Financial viability of circular business models in tyre recycling industry in Latvia
2020
Uvarova, I., BA School of Business and Finance, Riga (Latvia);University of Liepaja (Latvia) | Atstaja, D., BA School of Business and Finance, Riga (Latvia) | Korpa, V., Riga Stradins Univ. (Latvia) | Erdmanis, M., BA School of Business and Finance, Riga (Latvia)
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 unfavourable 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 tyre 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.
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