Every minute, the equivalent of a garbage truck filled with plastic enters the ocean.
While organizations have been tackling plastic pollution for years, they often rely on steady monetary donations and grants to fund their clean-up efforts — a constant push to reach long-term sustainability and social impact.
A team of researchers, led by Rotman professors Opher Baron and Gonzalo Romero, recently found that a combination of two separate revenue streams and blockchain technology is what catapulted Plastic Bank — a Vancouver-based plastic recycling company — to profitability while maximizing their environmental impact.
Their insights offer a way for social enterprises at large to operate more effectively.
“People are hungry to help the world in a way that moves beyond donating money to organizations – they want to see socially responsible businesses contributing to climate issues in a financially sustainable way,” says Romero, an assistant professor in Operations Management and Statistics.
When Baron and Romero became intrigued by Plastic Bank’s business model in 2020, they partnered with supply chain experts Zhuoluo Zhang and Sean Zhou from CUHK to develop a model that projects the company’s environmental impact and profitability.
The Rotman and CUHK researchers first connected in 2019, when Zhou was a visiting professor at Rotman where he held the Roger Martin Award for Emerging Leaders.
“We reached out to Plastic Bank and modelled how their profit and impact would change when they focused on one revenue stream, versus both,” says Baron, a distinguished professor in Operations Management and academic director of the Master of Management Analytics program.
The team's paper recently won second place in a research competition hosted by Dalhousie University's Centre for Research in Sustainable Supply Chain Analytics.
The power of Plastic Bank
Plastic Bank is a social enterprise that recovered more than 37,000,000 kilograms of plastic from 536 locations as of November 2021.
By selling two products in tandem — plastic offsets and sustainability-sourced plastic — the researchers found Plastic Bank is increasing the output of recycled plastic by 35 per cent while their profit in the local recycled plastic supply chain rises 130 per cent.
How does it work? First, individuals and businesses can buy plastic offsets, whereby they give Plastic Bank money to recover roughly the amount of plastic they consume annually.
For someone to become ‘plastic neutral’ in North America, they would give about $40 to prevent 84 kilograms of plastic from reaching the ocean.
Next, local workers are paid a fair wage to collect ocean-bound plastic in their communities, mainly in developing coastal countries like Haiti and the Philippines.
The plastic is reprocessed as ‘Social Plastic Collection Credits’ which corporations can buy at a premium for use in their products and packaging. This is a second source of revenue for Plastic Bank.
“This creates a closed-loop supply chain while helping those who collect it,” according to Plastic Bank’s website
Where there is a higher demand for plastic offsets — particularly in places with more environmental awareness — the launch of a business model like Plastic Bank’s can increase sustainably sourced plastic by 60 per cent and total profits by 200 per cent.
“This model has the potential to be applied to other materials, not just plastic, as long as there is demand from consumers for it to be recycled,” says Romero.
The value of technology for social enterprises
The magic of Plastic Bank’s business model is the use of blockchain technology, says Baron.
If Baron gives $40 to Plastic Bank to buy a plastic offset, for example, he’ll receive a blockchain certificate to trace where those dollars went, how much plastic was collected, who collected it, and where the Social Plastic ended up in the manufacturing supply chain.
“People like to see where their contributions are going,” Baron adds.
“Using blockchain to verify Plastic Bank's activities is genius as it adds credibility behind their plastic offsets, encouraging more people who are willing to put money into this mission.”
Romero, whose research focuses on how social enterprises’ operations are shaped by emerging technology, says he encourages students, alumni and entrepreneurs to think globally and pursue opportunities in the social enterprise sector.
“The demand is growing for ideas that tackle the world’s most pressing issues,” he says, noting the United Nations Sustainable Development Goals as a place to start.
“What we’re learning is that if you’re a business with environmental or social issues at the core, there are ways to jointly maximize your impact and profits for long-term success. There are many opportunities to run a profitable business that is socially-driven.”