Financial viability of circular business models in tyre recycling industry in Latvia

Abstract

The end-of-life (EOL) tyre recycling industry in Latvia is encountering economic and sustainability challenges, which require solutions by various stakeholders. Improvement of tyre waste management and recycling is important within the context of sustainability and the new streamlining of circular business models. Its importance is also recognized at the European Union level in relation to the further strategic goals and the European Green Deal. In addition, the tyre recycling industry in Latvia demonstrates a relatively unfavorable financial situation, which is one of the most significant factors hindering the introduction of new circular business models. The aim of this research is to clarify the challenges related to the financial viability of tyre recycling companies adopting the new circular business models. The main research methods are literature review, semistructured in-depth interviews, case studies and financial analyses. There are large stocks of EOL tyres and on average just 50 % of them are recycled. The tyre waste management companies are not motivated to supply EOL tyres to recycling companies. On the other hand, due to various reasons, most of the tyre recycling companies are not working with their maximum production capacity. The research results reveal that the tyre recycling companies mostly run traditional and inefficient business models that require large operating costs and ensure comparatively low profitability. In order to enable more efficient and environmentally friendly type recycling process, the companies should implement new, investment intensive technologies. Yet, they face critical issues of liquidity and financial returns. Major conclusions are related to the necessity to develop several business models interlinked within one portfolio thus ensuring the manufacturing of various products with higher added value and quality. This may maximise the profits and improve the financial viability of tyre recycling business models.

End-of-life tyre recycling: going beyond to new circular business models in Latvia

“…This company has implemented CBM with the greatest perspective compared to other tyre recycling companies. This is also evidenced by the financial performance of this company in recent years [13]. The company recycles EOL tyres for its own use.…”

“…For further case studies of business models, 3 tyre recycling companies were selected: E-DAUGAVA ltd.; VVV RECYCLING ltd.; R-TECHNOLOGY ltd. These companies actually operate in this field and have introduced new tyre recycling technologies [13]. The company ECO Baltia Vide Ltd. engaged in tyre recycling in the second half of 2019, so it was not included in the analysis of this study, as it is in the initiation stage within this business.…”