Post-industrial recycling tends to be much more efficient than post-consumer recyling since the inputs tend to be much more uniform. Wasted fiber costs manufacturers a lot of money -- more efficient operation will go straight to their bottom line.

In other words, this is a case where governments should focus on research, not regulation. Manufacturers may not have the money to do the research themselves, but are highly incentivized to incorporate the improvements if somebody else figures it out for them.