AP Benson undertakes a range of economic development assignments including project and programme evaluations, sector development planning, SME support programmes, impact studies and economic and financial assessments. This article focusses on recent work in the waste and recycling sector to illustrate our approach to economic and financial assessments.
Our team has delivered successful assignments in many sectors, making use of the sector specific knowledge of individual consultants and teams, including: (i) advanced manufacturing, automotive and aerospace, (ii) software, telecommunications, digital and creative industries, (iii) pharmaceutical, health and bio-sciences, and (iv) financial and professional services. We have also undertaken projects in construction, food, defence, retail, and leisure and tourism.
Case Study: Financial and economic feasibility of closed loop fibre to fibre recycling
AP Benson has over a decade's experience in the UK waste and recycling sector having advised public and private sector organisations across a range of waste streams.
Recent work includes assignments in the energy from waste (EfW) sector, mixed waste recycling facilities, precious metals recovery, rag and fibre, and closed loop recycling.
AP Benson was recently commissioned by the Waste and Resources Action Programme (WRAP) to complete a landmark project to assess the financial and economic feasibility of developing closed loop fibre to fibre recycling facilities in the UK and Europe.
The project is a testament to the ability of AP Benson consultants to secure reliable data points in a market (i) that is in its very early stages of development, (ii) in which there are few mature organisations, and, in common with many other such sectors, (iii) in which firms are understandably reluctant to share commercially sensitive data.
We undertook primary research with a very wide range of companies and organisations (including university departments and other publicly funded research organisations) that were in varying degrees of early stage development of fibre to fibre processing systems, some operating only pilot projects in the field. As a result, it was necessary to use data proxies and data that was provided was, with agreement, used on an aggregated basis in order to populate a 10-year economic and financial assessment of illustrative chemical and mechanical closed loop recycling processes.
The economic and financial model we developed comprised a detailed assessment of profit and loss, cash flow and balance sheet for each of ten years for each of the fibre to fibre recycling processes (chemical and mechanical). Each model took account of detailed information on tonnages, waste percentages, cost of sorting, volumes of metal and plastics waste from garment preparation, costs of disposal, transfer pricing from a mechanical recycling process into a yarn mill, and the sales price for chemically recovered cotton pulp and polyester pellets into a yarn mill as an alternative source of feedstock.
The complex model was used as a platform for trialling different input costs and sales and transfer prices in order to assess both economic feasibility and also how realistic fibre to fibre recycling could be given current market supply rates, volumes and prices, and the potential investment needed in automated sorting facilities.
Labour intensive sorting was a possible barrier to cost effective provision of post-consumer garments for recycling unless feedstocks into the recycling process could be sourced more cost effectively from Europe where sorting costs are lower.
The requirement for a careful sort of post-consumer textiles, identifying fibre type at a chemical level, to meet recycling specifications was considered crucial. Better communication to sorters of feedstock specifications was considered a valuable part of the process for setting up feasible recycling facilities since this would allow sorters to calculate their costs and hence sales prices for supplying sustainable post-consumer textiles.
The fact that some recyclers expressed a willingness to pay a premium price for a sustainable supply of feedstocks indicates that close supply arrangements between sorter and recycler could be an important aspect of market development. More generally, recyclers must integrate into the clothing supply chain with the support of retailers in order to support market development.
The high price variability in virgin cotton prices could, at times, make recycled feedstocks less competitive. For example, current mechanical recycling processes are reportedly only profitable at prices that are more than four times those of virgin cotton. Hence, it may be that economic scale is required in order to support commercial production.