste. To be strategies that are tailored to their needs and SWM status successful, these models require effective marketing and (see Chapter 2). To ensure that interventions are effective, public education campaigns, along with the equipment sustainable, and scalable, the unique challenges, capacity, needed to ensure adoption. To achieve impact and earn and resources of countries with nascent, emerging, and a profit, most operational platform innovations require island based SWM systems must be considered (see Table multiple stakeholders to change their behavior. Recruiting 12). Each country’s approach should be dynamic, evolve users requires sustained marketing efforts, financial with the development of its SWM capabilities, and able incentives, and conducting educational activities in the to adapt to the challenges in its environment. local language. Maintaining active users depends on Key success factors that enable innovations in plastic providing tangible rewards. While traceability is critical circularity to scale: for supply chain management, some stakeholders who are not digitally savvy may view platforms that have a • Align with end-of-use infrastructure: Packaging that is degree high transparency as overly intrusive, and this made from alternative materials could be mismanaged can become an obstacle to adoption. if the infrastructure to manage this waste stream is insufficient. Alternative materials that look like plastic • Scale SWM funding: Solid waste collection from households products may end up in the plastic waste stream and and businesses is typically mandated by SWM policies. contaminate the recycling system. When implemented at scale, private sector solutions focusing on recovery could be implemented across the • Support competitiveness: Alternative materials should LGUs. Without policies to fund such services, recovery be required to meet the same performance standards businesses will be unable to scale, and waste will not and be the same price as virgin plastics. Innovators be collected. may encounter challenges in accessing feedstock due to underdeveloped supply chains, and the need to be • Develop end markets: Processing plastic waste into cost-effective, which can impact the viability and scalability high-quality recyclables must be cost-effective. Unless of their business model. Technological breakthroughs there are customers who are willing to pay a fair price in the large-scale production of bioplastic alternatives for recycled materials, even low-tech solutions, such as have resulted in greater investments in commercial-grade manual sorting and mechanical shredding of plastics production facilities. will struggle to stay in business. The lack of local or 60 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations Table 12. Prioritization of Innovations Based on a Country’s Stage in the Plastic Value Chain and its Typology INNOVATION STAGES/SWM NASCENT ECOSYSTEM SMALL ISLANDS EMERGING ECOSYSTEM ECOSYSTEM Upstream – Policies & Regulations for Source BASIC RECOMMENDATIONS • Focus on strict controls • Implement and enforce Reduction: ONLY of plastic imports. advanced regulatory • Technologies: Develop alternative materials Emphasize basic policies to • Given the limited space frameworks that mandate & enhanced material manufacturing. reduce the generation of plastic that communities reducing plastics’ production • Methodologies: Institute LCAs for products, waste, and especially of SUPs, have for SWM, and and use. and sustainable product design principles. and limit plastic leakage; and the resulting leakage • Promote innovations for • Policies: Implement regulations to limit SUPs conduct public awareness of plastic waste, alternative materials & and incentives to use sustainable materials. campaigns on the benefits of develop strong policy eco-design. reducing plastic consumption. frameworks that • Support ESOs and PPPs drastically reduce to develop sustainable plastics’ use in the alternative materials. tourism and fishing industries. Midstream – Collection & Segregation: • Implement simple, • Focus on efficient • Prioritize collection and • Technologies: Implement advanced sorting cost-effective innovations localized, specialized, integrate advanced sorting and segregation systems that use AI and IoT such as community-based and compact waste and segregation systems. to optimize waste collection. collection. collection systems that • Develop robust systems for • Methodologies: Implement • Establish basic segregation are suitable for a small household and industrial community-based waste management practices at the household geographic area and waste segregation. models, and awareness raising and level. leverage community education programs on proper waste • Develop low-cost participation. segregation. technologies for sorting and • Policies: Implement mandatory regulations collection. on waste segregation and EPR. • Encourage business models that reduce plastics or extend the use of such products—for example, refill/reuse and product-as-a-service. Downstream – Recovery & Recycling: Emphasize building basic Explore innovative Invest in more sophisticated • Technologies: Enhance recycling processes infrastructure for MRFs and small-scale recycling recycling technologies such as and chemical recycling methods. recycling. technologies. chemical recycling. • Methodologies: Integrate SWM systems and Promote small-scale Use PPPs to develop conduct recycling efficiency assessments. community-led recycling large-scale infrastructure for • Policies: Require minimum recycled content initiatives. waste processing and recycling. and incentives for the recycling industry. Include the informal sector in Implement policies to support SWM. the recycling industry. Cross-Cutting – Transparency &Accountability: • Implement technologies such as the blockchain for • Technologies: Implement blockchain technology for supply chain transparency tracking SWM. and accountability across the plastic value chain. • Build strong partnerships in SWM, including regional • Methodologies: Develop and implement standardized data collection and and international collaboration for knowledge sharing & reporting frameworks and stakeholder collaboration models. resource exchange. • Policies: Develop and implement SWM regulations that promote transparency • Share best practices in SWM. and the public disclosure of SWM data. • Promote transparency and efficient SWM practices through data collection and sharing, and the development of digital platforms. Source: The World Bank Group 61 Scaling Innovations for Plastic Circularity with Investment in ASEAN Photo: Woman demonstrates how to use plastic recycling vending machine. Study team. regional end markets will restrict the demand for recycling innovations. 6.2 Supportive Policies and Financial Incentives for Plastic • Construct recovery and recycling infrastructure: Redesigning packaging to make it recyclable will only Circularity Innovations be effective if recovery and recycling infrastructure is widely available. This means increasing the collection 6.2.1. Policy Gaps and Coordination to and segregation of waste so that more recoverable Address Institutional Failures material is available for recycling. Due to the diverse economic and development stages of • Achieve critical mass: While launching a mobile app SWM in the six AMS, the policies and practices for plastic is easy and inexpensive, reaching scale in a crowded and solid waste management need to progress from a ecosystem takes time and effort. The critical challenge nascent to an emerging ecosystem. For innovations in for operational platforms continues to be attracting large the upstream stage of the plastic value chain to evolve buyers and sellers so that a critical mass of active users so that they support source reduction, effective policies is reached, and the platform delivers value and impact. and regulations must be issued and enforced. Also, the collaboration of a wide range of stakeholders is required, • Improve access to feedstock: Scaling recycling innovations which includes central government agencies, LGUs, requires access to enough materials, and strong policies businesses, and consumers. that support commercial operations. Significant barriers can arise due to insufficient feedstock because waste • Nascent Ecosystem. For countries in the early stages of collection and segregation are not enforced, and there SWM development, basic policies could include: (i) banning is not enough funding for local recycling infrastructure. non-essential and the most harmful plastic products; 62 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations (ii) introducing DRS for bottles; and (iii) imposing fines and the plastic bag levy in Tonga.120 Policies can also for inappropriate SWM practices. Also, a foundational reduce plastic waste from tourism—for example, day policy framework for SWM is necessary to establish clear tourists visiting Mabul Island in Malaysia are required and enforceable regulations for source reduction and to carry their plastic waste back to the mainland.121 SWM. This framework should also include defining the Establishing and implementing policy incentives for roles and responsibilities of the various stakeholders specific industries such as tourism can effectively reduce (government, the private sector, and communities). the use of plastic products, and improve the collection, Basic SWM regulations will encourage investment if recovery, and recycling of plastic waste. As tourism they ensure that all communities apply them, and that businesses on small islands need to address their own the large informal sector is integrated into local SWM plastic waste, they should collaborate in encouraging systems. innovations in plastic circularity.122 • Emerging Ecosystem: Countries with emerging SWM development should focus on improving and The roll-out of plastic waste management regulations expanding the use of already developed policies and should be carried out with enough lead time to allow infrastructure and adopting innovative approaches for the private sector to respond. As part of implementing dealing with their various challenges. Advanced SWM regulations, building government systems and capacity policies for source reduction would complement the for enforcement is critical for achieving credibility, so that implementation of extended producer responsibility investors will be willing to risk investing. The government regulations that make producers responsible for the of Korea has provided policies, systems, technology, and end-of-life management of their plastic products and the targeted training necessary to establish effective packaging. Policies for GPP would support innovators in waste collection and segregation systems, and successful developing alternative materials. Other regulations, such recycling markets. This has been financed with funds such as ones that restrict certain additives, would increase the as Korea’s Recycling Industry Growth Fund that fosters plastics available for recycling, and as plastics become waste circularity under the Environmental Policy Loan easier to recycle, this would increase the potential for Program. Synergy has been created, too, by combining investments in innovation. Also, mandates that require innovative private sector approaches, such as Superbin, recycled content in packaging and products would which produces plastic pellets from PET bottles by using encourage the development of markets for downstream AI. For more information, see the “Innovations for Plastic innovations in recovery and recycling. In addition, related Circularity in Korea: Enabling Conditions and Solutions.” policies would strengthen the development of robust Supplementary Note to this report. systems for SWM, and especially the development of To transition from a nascent to an emerging SWM ecosystem more sophisticated designs for recycling. This, in turn, (see Table 13), a country needs to strengthen its implementation would improve the monitoring and collection of data of policies and regulations by shifting from a basic regulatory on waste, which government authorities need so that framework to more complex policies, such as EPR. This they can make policy and operational decisions, which transition should foster a culture of innovation that results are based on accurate data and information. in the adoption of new technologies and practices for • Small Islands’ Ecosystem: It is important to implement SWM and progresses from basic waste collection and upstream policies to control plastic consumption and the disposal infrastructure to advanced processing and recycling amount of plastic waste that is discharged on an island. Upstream innovations can include policies to reduce 120 World Bank. 2022b. “Technologies and Solutions to Manage Plastic Waste the import and use of specific problematic plastic items, in Small and Remote Islands.” such as the plastic bag ban introduced in Samoa in 2019, 121 Ibid. 122 IUCN (International Union for Conservation of Nature). 2023. “Waste-Free Islands.” 63 Scaling Innovations for Plastic Circularity with Investment in ASEAN Table 13. Transitioning SWM Innovations from a Nascent to an Emerging Ecosystem in the Six AMS INNOVATIONS BY NASCENT ECOSYSTEM EMERGING ECOSYSTEM STAGES UPSTREAM (Policies & Basic policies and regulations to incentivize the Advanced policies for reducing plastic use and Regulations for Source reduction of plastic use, and the development of promoting sustainable alternatives: Reduction) alternative materials: Implement regulations that mandate the eco-friendly Implement tax breaks or targeted subsidies for design of products and packaging, and reduce plastic companies that invest in developing environmentally use from the design stage. friendly alternatives to materials with virgin plastics. Adopt GPP policies that prioritize products with less Drive innovations in alternative packaging by enforcing virgin plastic, as well as sustainable packaging. the restriction of SUPs. MIDSTREAM Focus on enhancing the efficiency of the collection and Support sophisticated systems for collection and (Collection & segregation of plastic waste: segregation: Segregation) Initiate government-supported community programs Invest in fully automated waste sorting facilities that for waste segregation and collection, and provide use advanced technologies such robotics and AI. resources and training to encourage local innovations. Implement incentive schemes for households and Integrate the informal sector into government SWM businesses that effectively segregate their waste. systems. DOWNSTREAM Encourage the development of low-cost recycling and Focus on advanced recycling technologies and the (Recovery & Recycling) recovery processes: development of markets for recycled products: Provide grants or subsidies to finance communities or Support advanced sorting and mechanical and the informal sector in operating “low-tech” sorting and chemical recycling facilities. recycling facilities, and particularly facilities that can Create policies that promote the market for recycled handle low-value and hard-to-recycle plastic. materials such as mandatory recycled content in certain Provide financial and technical support for establishing products. local recycling facilities. CROSS-CUTTING Implement digital systems for tracking waste flows and Implement blockchain technology for tracking and (Transparency & improving data collection to support evidence-based verifying nascent SWM practices. Accountability) policymaking. Foster international partnerships and adopting regional Mandate public reporting on waste management by and global SWM best practices and standards. businesses that generate waste. Source: The World Bank Group facilities. This should also improve engagement with local and accountability), and they should be based on each of the communities, and broader collaboration at the national two SWM ecosystems, as indicated in the country typology level that harmonizes regulations and investments. To sum presented in Chapter 2. These policy recommendations up, innovations in plastic circularity can enable countries are not an exhaustive list; rather they are based on a with a nascent SWM ecosystem to “leapfrog” their policies, preliminary analysis, and further analysis is required to practices, and technologies to develop an emerging SWM assess the efficiency and efficacity of these policies within ecosystem. their national context. In addressing the challenge of circularity along the plastic value chain, tailored innovation-related policies are crucial for both nascent and emerging SWM ecosystems. These 6.2.2. Financial Incentives to Address policies should be strategically focused on different stages Market Failures of the plastic value chain: Upstream (source reduction), Midstream (collection and segregation), Downstream Common plastic products are underpriced, overused, and (recovery and recycling), and Cross-cutting (transparency have a negative societal cost. As plastic circularity innovations 64 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations In a nascent plastic circularity ecosystem, business competitions can help jump-start the sector; however, the main purpose of competitions is to generate awareness and interest, and signal that plastic circularity is a government priority. are not financially competitive, the negative result of plastic innovations by providing payment if they achieve a successful waste-related externalities is borne by society at large. outcome. Although an outcome fund is more complex to set This market failure impedes the development of plastic up, as it requires attracting investors to provide financing circularity innovations so that getting the pricing right with upfront, an outcome fund has the potential to quickly proper financial incentives will facilitate the market for scale the most effective innovations by providing outcome plastic innovations. This can be done either through taxes payments within the timeframe of the fund. Outcome funds or penalties that raise the cost of using virgin plastic, or are beneficial for innovations that are not yet profitable but through providing subsidies and tax breaks for creating, have positive externalities that are large enough to warrant implementing, or using plastic circularity innovations. recognition and payment now. In cases where scaling Financial incentives can encourage the development and is sufficient to make innovations profitable, traditional scaling of plastic circularity innovations throughout the investment funds, such as the Lombard Odier Investment product cycle, and also incentivize different stakeholders. Managers (LOIM) Plastic Circularity Fund, invest in plastic circularity innovations that have a higher expected rate The government of Korea provides financial support through of return.123 The LOIM Fund is a private equity fund that various loan programs, such as the Environmental Policy targets reducing plastic waste and GHG emissions within the Loan and green financing, as well as financing programs plastic value chain, while also delivering market returns.124 for each growth stage of SMEs. These aim to promote the recirculation of waste and support the growth of the Key Success Factors for Policies and Financial Incentives environmental industry. At the upstream stage, research to Support Plastic Circularity: grants to universities and other research institutions • Define acceptable standards and incentives for source can initiate plastic circularity innovations—for example, reduction and reuse. The proliferation of products identifying indigenous plants that can provide an alternative with labels that claim to achieve a positive impact to plastic in packaging. Financial incentives, such as grants, confuses consumers, and they risk being perceived as subsidies, or low-interest loans, can also be given to the “greenwashing.” Clear policies on the quality and use businesses that adopt circular practices. of recycled plastic in packaging for food and personal In a nascent plastic circularity ecosystem, business care items would support the production of safer and competitions can help jump-start the sector; however, the more appropriate recycled plastic, as well as alternative main purpose of competitions is to generate awareness and packaging. It would also boost the success of refill/ interest, and signal that plastic circularity is a government reuse models. priority. As firms become more advanced, public financing • Strengthen policy mandates and enforcement. Vertical incentives such as matching grants or low-interest loans and horizontal coordination of policies across government can de-risk investing in plastic circularity innovations. For levels and ministries is needed to implement and enforce firms with proven innovations, more complicated financing policies, consistently. The capacity of government systems instruments such as public-private partnerships can be used to scale operations. 123 Alliance to End Plastic Waste. 2022. “New Fund will Target Plastic Waste On a larger scale, a plastic circularity outcome fund could as an Investible Opportunity.” finance the development of a number of plastic circularity 124 Hall. 2023. “LOIM Fund Takes Three Steps to Plastics Circularity.” 65 Scaling Innovations for Plastic Circularity with Investment in ASEAN also needs to be developed to properly enforce regulations Sectoral Regulatory Changes: Governments can boost the and effectively use monitoring and evaluation (M&E) demand for innovations both in their own offices (such as tools to measure accountability. Although manufacturers not using SUPs and segregating waste at source) and in their redesign products across regions, country-level incentives procurement. As one of the largest procurement entities such as tax advantages for tethered bottle caps, for in any country, government can play a significant role in example, are lacking in the six AMS. New policies need helping plastic circularity markets to succeed. GPP, which to be enacted on a regional basis and properly enforced considers bidders’ environmental impact in the procurement (see the Supplementary Note on Korea for additional process, can drive the demand for green innovations (see examples of best practices).125 Chapter 4). Although start-ups are usually barred from bidding on government contracts, their technology can • Develop supportive policies for transparency and be licensed or sold to larger firms that are qualified to bid, accountability. Successful digital mapping innovations and this can increase the demand for plastic circularity are contingent on policies that support the demand innovations. There are many benefits to rolling out GPP. For for services such data collection and reporting. EPR example, GPP can be transformative in driving industries to implementation requires accurate and transparent develop environmentally friendly products and services so tracking and reporting within supply chains, and this that they can qualify for public procurement. Additionally, can be addressed by blockchain technologies. However, as GPP considers the entire life cycle of a product, this can unless plastic reduction is mandatory and enforced, result in savings over the long term. Implementing GPP now digitalization will be limited to proactive global and ensures that governments develop the procurement tools local businesses. they will need in future to purchase complicated green products and services. Almost all countries in the OECD 6.2.3. Creating Market Demand have strategies and policies on GPP. As documented in the “Innovations for Plastic Circularity in Korea: Enabling To accelerate the development of functioning plastic Conditions and Solutions” Supplementary Note to this circularity markets, the potential for innovations must paper, Korea provides excellent examples of best practice. be substantial enough to attract investment. There are After the Korean government signaled the scale-up of GPP, three fundamental ways to accelerate market demand: (i) the market for green products became more competitive enforce regulations, (ii) activate prominent stakeholders’ and diversified.126 For another example of GPP, see Box demand, and (iii) strengthen public awareness campaigns. 9 on GPP implementation in Thailand. While government A sectoral approach can also help to transition the linear entities are a crucial source of demand for green products, plastic economy into a circular one. Focusing on specific large firms, universities, hotels, and restaurants should be industries can mobilize a range of plastic circularity encouraged to minimize their use of plastic, and instead innovations. For example, a green tourism strategy can use products made with alternative materials or recycled encourage the development of plastic circularity innovations plastic. Voluntary compliance is preferable, as has occurred across the hospitality industry such as by replacing SUP with the Singapore Packaging Agreement; however, over shampoo and body wash products with ones in refillable time, as industries adapt and innovators respond, minimizing bottles and providing water in refillable glass bottles. the use of plastic should be legally required. Applying a more customized approach to a sector can help businesses to comply more readily by addressing their initial difficulties, and this can speed up the implementation of plastic circularity innovations. 125 World Bank. 2024. “Innovations for Plastic Circularity in Korea: Enabling Conditions and Solutions: Supplementary Note for Scaling Innovations 126 OECD (Organization for Co-operation and Development). 2015. “Going for Plastic Circularity with Investment in ASEAN.” Green: Best Practices for Sustainable Procurement.” 66 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations Recommendations on Sectoral Regulatory Changes and projects in selected government agencies, Large-scale Adoption: and then report on GPP’s benefits to drive demand for greener products and services. Large companies and other private entities • Move the linear plastic economy toward a more circular should also be encouraged to implement one through buy-in from key stakeholders, and especially green procurement. GPP requires developing businesses, communities, and consumers. criteria for evaluating suppliers’ environmental (i) Manufacturing, services, and retail sectors performance, which could lead to certifying ensuring better compliance through a customized those suppliers that meet higher sustainability sectoral approach: In addition to EPR, other standards. policies that support the reduction of SUPs • Audit current government plastic usage and waste should be implemented with subsidies for management practices. Initially, audits could be the businesses (hotels) that adopt a circular piloted in specific ministries and benchmarked against economy model—for example, closed-loop SWM best practices to identify gaps and areas with recycling systems or business models that potential for improving recovery and recycling. This are based on product-as-a-service. could incentivize the development of advanced data (ii) Government targeting digitalization: The collection and analytical tools that could be used to government has a pivotal role to play in gain insights into waste generation patterns, collection fostering the evolution of sophisticated digital ratios, and recycling rates, as well as enable better and operational platforms. These are essential evidence-based policy and operational decisions. Finally, for enabling the seamless transition of waste the development of stakeholder engagement programs materials from one industry to another, where could enable various stakeholders to engage, promote they can be repurposed as raw materials. By a participatory approach to SMW, and increase the implementing such platforms, the government demand for innovations in plastic circularity. can encourage industries to look beyond traditional waste disposal methods and view Public Awareness: In all six AMS, consumer awareness waste as a valuable resource. This shift in was low, and this was reinforced by limited waste collection perspective can lead to innovative uses and lack of support for waste management and plastic of waste materials, reduce environmental recycling. Plastics are convenient and a part of daily life; impact, and promote sustainability. In addition, however, an effective public awareness campaign could digital and operational platforms can provide be instrumental in addressing many plastic waste issues crucial data and insights, which facilitate the from reducing the demand for virgin plastic, to encouraging identification of waste materials that can be segregation at source, and increasing the demand for redirected as resources for other industries. alternatives. Public awareness campaigns could also This approach can stimulate economic be used to demonstrate the business case for proposed growth and inspire new business models. government plastic waste policies and regulations, and For example, companies specializing in the get buy-in. processing and transformation of waste into usable materials can emerge, which creates Activating large-scale consumers, such as governments, new job opportunities and contributes to universities, large firms, hotels, and so on, could quickly the economy. increase demand for upstream plastic alternatives, as well as downstream source segregation. For example, Kenya’s (iii) Government targeting GPP: To demonstrate government conducted an effective social media campaign the feasibility of GPP, it could start with pilot aimed at government officials to push them to implement 67 Scaling Innovations for Plastic Circularity with Investment in ASEAN necessary regulatory reforms and bans. The campaign, which was paired with banning plastic bags and imposing 6.3 Direct Support to Plastic large fines, as well as prison time for manufacturing plastic Circularity Innovators bags, resulted in an 80 percent decline in SUP bags.127 In Kenya, as is the case in the six AMS, solid and plastic 6.3.1. Building Organizational Capacity waste was blocking waterways and causing flooding, and due to this problem, public buy-in for the ban was more Support is needed at the enterprise level to scale innovation. easily achieved. While not all innovations can succeed, the likelihood of their success increases if the key barriers that innovators Switching from multi-layered plastic sachets to ones made face are recognized (see Chapter 2), and efforts are made, with a mono-material will make sachets more readily collectively, at multiple levels to address these barriers. recyclable, this will only be effective if consumers change The entrepreneurs consulted as part of this study’s their behavior to properly segregate waste at source, and stakeholder consultations reported needing help with if recycling facilities are available to process the greater partnerships, business development, and fundraising (see volume of segregated waste and the wider variety of Section 1.5: Stakeholder Consultations). In the six AMS, recyclable resins. there are opportunities for SMEs to play a role across Recommendations for Improving Public Awareness: the plastic value chain in raising innovations from the concept stage to the readiness-to-scale stage, which could • Coordinate messaging in regional campaigns across bring in substantial investment. This is particularly true for the six AMS that promote reducing plastic waste as a innovations originating in the ASEAN Region. shared mission. For example, to achieve better impact, test different campaign messages and various media ESOs play a pivotal role in fostering innovations in plastic (such as TV, social media, and billboards) to determine circularity across the plastic value chain. As ESOs provide which type of messaging is the most effective for building direct support for plastic circularity start-ups, building ESOs’ public awareness about the need for plastic circularity. capacity and their service offerings could help to facilitate start-ups’ growth. Thus, ESOs could be instrumental in • Work with local schools and communities to integrate addressing the fast-growing challenges of plastic waste responsible consumption into the environmental education management in the six AMS. Notably, the ESO innovation curricula in schools. Schools should also pilot plastic ecosystem is more robust in Indonesia, the Philippines, reduction and waste segregation, which will help to Thailand, and Vietnam than it is in Malaysia and Cambodia, instill these values into future generations. Campaigns where there is little support for entrepreneurs (see Section are more effective when there is direct involvement 2.3.2: Lack of Organizational Capacity): in interventions, and schools can play a critical role in this regard. • Nascent SWM Ecosystem: ESOs can build the capacity of the local businesses that are involved in sustainable plastic management by conducting training programs and ESOs play a pivotal role in workshops, providing technical expertise and knowledge fostering innovations in plastic transfer, and enabling local enterprises to adopt and circularity across the plastic effectively implement circular economy principles. In Cambodia, the Ministry of Environment, in collaboration value chain. with various international agencies, runs innovation challenges that support start-ups. Across the ASEAN Region, the United Nations Development Programme runs 127 Global Plastics Policy Centre. 2022. “Kenya Plastic Bag Ban Notice No. the Ending Plastic Pollution Innovation Challenge (EPPIC) 2356 – The Environmental Management and Co-ordination Act (Plastic to support plastic circularity innovators by providing Bag Ban on Secondary Packaging).” 68 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations seed funding and networking opportunities with impact an emerging SWM ecosystem, ESOs can assist innovators investors. Innovators are encouraged to work with by: (i) developing capacity, building resilience, and organizations such as Impact Hub, SHE Investments, providing technical expertise; (ii) facilitating networking Khmer Enterprise, and EPPIC, which provide incubator and partnership opportunities; (iii) helping innovators programs that offer members technical assistance and to access funding and investors; (iv) supporting market funding to support their innovations. access and commercialization; (v) implementing monitoring and evaluation; and (vi) engaging in policy advocacy • Emerging SWM Ecosystem: In an emerging SWM ecosystem, and regulatory guidance. an ESO could help innovations to progress from the concept stage to the ready-to-scale/commercialization • Small Islands: Small islands should target midstream refill stage. With its better-connected plastic circularity and reuse innovations (see Section 3.1). In Indonesia, network, an ESO could help innovators to access timely the Alliance to End Plastic Waste (AEPW) has supported financing, participate in plastic innovation competitions, more than 50 projects with small grants, and is evolving and connect with markets. An ESO could also advise into an organization that provides concessional loans enterprises on their product’s design; help with and non-recoverable grants that de-risk and catalyze testing and research to validate market fit and pricing; additional investment. OPPA, Instellar, Ecoxyztem, Enviu, benchmark products against similar ones to ensure that and the Plastics Innovation Hub (the Hub)128 support new they have a competitive edge; and provide a review or innovations across the plastic value chain by creating facilitate getting reviews from others. In addition, an markets with prospective buyers. In Vietnam, which has ESO can help to set up PPPs for innovations in plastic a number of small islands, the Hub collaborates with the circularity, as well as facilitate their access to much Vietnam Administration for Seas and Islands, and unlike needed investment. ESOs can engage with policymakers the Indonesia Hub that focuses on upstream innovations, too, to advocate the development and implementation the Vietnam Hub prioritizes strengthening midstream of policies and regulations that target innovations in innovations in collection and segregation, and downstream plastic circularity and play a critical role in developing a innovations in recycling. In the Philippines, the DOST regulatory environment that supports innovations and has provided funding for developing technologies that investments in plastic waste management. In Vietnam, recycle plastic and produce alternatives to plastic.129 the ESO NPAP, identified “Boosting Innovation” as Government loans are typically focused on innovations one of its six impact areas, and the Vietnam Climate that produce alternative products,130 and the Development Innovation Center is an ESO that targets green innovations, Bank of the Philippines finances start-ups through its including ones concerned with plastics. Some other Green Financing Program. For small islands, ESOs ESOs in Vietnam are the Evergreen Lab, Green Hub, are helping innovators by: (1) tailoring their technical and CL2B. In Malaysia, the ESO MRANTI has partnered expertise and capacity building to the specific plastic with private entities Grab and KLEAN to operate reverse and SWM issues of small islands that are geographically vending machines. In Thailand, the ESO NIA focuses on isolated, have low solid waste management capacity, plastic waste management through its Social Innovation and lack the resources to make improvements; (ii) Platform, and on the bioeconomy and circular economy developing local circular economy models, identifying through its Innovation for Economic Platform. NIA is and developing niche markets for recycled products, working with the Thai Bio-plastics Industry Association, private companies, and local universities on innovating 128 The Hub, which was set up through the collaboration of the CSIRO; the Ministry of Education, Culture, Research and Technology; and innovators bio-based alternatives to plastics. Another participant in and investors, operates in Vietnam as well as Indonesia. the ecosystem that supports plastic circularity innovations 129 UNCTAD (United Nations Conference on Trade and Development). 2022. “Intersessional panel of The United Nations Commission on Science and is the Plastics Institute of Thailand, which supervises Technology for development.” innovative public-private partnerships. In countries with 130 Arayata. 2021. “Biodegradable plastic manufacturer gets P3-M loan from DOST.” 69 Scaling Innovations for Plastic Circularity with Investment in ASEAN Photo: Waste separation bins for general and recyclable waste on a Thai beach. iStock/choochart choochaikupt. and establishing a sustainable local plastic supply chain; universities. In countries that have few plastic circularity (iii) facilitating community engagement by promoting innovations, creating awareness about and the demand local stakeholders’ commitment to sustainability and for plastic circularity solutions is necessary. For example, responsible plastic and SWM; (iv) supporting regional short-term programs such as “boot camps” or “hackathons” collaboration beyond individual islands, which is needed with a plastic circularity theme can showcase aspiring due to their limited market size; (v) accessing dedicated entrepreneurs who have plastic circularity innovations sources of funds and investment that are customized that are tailored to their country’s context. to the unique challenges and potential of small islands’ • Emerging Ecosystem: Build ESOs’ capacity to provide plastic circularity markets; (vi) lobbying for supportive innovations with incubation and acceleration support that policy frameworks that are tailored to the needs of is tailored to the circular plastic economy. This includes small islands; and (vii) conducting assessments of the providing information on a country’s regulations, potential impact of plastic and SWM practices to understand markets, and corporate sponsorship opportunities. To how they affect the environment in small islands, and help businesses scale beyond early-stage pilots, ESOs developing metrics for measuring sustainability. need to be knowledgeable about stakeholder relations, To sum up, for small islands, ESOs can catalyze and regulations, and public contracting processes. Building sustain innovations in plastic circularity, as they have ESOs’ capacity to provide such services and knowledge a comprehensive approach that includes technical will make it easier for enterprises to navigate market support, funding, policy advocacy, and stakeholder opportunities and take advantage of them. collaboration—all of which contribute to transforming To increase efficiency and quality, Malaysia, Thailand, the plastic value chain into a more sustainable and circular model. and Vietnam should transition from manual to automated sorting and segregation technologies, such as having sorting lines that use optical sorting, near-infrared Recommendations for Building Organizational Capacity: spectroscopy, and magnetic density separation. It • Nascent Ecosystem: Encourage early-stage innovations is essential for Malaysia, Thailand, and Vietnam to with short-term programs that are carried out by ESOs or start planning and investing in such innovations so 70 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations that they can effectively promote innovation across plastic waste management, recycling, and circularity the four stages of the plastic value chain. While these innovations with clear environmental benefits should be high-level technologies should appeal to manufacturing able to access or indirectly benefit from these sources investors, only 2 percent of the midstream innovations of capital. Countries with an emerging ecosystem need are ready to scale (see Table 5 and Figure 7). The to bridge the SWM infrastructure gap in the downstream proximity of Thailand and Vietnam to China gives them stage of the plastic value chain by developing sorting access to the Chinese market to sell their lower cost recycled plastic pellets and flakes, and the opportunity to and recycling facilities that are capital intensive, which strengthen their downstream plastic and SWM systems means they still require concessional loans, in addition and infrastructure so that they can revitalize plastic to private and blended finance. Countries with a nascent circularity through innovations. ecosystem, including island countries, require grant funding and technical assistance for “low tech” and cost-effective 6.3.2. Access to Financing innovations in SWM, which take into consideration their lower level of socio-economic development and lack of With conducive solid and plastic waste management policies in place, as well as technical support, providing financing capacity. At the midstream stage, the nascent ecosystem is the next important step in helping plastic circularity relies on community-based segregation and collection. innovations to scale. However, it may be difficult to attract In emerging ecosystems in urban areas, LGUs need to interest from private investors that seek commercial returns invest in high-quality trucks for collection and improve if innovations are at stages that require the adoption of their transfer stations. policies before they are able to scale. Other ecosystem factors must be activated as well to create fully functioning Impact funds and venture capital firms specializing in plastic circularity markets. Table 14 summarizes the type debt financing offer a viable solution for growth-stage of financing that is available to fund plastic circularity plastic circularity enterprises in the ASEAN Region. A innovations at different stages of their development (see notable example of this in Indonesia is POP Southeast Chapter 5). Asia. This venture, which is a collaboration between a local For the six AMS to encourage investment, innovative financial recycling company and a broker from the United Kingdom, mechanisms and terms must be applied to bridge the has significantly expanded its collection and recycling financing gaps in the default capital ecosystem. Chapter 3 operations across Indonesia. In 2022, the United States showed the relative maturity of innovations in the ASEAN Agency for International Development’s Clean Cities, Blue Region, with most of them still at the concept and piloting Ocean Program awarded POP a grant for buying waste stages, and not yet ready to scale. As these innovative consolidation equipment for a new facility in Semarang, solutions mature, they will need access to diverse types Java.132 Such financial support has been instrumental in of capital from a variety of sources. Over the course of an innovation’s life cycle, it needs different types of increasing private capital providers’ potential returns on financing, which range from small grants at the concept their investment and, thus, it has created a more attractive development stage to more complex types of investment. In investment landscape. In addition, regional, bilateral, and recent years, several thematic bonds and loans have been national plastic pollution reduction programs provide an created—for example, in Indonesia, a number sustainabil- opportunity to increase access to capital for smaller-scale ity-linked bonds have been issued131 —but the majority of investments. these funds target larger infrastructure projects. However, 132 Waste consolidation equipment comprises the machinery and tools that 131 Global Plastic Action Partnership. 2022. “Unlocking the Plastics Circular are used to compact, compress, or otherwise reduce the volume of waste Economy: Case Studies on Investment.” materials. 71 Scaling Innovations for Plastic Circularity with Investment in ASEAN Recommendations to Access Financing: offer more flexible terms by providing blended finance vehicles and instruments. Local or regional financial • Nascent Ecosystem: Create small pools of capital for intermediaries could also help to recruit prospective local innovators by providing grants or contracts with investors, and facilitate partnerships and co-investment governments and IFIs. opportunities that focus on appropriate innovations • Emerging Ecosystem: Promote innovative approaches in the six AMS. to bridging the mismatch between the returns sought by investors, and innovators’ need for patient capital Table 15 summarizes the recommendations to address so that they have time to refine their business model. local innovators’ limited access to capital, and these are IFIs, impact investors, and commercial banks could prioritized by each country’s typology. Table 14. Potential Types and Sources of Capital for Innovations Across the Plastic Value Chain STAGE OF 1: CONCEPT 2: PILOT & REFINE 3: READY-TO-SCALE DEVELOPMENT UPSTREAM (Policies & Non-debt/non-equity capital Venture capital or angel/ Financing at scale through corporate Regulations for Source Technology-oriented solutions: Private wealthy family investors and venture capital Reduction) and public research and development impact investors In the long term, larger infrastructure grants, in collaboration with could be financed through joint universities and research institutions ventures, including corporate Low-technology solutions: Access to venture capital philanthropic funding A combination of innovations self-financed by manufacturers of fast-moving consumer goods and packaging to fund the design of products for refill and reuse MIDSTREAM (Collection ESOs or corporations (pilots); (Further opportunities to scale depend on policy incentives and & Segregation) non-debt/non-equity capital changing consumers’ behavior) DOWNSTREAM Non-debt/non-equity capital—for example, grants from donor agencies, Corporate venture capital (Recovery & Recycling) foundations, angel investors, or wealthy family investors (joint ventures or mergers and acquisitions); IFIs (as part of larger blended finance investments for infrastructure); Debt/venture capital debt; bank loans; and equity CROSS-CUTTING Corporations (pilots); non-debt/ Venture capital, angel Potential to attract additional (Transparency & non-equity capital investors, wealthy family profit-seeking investors Accountability) investors, and impact investors (Further opportunities to scale depend on policy incentives and corporate reporting requirements) Source: The World Bank Group Table 15. Recommendations and Prioritization for Limited Access to Capital STAGES NASCENT SMALL ISLANDS EMERGING MARKETS Financial instruments (grants, low-interest loans) +++ ++ ++ Blended finance, including public-private partnerships + + +++ Note: + designates the level of importance: + basic; ++ important; +++ critical. Source: The World Bank Group 72 Chapter 6. Creating the Enabling Environment and Markets to Improve Investments in Plastic Circularity Innovations Regionally, additional financing incentives could be 6.4. Regional Cooperation strengthened and leveraged through a platform that is managed by a qualified financial intermediary that offers Cooperation at the regional level could provide greater both technical assistance and financial resources for start-up/ market stability due to the larger size of the market, early-stage companies, as well as growth-stage ones. and the predictability of regulations across the six AMS Financing could be pooled through a regional fund, a countries. In the previous sections, suggestions have been fund-of-funds, or a guarantee facility that encourages the made about what can be done at the regional level. These allocation of financing from financial intermediaries and recommendations include: (i) pooling knowledge and best local banks. Such an intermediary could also facilitate local practices to speed up the adoption and replication of “marketplaces” by building awareness and introducing local plastic circularity innovations; (ii) standardizing practices and innovations to investors across the impact-return spectrum requirements across the ASEAN Region so that businesses and enabling the transfer of advanced technologies from can operate more easily from one country to another, which more developed markets to each of the six AMS. would thereby accelerate improvements in plastic circularity; Recommendations for Regional Cooperation: (iii) data collection and public reporting; and (iv) financing. Since 2022, the Intergovernmental Negotiating Committee • ASEAN Ambitions: In the coming years, the six AMS will on Plastic Pollution, led by the United Nations Environmental be subject to the legally binding instrument on plastic Programme, has been developing an international legally pollution of UN Intergovernmental Negotiating Committee binding document on plastic pollution that will be ready on Plastic Pollution. Whether this instrument ends up by the end of 2024. This document addresses the whole being modest or ambitious in scope, the process will life cycle of plastics, and it is expected to influence plastic set the stage for greater attention and activity from production, consumption, and waste management globally. both public and private actors, which will provide an opportunity for the ASEAN Region to harmonize its Regional cooperation also plays an essential role in providing policies and standards. the data and information needed to develop sound policies and interventions. In the case of Korea, the government • Regional Coordination for Equitable Plastic Policies is promoting cooperation with neighboring countries in the Six AMS: Given the important level of trade by establishing sub-organizations in the environment across the six AMS, coordinating plastic policies at field, as well as the science and technology field, which the regional level is necessary to: “level the playing include KEITI and the Korea Institute for Advancement of field” for manufacturers in different countries, reduce Technology (KIAT). Cooperation occurs not only through compliance burdens, and build economies of scale so regional organizations such as the EU and ASEAN, but that packaging standards are consistent throughout also through the National Cooperation Center, bilateral the region. development assistance, and the Global Network of the • Promote technology transfer: Transfer technical Korea Standards Association that reviews better practices innovations in plastic circularity from outside the ASAEN and shares success stories from Korea with other countries. Region to support nascent local entrepreneurs through By analyzing these success stories and developing effective vehicles developed by the private sector, financed with strategies in the six AMS, it should be possible to make government incentives, and supported by adequate significant progress in plastic waste management. Such policies. With a sufficient level of support from policies, collaboration could be carried out through new or existing capacity-building, and catalytic funds, innovations could online or offline platforms or hubs, and it could be applied boost plastic waste management and plastic circularity, more effectively if stakeholders collaborate in discussing and address the plastic pollution challenges in the how to apply it. ASEAN Region. 73 • A Regional Platform for Sharing Practices and Business As previously discussed, the selection of innovations from Models: Through an ASEAN regional platform that offers three centralized databases provided a practical approach for resources and expertise for innovators, provide information identifying innovations in the ASEAN Region. By registering on practices and business models in local languages so in a database to participate in an innovation challenge, that countries can learn from each another. This regional work with an accelerator, or join an incubation program, platform could give ESOs the latest regulations, notices entrepreneurs indicated their desire to attract more capital about green government procurement, and sources to scale their innovation. While these databases likely did of green financing information so that they could help not include all of the plastic circularity innovations that their clients to respond to regional opportunities. were operating in the six AMS when this study was carried out in 2022 and 2023, the databases’ focus on early-stage innovations made it possible to examine emerging solutions 6.5. Conclusion and pinpoint ones that were at a formative stage. This identified innovations with promise regarding their ability to The severity of the plastic waste challenge within the ASEAN scale, have an impact, and benefit from additional backing Region has escalated to a critical point that urgently requires and resources. Unfortunately, due to lack of resources, it a set of strategic responses, including leveraging local was not possible for this study’s research team to engage, innovations. The complexities of the fast-rising volume of directly, with innovations and entrepreneurs in each AMS, plastic waste and leakage into the environment demand that which limited the study’s ability to evaluate innovations all stakeholders work together, from the policymakers who more rigorously. Also, the status of the innovations in this enact legislation, to the entrepreneur’s driving innovation, study could have changed since the study was carried out. down to the consumers who shape market demand through their purchases. Along with identifying and implementing To build on the insights provided in this paper, the authors effective solid and plastic waste management policies recommend carrying out a more in-depth examination in and regulations, innovations should be sought that can each of the six AMS. This could be undertaken through fill the gaps in plastic waste management and catalyze country-specific innovation mapping that would involve the transition to plastic circularity. examining the innovation-related policies, industry-specific initiatives, incentives, and support structures that are in By championing a full suite of policies, from waste management place to foster innovation. By examining these aspects, a protocols and incentives for green entrepreneurship to more complete and nuanced view of the ASEAN innovation consumer education campaigns, the AMS can set new ecosystem could be obtained, which could guide the benchmarks for environmental governance of plastic waste development of strategies and actions that are tailored management. If the AMS can provide replicable models to the specifics of the innovation landscape in each country. of success to address plastic pollution, their efforts will resonate far into the future, and across the globe. Thus, it is In addition, the transfer of technologies and innovations critical for the AMS to act with foresight, and fully leverage from other countries that are both viable and scalable the instruments of policy, finance, innovation, and collective should be explored, along with other countries’ innovative action to steer the region toward a future with robust business models. Valuable insights and experience can be plastic waste management, and no plastic leaking into gained from countries that already have an established the environment. To effectively scale plastic circularity, the track record in developing successful innovations in plastic combined and concerted efforts of communities, businesses, circularity, and this should include both developed countries and public sector agencies must be fully mobilized and (North-South transfer) and developing countries (South-South rise to the challenge. collaboration). Cross-border technology transfer and knowledge exchange also have the potential to significantly enhance innovations, as well as their sustainability across the ASEAN Region. Appendices List of Abbreviations 7IMDC 7th International Marine Debris Conference ADB Asian Development Bank AEPW Alliance to End Plastic Waste AI Artificial Intelligence AMS ASEAN Member States ASEAN Association of Southeast Asian Nations BMA Bangkok Metropolitan Administration BPA Bisphenol A CFR Collected for Recycling CSIRO Commonwealth Scientific and Industrial Research Organisation DEG Deutsche Investitions – und Entwicklungsgesellschaft/German Investment Corporation DOST Department of Science and Technology DRS Deposit-Return System EC European Commission EPPIC Ending Plastic Pollution Innovation Challenge EPR Extended Producer Responsibility EPS Expanded Polystyrene E&S Environmental and Social ESMS Environmental and Social Management System ESO Entrepreneur Support Organization EU European Union FDI Foreign Direct Investment GHG Greenhouse Gas GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH/German Corporation for International Cooperation GPP Green Public Procurement GPPP Green Public Procurement Policy GSSB Green, Social, and Sustainability Bond GVC Government Venture Capital HDPE High-Density Polyethylene IFC International Finance Corporation IFI International Financial Institution 75 IoT Internet of Things IPPN Indo-Pacific Plastics Innovation Network IUCN International Union for Conservation of Nature KEITI Korea Environmental Industry and Technology Institute KIAT Korea Institute for Advancement of Technology LDPE Low-density Polyethylene LGU Local Government Unit LLDPE Linear Low-Density Polyethylene LOIM Lombard Odier Investment Managers M&E Monitoring and evaluation MLP Multilayered Packaging MoE Ministry of Environment MONRE Ministry of Natural Resources and Environment MRANTI Malaysian Research Accelerator for Technology and Innovation MRF Material Recovery Facility MSMEs Micro, Small and Medium Enterprises MSW Municipal Solid Waste MSWS Municipal Solid Waste System MT Metric Ton NIA National Innovation Center NPAP National Plastic Action Partnership NSWMC National Solid Waste Management Commission OECD Organisation for Economic Co-operation and Development OPPA Ocean Plastic Prevention Accelerator PE Polyethylene PEF Product Environmental Footprint PET Polyethylene Terephthalate PIANOo Professioneel en Innovatief Aanbesteden, Netwerk voor Overheidsopdrachtgevers/Dutch Public Procurement Expertise Centre PLA Polylactic Acid POPSEA Prevented Ocean Plastic Southeast Asia PP Polypropylene PPP Public-private Partnership PS Polystyrene PVC Polyvinyl Chloride R&D Research and Development RA Republic Act RAP Regional Action Plan 76 RDF Refuse Derived Fuel RMF Recycling Modernization Fund rPET Recycled Polyethylene terephthalate SEA-MaP Southeast Asia Regional Program on Combating Marine Plastics SICA Social Impact Challenge Accelerator SLBs Sustainability-linked Bonds SMEs Small and Medium Enterprises SPA Singapore Packaging Agreement SPP Sustainable Public Procurement STP Science and Technology Parks SUP Single-use Plastic SWM Solid Waste Management TCG Thai Credit Guarantee Corporation UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme VC Venture Capital WBG World Bank Group WtE Waste-to-Energy 77 Appendix 1. Country Profiles for the Six AMS Summary of Waste Management, Policy, and Innovation Environment in the Six AMS () - Future/Planned or partial - Not yet - Priority LEGEND  - Enacted enactment  - Considering considering for innovative solutions CAMBODIA INDONESIA MALAYSIA PHILIPPINES THAILAND VIETNAM SOLID AND PLASTIC WASTE MANAGEMENT MSW collection 86% in cities & 60% of urban 80% in urban 40% in urban 20%–100% of the 85% urban & 40% coverage district centers population areas areas population rural population Share of MSW 72% in cities & 39% (plastic only) 95% in cities 10–95% (collection 46–91% across all collected district centers Undeveloped rural efficiency) provinces collection PLASTIC WASTE MANAGEMENT Top three resins PP PP LDPE PP PE PP found in the HDPE LDPE HDPE PE PP HDPE environment LDPE PS PP PS PS PET polyester Key plastic waste Food wrappers & Plastic bags Takeaway bags Plastic bags Plastic bags Hard & Soft plastic types – materials packaging Transparent plastic Containers (food Sachets Snack bags & fragments with the highest Shopping bags Sachets packaging) Plastic bottles pouches. Fishing gear rates of mis- Beverage cups & Plastic bottles & Plastic bottle caps Trays, boxes, cups Plastic bags Beverage bottles management bottles cups & lids Other packaging Styrofoam food Other plastics Plastic straws (diapers, straws) Plastic films Straws Plastic bottles containers (packaging) Stirrers Informal sector’s 3,000 waste 2 million informal 99.9% >90% 90% in Bangkok, 90% collection of pickers collecting waste collectors Rayong & Chon plastics for the majority of supporting Buri recycling plastics recycling Plastic recycling <1% 10% 20% 9% 9–19% 10–15% rate POLICIES (SELECTED) Segregation at source       Material ban/Bag tax       Use ban: SUP  ()    () Waste import bans     () () EPR for packaging   ()    Innovation policies       78 CAMBODIA INDONESIA MALAYSIA PHILIPPINES THAILAND VIETNAM PRIORITIES FOR INNOVATIVE SOLUTIONS Innovation for collection, segregation,       processing & recycling Multilayered packaging/sachet   alternatives SWM innovations for small islands   Innovations to support EPR   Sources: Pucino et al. 2020. “Plastic Pollution Hotspotting and Shaping Action: Regional Results from Eastern and Southern Africa, the Mediterranean, and Southeast Asia”; National Solid Waste Management Commission Philippines Website. World Bank. 2020. “Mobilizing Private Finance for Nature”; World Bank. 2021b “Market Study for the Philippines, Malaysia and Vietnam: Plastics Circularity Opportunities and Barriers”; World Bank. 2022a. “Where Is the Value in the Chain? Pathways out of Plastic Pollution”; World Bank. 2024. “What a Waste Global Database”; WWF (World Wildlife Fund) Malaysia. 2020. “Study on EPR Scheme Assessment for Packaging Waste in Malaysia”; WWF (World Wildlife Fund) Thailand. 2020. “Scaling Up Circular Strategies to Achieve Zero Plastic Waste in Thailand”; NPAP Indonesia (National Plastic Action Partnership). 2020. “Financing System Change to Radically Reduce Plastic Pollution in Indonesia: A Financing Roadmap Developed by the Indonesia National Plastic Action Partnership. 79 Appendix 2. Top 10 plastic circularity transaction by deal value in the Six AMS (2018-9M 2022) The following table lists the top 10 plastic circularity transactions that have taken place in the six AMS since 2018. Nearly all 10 transactions involve well-established businesses that are involved in waste management solutions. None of the top 10 transactions involved early-stage ventures or start-ups. DEAL VALUE COMPANY SOLUTION INVESTOR(S) INVESTMENT TYPE YEAR COUNTRY ($ MILLION) Indorama Ventures Recycling Debt Financing 303 2021 Thailand Public Company Ltd Sustainability- linked bond Indorama Ventures Recycling IFC, ADB, DEG Development Bank 300 2021 Thailand Public Company Ltd Financing Debt Financing Indorama Ventures Recycling Debt Financing 255 2020 Thailand Public Company Ltd Sustainability- linked Ninja Loan Indorama Ventures Recycling Debt Financing Green 212 2020 Thailand Public Company Ltd Loan Alam Flora Sdn Bhd Recovery Malakoff Corp Corporate/ Strategic 209 2019 Malaysia Bhd Investment Merger/ Acquisition Cenviro Recovery SK ecoplant Corporate/ Strategic 80 2022 Malaysia Investment Merger/ Acquisition SMHB Services (for HSS Engineers Corporate/ Strategic 69 2018 Malaysia producers Investment & waste generators) Duy Tan Plastics Recycling Debt financing/ loans 60 2020 Vietnam Manufacturing Berjaya EnviroParks Recovery Berjaya Group Corporate/ Strategic 19 2020 Malaysia Investment Merger/ Acquisition Inocycle Technology Recycling IPO 11 2019 Indonesia Group Source: Plastics Circularity Investment Tracker, 2023 80 Appendix 3. Stakeholder Consultations List of Interviewees: The following is a list of the various stakeholders in alphabetical order that The Circulate Initiative consulted for the purposes of this study. Most of these sources were engaged through a series of one-on-one consultations conducted during the 7th International Marine Debris Conference (7IMDC): Incubators, accelerators, and other entrepreneur support organizations 1. Enviu/Zero Waste Living Lab 2. Impact Hub Phnom Penh 3. Instellar 4. Makesense 5. Seedstars 6. Techo Startup Center 7. The Incubation Network Investors 1. ABC Impact 2. Asian Development Bank 3. Circulate Capital 4. Damson Capital 5. Global Innovation Fund 6. ICM Falk Foundation 7. inBest Ventures 8. International Finance Corporation 9. North-East Family Office (NEFO) 10. Rumah Group 11. Sagana Ministries and other official sources 1. Khmer Enterprise 2. Ministry of Economy and Finance, Cambodia 3. Ministry of Environment, Cambodia 4. Ministry of National Resources and Environment, Vietnam 5. National Coordinator for the Marine Plastic Environment, Cambodia 6. Pollution Control Department, Ministry of Natural Resources and Environment, Thailand Associations, corporations, development agencies, and other businesses 1. Alliance to End Plastic Waste 2. Center for Southeast Asian Studies 3. Dow 4. Dow Venture Capital 5. Commonwealth Scientific and Industrial Research Organisation (CSIRO) 6. GIZ 81 7. Mekong Inclusive Ventures 8. Philippine Alliance for Recycling and Materials Sustainability (PARMS) 9. Save Philippine Seas 10. The Growth Drivers (TGD) 11. United Nations Development Programme, Cambodia 12. Worldwide Fund for Nature Questions: The following is a list of the types of questions that were asked of the stakeholders who were interviewed in this study. However, not all of these questions were discussed with all of the stakeholders; instead the questions below were customized, depending on the type of employer; the employer’s role in plastic circularity; and the role of the individual interviewee. Innovation-specific questions were asked of investors, official sources, and other businesses: 1. How do you define innovations? 2. What is your perspective on the state of the innovations tackling plastic waste in the six AMS – prototyping, testing/ conducting trials, commercialization? 3. Are there some parts of the plastic value chain that have more innovative solutions than others? Which are these? Why? 4. What is your experience in working with innovators tackling the plastic waste crisis in the six AMS? 5. Which barriers to scalability or replicability do these innovations face? Investment-specific questions were asked if these applied to the innovators, official sources, and other businesses: 1. What is your view of the prospects for investing in the plastic circularity value chain in ASEAN and the six AMS? 2. Which barriers to investment do you see (a) across the value chain, as a whole; and (b) with regard to specific innovation stages? 3. When you assess a prospective investment, how do you weigh anticipated financial returns versus having a broader impact (for example, the environmental, social, and governance [ESG] impact)? 4. What is your optimal holding period for an investment? 5. In ASEAN and the six AMS, where do you see financing gaps along the plastic value chain, and what form do these gaps take—for example, which actors are absent in the financing ecosystem; and which financial products are not available? 6. Are there specific policies, which you think could improve the attractiveness/bankability of investments within the value chain? 82 Policy-specific questions were asked if these applied to innovators, investors, and other businesses: 1. What are some of the policies or other initiatives (public or private sector-led) that might foster greater innovation and support existing innovators? 2. What are some of the key policies tackling the plastic waste challenge in your country, and how effective are they? 3. How do you ensure that any national-level policies and regulations related to tackling the plastic waste challenge are implemented at a local level? 4. Are regulations enforced? 5. How do you think policies could support the innovative businesses involved in tackling plastic waste? 6. How could multilateral development banks support ASEAN member states in tackling the plastic pollution challenge? 7. What form might an ASEAN-wide “platform” to support innovations and investments in plastic waste management and alternatives to plastic take, and what role might the platform play in fostering a more enabling environment for plastic circularity innovation in the ASEAN Region? Summary of the panel discussion held during the 7th International Marine Debris Conference on key actions needed to advance innovation and investment in ASEAN’s plastic circular economy. The 7th International Marine Debris Conference, which was held in September 2022, provided a timely opportunity for stakeholders to make recommendations regarding the legally binding instrument on plastic pollution that the Intergovernmental Negotiating Committee of the United Nations Environment Programme was planning to develop. The conference brought together representatives from government, industry, academia, civil society, and other relevant stakeholders to discuss the latest solutions for achieving plastic circularity and catalyzing action to stop marine litter and pollution. During the conference, the World Bank Group held a panel discussion that explored the opportunities and challenges for driving policies and investments to scale plastic circularity innovations in the ASEAN Region. The following points summarize this panel discussion: Improving infrastructure should be a priority to curb plastic waste leakage in the ASEAN Region. Inadequate infrastructure contributes significantly to Southeast Asia’s plastic pollution problem, and especially inadequate infrastructure for collecting, cleaning, and processing plastic waste. This results in the leakage of plastic waste into the environment, as well as a missed opportunity to capture and maximize the full value of recycled waste in the region’s economy. Depositing waste in landfills and incinerating it are short-term solutions, but with sufficient investment and support, adequate waste management and recycling infrastructure can be built that makes use of the plastics in the waste stream. Advance the Circular Economy through knowledge sharing. Due to differences in the stages of plastic circularity across Southeast Asia, making improvements in plastic waste management should be tailored to the local conditions in each country. However, it would be valuable for countries that are just starting to improve their plastic waste management system to learn from others in the ASEAN Region, and outside the region that have successfully implemented policies and programs to advance their Circular Economy. For example, it is important to ensure that there is enough quality feedstock for recycling as this is necessary to drive the demand for recycled plastics. Investments from all sources, including development finance institutions and the private sector, are needed to fund adequate solid waste management infrastructure in the ASEAN Region. The efforts of a single actor are not enough to build an adequate solid waste management system. While the public sector is responsible for creating the 83 foundations for waste management systems and operations, private sector financing is also needed to bolster government investments so that they match the increasing scale of the plastic pollution problem. Also, blending public and private capital can go a long way in de-risking investments, and setting the stage for more funding. Positive developments and commitments from both the public and private sectors have occurred such as the approval of a $20 million grant for the World Bank Group’s Southeast Asia Regional Program on Combating Marine Plastics (SEA-MaP) that is facilitating the SWM efforts of a number of stakeholders at both the regional and country levels. In addition to financing, businesses are needed to drive innovation across the plastic value chain, and governments can use several regulatory tools to incentivize these new solutions. The promulgation and enforcement of plastic waste management laws and regulations are essential for creating an enabling environment for innovation and investment. Korea is a good example of a country that for decades has implemented supportive plastic waste management policies and regulations, which range from banning single-use plastics and discouraging hard-to-recycle ones, to implementing frameworks that promote resource circulation and the recycling industry. As a result of these regulations, and the significant efforts of key stakeholders within the plastic waste ecosystem, Korea has achieved one of the highest recycling rates in world. This support has enabled the government to introduce schemes that have expanded stakeholders’ responsibilities to shift toward circularity practices that reduce, reuse, and recycle plastics. Recent developments in extended producer responsibility policies across Southeast Asia include the passage of new laws in the Philippines and Vietnam that are helping to create a market for businesses in waste management and recycling, reinforce the sector’s growth prospects, and attract investors. Create a sustainable market that attracts stakeholders’ participation. To achieve an effective transition to circularity, the public and private sectors need to develop good partnerships with other and establish a market with strong growth prospects and a pipeline of investible solutions that will attract investors. Governments have a key role to play in this through introducing policies that encourage the demand for recycled materials, as well as providing incentives to encourage and assist businesses to innovate and take the lead in this sector. Governments can also play an important role through supportive policies that are designed to accelerate investment, or by using bilateral and multilateral funding to invest, directly, in innovators and entrepreneurs in both the formal and informal sectors. The transformation to a circular plastic value chain can only be achieved when the entire ecosystem works together to scale infrastructure and innovations that will help to mitigate leakage and redefine the future of waste. With the plastic pollution problem gaining global attention, panelists agreed that now is the time to catalyze progress by addressing systemic gaps. 84 Appendix 4. Key Types and Sources of Capital in the ASEAN Region Investment in plastic circularity innovations in the six AMS is led by a small, but committed, group of funders and impact investors. The following table presents the key types and sources of capital in the ASEAN Region. TYPE OF NON-DEBT, NON-EQUITY FINANCE (GRANTS AND PRIZES) CAPITAL Sources and Foundations: Foundations, which are also called charitable foundations, philanthropic foundations, and trusts provide funds for Examples plastic circularity innovations to non-profit businesses and other ecosystem actors such as entrepreneur support organizations (ESOs). With their grants, foundations can be a source of early-stage financing for plastic circularity start-ups. US foundations make program-related investments with no-interest or low-interest loans in nonprofit and for-profit entities that provide a return on capital. For example, the Alliance to End Plastic Waste (AEPW) has supported more than 50 projects in specific regions under its four strategic pillars: waste management infrastructure, innovation, education and engagement, and plastic waste clean-up. The AEPW began by giving relatively small grants, which is still does, but its investment activity has evolved into a more project-finance-orient- ed approach that provides (a) concessional loans of $1 million to $6 million, and (b) non-recoverable grants of $3 million to $5 million that act as a catalyst for additional investment by de-risking projects. Other examples include: • Partnership for Growth (P4G), which operates in Indonesia and Vietnam, has provided more than $500,000 for grants that fund refill/reuse enterprises. • The Google Foundation (a corporate foundation) is a $500,000 operational platform based in Indonesia, with additional funding available through the APAC Sustainability Seed Fund,133 and the DBS Foundation in Singapore. These provide grants to social enterprises, including a total of $250,000 for start-ups in Indonesia that produce alternative materials. • The ICM Falk Foundation launched the ICM Circular Innovation Grant Program in 2022, which provides grants of up to $5,000.134 Donor Agencies (DAs) and International Financial Institutions (IFIs): Multilateral and bilateral development agencies provide funding to promote economic development and social welfare in developing countries.135 DAs and IFIs offer small grants directly or, more commonly, through an intermediary (an ESO). These amounts range from $5,000 to $500,000, but smaller awards are more common, and they target enterprises at the concept and piloting stages. Investments may take the form of non-recoverable grants awarded to projects as a developmental benefit for their participation in an incubation or acceleration program, or as cash for winning a plastic pollution innovation competition or a request for proposals. In the six AMS, some examples of DAs and IFIs that are active in funding plastic circularity innovations include the Norwegian Agency for Development Cooperation (NORAD), Australian Department of Foreign Affairs and Trade (DFAT), United States Agency for International Development (USAID), Asian Development Bank (ADB), and Global Affairs Canada (GAC). The Norwegian Ministry of Foreign Affairs and NORAD have funded several innovation activities that focus on reducing marine plastic pollution in the ASEAN Region, including the Ending Plastic Pollution Innovation Challenge (EPPIC) in 2021, which offered four winners up to $18,000 each in seed financing, and other benefits.136 A similar program that focuses on innovative solutions for plastic waste in Cambodia is managed by the United Nations Development Programme (UNDP). Australia’s DFAT, in partnership with the Commonwealth Scientific and Industrial Research Organisation (CSIRO), which is Australia’s national science agency, and the Indonesian Ministry of Education, Research, and Technology (Kemenristek), established the Plastics Innovation Hub Indonesia in 2021. Comprising both incubation and accelerator programs. the platform provides up to AU$300,000 in seed funding, and access to the Kemenristek’s Kedaireka Matching Fund Program.137 Other donor agencies are also involved in supporting innovations for addressing plastic waste in emerging markets, including GAC, which has provided multi-year funding for The Incubation Network for its programming in South and Southeast Asia that promotes gender equity, and provides support for vulnerable workers. In 2022, USAID launched its $62.5 million flagship initiative, Save Our Seas, which funds projects in Indonesia, Thailand, and Vietnam to improve the management of plastic waste, and create innovative Circular Economy models. 133 AVPN (Asian Venture Philanthropy Network). 2022. “APAC Sustainability Seed Fund.” 134 ICM Falk Circular Innovation Grant Program. 2022. “Empowering local innovation, leadership, and entrepreneurship for global impact.” 135 OECD (Organisation for Economic Co-operation and Development). 2021c. “Official development assistance (ODA).” 136 UNDP (United Nations Development Programme), Norwegian Ministry of Foreign Affairs, and NORAD (Norwegian Agency for Development Cooperation). 2023. “Ending Plastic Pollution Innovation Challenge.” 137 Kedaireka. 2021. “About Matching Funds.” 85 TYPE OF NON-DEBT, NON-EQUITY FINANCE (GRANTS AND PRIZES) CAPITAL Sources and In 2020, ADB launched the “Technology Innovation Challenge for Healthy Oceans” for projects piloting technologies that prevent Examples plastic waste and accelerate the transition to a Circular Economy by significantly reducing or eliminating single-use plastics.138 The first winner of the challenge in 2020, which was awarded $500,000, was Koinpack, an Indonesian deposit-based system for reusable plastic packaging.139 Entrepreneur Support Organization (ESO) Incubators and Accelerators: An ESO is an intermediary that supports, trains, mentors, and sometimes provides financing for existing or potential founders of start-ups, or it can help a start-up to identify sources of financing and apply for it. ESO programming usually supports an incubator or accelerator that helps start-ups to advance to early-stage development. Some ESOs offer their services in return for shares in the participating company. As an intermediary supporting ESOs across the ASEAN Region, The Incubation Network (TIN) has provided approximately $2 million in support for innovations in Southeast Asia and India, which was provided either through an ESO or directly to ventures, SMEs, and NGOs. Since participating in at least one of TIN’s programs, the network’s Indonesian, Filipino, Thai, and Vietnamese alumni have raised a reported $9 million in external funding. Criteria and • The purpose of the funding must be charitable, have impact, and be development-oriented in nature. As intermediaries, ESOs Requirements generally adopt a more thematic approach to supporting purpose-driven businesses. • The recipient must be a nonprofit, charitable entity, or otherwise be able to qualify as a grantee/vendor with the funding agency (for example, a social enterprise). • For tax reasons, there are often barriers that prevent directly supporting for-profit entities; however, these may be supported through an intermediary, such as an ESO. TYPE OF DEBT CAPITAL Sources, with Venture Debt:140 Venture capital businesses may provide debt for high-growth entities. Few investment vehicles or institutions in the Description six AMS or in ASEAN Region, as a whole, are able (or willing) to provide venture debt to seed or early-growth-stage plastic circularity and innovations. One notable exception, Circulate Capital’s Ocean Fund, has invested in a number of local businesses in the recovery Examples and recycling sectors in Indonesia, with amounts ranging from several hundred thousand dollars to $5 million. Other venture debt providers include C4D Partners and BIDUK in Indonesia, and inBest Ventures in the Philippines. For information on the role of venture equity alongside debt see the section below on equity. Bank Loans (including IFIs): In the six AMS, loans are generally not available for seed and early-growth-stage entities from either local or international commercial banks. These banks are reluctant to lend to start-ups, given their typically poor risk profile, and this generally applies to early-growth-stage plastic circularity innovations. However, once innovations are ready to scale, getting a loan is more likely. Also, commercial banks in Asia are becoming increasingly aware of their corporate social responsibility, including providing finance for businesses that are combatting plastic pollution. For example, in 2019, Swire, ALBA, and Baguio announced a joint venture to manufacture reusable containers made from recycled plastics, and HSBC provided a green loan to help finance the Hong Kong-based facility.141 IFIs are development finance institutions that have been established by more than one country to support private sector development. Sources, with in developing countries. They use their capital to source private funding from capital markets.142 In the ASEAN Region, their Description investments in the plastic value chain have primarily comprised extending loans to entities, or investing indirectly through funds and that have a plastic circularity investment mandate. One notable example is IFC’s provision of $150 million of senior debt through Examples its first-ever blue loan to Indorama Ventures for scaling its PET recycling facilities in five emerging market countries that include Indonesia, the Philippines, and Thailand. ADB and Deutsche Investitions-und Entwicklungsgesellschaft (DEG) have matched IFC’s loan to Indorama Ventures with an additional $150 million. 138 ADB (Asian Development Bank). 2020. “Healthy Oceans Technology Innovation Challenge.” 139 Zero Waste Living Lab. n.d. “Koinpack is the Winner of the Technology Innovation Challenge on Healthy Oceans – Prevent Plastic Waste.” 140 “Venture debt financing is a type of financing often used by early-stage companies that are looking to raise capital but do not yet have a proven track record of generating revenue. Unlike traditional forms of debt financing, venture debt is typically provided by specialized lenders who are willing to take on a higher level of risk in exchange for the potential of higher returns. This type of debt financing is typically used as a complementary method alongside equity financing.” (Hayes. 2024. “What is Venture Debt Financing? What Is It and How Does It Work?”). 141 Swire Pacific. 2019. “Ground-breaking of New Plastics Recycling Facility Heralds Creation of Closed-loop Economy for Reusable Plastic Containers.” 142 OECD (Organisation for Economic Co-operation and Development). n.d. “Development finance institutions and private sector development.” 86 TYPE OF DEBT CAPITAL Criteria and • Borrowers must have a good credit history, be able to show recurring revenue, and/or provide collateral to secure their loan. Requirements • Borrowers must be able to service their loans; however, most business models are not widely understood by retail banks, and interest rates can be prohibitively high. TYPE OF EQUITY CAPITAL Sources, Angel Investors and Family Offices: Typically, angel investors are individuals who invest their personal wealth in businesses that are with in the earliest development stage. The investors may be motivated by their concerns about the environment, and they are willing to Description invest in unproven business models that cannot get funding from other sources. and A family office (FO) is a corporate entity established by a wealthy family to manage its collective wealth, and provide other services Examples to family members, such as tax and estate planning services. Regarding investments in plastic circularity, the motivations of FOs can be quite opaque, and they are influenced by the preferences of individual family members. Globally, little research has been carried out to examine the investments of angel investors and FOs, and, therefore, the extent of their financing for early-stage innovations in plastic circularity is not clear. However, based on conversations with stakeholders in this study, the plastic circularity investments of angel investors in the six AMS have been from about $250,000 to $500,000, although the amounts are often considerably less (particularly in the less developed economies in the ASEAN Region). Although angle investors do not necessarily invest in equity, they often do. Anecdotally, angel investments in the plastic circularity sector has been greatest in Indonesia, and downstream plastic waste collection and sorting services have been of particular interest. However, overall, it appears that such investments have been minimal. Venture Capital (VC) Investors, Including Impact VC Investors: VC investors invest in early- and ready-to-scale, high-growth-stage businesses by taking equity or providing convertible debt, and they expect commercial returns. In the ASEAN Region, VC investors are attracted to the opportunities resulting from the region’s economic growth, which is driven by strong consumer demand, and the creation of local wealth; however, VC investors have not invested very much in plastic circularity innovations. A subset of VC investors are VC impact investors, which provide financing with the intention of generating positive and measurable social and environmental impacts, as well as earning a return on their investment;143 however, there have been few VC investors in plastic circularity in the six AMS. Circulate Capital is one investor that specializes in plastic circularity enterprises in the six AMS, and others, such as AC Ventures, Openspace, SOSV, and Katapult Ocean have each made a single investment in the sector in the AMS. IFIs have also provided impact venture capital. In 2020, ADB launched a new venture arm, ADB Ventures. This provides seed, and early-growth-stage capital in emerging economies in Asia to finance technology-driven start-ups, including Circular Economy-themed innovations, and support achieving the United Nations’ Sustainable Development Goals. ADB Ventures provides initial seed investments of $200,000, and at a later stage, equity investments of $500,000 to $3 million.144, 145 Corporate Venture Capital (VC): Corporate VCs invest corporate funds directly in start-up businesses, which typically further the corporation’s strategic goals (such as increasing the corporation’s sales and profits), and/or generating financial returns by investing in businesses that the corporation’s management understand better than is the case with typical venture capitalists.146 In the six AMS, there has been little corporate VC investment in plastic circularity innovations that are start-ups or early-growth-stage businesses. One exception is the Dow Chemical Company’s strategic joint ventures with established local firms that are developing high-quality mixed virgin and recycled plastic pellets. Although the company has not invested in start-ups in the six AMS, it has invested in other regions, including East Africa. In early 2022, Dow Chemical Company invested an undisclosed amount in Mr. Green Africa, an early-growth-stage, tech-enabled plastic recycling company in Kenya. Another example is Coca-Cola Amatil, the Australian bottling and distribution company that launched a corporate venture platform called Amatil X in Indonesia in 2019, with the objective of investing in four priority areas: on-demand delivery, distribution optimization, in-store analytics, and sustainable packaging. As of early 2024, Amatil X had not made any investments in innovative packaging businesses in the six AMS. 143 Global Impact Investing Network. n.d. “What is impact investing?” 144 ADB (Asian Development Bank). 2020. “ADB Ventures Raises $50 Million, Exceeding Fund Capitalization Target.” 145 See ADB Ventures. n.d. “We invest to scale up climate solutions in emerging Asia.” 146 Chesbrough. 2002. “Making Sense of Corporate Venture Capital.” 87 TYPE OF EQUITY CAPITAL Criteria and • The minimum investment amounts are typically $2 million but may start below $1 million if additional follow-on funding is expected; Requirements and more than $20 million for IFIs. • Expected returns for traditional venture capital investments can exceed a 25 percent internal rate of return (IRR); however, impact venture capital investors may accept a lower IRR (around 15 percent). • The optimal term of investment before exiting, such as the sale to a strategic investor or an IPO, is typically 5 years or less; however, impact investors may be willing to accept a longer time horizon, in combination with long-term financing. Investment activity and practices for the future: Innovators and small businesses typically do not access certain types of capital. They use a combination of grants and loans, or convertible debt and equity, and sometimes in combination with strategic partners that leverage other forms of investment. As stakeholders in the six AMS consider how to increase investment in innovations for plastic circularity, two practices are highly relevant: blended finance and corporate bonds and loans.147 Blended finance: Blended finance brings together multiple sources and types of capital to scale innovations and infrastructure. It uses catalytic capital (such as investment capital that is longer term, risk-tolerant, and flexible) from public or philanthropic sources to increase private sector investment in sustainable development.148 Blended finance also uses a variety of financial instruments to reduce the risk and/or increase the returns associated with a transaction or investment vehicle. In the six AMS, reducing credit risk has been central in the innovative use of blended finance, which has facilitated access to capital for businesses seeking smaller investments. For example, Circulate Capital’s Ocean Fund benefits from a partial credit guarantee of up to $35 million from the US International Development Finance Corporation (DFC). This guarantee reduces the credit risk of loans, and it allows the fund to make investments that it might otherwise decline. The Ocean Fund is one of the few impact funds or venture capital firms offering debt financing to growth-stage plastic circularity entities in the ASEAN Region. Notably, one of its investments in Indonesia has been in Prevented Ocean Plastic Southeast Asia (POPSEA), a joint venture between a local recycling company and a broker based in United Kingdom, which has helped to scale its waste collection and recycling operations across the country. In 2022, USAID’s leading program to combat ocean plastic pollution, Clean Cities, Blue Ocean, gave a grant to POPSEA for the purchase of aggregation equipment for its new facility in Semarang, Java. This grant is expected to increase the potential returns on investment for the providers of private capital. Thematic corporate bonds and loans: Several emerging market businesses in the plastic value chain have raised significant sums by issuing bonds in international or domestic debt capital markets. The proceeds from these bonds must be applied either to a specific project, or in the borrowing company’s operational portfolio in a manner that is designed to have a measurable impact on one or more sustainability- or climate-related metrics. In these transactions, increasing plastic circularity is the common goal such as through investing in additional recycling capacity or increasing the use of recycled material. 147 A third mechanism on the horizon, plastic credits, may play an increasingly important role in the future. 148 Convergence. n.d. “Blended Finance.” 88 Appendix 5. Selected Financing Criteria for Plastic Circularity Investments DBS Foundation Social Enterprise Grant Program Qualifying Criteria To qualify for consideration in the program, a social enterprise must: • Be registered in Singapore; China; Hong Kong, SAR, China; India; Indonesia; or Taiwan, China. • Have a viable business model, sales tractions, and a proven track record in sales and profitability. • Offer an innovative solution to tackle critical social or environmental issues. • Have a strong business plan to scale operations, impact, and reach (for example, leverage technologies and platforms). • Implement a framework to measure and track key metrics, such as growth, finances, reach, and impact indicators. • Have strong leadership and team experience, with a clear commitment to building a sustainable business for impact. Ending Plastic Pollution Innovation Challenge Participants are assessed using five separately weighted criteria: • Viability and local potential (such as a locally tailored solution with demonstrable potential to reduce plastic pollution) – 35 percent. • Innovativeness (such as a new idea to solve plastic waste) – 20 percent. • Sustainability and scalability (operational and financial stability combined with the ability to scale and be replicable in other contexts) – 20 percent. • Impact (with respect to SDG 1: no poverty, SDG 5: gender equality, and SDG 10: reduced inequalities) – 10 percent • Diversity and complementarity of the submitting team – 15 percent. 89 Appendix 6. Selected Venture Debt Providers and Their Products COMPANY COUNTRY INDICATIVE LOAN PRODUCT C4D Partners149 Indonesia Convertible debt, debt with a revenue share, or debt with other types of incentives Investment range: $200,000 to $1 million, with an average tenor of 5 years BIDUK150 Indonesia Customized, uncollateralized, cash flow-based loans of $10,000 to $150,000 for a usual term of 3 to 12 months, with 18 months as the maximum inBest Ventures151 The Philippines For corporations with at least a 2-year track record, $100,000 to $300,000 in growth capital as a conventional loan, venture loan (with flexible terms), mezzanine investment, and/or equity with a tenor ranging from 3 to 7 years. $20,000 to $80,000 in short- to medium-term liquidity loans Source: Company websites, 2023 149 C4D Partners. n.d. “Capital 4 Development Partners.” 150 Biduk Indonesia. 2021. “Revolutionizing Financing for Small and Growing Businesses in Indonesia”. Biduk Indonesia. 2022. “Biduk’s Unique Value Proposition.” 151 InBEST Ventures. n.d. “Who we are.” 90 Appendix 7. Perceived Barriers and Supportive Policies to Drive the Development of Plastic Circularity in the Six AMS CATEGORY PERCEIVED BARRIERS SUPPORTIVE POLICIES Alternative For bio-based and biodegradable materials: • Adoption of international standards for bio-based and Materials • Lack of technical expertise to develop and/or implement biodegradable materials domestically. • Consumer labeling standards and guidance • Competition from large-scale and technically • Point-of-sale tax on most commonly littered plastics. sophisticated producers • Bans of materials (such as bans of plastic bags and • Lack of indigenous materials (such as agriculture- or straws, and of oxo-biodegradable products) aquaculture-derived materials) • Green Public Procurement Policy with preference given • Commercial scalability not viable due to issues with to alternative material, eco-design, recycled material supply, technical performance, and/or relative cost over pricing. • Incentives/tax breaks for businesses using preferred alternatives. • Eco-modulated EPR fees Redesign Designs that involve alternative materials or refill/reuse: • Promotion and adoption of guidelines for acceptable • Barriers such as lack of technical expertise to develop recycling/composting designs products using alternative materials, and lack of the • Consumer labeling standards and guidance requisite reverse logistics for refill/reuse innovations. • Adoption and enforcement of segregation-at-source • Designs for recycling or composting policies • Lack of the requisite SWM infrastructure such as • Incentives or tax advantages for designs (such as segregation, collection, and processing facilities that can tethered caps) or business models that demonstrate the accept or maximize the value or impact of redesign ability to reduce litter Refill/Reuse • Customer inconvenience and/or price sensitivity limits • Policies promoting water bottle refill stations in public adequate buy-in/demand. spaces. • Lack of the requisite reverse logistics infrastructure • Inclusion of refill/reuse to meet EPR compliance. impedes scalability • Policies that subsidize or encourage investment in shared collection and washing infrastructure Services to • Inadequate commercial demand • Appropriately structured EPR regimes and reporting producers • Relevant standards lack transparency/rigor requirements and waste generators Operational • Low barriers to entry • Policies that adopt and promote the selected operational Platforms • Highly fragmented market with no dominant technology platform(s) to support municipal collection, and align with or platform EPR data reporting compliance, as required • Customer inconvenience and/or the perception that it duplicates a municipal service limit. • Inadequate buy-in/demand Digital Mapping • Unproven commercial application, especially where • Mandated corporate ESG reporting requirements (for the participation of a large informal sector presents example, the EU’s Corporate Sustainability Reporting implementation challenges. Directive) • Possible competition from large technology companies (Big Tech) 91 CATEGORY PERCEIVED BARRIERS SUPPORTIVE POLICIES Recycling • Inadequate quantity/quality of feedstock • Source segregation. • Insufficient demand for recycled material, except for some • Pay-as-you-throw (PAYT) high-value plastic-derived polymers • EPR for packaging • Price is uncompetitive when compared to the price of the • Design guidelines and requirements for recycling. virgin equivalent. • Recycled content mandates • Collection is viewed as an activity with poor returns. • Green Public Procurement Policy • The existing technologies for sorting have several • Recognition of informal collectors and integrating them well-established players with high technology-related into municipal services barriers to entry Recovery • Inadequate demand reflects the absence of consumer • Advanced disposal fee or tax on the most littered items buy-in (SUPs and other products) to create funds for street • Existing separation technologies for sorting have several cleaning, litter prevention, and so on well-established players, with high technology-related • For illegal dumping and littering, and failure to comply barriers to entry. with public cleaning laws, charge fines and impose • Additional capacity development required consequences (such as canceling the business license of repeat offenders) 92 Appendix 8. Summary of Selected SWM and SUP Policies () - Future/Planned or partial - Not yet - Priority LEGEND  - Enacted enactment  - Considering considering for innovative solutions POLICY CAMBODIA INDONESIA MALAYSIA PHILIPPINES THAILAND VIETNAM Segregationat Source       Material Ban: Bag Ban/Tax       Use Ban: SUP  ()    () Waste Import Bans     () () EPR for Packaging   ()    Preferred Procurement       Tax Incentives/ Tariff Rebates       Recycled Content Allowances       Recycled Content Mandates       Material Bans (Oxo-degradable)       93 Bibliography ADB (Asian Development Bank). 2020. “Healthy Oceans Technology Innovation Challenge”. 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