MALAYSIAN PLASTIC CIRCULARITY SERIES Report #5 Exploring Plastic Circularity Opportunities in the Construction Sector Administ r d b © 2025 The World Bank Group 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org This work is a product of the staff of the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC), members of the World Bank Group, with external contributors. The “World Bank Group” refers to the legally separate organizations of the IBRD, IFC, the International Development Association (IDA), and the Multilateral Investment Guarantee Agency (MIGA). 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The World Bank Group therefore does not warrant that the use of any third-party-owned individual component or part contained in the work will not infringe on the rights of those third parties. The risk of claims resulting from such infringement rests solely with you. If you wish to re-use a component of the work, it is your responsibility to determine whether permission is needed for that re-use and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses should be addressed to World Bank Publications, the World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; e-mail: pubrights@worldbank.org. Cover design: Sarah Jene Hollis Contents 1. Introduction 44 2. Overview of plastic usage and waste in the construction sector 55 3. Challenges to plastic recycling in Malaysia’s construction sector 77 4. Global initiatives to increase construction plastic recycling 88 5. Opportunities to encourage plastic recycling 10 10 6. Conclusion 11 11 1. Introduction This report is the fifth in the Malaysian Plastic Circularity Series, a market assessment conducted in 2023-2024 with the objective of offering comprehensive insights into Malaysia’s plastic recycling economy. The assessment covers topics along the value chain, including feedstock collection, infrastructure, policies, and initiatives to address plastic waste challenges, with an in-depth analysis of the electrical and electronics (E&E), automotive, construction, and healthcare sectors. Information on the approach, methodology, and the background to the series is in the first report, Introduction to the Malaysian Plastic Circularity Series. This report centers on plastic usage and recycling in the construction sector and sets out to create a market by identifying and assessing potential opportunities in plastic circularity in Malaysia’s construction sector and attracting private sector investment across the value chains. In Malaysia, the construction sector is the fourth largest consumer of plastics, after the packaging, E&E, and automotive sectors. Construction contributes about 6 percent of the nation’s plastic consumption.1 However, Malaysia’s plastic sustainability and circularity initiatives have predominantly targeted the packaging and consumer goods sectors, leaving other areas such as construction less explored. According to the Malaysia Construction Industry Development Board (CIDB), in 2018, the overall recycling rate in the construction sector was 13.7 percent,2 and the sector’s plastic recycling rate is estimated to be less than 1 percent.3 Given this low recycling rate, it is worthwhile exploring the construction sector further to identify opportunities to increase plastic circularity and sustainability. In Malaysia, the construction sector is the fourth largest consumer of plastics... Construction contributes about 6 percent of the nation’s plastic consumption. 1 MPMA (Malaysia Plastics Manufacturers Association). 2024. “2024 Roadshow.” https://mpma.org.my/upload/Industry_Outlook_2024_Roadshow.pdf 2 Construction Industry Development Board Malaysia, Guidelines on Construction Waste (Malayasia: CIDB, 2008) https://www.cream.my/data/ cms/files/5_%20Guidelines%20on%20CWM%281%29.pdf 3 EPIC (Environmental Preservation and Innovation Centre). 2020. “Sustainable Waste Management Practices for the Construction Industry.” The Ingenieur 82 (April – June 2020): 36-46 4 2. Overview of plastic usage and waste in the construction sector The construction sector accounts for 6 percent of Malaysia’s total plastic consumption (Figure 1). The packaging, E&E, and automotive sectors4 are the largest consumers of plastic in Malaysia, making up approximately 85 percent of total plastic consumption in 2023.5 Plastic construction waste tends to be durable plastics such as polyvinyl chloride (PVC) and high-density polyethylene (HDPE) pipes, polypropylene (PP) and PVC interior fittings, PVC casings, and HDPE water tanks (Figure 2). Figure 1: Breakdown of plastic consumption by revenue and sector in Malaysia, 2023 70 FOCUS 1.8 61.4 1.8 60 1.8 3% 3.7 3% 3% 7.4 6% 50 12% 17.2 Malaysian ringgit, billions 28% 40 30 27.6 45% 20 10 0 Packaging E&E Automotive Construction Others Household Agriculture Total Source: MPMA, 2024 4 Further analysis of these sectors can be found in other reports within the Malaysian Plastics Circularity Series. 5 MPMA, 2024 5 Industry stakeholders estimate that plastic waste and sand) and mixed waste (mineral debris and steel, accounts for less than 5 percent of Malaysia’s total wood, glass, and plastic). In Malaysia, plastic waste is construction waste. However, the large quantity of estimated to generate between 2 percent and 5 percent waste in the sector creates up to 14 kilotonnes per of total construction waste.6 Data for the amount of annum (ktpa) of plastic waste. Heavy materials such plastic waste generated by the construction industry as concrete, metals, and timber make up the majority is limited, and further detailed breakdowns of resin of construction waste, which is generally split into two type and end-of-life (EOL) treatment are not available. categories: building rubble (concrete, ceramics, soil, Figure 2: Typical sources of plastic waste from the construction industry PP and PVC PVC casings interior fittings PVC and HDPE water HDPE pipes tanks 6 EPIC, 2020 6 3. Challenges to plastic recycling in Malaysia’s construction sector Lack of waste separation at source (SAS) mandates for construction players in Malaysia Existing policies that enhance circularity in the construction sector lack specificity and are voluntary, leading to low adoption. For instance, the Ministry of Housing and Local Government’s (KPKT) Circular Economy Blueprint does not explicitly include the construction sector under its proposed Extended Producer Responsibility (EPR) system. Large, publicly listed companies such as Sunway Construction and Gamuda have internal sustainability and circularity targets, as well as mandatory reporting requirements to Bursa Malaysia7 regarding their waste generated, diverted from, and directed to disposal. For example, Sunway Construction targets 10 percent waste diversion from landfill by 2030,8 and Gamuda is aiming to reduce waste sent to landfill by 50 percent by 2030.9 However, interviews with key construction players reveal that most voluntary separation efforts focus on heavier materials like concrete, timber, and metals, as they generate significantly more waste in construction than plastic. Lower significance and value of plastic waste compared to other construction waste Recovery from the construction sector before demolition activities focuses on bulky, high-value items. Interviews with primary and secondary waste aggregators indicate that higher value plastic recyclables, such as HDPE and PVC pipes, are typically replaced and discarded by contractors, and are frequently recovered by the informal sector to be sold for recycling in the open-loop recycling system.10 Furthermore, lightweight plastic fittings are de-prioritized relative to higher-value items such as water tanks and large pipes. Additionally, most construction companies seek to complete demolition as quickly and efficiently as possible, and the tedious task of separating and recovering plastic fittings before demolition is a low priority. This results in plastic waste co-mingling with other construction waste post-demolition, making it difficult to separate for recycling. As such, most plastics recovered from the construction sector in Malaysia are post-consumer plastics used on sites. The CIDB Malaysia’s 2008 guidelines recommend that large-scale construction projects develop a waste management plan that outlines procedures for collecting, storing, and recycling plastic waste. Interviews with stakeholders highlighted that most of the plastic recovered for recycling consists of post-consumer plastics used by workers, such as polyethylene terephthalate (PET) bottles, takeaway containers, and secondary/tertiary plastic packaging, including stretch films and shrink wraps. Importance of cross-sectoral recycling initiatives The study indicates that the supply of plastic waste from the construction sector is around 14 ktpa, emphasizing the importance of cross-sectoral recycling initiatives. Even if the full amount of plastic waste were to be collected, it would be insufficient to support a sector-specific and plastic-specific recycler, given that mechanical recycling plants that can benefit from economies of scale have a minimum capacity of approximately 30 ktpa.11 The inadequate supply of plastic waste from the construction sector highlights the importance of cross-industry recycling initiatives, such as open-loop recycling, compared to within-sector closed-loop recycling programs. 7 As part of its regulatory duties, Bursa Malaysia introduced mandatory sustainability disclosures from financial year 2023 onwards for publicly listed companies as part of a push to align with global environmental, social, and governance (ESG) standards. 8 Sunway. 2023. “Annual Report.” https://ir2.chartnexus.com/suncon/doc/ar/ar2023.pdf 9 Gamuda. 2024. “ESG Impact Report.” https://gamuda.listedcompany.com/misc/esg_impact_report_2024.pdf 10 The working definition for open-loop recycling in this study is that plastic waste from a given sector is recycled for use in other sectors, or plastic waste from other sectors is recycled for use in the given sector. The working definition for closed-loop recycling used in this study is that plastic waste from one sector is recycled for use in the same sector. Please see Introduction to the Malaysian Plastic Circularity Series for more information. 11 Based on the study’s assessment validated through interviews with technology providers. 7 4. Global initiatives to increase construction plastic recycling Initiative 1: Mandatory segregation of construction waste In places where waste segregation is mandated, there are high construction and demolition (C&D) recycling rates. For example, Singapore requires stringent segregation of construction waste, in which all recyclable materials must be identified and dismantled even before demolition (Table 1). The success of such a mandate is evidenced by the high recycling rate of 99 percent in Singapore. In New South Wales, Australia, the sorting of recyclables occurs in C&D facilities after demolition, but this jurisdiction still reaches C&D recycling rates of almost 80 percent. Table 1: Examples of countries and regions with mandatory separation of construction waste Country/ region Directive Recovery rate Singapore The Code of Practice of Demolition in Singapore requires the 12 Singapore has an overall C&D recycling rate quantification of all salvageable materials (such as concrete, of 99 percent in 2023.13 bricks, metals, wood/timber, and plastics) which must be identified, dismantled, and removed prior to demolition. New South Wales, Under the Waste Regulation, conditions for the holder of an New South Wales has an overall C&D Australia environmental protection license of a construction and demolition recycling rate of nearly 80 percent from waste facility include sorting and classifying C&D waste into 2016 to 2019.15 individual listed waste types (including plastics) before being transferred to the waste storage area.14 Initiative 2: Guidelines or standards for recycled content levels on construction end-applications Guidelines to facilitate the usage of recycled content in construction end-applications promote upcycling opportunities for recycled plastic in the construction industry. However, recycled content is only used on a voluntary basis in construction applications globally, including in Malaysia. For example, recycled content is commonly used in construction applications like pipes and casings. In the European Union, almost 17 percent of the plastics used in the building and construction sector are made of recycled content.16 Examples of applications include insulation, pipes, and cladding materials. Interviews with Malaysian stakeholders indicate that construction companies in Malaysia use recycled content in construction end-applications such as pipes and PVC casings, with the use of recycled content motivated primarily by cost efficiency and savings. Specifically, manufacturers indicated that recycling second-hand discarded offcuts, rejected materials from the market, and broken materials can be cheaper than procuring new materials. However, there are potential limitations to using recycled content in construction, especially in high-pressure use cases. For example, in Malaysia, HDPE and PVC water pipes certified by Malaysian Standard (MS) 1058 and MS 628 have a zero tolerance for recycled or reprocessed products due to 12 For more information on the Singapore Code of Practice of Demolition, please refer to the Singapore Building & Construction Authority’s website: https://www1.bca.gov.sg/buildsg/sustainability/additional-programmes/demolition-protocol 13 For more details on the recycling rates in Singapore, please refer to the Singapore National Environment Agency (NEA)’s website: https://www. nea.gov.sg/our-services/waste-management/waste-statistics-and-overall-recycling 14 NSW DPIE (New South Wales Department of Planning, Industry and Environment). 2021. “NSW Waste and Sustainable Materials Strategy 2041.” https://www.epa.nsw.gov.au/Publications/recyclereuse/NSW-Waste-and-Sustainable-Materials-Strategy-2041 15 Australian Government, Department of Agriculture, Water and the Environment, National Waste Report 2020 (Canberra: DAWE, 2020), https:// www.dcceew.gov.au/sites/default/files/env/pages/5a160ae2-d3a9-480e-9344-4eac42ef9001/files/national-waste-report-2020.pdf 16 Plastics Europe. 2022. “The Circular Economy for Plastics.” https://plasticseurope.org/wp-content/uploads/2022/06/PlasticsEurope- CircularityReport-2022_2804-Light.pdf 8 their reduced quality and durability under high-pressure applications. In other applications, such as non-pressure drainage pipes and casings for wires, there are fewer demands on quality, which allows a high percentage of recycled content to be used. Due to the complexities in using recycled content in construction, guidelines or standards on the recycled content levels for different construction end-applications are needed. In the United States, the Environmental Protection Agency (EPA) has established the Comprehensive Procurement Guidelines Program to encourage the use of recyclable materials in the construction sector (Box 1).17 This program offers valuable input for developing recycled content guidelines for Malaysian construction materials made from plastic. Box 1. COMPREHENSIVE PROCUREMENT GUIDELINES (CPG) FOR CONSTRUCTION PRODUCTS The CPG program, established by the United States EPA, is designed to promote the use of recycled materials in federal, state, and local government procurement. As part of the CPG program, the EPA publishes a list of designated products and recommendations for recovered content, which includes post-consumer content and total recovered material content. Construction products are included in the CPG program, with items such as carpet (polyester), non-pressure pipes, and shower and restroom partitions listed (Table 2). Table 2: Selected examples of recommended recovered materials content levels for construction products within EPA’s CPG program Product Material Recommended Total recommended post-consumer content recovered materials content levels18 Carpet (polyester) PET 25% to 100% 25% to 100% Non-pressure pipe HDPE 100% 100% PVC 5% to 15% 25% to 100% Shower and restroom Plastic 20% to 100% 20% to 100% dividers/partitions Source: United States EPA CPG program19 17 For more details on the United States EPA’s CPG program, see https://www.epa.gov/smm/comprehensive-procurement-guidelines- construction-products 18 Includes pre-consumer (recycled before they reach the consumer, such as manufacturing scraps or by-products) and post-consumer content. 19 For more information on the United States’ EPA CPG Program, see https://www.epa.gov/smm/comprehensive-procurement-guideline-cpg- program#:~:text=The%20CPG%20program%20is%20authorized,the%20municipal%20solid%20waste%20stream 9 5. Opportunities to encourage plastic recycling Based on the study findings, several opportunities could be pursued to enable durable plastic recycling in the construction sector in Malaysia. Table 3: Summary of opportunities to encourage plastic circularity for the construction sector Areas for action Opportunity Description Applicable Immediate or Expected value chain medium-term improvement segment timeline Strengthen waste ❶ Mandatory Mandatory data reporting will Governance Medium Data management data reporting provide a clearer picture of plastic (next 3-5 years) transparency governance and and supporting usage and plastic waste generation institutional systems in the construction sector. Such framework systems also enable the success of mandatory waste segregation policies to be monitored and assessed. ❷ Mandatory Given the high C&D recycling Industry Medium Collection rate waste segregation rates noted in countries where application (next 3-5 years) Recycling rate policies for waste segregation is mandated, general waste there is a potential opportunity to unlock recycling value via waste segregation mandates. Build synergies ❸ Designing and Designing and standardizing plastic Industry Immediate Recycling rate across value chains standardizing specifications for recycling allows application (next 3 years) and sectors to plastic plastic products from different promote cross- specifications for sectors to be recycled together, sector recycling recycling across facilitating cross-sector synergies. sectors ❹ Exploring Chemical recycling, a more Recycling Immediate Recycling rate chemical recycling advanced recycling technology, can (next 3 years) as a new recycling be explored as a complementary technology technology to process mixed plastics from different sectors, creating an avenue for cross-sector recycling. ❺ Developing To circumvent the limited supply Collection Medium Collection rate an integrated of plastic waste generated (next 3-5 years) Recycling rate collection in the construction sector, and sorting developing integrated collection infrastructure and sorting infrastructure, such as waste collection trucks and material recycling facilities, can be considered to facilitate the collection and aggregation of waste across different sectors. Encourage the ❻ Establishing Guidelines to facilitate incorporating Industry Immediate Demand for use of recycled or adopting recycled content in construction application (next 3 years) recycled plastics materials in end guidelines end-applications will help applications or standards encourage plastic recycling in the for recycled construction sector. content levels in construction end- applications 10 6. Conclusion The findings of the construction sector assessment show that limited attention is given to plastic waste generated in this sector due to its relatively small amount. Plastic waste only accounts for around 5 percent of construction waste, equivalent to an estimated 14 ktpa. In addition, construction plastic waste has a lower significance and value than other C&D waste. Based on global best practices, this study has identified six potential opportunities for the construction sector in Malaysia to increase plastic recycling across three areas. Strengthening waste management governance and the institutional framework is crucial. This can be achieved through mandatory data reporting and supporting systems, as well as by instituting mandatory waste segregation policies for the C&D sector. Building partnerships across value chains and sectors to promote cross-sector recycling is essential, given the inadequate supply of plastic waste from the construction industry to support closed-loop recycling. To enable open-loop (cross-sector) recycling in Malaysia, three key initiatives have been identified: 1. Designing and standardizing plastic specifications for recycling across sectors 2. Exploring chemical recycling as a new recycling technology to process mixed plastics 3. Developing an integrated collection and sorting infrastructure. Finally, encouraging the use of recycled materials in construction end-applications is essential. Establishing or adopting guidelines or standards like CPG for recycled content levels in construction materials will increase the use of recycled plastic within the sector. 11 June 2025 Administ r d b