I. Industry Risk Analysis

(1) Policy Risk

Currently, the scrap recycling industry faces the risk of fragmented policy implementation. Local subsidy standards are frequently adjusted without continuity, and entrepreneurs may encounter financial risks where the upfront investment does not match the subsequent subsidy amount. The rapid iteration of environmental protection technical standards has led to pressure for equipment updates. For example, in 2023, many provinces raised the emission standards for tire pyrolysis, forcing some small and medium – sized factories to upgrade their technologies or exit the market. The approval of hazardous waste business licenses has become stricter, and the extension of the cross – regional transportation permit cycle directly affects the stability of the raw material supply chain. There is a gap in tax incentives between policy pilot cities and non – pilot areas, and cross – regional expansion faces a sharp increase in compliance costs. The progress of circular economy legislation has fallen short of expectations, and there are still gray areas in the supervision of emerging fields such as the remanufacturing of second – hand parts, and the compliance of business models is variable.

(2) Economic Risk

During the economic downturn, the scrap recycling industry faces dual pressures of shrinking demand and price fluctuations. As the growth rate of the manufacturing industry slows down, the source of industrial waste decreases, resulting in unstable raw material supply for recycling enterprises. The weak consumer market has led to a decline in the recycling volume of civilian scrap products such as automobiles and household appliances. The prices of recycled resources fluctuate sharply under the influence of the commodity cycle, and the risk of inventory valuation for enterprises has increased significantly. At the same time, the investment in environmental protection technological transformation and labor costs are rising rigidly, but the bargaining power of recycled products is restricted by the sluggish terminal market, squeezing the profit margin. Currently, the financing environment is tightening, and the vulnerability of cash flow under the heavy – asset operation model is prominent. Small and medium – sized entrepreneurs are prone to fall into the capital chain dilemma of “high investment – low turnover”.

(3) Social Risk

The social risks faced by the scrap recycling and disposal industry are mainly concentrated in the inter – generational demand differences and conflicts in environmental protection concepts: young consumers tend to choose convenient and efficient digital recycling services, but the middle – aged and elderly groups still mainly rely on traditional recycling channels. This generational consumption gap has hindered the innovation of service models. The tightening of environmental protection policies has led to an increase in compliance costs, and the public’s awareness of environmental protection supervision in the recycling and disposal process has been enhanced. Minor violations can trigger public opinion crises. Illegal dismantling workshops and formal enterprises have coexisted on the interest chain for a long time, and the gray industry exerts unfair competition pressure on new – generation entrepreneurial entities. The differences in the perception of the economic value of waste among different generational groups have not only promoted the development of the second – hand trading market but also given rise to industry chaos where inferior refurbished products damage consumers’ rights and interests.

(4) Legal Risk

As an entrepreneur, when entering the scrap recycling and disposal industry, it is necessary to focus on environmental protection compliance risks: If you do not obtain the “Hazardous Waste Business License” or do not operate in accordance with the “Law of the People’s Republic of China on the Prevention and Control of Environmental Pollution by Solid Wastes” (such as mixing hazardous and non – hazardous wastes for storage), you will face a fine of up to 5 million yuan and the risk of having your qualification revoked. If the processing process does not meet the technical requirements of the “Measures for the Administration of Renewable Resources Recycling” (such as excessive dust emissions during dismantling), the ecological environment department may impose daily fines. If an accident occurs due to violations of the training regulations of the “Law of the People’s Republic of China on Work Safety” in the employment process, in addition to civil compensation, criminal liability may also be assumed. In addition, improper tax handling is likely to be recognized as falsely issuing purchase invoices. If the amount of suspected tax evasion exceeds 50,000 yuan, criminal liability will be incurred.

II. Entrepreneurship Guide

(1) Suggestions on Entrepreneurial Opportunities

In niche fields such as power battery recycling and tire recycling, the demand for compliant treatment has increased significantly under the promotion of policies. Entrepreneurs can rely on the regional recycling network to integrate the upstream scrap collection and storage and the downstream recycled material sales channels, focus on developing a traceable digital management system, and explore vertical technical scenarios such as refined sorting in automobile dismantling and precious metal purification. Through differentiated services (such as providing flexible recycling solutions for small and medium – sized repair shops), they can avoid direct competition with leading enterprises.

(2) Suggestions on Entrepreneurial Resources

Entrepreneurs in the scrap recycling and disposal industry should focus on policy resources and actively contact the Ministry of Industry and Information Technology/Environmental Protection Department to obtain industry qualifications and special subsidies. Strengthen the integration of supply chain resources, sign tire/battery recycling agreements with auto repair shops and 4S stores, and build or lease regional sorting centers to cover the disposal network. For technical resources, it is advisable to introduce tire pyrolysis and battery echelon utilization technologies through equipment leasing/contract processing models to reduce heavy – asset investment. Apply for green credit and carbon emission trading subsidies for capital resources, and jointly establish an emergency working capital pool with industry associations. At the same time, build a resource pool of outsourcing service providers such as hazardous waste transportation fleets and environmental assessment and testing to solve the legal risks in the storage and transportation of hazardous waste through compliant trusteeship.

(3) Suggestions on Entrepreneurial Teams

When forming a team in the scrap recycling industry, it is advisable to recruit core members with mechanical dismantling technology and the ability to interpret environmental protection policies first, and match them with operation talents familiar with supply chain integration and coordinators good at maintaining government – enterprise relations to form a triangular support of “technology + resources + compliance”. It is recommended to adopt a flat management structure to accelerate decision – making, implement performance – based quantitative incentives for on – site workers, and set up a legal counsel position to track changes in solid waste treatment regulations in real – time. Attract key talents with hazardous waste disposal license resources through equity binding, conduct regular equipment safety operation training, and establish a rapid response mechanism for policy fluctuations (such as adjustments to the recycling category catalog).

(4) Suggestions on Entrepreneurial Risks

Entrepreneurs need to establish a compliance management system first, track policy changes such as the “Law of the People’s Republic of China on the Prevention and Control of Environmental Pollution by Solid Wastes” in real – time, and keep information synchronized with local ecological environment departments. Strengthen investment in environmental protection facilities, install anti – leakage treatment equipment and regularly monitor pollutant emissions to prevent environmental protection penalties. Purchase work safety liability insurance to avoid the risk of work accidents, standardize the dismantling process and configure explosion – proof devices. Implement an inventory turnover rate monitoring mechanism, and sign long – term consignment sales agreements with recycled material processing factories to hedge against price fluctuation risks. When applying for the “Hazardous Waste Business License”, simultaneously layout the pre – review of new energy vehicle battery recycling qualifications to occupy the emerging market in advance. Cooperate with third – party testing institutions to build a quality traceability system to ensure that the dismantled products meet the GB/T39780 recycling standards.