According to the Sri Lanka Customs, polyethylene terephthalate (PET) plastics imports increased from 9.1 to 16.7 thousand tonnes between 2013 and 2017. Of the imported plastics, 60% were raw materials for consumer goods (e.g., dairy products), with only a small portion being recycled. The government promotes reducing, reusing, and recycling (3Rs) and Extended Producer Responsibility (EPR), but regulation is minimal, especially among Small and Medium-sized Enterprises (SMEs), which make up 52% of the gross domestic product (GDP) and 45% of employment, based on Asian Development Bank data.

According to the Central Environmental Authority (CEA), there are approximately 300 registered waste collectors, 2,000 informal micro-small collectors, and 50 small to large recyclers. Most of these entities (90%) are in Western Province, with only 5% owned by women. Small to medium collectors and recyclers face challenges adhering to environmental and health guidelines and adding value due to the high investment needed for necessary technologies. The industry is dominated by a few large recycling plants in partnership with collectors, Local Authorities (LAs), and Non-Governmental Organisations (NGOs), resulting in a lack of raw materials for small-scale recyclers.

The COVID-19 pandemic exacerbated these challenges, impacting national and global supply chains. SMEs faced minimal adaptive and recovery capacity post-pandemic, resulting in high-interest loans to cover operations and staff salaries. Inflation and diminishing markets further impacted Financial Institutions (FIs) and investors, worsening the financial situation of SMEs.

To address these challenges, there is a need for transformative circular models in the plastics sector that promote EPR for cleaner production. Innovation and circular models are expected to enable SMEs to lead an inclusive, green recovery in Sri Lanka. A holistic Value and Supply Chains (V/SC) approach could strengthen sustainable business planning and investment models, as well as public-private commitment to plastic waste management, by addressing issues such as technical skills, informalisation and resource gaps of SMEs, limited connectivity in plastic V/SC, lack of awareness of the economic potential of recycling and upcycling ventures, limited access to start-up capital and green financial products, insufficient representation of collectors and recyclers in policy dialogue, weak enforcement of existing regulations leading to a lack of standardization, and lack of accurate data and traceability of plastic packaging in its lifecycle.

In this context, financing from the Development Cooperation Instrument 2014-2020 (as set out in the Multiannual Action Programme 2018 under the Multiannual Regional Indicative Programme for Asia 2014-2020 - Annex 2) was provided. A Call for Proposals was launched, and a grant was awarded to the NGO “Agency for Technical Cooperation and Development” (ACTED) with four co-applicants: Biodiversity Sri Lanka (BSL), Sri Lanka Industrial Services Bureau (ISB), STENUM Asia Sustainable Development Society (STENUM Asia), and The Energy and Resources Institute (TERI). Initially, “adelphi Research GmbH” was also a co-applicant but withdrew from the contract.