March 20, 2023

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TrueCover: Disrupting the Cycle of Quality Uncertainty

Is the recycling industry the only industry left on the planet where you have to buy feedstock for your processing plant without knowing what the quality of that feedstock is? We can’t say for sure. What we do know is that one of the biggest challenges in our industry is assessing the true quality of recyclable materials.

The Recycling Industry’s Market for “Lemons”

The absence of accurate quality assessment leads to good suppliers of recycling being unable to differentiate themselves from ordinary and malicious suppliers. This leads to a market where buyers cannot distinguish between good and bad products, a problem known as the “Market for ‘Lemons’” (Akerlof, 1970). It is this difficulty in understanding true product quality that makes buyers hesitant to pay a fair price for good quality material.

Over time, this has resulted in a reduction in the supply of high-quality materials, since there is simply no reward for ensuring a high quality.

To properly address this issue, accurate methods of material quality assessment need to be created and maintained. Only this will ensure fair pricing and allow the production of high quality materials to receive genuine rewards.

How is Material Quality graded today?

When it comes to recycling plastics, one of the most commonly sourced materials is PET (polyethylene terephthalate). Among the various forms of PET, ‘Clear PET’ is the most sought-after. Clear PET is typically graded based on its ‘clear’ content, on a scale from 80/20 to 98/2.

The first number represents the percentage of PET Clear in the material, and the second number represents the percentage of other materials; such as coloured PET, other types of plastics or non-plastic material.

Under the “Market for ‘Lemons’” situation, sellers may be tempted to overstate the quality to get a higher price, and buyers always receive materials that are below expectation. The grading system for PET clear is not always accurate or consistent across the whole industry. Many sellers advertise their PET as being 90/10 quality, but in reality, the PET clear content is often much lower. Sellers get away with this because there hasn’t been a good way for the buyer to verify the actual quality of the material. TrueCircle’s mission is to break this cycle of quality uncertainty.

Unveiling True Material Quality

At TrueCircle, we have conducted thorough research into the discrepancy between advertised and actual grades of materials. To achieve this, we use a combination of in-person inspections and AI monitoring of the seller’s material output line. Through our research, we have discovered that when a material is advertised as 90/10, it typically falls within the range of 81%-92% PET Clear content.

We understand that sometimes materials can deviate from their advertised quality. That’s why we offer TrueCover, which always comes with a detailed material analysis, and provides financial protection over any instances where purchased material is of a lower quality than the quality specification of a listing, for both buyers and sellers.

All listings with TrueCover will have an industry standard quality specification, plus the actual percentage values alongside more specific material groupings. This means that you will know the exact quality of the material, whether it is the 91% or the 83% 90/10 PET, for every purchase on TrueCircle Trade.

Moreover, TrueCover insures against material deviations with respect to the actual percentage values, not the listed grade. For example, if the actual quality of 90/10 PET is 81.06% after our inspections and assessments, the buyer will receive immediate updates and compensation for the discrepancy in promised quality.

This way, buyers can be sure that the material quality is always fully disclosed and that any deviations from the expected quality will be promptly addressed and compensated. At the same time, sellers can achieve greater pricing for their high-quality materials.

By providing protections for both buyers and sellers with TrueCover, we break the cycle of quality uncertainty, which will ultimately lead to a more reliable and sustainable recycling industry.

Reference

Akerlof, G.A. (1970) “The market for ‘Lemons’: Quality Uncertainty and the market mechanism,” The Quarterly Journal of Economics, 84(3), p. 488. Available at: https://doi.org/10.2307/1879431.

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