Managing Sustainability Transformations

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Karlstad Business School

Tobias Bergqvist & Jonathan Lannö

Managing Sustainability Transformations

Barriers for Implementing Recycled Plastics in the

Automotive Industry

Industrial Management

Master’s Thesis

Term: Spring 2020

Supervisor: Samuel Petros Sebhatu

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Managing Sustainability Transformations – Barriers for Implementing Recycled Plastics in the Automotive Industry

Master’s Thesis in Industrial Engineering and Management

TOBIAS BERGQVIST & JONATHAN LANNÖ

Ledning av hållbarhetsomvandlingar – Barriärer för implementering av återvunnen plast i bilindustrin

Examensarbete 30hp/Civilingenjör Industriell Ekonomi

Karlstad University 651 88 Karlstad Sweden

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Acknowledgement

This report has been conducted by two Master of Science students as a degree project in Industrial Engineering and Management. The workload has been divided equally and the students have worked closely together to achieve the final result.

We would like to express our gratitude to Samuel Petros Sebhatu, our supervisor at Karlstad University, for constructive criticism and support throughout the research.

We would also like to thank our co-supervisor Alexandre Sukhov for providing us with additional guidance.

The research was conducted at Volvo Cars in Gothenburg and we would like to thank the employees of Air Induction System for their curiosity in our work and willingness to help. A special thank you to our supervisor at Volvo Cars, Johanna Bergström, whom it has been a pleasure to work with during this time. We are very grateful for her continuous help.

Lastly, we would like to express our sincerest of gratitude to the companies taking part in our study. Without their kind participation, this thesis would simply not have been possible.

Sincerely,

Tobias Bergqvist & Jonathan Lannö Karlstad University

2^nd of June 2020

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Abstract

In the last three decades, the increased use of plastics is rapidly becoming a global environmental issue, resulting in growing landfills and pollution of air and water. The automotive industry, as a major demander of plastic materials, is starting to take responsibility with promised sustainability actions. One action relates to the concept of circular economy and closed loop thinking through the implementation of recycled plastics. However, the barriers of such implementations are still undiscovered, with research missing out on the challenges of strategic and business perspectives.

The aim of this thesis is to asses and understand the challenges connected to implementing recycled plastics in the automotive industry, and to provide strategic recommendations.

In order to identify the challenges, an empirical case study was carried out collecting data through 10 interviews with suppliers throughout the plastics refining chain. A cost calculation was also included, to highlight the economic potentials of recycled plastics.

The findings address 6 themes as barriers for implementing recycled plastics in the automotive industry: economic, organizational, infrastructural, interactional, design and technical barriers. The barriers shed light on the challenges connected to the implementation of recycled plastics and concludes that the rate of recycled plastics in a car can be increased, which also increases sustainability and circular thinking.

However, the rates could be further improved if managers were to consider the existing barriers when implementing higher rates of recycled plastics in their components.

Keywords

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Sammanfattning

Den ökade användningen av plast under de tre senaste decennierna håller snabbt på att bli ett globalt miljöproblem, med växande deponier samt förorening av luft och hav som konsekvens. Bilindustrin, som är en stor konsument av plastmaterial, börjar ta sitt ansvar genom utlovade hållbarhetshandlingar. En av dessa handlingar relaterar till cirkulär ekonomi och closed loop-tänk genom implementering av återvunnen plast.

Samtidigt är barriärerna för en sådan implementation fortfarande outforskade, med studier som åsidosatt utmaningar på strategisk och affärsmässig nivå.

Den här studien syftar till att analysera och förstå de utmaningar som är kopplade till implementering av återvunnen plast samt att utifrån uppnådda forskningsresultat bidra med tillämpbara rekommendationer.

För att identifiera dessa utmaningar så genomfördes en empirisk fallstudie för att samla in data genom 10 intervjuer med leverantörer utefter plastens förädlingskedja. En kostnadsberäkning är också inkluderad för att framhäva den ekonomiska potentialen i återvunnen plast.

Resultatet adresserar 6 teman som barriärer för implementering av återvunnen plast:

ekonomiska, organisatoriska, infrastrukturella, interaktiva, design- och tekniska barriärer. Barriärerna belyser utmaningar kopplade till implementeringen av återvunnen plast och fastslår att mängden återvunnen plast i en bil kan ökas, vilket också ökar hållbarheten och det cirkulära tänkandet.

Samtidigt kan mängderna ökas ytterligare, om ledare tog de existerande barriärerna i beaktning vid implementeringen av högre nivåer återvunnen plast i deras komponenter.

Nyckelord

Cirkulär ekonomi, Supply Chain Management, Hållbar utveckling, Återvunnen plast

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Abbreviations

CAGR Compound Annual Growth Rate CE Circular Economy

CSR Corporate Social Responsibility ELV End-of-Life Vehicle

EoL End-of-Life

OEM Original Equipment Manufacturer SCM Supply Chain Management

SD Sustainable Development SDG Sustainable Development Goals

SSCM Sustainable Supply Chain Management TBL Triple Bottom Line

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1. Introduction

This chapter introduces the background of the thesis and research context. The reader is offered an understanding in the problematization of the research, as well as the aim and purpose of the study, leading up the research questions.

1.1. Background

Economic prosperity derived from industrial development during the last decades has brought devastating effects on the environment. Rapidly increasing global temperatures due to greenhouse gas (GHG) emissions must be dealt with in order to stay below a temperature rise of 1.5°C (IPCC 2014). To accomplish this, emissions from anthropogenic activities must be cut drastically (Cook et al. 2013). Serving as guidance for the distressing issues are UN’s Sustainable Development Goals (SDG), encouraging the contributors of GHG emissions to start taking actions through a clear action plan for what needs to be achieved to reverse the negative environmental trends (UN 2015).

The automotive industry, as a significant contributor of GHG emissions (European Environment Agency 2019), is starting to take increased responsibility for their actions.

Some of the biggest car manufacturers in the world focus on developing solutions for higher levels of sustainability (e.g. Volvo Cars 2018; Daimler 2014; Toyota 2015). The introduction of new economic concepts, such as circular economy (CE), has at the same time received increased research attention in recent years (Geissdoerfer et al.

2017) and could imply new business models and a more sustainable management of natural resources. The model itself poses great differentiating strategies since higher utilization rates mean less dependency on scarce resources, reaping benefits from already extracted resources. In that sense, the ambition of CE is not only to impact the environmental performance, but also economic performance (EMF 2013).

One action for environmental incentives is fuel-efficiency legislations (COM 2009), which has driven car manufacturers to develop new ways of lowering fuel consumption in car models, such as increasing engine efficiency and lowering the overall weight.

However, as the vehicle weight has been reduced, the use of plastics has rapidly increased in new cars (Miller et al. 2014). The use of plastic materials in automotive components has increased from 7% in 1970 to roughly 20% in the 2010s (Maccarrone 2018). Given the material’s lifecycle, plastics only account for 4% of the global annual GHG emissions (Zheng & Suh 2019). Nevertheless, the increased use of plastics is already becoming a global environmental issue, causing rapid growth of landfills and the pollution of air and water (Barnes et al. 2009). Globally, over 100 million cars are produced every year (Statista 2019), so even small adjustments in favor of sustainability can have great impact on the environment. Hence, the automotive industry possesses a responsibility in forming the change the world calls for.

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The focus of this thesis is to assess the sustainability work in the automotive industry and especially with regards to sustainable plastics at Volvo Cars. Volvo Cars are currently evaluating the possibilities of increasing their use of recycled plastic, rather than virgin-based materials. As a way of taking responsibility and to lower the environmental footprint, their aim is that plastic components in every new vehicle from Volvo Cars will contain 25 wt. % of recycled plastics as of 2025 (Volvo Cars 2018). In addition to their ambitious statement, they also urge suppliers in the automotive industry to develop the next generation of components to be as sustainable as possible, especially appointing the use of recycled materials. Being one of the biggest car manufacturers in Europe, Volvo Cars has a great responsibility of working closely with their suppliers in order to force development throughout their supply chain. To further understand the conditions for and the implementation of the 25% goal, a case study was conducted at Volvo Cars and at some of their suppliers of plastic components.

1.2. Problematization

Numerous studies have been carried out on the concept of circular economy (CE) in recent years (Geissdoerfer et al. 2017). However, to our knowledge, the research to date is limited in the knowledge and understanding of the holistically interconnected challenges when implementing CE in organizations and the impact on their supply chain. The actual link between CE and sustainability has also been subject for criticism in recent research. Korhonen et al. (2018) elevate in their article the limitation of assuming that a regenerative model always will lead to a net benefit in terms of the environment. Furthermore, the authors also point out the lack of critical analysis of the interconnection between CE and sustainability, and that the scientific research remains unexplored. Manninen et al. (2018) question the environmental value proposition of CE and whether it captures the ambitious intentions of increasing environmental performance. Although CE often is promoted as a driver for sustainability, the actual environmental benefits are yet to be explored. In addition, Lieder and Rashid (2016) argue that most of the research on CE has evolved primarily on waste generation, environmental impact and resource use while neglecting economic and business perspectives.

In terms of environmental performance and responsibility, manufacturing industries such as automotive companies are facing various challenges in the field of sustainable development (SD). One of the challenges that needs to be addressed, connected to the 12^th SDG, is sustainable management and efficient use of natural resources (UN 2015).

Large manufacturing companies are urged to adopt sustainable practices in order to contribute to a more responsible production and consumption. Hopewell et al. (2009) evaluate different actions towards a more sustainable management of plastics and highlight the important role of recycling to reduce the negative impacts from plastic

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transformation of recycled plastics into cars are limited by both economic and mechanical challenges. First, the market of recycled plastics is heavily dependent on the supply, which further highlights the role of CE, and a proper waste management (IVA 2020). Further, World Economic Forum (2016) called for a more effective EoL market for recycled plastics to increase the circularity. In addition, companies facing such transformations are also expecting decreased costs which limits the liberty of the implementations (Schönmayr 2017). This calls for a cost analysis approach to integrate economic feasibility. Altogether, there is a need of further understanding the barriers of implementing recycled plastics which possibly hinder the development of CE thinking.

1.3. Aim & Purpose

The aim of this thesis is to asses and understand the challenges connected to implementing recycled plastics in the automotive industry. The purpose is to assess if CE, sustainability and CSR applications can be used in the supply chain strategies of organizations facing sustainability transformations, especially targeted towards changing oil-based plastics into recycled equivalents. The thesis could contribute with raised awareness of the possibilities in the CE thinking, through highlighting the possibilities for ecological and economical synergies.

1.4. Research Question

Derived from the problematization, and serving as guidance to achieve the aim and purpose, the research question is framed as:

RQ: What implementational barriers of recycled plastics exist in the supply chain of an automotive company?

1.5. Thesis Outline

The chapters are organized as follows: In chapter 2, the theoretical framework is laid out, aiming to put the research in an academic context. The concept of Sustainability is presented before the reader subsequently gets introduced to the concepts of Corporate Social Responsibility, Circular Economy and Supply Chain Management. Furthermore, the second chapter also covers plastics and its recycling processes to give a sense of the complex procedures. In chapter 3, the methodology is explained to offer a deeper understanding of the research structure and approach. In chapter 4, the empirical findings of the research are presented, which are later discussed in chapter 5. In chapter 6, the conclusion and limitations are presented as well as suggestions for future research.

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2. Theory

This chapter includes theoretical perspectives on sustainable development from an organizational point of view, with focus on corporate social responsibility. The chapter also includes the implementation of circular economy in order to assess how recycled plastics is implemented in the supply chain.

2.1. Sustainable Development

The most famous definition of Sustainable Development was presented in the Brundtland report (1987, p.41) as “(…) development that meet the needs of the present generation, without compromising the ability of future generations to meet theirs.” In addition, there has been multiple alternative definitions presented throughout the years (e.g. Hopwood et al. 2005; Glavič & Lukman 2007). Despite their differences, the definitions aim to describe the same underlying issue: the current handling of the earth’s resources is not sustainable. The modern economic prosperity trends, and the enclosed environmental risks are starting to be questioned in terms of long-term sustainability (Clark et al. 2005). As an action of clarification, and to provide a tangible action plan for the distressing sustainability issues, UN presented 17 SDGs in 2015 (UN 2015).

The goals are targeting different parts of the trilateral sustainability concept to urge actions within multiple areas. The three goals most strongly connected to this thesis are no. 9 (industry, innovation and infrastructure), no. 12 (responsible consumption) and no. 13 (climate action).

The impact on the environment can be described with a function of three interrelating factors: consumption, technology and population (Chertow 2001). As for the automotive industry, all factors can be hard to address. However, consumption and technology (SDG no. 12 and 9) are two sectors where the automotive industry plays a significant role and thus must take responsibility for its negative influence. Amongst other things, the depletion of renewable resources requires adjustments to achieve the sustainability goals set up by the UN. The industry must start not just to perform better, but well enough (Hauschild 2015).

2.1.1.Corporate Social Responsibility

The concept of CSR emphasizes the importance of responsibilities that modern businesses have to society that extends beyond those to investors or stockholders of a firm (Carroll 2018). The concept has roots in the early 1940s, where concerns of social responsibilities among business executives were addressed by researchers. It was argued that businesspeople, at least partially should look beyond direct economic or technical interests of the firm when making decisions regarding social responsibilities. In this sense, CSR is not a newly emerging concept in the field of corporate conduct.

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Nevertheless, over time, it is increasingly important for firms to show their ambitions in terms of viable actions of responsibility (Carroll 2018).

The concept and its dimensions have been defined and redefined in various ways (e.g.

Steiner 1971; Sethi 1975) but the commonly held view of CSR was defined by Carroll in 1979, arguing for a four-part definition of CSR in order for firms to be viewed upon as responsible businesses. First, and foremost, businesses have responsibilities that are economic in nature. They ought to produce goods and services that society demands and to sell them to make profit. Above all, this is the very foundation of a business: to make profit. Secondly, society expects businesses to fulfill their economic mission within the requirements of the legal system. Hence, the legal responsibility is the second part of the definition. The remaining two parts of the definition extend beyond the obedience to the law, namely ethical and philanthropic responsibility. The ethical responsibility refers to the ethical norms that society expects business to follow. Finally, the philanthropic responsibility concerns charitable and humanistic activities that businesses undertake in order to help society alongside their own interests (Carroll 2018). The concept of CSR is closely connected to the triple bottom line (TBL) of sustainable development, that is economic, environmental and social sustainability. The concept of CSR applies to all organizations, non-dependent of size. However, the discussion tends to focus on large companies since they have more power and tend to be more visible for scrutiny (Carroll 2018). Considering CSR in the automotive industry, it comprises a great variety of issues. The issues are mainly emerging during the production, use and disposal phases. In order for automotive companies to adopt a sustainably sound approach to CSR, they should consider a life-cycle approach and thus paying attention to CSR issues in all stages of their supply chain (Orsato & Wells 2007).

2.2. Circular Economy

Since the beginning of the industrialization, the industrial economy has never moved beyond one fundamental characteristic: the linear model of resource consumption that follows a pattern of ‘take-make-dispose’. The model includes material extraction from companies, applying energy and labor in the manufacturing process and selling it to an end consumer. When the purpose of a product has been served, the end consumer discards it (EMF 2013). However, the linear model, and furthermore the entire economic system, is starting to experience completely new levels of risk exposure. As a result of increasing population and consumption over many years, real prices of natural resources began to considerably rise at the start of the new millennium, marking the turning point from otherwise declining real prices. The trend of increased prices and volatility are likely to remain as populations grow, extraction of resources moves to locations harder to reach and due to the fact that environmental costs associated

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with resource depletion increase. According to EMF (2013), the current take-make- dispose pattern entails significant economic costs in terms of resource losses. Eco- efficiency aims to minimize the volume, toxicity and velocity of the material flow system of a take-make-dispose pattern. However, the pattern incurs resource losses due to waste in the production chain, end-of-life waste, energy use and erosion of ecosystem services. If companies were to consider the resource losses in these aspects, tremendous savings could be done in favor of the environment and the economy (COM 2015; EMF 2013).

In contrast to the linear model of economy, CE is designed to be restorative and aims to decouple economic growth from the depletion of finite resources and environmental impact (EMF 2013). In a CE, products and materials are designed for reuse, with the understanding that the foundation for sustainable economic growth comes from reusing vast amounts of reclaimed material from end-of-life products, and not from endless extraction of raw materials. Furthermore, CE refers to a set of principles characterized by high utilization rates and efficient use of natural resources. The model is based on three basic principles: design out waste and pollution, keep materials and products in use and regenerate natural systems (EMF 2013). This makes CE closely connected to the thinking of ‘Cradle-to-Cradle’ (C2C), a famous model developed by McDonough and Braungart (2002). In the C2C model, products and materials are regenerated when their initial purpose has been served, instead of being considered as waste in their end-of-life (EoL), in order to maximize utility and to prolong the time of the resources in the economy for as long as possible. To regenerate materials and products, also called eco-effectiveness, several actions can be taken, which is also the core of the CE. From a technical point of view, CE mainly focuses on three activities (also called the 3R framework): reuse, recycle and recover activities (EMF 2013). The 3R framework is the most commonly used definition for waste management of CE.

However, as stated by Kirchherr et al. (2017), the definition is lacking the fourth and most important part of waste management, completing the 4R framework, namely reduce. The same authors assume that practitioners of CE mention this part the least since this may imply negative contribution to consumption and economic growth.

The automotive industries are facing numerous challenges when balancing economic issues with environmental output (Orsato & Wells 2007) which requires both ’impact decoupling’ and ‘resource recoupling’ as new mindsets for the industry. Impact decoupling refers to increased economic output while decreasing the environmental impacts, and resource decoupling means decreasing the resource use required by the economic activities (UNEP 2011), see Figure 1. Nowadays, the decoupling of economic growth from environmental impact has been identified as the core objective for

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environmental governance and resource strategy, and as one of the most important topics related to sustainable development (Zhang et al. 2016).

Figure 1. Impact and resource decoupling. Source: UNEP (2011, p. 15).

Most of the research in the field of decoupling has examined the relationships at a macro-scale, built by global reviews or cross-country comparisons. However, research paying attention to smaller contexts, or the decoupling’s different dimensions (Conrad

& Cassar 2014) has yet not appeared. In addition, UNEP (2011) advised future studies focusing on convincing key audiences in the critical importance of the decoupling theories. Thus, based on these shortcomings, a deliberately focused research can provide new insights in the concepts of decoupling, providing means for increasing economic output while decreasing the enclosed environmental impact.

COM (2015) argue that CE will boost the competitiveness within the EU by protecting businesses from resource scarcity and volatile real prices, proposing more efficient ways of producing and consuming goods and services and creating new business opportunities. However, comprehensive knowledge on circular business models is needed to stimulate the implementation of circular economy on a micro-level (Lewandowski 2016). Lewandowski (2016) means that the most important component of any circular business model is the value proposition. One alternative way of proposing value to the customer, moving away from the traditional model of ‘buy-and- own’, is the product-service systems (PSS). In a PSS, goods are primarily produced to serve the purpose of a service, based on their functionality instead of actual sales.

Leasing and rental transactions are two examples of PSS. Leasing has been adopted in the industry for quite some time and now manufacturers are starting to introduce subscription of cars, such as Care by Volvo (Volvo Cars n.d.) and Audi on demand (Audi n.d.) It offers manufacturers increased control over the product’s lifecycle and is promoted to increase reuse and recycling and thus increasing resource productivity and minimizing waste. However, the research to date on CE has mainly evolved around waste generation, missing out on business perspectives (Lieder & Rashid 2016).

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2.3. Supply Chain Management

As businesses have evolved to meet global demands for goods and services, they have expanded their production to include other organizations (Kryder 2018). The resulting network of businesses is often referred to as ‘supply chain’, which contains the flow of products, services, finances and information, from producer to consumer. The management of this network of value creation is called ‘Supply Chain Management’

(SCM) and is a commonly known way of managing businesses. However, the increased awareness of sustainability is driving the development towards a more sustainable management of the supply chain, with increased transparency and accountability (Kryder 2018).

Sustainable Supply Chain Management (SSCM) aims to improve the performance of a supply chain in line with the TBL and CSR, since stakeholders expect companies to be committed to finding sustainable solutions to a greater extent than previously (Sajjad

& Eweje 2013). To jointly develop more sustainable processes and products within the supply chain is called ‘greening the supply chain’ and is potentially an effective tool to improve the supply chain performance in this respect (Simpson et al. 2007). There are many different actions that businesses can take in order to improve its SSCM, and by doing so, increasing their flexibility, which could serve as a competitive advantage when new regulations are rolled out and adaption is vital. For example, in 2000, the European Parliament introduced the End-of-Life Vehicle (ELV) directive with the goal to reduce waste and improve the environmental performance by enhancing the recovery of ELVs (COM 2000), which increased the pressure to take corporate responsibility. This is also in line with CE, to close the loop with efficient waste management and the great importance to enhance the overall issue considering the disposal phase. In terms of sustainable supply chain management (SSCM), many CSR actions can be made in order to also incorporate ecological aspects into the whole value chain. According to Thun and Müller (2010) companies within the German automotive industry have realized several SCM goals, including fulfillment of legal regulations and environmental protection. However, the same companies have lacked success in the realization of efficient resource usage and waste management. A new thinking of driving this challenge could be to use SSCM as the important link between all the previous theories and a driver for SD. Altogether, this increases the importance of research within SSCM as a way of SD in the automotive industry and as a result, enhancing CSR and CE.

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2.4. Recycled Plastics

Some of the benefits with plastics are the favorable light weight, low cost and good durability (Andrady & Neal 2009). Due to the advantageous properties, plastics is one of the most used material in the world (Geyer et al. 2017). With a Compound Annual Growth Rate (CAGR) of 8.2%, plastic production levels have grown from an annual production of 1.7 million ton in 1950 to 360 million tons in 2018 (PlasticsEurope 2019), making plastics outgrow most other man-made materials (Geyer et al 2017).

Plastics in general are energy efficient which, in turn, can reduce greenhouse gas emissions significantly compared to other materials (Pilz et al. 2010). Nevertheless, analyses of the lifecycle show that plastics have a negative environmental impact during the production and end-of-life phases (Thompson et al. 2009). When plastic production levels rapidly increased, economic incentives driving the production price to be lowered resulted in the coal-based plastics being exchanged into oil-based equivalents, which proved lowered extraction costs (Mulder 1998). The presence of oil in plastics causes multiple environmental issues (Ashby 2016). Firstly, oil is a non-renewable resource.

Secondly, the carbon contained in the oil-based plastics will eventually be released into the atmosphere and thirdly, fossil plastics degrade extremely slow, enclosing long-term handling issues such as depletion in marine environments. Ashby (2016) further argues that society is put at risk, in the form of cost volatility or supply constraints, caused by the dependency of unrenewable resources.

However, due to the low weight, plastics can be used to reduce the overall use of fossil fuels. This argues in favor of plastics, but a sustainable production is required. By using plastics instead of substitutes, the environmental impact can be significantly lowered, thanks to its moldability and versatility, enabling energy efficient designs (Pilz et al 2010). Pilz et al. (2010) further found that using alternative, heavier materials instead of plastics would annually increase GHG emissions with over 120 million tons (61%), energy consumption with 2 400 million GJ (57%) and total mass with 107 million tons (374%). Based on the entire lifecycle, this makes plastics one of the most energy efficient materials.

With obvious benefits during the usage phase, the biggest concerns of plastics relate to the waste management, meaning how the society treat the material in its EoL. Plastics production only accounts for 4% of global consumption of fossil fuels (Zheng & Suh 2019), so the most troubling issues with plastics relates to the massive levels of waste, and the shortcomings in the current waste-handling (Thunman et al. 2019). The total level of discarded plastics in 2015 was estimated to 200 million tons (Geyer et al. 2017).

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Figure 2. Cumulative plastic waste generation and disposal. Source: Geyer et al. (2017).

However, as Figure 2 shows, the recycling and incineration rates are increasing, in the same time as discarding rates are decreasing. This trend is also supported by PlasticsEurope (2019), presenting numbers of an increasing rate of plastic recycling.

Since 2006, the recycling rate has increased by 100% (5,7% CAGR), energy recovery by 77% (4,8% CAGR) and landfilling has decreased 44% (-1,1% CAGR). Around 9,4 million tons of post-consumer plastic waste were collected in Europe 2018 (PlasticsEurope 2019).

The existing end-of-life treatments consist of four different methods; reuse, recycle, recovery and landfilling (Ferrão et al. 2006). Recycling can be divided into two different subsets: chemical and mechanical recycling. In mechanical recycling, the process is heavily dependent on the kind of plastics and how well the material is recovered, and thus, the process differs. Plastics are one of the most complicated materials to recycle due to different mixtures and additives, dependency on pre-sorting, a wide range of colors and a large energy demand, to name a few. The main process for mechanical recycling includes sorting, cleaning and quality control. Afterwards, the materials are grinded, mixed, and pelletized. Finally, the mixture is blended, reinforced, filled and stabilized, and a new, recycled, material is available. In chemical recycling, the chemical structure of the material is changed by converting the materials back to monomers with depolymerization. Chemical recycling doesn’t require as high levels of material sorting as mechanical does, but the technology hasn’t come as far. Examinations of the most common plastics lifecycles show that mechanical recycling is preferable over chemical recycling. If the polymers cannot be recycled, energy recovery is the preferred option.

Landfilling should be avoided to the most possible extent (Ragaert et al 2017), as it causes the highest damage to the environment.

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2.4.1.Recycled Plastics in the Automotive Industry

The most common choices of plastics in automotive applications are PP, PUR and PA (PlasticsEurope 2013). The materials respectively represent 28,6%, 17,4% and 11,9%

of the total car. The ecological benefits during the usage phase are especially important for the automotive industry, with long use-cycles and intensive fossil fuel demand influenced by total weight, meaning the weight reduction from plastics helps reduce emissions from propulsion. Studies have confirmed this, stating the fuel efficiency improves by 3-7% through the weight reduction (Miller et al. 2014).

Regarding the environmental impact of the plastics, the automotive industry has been presenting actions aimed to reduce the environmental impact of plastics while maintaining, or increasing, the plastics used. Chrysler (Fiat 2013) have come far in their process on implementing recycled materials, with an average of 40% recycled plastics used in their plastic components. Ford (2014) used over 20 million kg of post-consumer plastics for producing recycled exterior in their vehicles in North America, equal to 8 kg per car, and Toyota (2019) presented numbers of 20% of recycled plastics in their cars. Volvo Cars (2018) has also presented ambitious goals for the plastics management with the 25 wt. % recycled plastics goal. Today, Volvo Cars uses around 200 kg of plastics in each car (Raudaskoski et al 2019) which corresponds to around 16% of all materials used. Setting a goal like this requires a lot from the involved partners and suppliers. A high level of cooperation is required throughout the supply chain, all the way from recyclers to car manufacturers.

2.5. Theoretical Summary

CE has offered new ways of thinking to drive the challenges of CSR to achieve sustainable development actions. In order for businesses to focus on SD and CSR, sustainable thinking must become omnipresent throughout the supply chain. In order for businesses to fully adopt a sustainably sound approach to CSR, Orsato and Wells (2007) argued that they should consider a lifecycle approach and to pay attention to CSR matters throughout the supply chain. Simpson et al. (2007) described it as

‘greening the supply chain’, when a supply chain jointly works for increased sustainable processes. However, as Thun and Muller (2010) found, the supply chains can effectively work for enhanced environmental protection plans and fulfillments of legal regulation, but as the research on the German automotive industry showed, the same businesses often failed to successfully implement efficient resource usage and waste management.

This highlights the importance of CE throughout the supply chain, serving as a catalyst for SSCM and thus, sustainable actions ranging over the supply chain. COM’s (2015) arguments of CE boosting the competitiveness as the businesses are protected from resource scarcity and volatile prices are valid. But as multiple studies show (e.g.

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Lewandowski 2016; Lieder & Rashid 2016), our understanding of CE and the previous studies are too macro-focused and waste generation targeted, while neglecting economic and business perspective. Further research on micro-levels are required to stimulate the implementation of CE in business models, to enhance the sustainable thinking throughout the supply chains.

In order to further assess sustainable supply chains, driven by CE to enhance SD, the empirical part of this thesis focuses on the implementation of sustainable materials, especially targeting recycled plastics in the automotive industry. Plastics show very good properties and should be treated as a sustainable material due to its decrease in carbon footprint when substituting heavier materials. One of the shortcomings of plastics, however, relates to the currently unsustainable waste management (Thunman 2019) with levels of recycled plastics being too low. The plastic demand in the automotive industry is expected to grow, and with it also the demand for sustainable plastics, as multiple car manufacturers have presented ambitious plans for introducing recycled materials in their products. It is therefore of importance to highlight the challenges of recycled materials, as the research on the matter remains rather undiscovered.

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3. Method

This chapter covers the methods used in this study and is divided into the subchapters of research strategy, data collection and data analysis. The chapter also includes a description of the actions taken in order to conduct research considering ethics and improved trustworthiness.

3.1. Research Strategy & Design

The study used qualitative methods follow an interpretive orientation (Gray 2017). The researchers sought approaches that would enable in-depth information collection and general overviews of underlying matters, in which the qualitative approach is beneficial (Gray 2017). The qualitative approach was also preferred as the research was targeting questions such as ‘why’ and ‘how’ (Gray 2017), which was required for the researchers to be able to create the basis for strategic recommendations. Yin (2018) described participants in a qualitative study as placed in their natural setting, with their subjective opinions investigated. This also argued in favor for a qualitative approach since the interviews served to capture ideas from experts and to provide insights on the underlying challenges and possibilities of recycled plastics. The interpretive perspective, which “seek to explore people’s experiences and their view or perspectives of these experiences” (Gray 2017, p. 37), was adopted as an appropriate strategy since the collected data would consist of experts’ opinions and perceptions of an underlying matter. The experts’ perceptions and opinions were later used in the data analysis stage, where they served as a basis for identifying the challenges.

The research followed an inductive approach by collecting data, which subsequently were analyzed for patterns that suggested relationships, theories and generalizations.

However, Gray (2017) argues that the inductive process must take note of pre-existing theories or ideas when approaching a problem, and that the very fact for a subject to be selected itself implies judgments regarding what subjects are interested to assess. In addition to that, Gray (2017) also states that the inductive approach doesn’t set to corroborate or falsify existing theory, but rather to collect data with the aim to establish patterns, meanings and consistencies. Eisenhardt and Graebner (2007) stated that the inductive method is more emergent since the approach creates new patterns and indicators based on underlying arguments. Thus, the research question was targeted by building a theoretical framing through a literature review in order to subsequently expand the reasoning based on empirical data collected through qualitative measures in the case study.

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3.2. Empirical Context

In order to put the theories in a practical context, the study based its empirical research in Volvo Cars R&D department of Air Induction System (AIS) in Gothenburg, Sweden, as well as suppliers to AIS. AIS was chosen as a suitable department for the study based on its numerous plastic components, resulting in a significant experience of plastics handling. Further, AIS also has well-established relationships with plastic suppliers and plastic component manufacturers in their supply chain, which eased the process of finding businesses and experts to assess. By deliberately targeting the limited segment of an automate industry, the research can focus its findings on a practical case in order to prove feasibility.

The automotive industry was chosen based on its superimposed position caused by its massive influence on the society, technology and environment (Orsato & Wells 2007).

Further, the automotive industry is deeply concerned with safety, design and reliability (Schönmayr 2017), forcing the materials to live up to high standards. The plastics are often found in the engine’s bay, with heavy loads and high temperatures, or in the interior, with high design requirements. Thus, based on its high influence and heavy requirements, targeting the most demanding and influential industry, the findings of the thesis can more easily be transferred to similar industries with lower requirements on material standards, resulting in improved effects in favor for sustainability.

3.3. Data Collection

The collection of data in the research has been done through a pre-study and semi- structured interviews in conjunction with unobtrusive measures. Interviews were the main instrument of data collection and they were used to collect data about the factors and aspects regarding implementational barriers when increasing the use of recycled plastics in a manufacturing context. In order to have sufficient knowledge on relevant theories of interest, a literature review was performed prior to the case study.

3.3.1.Pre-study

A pre-study was conducted in order to help the researchers to find the appropriate scope of the thesis and to frame the empirical case context. A pre-study is beneficial in order to refine the understanding for a specific setting prior to the collection of main data (Yin 2018). It consisted of four expert interviews with engineers from the case company and two individual workshops with supervisors from both the university and Volvo Cars, seen in Table 1.

For the pre-study, snowball sampling was performed to identify key informants within the case company. It was used in order to gain benefit from the insiders’ knowledge of

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rich information (Biernacki & Waldorf 1981). In organizations where hard-to-reach populations exist, for example in large organizations where suitable participants can be hard to find, snowball sampling is a beneficial approach (Gray 2017).

The interviews and workshops together provided a broader understanding and knowledge in the area of research and helped the researchers to develop an improved research plan. The researchers took notes from the interviews on the most important topics, which were used to frame the scope of the thesis.

Table 1. Overview of interviews and workshops conducted during the pre-study.

Collection

Method Date Source of data Role Length of interview [h:min:s]

Workshop 1 23/1-2020 Car manufacturer Supervisor 1:00:00 Workshop 2 4/2-2020 University Supervisor 1:00:00 Interview 1 4/2-2020 Car manufacturer Product

Manager 1:00:00 Interview 2 21/2-2020 Car manufacturer Environmental

Management 0:30:00 Interview 3 27/2-2020 Car manufacturer Solutions

Architect 1:10:00 Interview 4 2/3-2020 Car manufacturer Principal

Engineer 1:00:00

3.3.2.Interviews

Interviews were chosen as the main instrument for data collection since the research was exploratory in nature and due to its high ability of exploring perspectives of informants (Bryman & Bell 2011). A semi-structured approach was adopted in order to have the possibility of additional questions and expanded answers (Gray 2017). The interviews were conducted with the aid of an open-ended interview guide (Appendix I) giving inspiration to additional questions and answers (Gray 2017). The interview guide was constructed and based on the research questions and with respect to the topic- related theory (Gray 2017). The guide contained a list of pre-specified topics and questions that were to be covered in each interview. Depending on the interviewee’s ability to elaborate their answers, additional or follow-up questions were asked in order to achieve higher coverage from the interview themes. The interviews were sound recorded with the participants’ approval to assure that all information was obtained for analysis. Notes were also taken during the time of the interview to write additional reminders or follow-up questions.

Since the study was constrained by time, it was of great value to identify a small number of respondents who were especially informative (Bryman & Bell 2011). This would also be beneficial in terms of data saturation since small samples also should achieve saturation (Gray 2017). The respondents were contacted via email, providing them with

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a brief introduction of the thesis and asked if they would like to participate as an interviewee. The sample consisted of 10 people who participated as interviewees. From the participants, 8 people originated from external organizations and 2 people from within the case company. The language used in the interviews was case-by-case determined, depending on the wish of the interviewee to speak English or Swedish.

The interviews were conducted between the 2^nd of March 2020 and the 15^th of April 2020. The list of interviewees is seen in Table 2.

Table 2. Overview of the interviews conducted.

Interview

# Date Working area Length of

interview [h:min:s]

Transcription

pages Transcription word count

1 2/3-2020 Vehicle Manufacturer 0:35:00 4 762

2 12/3-2020 Component

Manufacturer 1:19:25 25 10 351

3 13/3-2020 Plastics supplier 1:38:57 15 5 793

6 19/3-2020 Vehicle Manufacturer 1:15:53 25 10 339

7 24/3-2020 Plastics recycler 1:13:18 19 8 241

Total 11:52:18 160 61 180

3.3.3.Unobtrusive Measures

The measures collected of unobtrusive nature were in the form of business and organizational documents. They were used for calculations in the business case example in order to demonstrate economic feasibility. Investments are needed to change the manufacturing process and the unobtrusive data served as a basis for the business case example. Financial data regarding manufacturing costs were provided by the case company and from external manufacturing companies.

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3.4. Data Analysis

The analysis of data was done with the aid of thematic coding for the conducted interviews and through a cost and environmental analysis for the unobtrusive measures.

3.4.1.Interviews

In order to verify the takeaways from each interview, the recorded interviews were transcribed. Prior to the analysis, the transcripts were first read without further reflection or associations, and then re-read for the analysis. According to Bryman and Bell (2015), this makes the researcher familiar with the data which eases further assessment.

The data in the transcriptions were analyzed through thematic coding (Gray 2017), which serves as a suitable method when analyzing qualitative interview data. The thematic coding aims to capture patterns and takeaways from the transcriptions and turn them into grand themes. Subsequently, the themes underwent further assessment.

According to Bazeley and Jackson (2013) the analytical account can be executed with the aid of three steps: describe, compare and relate. Firstly, the themes were described further. Potential different perceptions or interpretations from different interviewees were accounted for and compared in the second step, which also contained possible explanations to the differences. Thirdly, the themes interconnection and relationships were assessed to find if, and how they differed. Data used from the Swedish interviews were translated to English by the researchers prior to presenting them in the report.

3.4.2.Cost & Environmental Analysis

The cost calculations were done in order to provide an additional dimension of the business perspective when introducing a new material in an ongoing or future production. In addition to cost analysis, environmental calculations were done to show the climate impact when introducing sustainable materials. The case example was built on two scenarios. The first scenario represented the choice of not introducing a new material, sticking to the virgin plastics as usual. In the second scenario, the material in the production is changed to recycled plastics, which is associated with additional fixed costs. In Table 3, the variables used for the cost calculation are presented.

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Table 3. List of variables used in the cost and environmental analysis.

Variable Description Unit

𝐴𝑇𝐶_!(𝑛) Component cost in scenario 1 [SEK/part]

𝐴𝑇𝐶_"(𝑛) Component cost in scenario 2 [SEK/part]

𝐶_#$% Tooling investment in scenario 2 [SEK]

𝐶&'(& Component testing in scenario 2 [SEK]

𝐶_)*+,- Labor cost in scenario 2 [SEK]

𝑄 Number of components produced [-]

𝑃_%#-.#$ Material price for virgin material [SEK/part]

𝑃_-'/0/)'1 Material price for recycled material [SEK/part]

𝐸 Environmental savings [CO2e]

𝑚 Mass of resin used per component [kg]

𝐶𝑂2𝑒 CO2e savings per mass unit of resin [CO2e/kg]

For the calculations, the average total cost (ATC) approach was chosen in order to compare the cost per component in the two scenarios. The cost per part in scenario 1 is equal to the price for virgin material, since no fixed costs are added. The cost per part is constant and non-dependent on components produced, seen in equation (1).

𝐴𝑇𝐶_!(𝑄) =^"∗$!"#$"%

" = 𝑃%&'(&) (1)

The cost per part in scenario 2 is dependent on components produced according to equation (2), since fixed costs are associated with changing the material.

𝐴𝑇𝐶_*(𝑄) =⁺^"%!^,+&'(&,+_)*+,#,("∗$_#'-.-)'/)

" =⁺^"%!^,+&'(&,+_)*+,#

" + 𝑃_'/0102/3 (2)

The different scenarios were used to compare component costs in series production to demonstrate economic feasibility. Equation (3) represents the environmental savings when changing from virgin to recycled plastics. Environmental savings are calculated with the aid of the estimates from the report of Stenmarck et al. (2018).

𝐸 = 𝑚 ∗ 𝑛 ∗ 𝐶𝑂2𝑒 (3)

Explicit corporate numbers are excluded from the official report. The shown cost calculations are instead based on fictitious numbers, since the objective with the analysis is rather to illustrate a general business case.

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3.5. Ethical Considerations

Ethics in business research concern the appropriateness of the behavior of the researcher in relation to the subjects of research, directly or indirectly affected by it (Gray 2017). In this case study research, ethical considerations have been made in order to ensure the integrity of the participants (Bryman & Bell 2011). In short, this was done with thorough communication throughout the interviewee process. As stated by Crow et al. (2006), participants should be provided with sufficient and accessible information about the research in order to make an informed decision on their participation.

Informed consent was ensured via the checklist of Gray (2017) prior to the interview.

The interviewees were promised anonymity, to ensure that GDPR regulations were followed, by using aliases. To avoid spreading of the information, data management was also considered by storing files in an encrypted manner.

3.6. Trustworthiness

To create conditions for trustworthy findings, the research used Skrtic’s (1985) framework of trustworthiness, consisting of: credibility, conformability, dependability and transferability throughout the thesis. Credibility was approached through triangulation of sources, investigator triangulation and theoretical triangulation (Bryman and Bell 2014).

To further improve credibility, the thesis used member checking (Gray 2017) for the interviews, meaning the transcripts were sent out to the interviewees with an offer to adjust in the case of misinterpretations by the researchers. Potential changes and adjustments were added to the transcripts prior to the analysis. This minimized the possibility for interviewer biases (Gray 2017), which in turn also improved conformability. Conformability were also strengthened by investigator triangulation, in which the interviews were executed by both researchers together, to reduce the risk of biases. The themes developed during the thematic coding were compared with previous research to validate the findings. The dependability was strengthened by making sure the methods were described in detail in an audit trail so that they could be replicated.

A lot of effort was put on transferability. The ongoing research gained a lot of attention, both within departments at Volvo Cars and throughout the supply chain, since the recycled plastics goal is important to the company. The strong dependency towards Volvo Cars from business further down the supply chain meant Volvo Cars’ strategies impacts the entire supply chain, and thus, the suppliers were also interested in the findings. Further, Volvo Cars is not alone in the mission of enhanced rates of recycled materials, meaning the findings can also be of interest to other businesses, non-related to Volvo Cars. Thus, rather than focusing the research too much on AIS specifically, the researchers aimed at creating generalizable findings that could be transferred to multiple instances both within and outside of Volvo Cars.

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4. Findings

In this chapter, the results from the analytical part of the study are presented. The chapter is divided into two sections, where the first part aims to present the main findings from the thematic interview analysis and where the second part is dedicated to present the results from the cost analysis.

The case study executed at Volvo Cars highlighted potential barriers of implementing recycled plastics in the automotive industry. By targeting suppliers throughout the plastics refining chain, the thesis assessed CE actions in the supply chains, and found that there are some barriers hindering the ongoing implementations.

The findings identified a big focus on sustainability and circularity in the industry. Many suppliers in the study are thoroughly working with lowering environmental impact through CE and SD actions. Recyclability, as focus of the case study, is a prioritized action, and a target for the entire supply chain. Volvo Cars’ 25% recycled plastics goal successfully managed to enhance the focus of sustainability and circularity throughout the supply chain.

However, in order to fully integrate sustainably sound solutions for recycled plastics in the automotive industry, there exist implementational barriers that must be addressed in combination with economic feasibility.

4.1. Barriers of Implementing Recycled Plastics

The analysis of the collected interview data resulted in six themes that corresponds to the main barriers of implementing recycled plastics in an automotive supply chain. The themes are economy, organization, infrastructure, suppliers, design and technical requirements. An overview of the themes with the corresponding codes are presented in Appendix II. The themes are also presented in the following sections, without order of importance.

4.1.1.Economic Barriers

A theme of prominence that was iterated from informant terms was the question of economic feasibility. It mainly refers to the insecurities regarding price and price development but also in terms of demand and supply concerns. Another frequently used term was the way in which automotive companies approach the implementation of recycled plastics and the underlying drivers for realization.

Prices was frequently referred to by all interviewees and mainly in terms of insecurities regarding the long-term price development, which possibly could hinder the wide introduction of recycled plastics. The discussion primarily evolved around the drivers

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for increasing and decreasing prices in regard to the importance of keeping stable prices for a longer period of time.

“I think there are two strong mechanisms. Partly, we will see increasing technical requirements, resulting in more expensive solutions, which will force the prices upwards. On the other hand, recycling will be scaled up which will keep the prices down. Which of the aspects will outrun the other, I don’t know.” – Interviewee 3

The interviewee concerns related to demand and supply indicate on a market failure.

For large volume products, a determining factor is to assure future volumes of material.

In an immature market, with increasing demand as an additional factor of risk, this is problematic. The insecurities related to future supply imply risky investments that seem to cause a demand lag, which in turn is possibly prohibiting the development of the industry. It’s really a hen-egg dilemma, of what drives the development towards increased recycling rates.

“There is not an infinite amount of this. Somewhere down the road, the supply will start to run out, and what will the price and quality be on the remaining material.

It’s an act of balance we will face in the future, when there are low volumes on recycled plastic and how we will handle it.” – Interviewee 9

The way in which automotive companies approach the implementation was also considered of high importance by the interviewees. The increasing interest in recycled materials sounds like an action of sustainability, but the actual motives for introduction are not only the question of sustainability. The major motives for introducing recycled materials are of economic nature. The general view among suppliers is that recycled plastics is a part of cutting cost activities, preferably without altering the technical requirements. A cost-benefit approach, neglecting benefits that aren’t related to financial costs, could hinder the introduction of recycled materials.

“What one will have into the bargain is to save money. When you scratch the surface of sustainability, saving money is the actual driving force.” – Interviewee 2

“Sometimes, they add that ‘the only difference is that we would like to pay less for this’. And we are courteously saying ‘that is an unreasonable requirement’. Sure, one might save a penny depending on quality, but one must discuss the most critical desires they have and if they can let go on something in order to highlight the most important requirements. Eventually, they are able to let go on some of their requirements and have an open and good discussion on how to move forward to a common goal.” – Interviewee 5

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4.1.2.Organizational Barriers

Another prominent theme that emerged from the informant terms was the barriers of organizational nature. The theme was derived from key terms such as insufficient knowledge, communication and information sharing. Another key term which emerged within the same theme was the importance of strategy.

Insufficient knowledge mainly refers to the lack of experience and knowledge regarding the usability of recycled plastics. The main applications for recycled plastics are characterized by low requirements in terms of material performance, especially in relation to automotive applications. In some cases, this fact has led to engineers systematically neglecting recycled alternatives on the assumption that the quality always is insufficient. The data set shows that these misconceptions may be built on lacking knowledge.

“Yes, it’s a limited experience in the previous use of recycled plastics. One does not have the body of knowledge that one can expect.” – Interviewee 2

“It is just that you have misunderstood the prerequisites. As soon as someone believes in something rather than facts, it becomes very difficult to do the right thing.” – Interviewee 8

One of the most prominent factors from an organizational point view is the importance of communication and information sharing. The case company is a big organization, with many departments, and the data set show a lack of structure when it comes to reaching out with information in an efficient way. From a constructor point of view, it should be easy to determine if the designed application can be used with recycled plastics and if the material has been tested before and which companies that offer it.

The case company has a plentitude of communication systems which makes the information process more inefficient.

“The key is communication. It is hard to reach out and there is so much information, it is rather pull than push. Imagine how easy it would be if you access our information platform and, let’s say you need this type of recycled plastics and you see ‘Oh, somebody has already tested this type of material and it’s accessible through these distributors’ and if you are lucky, it has also been tested to similar technical environments.” – Interviewee 6

“You have to find this information somewhere because it’s a jungle out there if you are looking for suitable suppliers. It is hard to reach out, so to speak.”

– Interviewee 1

Another key term with high occurrence in the data set was the importance of having a clear strategy within your supply chain, which also connects back to having a

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where initiated projects get stuck on the way. In some cases, it is due to indistinct requirements or that it takes a vast amount of time to get an approved decision. From the findings, the general opinion is that a clear strategy is needed in order to finalize projects and secure material volumes for current and future production.

“I think they need to talk together to get a common thread in their work, what they actually want. In the top management at Volvo Cars, there is a lot of focus on the 25% plastic goal in 2025, and we will succeed together if we become more unified. It is a bit unclear today, different departments have different wills. They would need to work in a more coordinated way and have a common thread of work to succeed with introducing recycled plastics in more components in the future. They will benefit from our knowledge when introducing it in more components.”

– Interviewee 10

“That is a huge challenge, to spread the message from the top down. The ones you have the dialogue with down to the ones performing the job. The important thing is ‘why’. ‘Why do we do this?’ And if the ‘why’ is communicated, it is so much easier to get something out of it. Given the high tempo of today’s business, it is hard to manage to do the right thing. On the other hand, spontaneously, it should be easy to do the right thing.” – Interviewee 8

4.1.3.Infrastructural Barriers

One of the most widely spread concerns regarding the introduction of recycled plastics in the automotive industry relates to the quantities available. Both short term and, especially, long term. Companies are afraid to make full shifts to recycled materials as the increasing demand lowers the availability of good qualities.

“Right now, there’s such a rush for recycled materials that companies must work actively to secure its own cycles.” – Interviewee 8

The suppliers have noticed there might not be enough material of recycled kind since everyone are asking for the same thing. If every car manufacturer wants the same recycled plastics, Volvo Cars as a rather small car manufacturer might face troubles finding good qualities.

”I believe that if the car industry as a whole introduce recycled materials all over the vehicles and all manufacturers starts asking for the something, there will be a challenge for us to guarantee volumes, price and quality.” – Interviewee 9

One way of increasing the volumes is to improve the current flow of material going back to production as post-industrial waste. However, the introduction of recycled plastics requires functioning infrastructure to collect the waste from somewhere and regenerate it to new plastic grades.

Managing Sustainability Transformations

Tobias Bergqvist & Jonathan Lannö