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Using Open Innovation to Solve the Ocean Plastics Problem

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The Plastic Bank is using open innovation to expand plastic waste collection in countries with limited traditional waste management. This has the potential to improve livelihoods among the poorest citizens of the world's poorest countries and reduce the flow of plastic into the ocean.

The Plastic Bank is harnessing open innovation in order to deliver a superior plastic recycling platform in countries where traditional waste management strategies have fallen short. The organization seeks to reduce the eight million metric tons of plastic that currently enters oceans annually by incentivizing individual waste pickers to collect more recyclable plastic. By creating a valuable market for the plastic, the Plastic Bank is able to compensate its collectors a fair wage that allows them to provide for their families.

The Harvard Business Review’s analysis of crowdsourcing opportunities highlights how open innovation can be harnessed efficiently and flexibly match talent to discrete tasks.[1] Waste management is a prime opportunity to do just this, especially in places where capital investments necessary for traditional waste management are cost prohibitive. This is the niche that the Plastic Bank seeks to fill.

Open innovation allows the organization to crowdsource this process of plastic collection and recycling. The Plastic Bank works directly with some of the poorest citizens of the world’s poorest countries (and those that produce the most ocean bound plastic) to collect recyclable plastic. The organization then turns to an flexible pool of recyclers to recycle its plastic. Finally, the Plastic Bank then markets its plastic to sustainability oriented companies like Marks & Spencer who use the recycled plastic in their products.[2]

The Plastic Bank’s use of open innovation enables their entire business model. Instead of hiring a team of waste collectors and investing in a fleet of garbage trucks, Plastic Bank’s open innovation model allows individual trash collectors to collect as much waste as they can and deposit their waste at collection points at stores that the company operates. These stores sell food, fuel, stoves, and water that waste collectors can purchase with the proceeds from their recycled plastic. These transactions are enabled by blockchain via an IBM-enabled enterprise IT system that pays collectors in an instantly redeemable currency.[3]

The Plastic Bank also uses open innovation on the other side of their process: the recycling itself. The organization uses existing and new informal recyclers who bid on the physical recycling. By using these third-party recyclers in a flexible arrangement, The Plastic Bank prevents getting locked into long term contracts. The organization can get lower prices for the recycling, allow for flexibility in its recycling demand, and avoid the capital expenses associated with building its own recycling infrastructure.[4]

To address the challenges of a distributed and informal labor force, Plastic Bank has partnered with IBM to utilize another megatrend, blockchain enabled crypto currency, to compensate their workforce. After depositing recyclable plastic in certified collection points, the company pays waste collectors in “social plastic” that can be redeemed for food, water, and phone charging, among other necessities. This allows the company to directly pay their collectors in an instantly redeemable currency without building out its physical presence at collection points.[5]

In the next several years, the company plans to expand its operations from Haiti and the Philippines to Indonesia and Brazil. Within each of these countries there is also considerable room for expansion. The Philippines and Indonesia are two of the largest producers of ocean bound plastic, and on a per capita basis Haiti also ranks highly.[6] As the organization expands, they will have to adjust their open innovation model. Since the plastic collectors are paid in store credit, the company will need to expand its selection of merchandise so as to attract new collectors. The company has already begun to roll out some of these new inventory items, including non-traditional retail goods like school tuition, cell phone charging, and health insurance.[7]

In the longer run, I would love to see the organization reduce the cost of its recycled plastic to allow it to compete with less expensive virgin plastic. This will expand their market beyond environmentally and socially focused consumers to a broader mainstream. To do this, the company will have to expand its scale within each country to reach a critical mass enough to either build its own recycling infrastructure or negotiate better prices with existing recyclers.

 

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[1] Kevin J. Bordeau and Karim R. Lakhani, “Using the Crowd as an Innovation,” Harvard Business Review 91, no. 4 (April 2013): 61-69

[2] David Katz, “Social Plastic,” PowerPoint Presentation, November 4, 2016, The Plastic Bank, Vancouver, BC.

[3] IBM, “The Plastic Bank,” https://www.ibm.com/case-studies/plastic-bank

[4] David Katz, “Social Plastic,” PowerPoint Presentation, November 4, 2016, The Plastic Bank, Vancouver, BC.

[5] Adam Wernick, “The Plastic Bank works to turn plastic trash into cash and other necessities for the world’s poor,” Public Radio International, March 5, 2018, https://www.pri.org/stories/2018-03-05/plastic-banks-works-turn-plastic-trash-cash-and-other-necessities-worlds-poor, Accessed November 2018.

[6] Lisa Goldapple, “Banking What the Sea Spits Back: The Plastic Bank,” The Atlas of the Future, September 21, 2016, https://atlasofthefuture.org/project/the-plastic-bank/, Accessed November 2018.

[7] David Katz, “Social Plastic,” PowerPoint Presentation, November 4, 2016, The Plastic Bank, Vancouver, BC.

13 thoughts on “Using Open Innovation to Solve the Ocean Plastics Problem

  1. Excellent article! I had never heard of the Plastic Bank before, and am very intrigued by the mechanism by which they are solving the problem. There business model is very unique and creative. I worry that by using blockchain as a source of currency, they are limiting their scope of potential customers. Many people are either unaware or distrustful of cryptocurrencies. I am not sure how exactly they would alternatively create a currency. I am curious to see how this company continues to grow and the effect it will have on the environment and local communities.

    1. Agreed. The use of cryptocurrency seems overly risky and limiting. It seems like they could still pay people electronically, while avoiding building out any infrastructure. I do, however, love the environmental mission of the project. Any idea as to the quantity of plastic removed and it’s impact relative to the size of the Great Pacific Garbage Patch (a floating island of trash the size of Texas)? For more on the Great Pacific Garbage Patch look here: https://www.nationalgeographic.org/encyclopedia/great-pacific-garbage-patch/

  2. Great article! I was also not aware that the Plastic Bank existed. I would like to learn more about how the incentive/payment scheme works for the collectors. Proper tracking is often hard in the countries discussed in the article and making sure the right people are compensated .

  3. This is an incredibly interesting concept to address a major growing issue. I wonder if there may be a way to integrate a third level of crowd-sourcing to this structure – the stores. One of your questions is surrounding the cost of this venture, and you mention that the Plastic Bank is currently using company stores to collect the plastic, distribute funds, and sell goods to the collectors. I wonder if there is an opportunity to further reduce costs by not having to set up the infrastructure for these company run stores and somehow introduce this payment technology into local stores so that the company can outsource the management of the stores.

  4. I thought this was a really interesting example of how a company can think innovatively to solve a problem from multiple angles. You raise a good point in the end about how important it is for them to reach critical mass in order to reduce their costs. In the short-term, might it be worth subsidizing the cost to achieve scale faster? If this has the potential to be a long-term shift in the way we recycle, maybe a short-term investment is worth it.

  5. I must admit I found the use of a specialized cryptocurrency to be odd, as there are plenty of good payment networks with good old money they could just use to achieve their objectives. That being said, I do like the decentralized aspect of paying individuals to find recyclable goods and depositing them at certified collection points where they can be exchanged for food, water and phone charging. Recycling is now not just an environmental issue, it is also a geopolitical one as China has sharply reduced the amount of recycling and garbage imported into the country. In the past, China was a major depot for recycling plastics and waste materials, and now many countries, the US included, must develop more innovative approaches to deal with their own environmental waste. There are both large challenges but also substantial revenue opportunities for businesses that can develop novel ways of managing recycling.

    For more info: https://www.ft.com/content/360e2524-d71a-11e8-a854-33d6f82e62f8

  6. Loved the article and the social entrepreneurial angle that fits with Plastic Bank’s mission and the very relevant target countries. My concern is around tokenizing the incentive compensation system for the waste collector. First of all these waste collectors are not technologically educated or equipped to make or receive such transaction, the article doesn’t address how Plastic bank is addressing the physical aspect of the transaction. Secondly, I can understand the reason behind using blockchain for tracking the transactions but we know every crypto token these days gets traded and this might create huge volatility and inconsistency in the cost of services that Plastic Bank wants to provide to the low-income people for whom this might be a single source of income. Maybe I am interpreting the blockchain innovation mechanism incorrectly but to me, this tokenization might adversely affect one of the goals of the company that is to provide a fair wage to collectors.

  7. Interesting application of open innovation and blockchain to solve this problem! I wonder how much scale Plastics Bank has in Haiti and Philippines. From a “chicken and egg” network effect view, is it more important to reach critical mass for collectors, recyclers, or companies? I agree with the comment above that subsidizing the cost in the short-term may enable Plastics Bank to reach critical mass and reduce costs in the long-term.

  8. Never heard of this initiative – so cool to read about. My question has to do around the operations involved in collecting the plastics from these impoverished areas. Crowdsourcing seems great when it’s digital or local in nature – in collecting ideas or solutions – and it also seems to solve for a lot of the business costs in reaching far. However, does The Plastic Bank lose these savings through having to invest in infrastructure to reach impoverished areas?

  9. Very interesting article and such a great initiative! Regarding the sustainability oriented companies that it sells to, assuming many of these companies aren’t actually present in, for example, Haiti, do companies like the Plastic Bank do an impact assessment on the environmental impact of shipping the recycled plastics to its end destination? I often wonder whether these types of environmental impacts are adequately considered by consumers. I expect not, probably mostly due to a lack of information.

  10. Fascinating article and interesting application of crowdsourcing to solve a critical environmental problem. I am particularly interested in the uses of this recycled plastic and how it can further help to protect the environment by reducing the demand for virgin plastic. Another thought would be advocate for government regulations and support for the use of this recycled plastic in certain industries e.g. beverage manufacturing etc.

  11. Great article on tapping into distributed labor! Thanks for sharing it. Is there a path for this company to have a business model that is not reliant on plastic procurers who specifically want to purchase recycled plastic from the ocean at a 3x premium to virgin plastic for sustainability purposes [1]? I like the idea of applying innovative business practices (e.g., open innovation) and technologies (e.g., crypto currency) to sustainably provide a service in the market, but I worry about some actors incorporating these methods in unsustainable ways. That said, I think that the waste industry could benefit enormously from innovators looking to make waste collection and processing more efficient. I hope The Plastic Bank is successful!

    [1] Anne Field, “The Plastic Bank: Using Plastic Refuse To Create A Global Currency For The Poor,” Forbes, November 29, 2017, https://www.forbes.com/sites/annefield/2017/11/29/the-plastic-bank-using-plastic-to-create-a-global-currency-for-the-poor/#58ab3f1b7433, accessed November 2018.

  12. Great article! Similar to what we have seen in multiple cases from marketing, I think this is a very interesting example of a company that could be doing greater good in a profitable way. Clearly, this creative business model not only benefits Plastic Bank, but also the public and the environment. What I think may be interesting to look into is how can Plastic Bank leverage this business model and its benefits to the environment in a way to create other sources of income. We have seen from the International Carbon Finance case how companies make profits by reducing their carbon emission footprint allowing them to create carbon credits and to sell them to other companies that have larger carbon footprints. Given that recycling reduces carbon emissions by eliminating waste disposal in incinerators, I wonder if in the future Plastic Bank could be scaled to a point of making big enough reductions in carbon emissions and using those reductions to create carbon credits that could be solid for profit.

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