circular economy as strategy for sustainable development and business innovation

Circular economy Possibilities and limitations as strategy for

sustainable development and business

innovation UFRJ – 20 July 2015

Michael Søgaard Jørgensen [email protected] Center for Design, Innovation and Sustainable Transition (DIST) Department of Development and Planning Aalborg University Copenhagen

mailto:[email protected]

Overview of presentation

• Introduction to circular economy – Ellen MacArthur Foundation and European

Environmental Bureau

• A more critical perspective on circular economy

• Three types of re-design needed in companies for more circular business strategies

• Introduction to the Sustainable Production 3.0 project

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The limits of the linear ‘take-make-dispose’ economy reaching its limits

• Relies on large quantities of cheap, easily accessible materials and energy

• 2025: Growing world population(1.1 bn) and growing middle class (3 bn) – 24% higher food consumption – 47% more packaging – 41% more end-of-life materials (waste)

• Resource-related challenges to businesses and economies also growing: – Pressure on natural resources intensifying – Low and poor recycling => Unable to keep up stock of quality

materials – Higher price volatility => higher business investment uncertainty – Commodity prices increased 150% during 2002-2010 (metals,

food and non-food from agriculture) 3

4

Total EU resource consumption - not only national – measured in terms of mass

Source: European Environmental Bureau, 2015

5 Source: European Environmental Bureau, 2015

Circular economy – a new concept with high political attention

• Distinguishing between technical and biological circles

• Circular design

– Modular products, purer material flows, easier disassembly

• More and more people living in urban areas make sharing, repairing and recycling easier

• Innovative business models: from ownership to performance and access based service systems

• Core competences and technologies along reverse cycles and cascades: RFID tags for easier identification and recycling; 3D printing for spare parts

7

8

Findings from Ellen MacArthur case study about circular economy opportunities in Denmark Conducted together with Danish stakeholders

A step back: 4+1different strategies for

environmental protection

1) Treatment of emissions from manufacturing

2) Recycling of waste from manufacturing and products

3) Cleaner production – preventing waste from industrial

production

4) Cleaner products – prevention through development of

more effective and less polluting products

5) Circular economy – making flows circular and extending

product life time and use

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Four sources of value-creation for businesses

• The power of the inner circle – Small change during re-use, refurbishment and

remanufacturing – Faster return to further use => higher savings

• The power of circling for longer time – Maximum time in each circle – Maximum number of cycles

• The power of cascaded use – Clothes => second hand => fibre in furniture =>

insulation material => return fibre to the biosphere

• The power of the pure inputs – Uncontaminated material streams increases efficiency

in collection and re-distribution of materials

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Claimed results of a circular economy

• Keeping products, components, and materials at their highest utility and value at all times

• Controlling stocks of finite materials and balancing renewable resource flows

• Decoupling global economic development from finite resource consumption

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Decoupling economic development, ressource consumption and environmental impacts


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Assumptions in modeling? No losers?

A critical perspective on circular economy (A)

• The idea about a circular economy NOT new – Friends of the Earth Europe developed in the mid 1990’ies

Environmental space as concept

– Limited resources and ‘room’ for pollution + social justice => higher resource efficiency through changes in consumption

• Can and will the same businesses that created the globalized linear economy develop a more circular sustainable economy?

• EU: Business Europe lobbying against circular economy plan => plan with higher recycling targets and eco-design guidelines withdrawn => “A more ambitious plan will be developed”

• Rules against waste export and its social and environmental bad conditions seen as barrier to circular economy

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A lot of technical possibilities not implemented

17

Source: European Environmental Bureau, 2015

Basic hypotheses about sustainable transition: from vision to transition

• Technical opportunities – like circular economy - not ‘working solutions’ until specified within an institutional and regulatory context

– Bioenergy

– Smart homes

– LED lighting

• Innovation and change is governed by a complexity of interpretations and conflicts

– Should be seen as necessary parts of process of change

• Transitions occur based on actors becoming aligned and interconnected while maintaining different interests

Case: The co-evolutionary history of renewable energy transition in Denmark

Source: Elle et al , 2015

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What is produced?

Why is waste generated?

Globalised cheap production

challenges repair and upgrading

A critical perspective on circular economy (B)

• We need to look more at – What is produced? Why is waste generated?

• Compare with identified opportunities in Danish case studies:

• Focus on food waste minimisation and processing of waste in biorefineries into ‘valuable components’ – Not focus on the big production of animal food

products which in itself creates a lot of waste – compared with plant products

• Not focus on fast fashion and ongoing new generations of non-repairable and non-upgradeable consumer products

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Impact of production AND consumption of products


Policy-maker kit for national circular economy strategy

24 Source: Ellen MacArthur Foundation, 2015

Sustainable Production 3.0: from concept to development of business strategies

Overall objectives:

• Develop and implement new sustainable business strategies based on the concept of circular economy

– as cooperation between business, municipality, customers, waste management companies, etc.

• Disseminate the experiences and results from the develoment projects

– for other companies, business networks, municipalities, consultants, universities, etc.

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Areas of case companies so far

• Healthcare equipment • Electrical and electronic installations • Furnitures • Textiles and clothing • Textile service • Professional laundry and cleaning machines • Food and drinking water • Emergency equipment • Waste treatment

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Three necessary types of re-design towards a more circular business strategy

1. Re-design of products and services

• Considering changes in roles of products, users, context etc.

2. Re-design of value chains

• Up-stream and down-stream

3. Internal re-design of business

• Integrating environmental concerns in product and strategy development

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Local network 1:

Workforce, supply,

regulation etc.

Supplier A Supplier B Customer1 USE: DE-

SCRIPTION <=>

SCRIPT?

Regulatory network X:

Government,

Civil society organisations:

Env., work env., quality etc. –

demands and possibilities

Regulatory network 1

Government,

Civil society organisations

Local network X:

Workforce, supply,

regulation etc.

Company in focus

Developmental network– here with

supplier and customer

SCRIPT: ASSUMPTIONS

Final user USE: DE-

SCRIPTION <=>

SCRIPT?

Four types of network of a company: Product chain, innovation network, regulatory

networks and local networks

Flows of materials, knowledge and capital: product chain

(Re-)Design and social practices: Design, use and adaptation

Inscription: delegation af roles to actors, products and infrastructure

=>

(Manu)script med inscribed actors etc.

=>

Use? Accept? Users adapting products or practice?

User participation?

Configuring af potential future users: Hard or soft script?

Stabilisation? (‘black boxing”) Learning from experience? Improved design?

Business strategies’ influence on social practices: fashion

Production and sale

• Fast fashion => shorter time from fashion show to shop

• 2 => 4 => 8 => 50 seasons a year

• ‘Greener’ product strategies – Use of recycled material

– Demands to suppliers?

– Eco-labelling of single products

– Eco-labelling of product areas (kids)

Clothing practices of young Danish women

• Frequently buying clothes you don’t need – ”it is so cheap”;

• Forgotten clothes; ”safe choices”; 30-50% of clothes in wardrobe not in use

• Imagining expectations from your social network for frequent changes of clothes

• Eco-labelling not interesting: ”limiting our choices”

• Questionning the actual greening of consumption

• Relation to service solutions (sharing etc.)?

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Re-designing the value chain: Feasibility of circular environmental business strategy

Source: Sanchez, Wenzel and Jørgensen, 2004

Case: Equipment for health care: service delivery contracts as part of public procurement?

• Change of CT scanners difficult => On the spot up-grading attractive

• From product sale to service delivery contracts (no. of CT scans) => manufacturer optimise use of equipment

– New development in public procurement in some countries

• Re-manufacturing attractive for manufacturer and customer:

• Re-manufactured health care equipment cheaper solution for developing countries and other health care systems under economic pressure

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One of the global partners of Ellen MacArthur Foundation

Case: The upgradeable electrical and electronic installation: control and monitoring of temperature, ressource consumption, telephone and IT grids etc.?

• Costly to upgrade installations

• No longer value for the customer after some years

• => A lot of waste recycled as down-cycled materials after 5-6 years (cables, equipment)

• Will it be possible to develop upgradeable electrical and electronic installations – Combined with

service contracts? 34

Internal re-design of business: Business practice: Translating signals in the context - based on the history of the organisation •What can initiate changes in strategy?

Source: Howard-Grenville, J., Nash, J. & Coglianese, C.: Constructing the License to Operate: Internal Factors and Their Influence on Corporate Environmental Decisions. Law & Policy,vol 30, no.1. 2008, pp. 73–107

Information network for integration of environmental concerns in innovation processes

Knowledge

resource

Communication

linkage

Source: Lenox & Ehrenfeld 1997: Environmental Design Capability

Interpretive structure?

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Elements in environmental design capability

(Lenox & Ehrenfeld 1997: Environmental Design Capability)

• Knowledge resources:

– Expertise (internal and external) on environmental impacts and strategies for abatement and prevention

• Communication linkages between knowledge resources and (product) development activities, e.g.:

– Gatekeepers as mediators in design team

– EHS personnel in cross function design team

– Transfer of design tools: ICT-network, checklists

• Interpretive structures supporting the development of mutual E&W understanding and language => environmental information is understood and valued, e.g.:

– EHS training for gatekeepers and designers

– Gatekeepers part of cross function design team

– Gatekeepers permanent member of design team 37

Coloplast’s process for medical device development

Product knowledge Room for innovation

Economic

investment

Environmental

involvement

User

needs

Idea Concept Product

Coloplast: Integrating Environmental concerns in Product Development (A)

Ideas/customer needs

Stage 0

Idea formulation

Stage 1

Concept formulation

Stage 2

Gate 1

Gate 2

Gate 3

Environmental screening

• Highlight environmental hotspots

• Suggest possible improvement areas

Specific solutions, e.g.:

• Possibilities of recycling

• Elimination of unwanted emissions

• Environmental assessment of

alternative materials, chemicals and

processes.

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Product development

Stage 3

Test marketing

Stage 4

International marketing

Stage 5

Gate 4

Gate 5

Life cycle assessment

1. Quantify and assess

significant environmental impacts

2. Customer oriented information +

documentation

Coloplast: Integrating Environmental concerns in Product Development (B)

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20 specific business development projects (A)

• 2 year cooperation with each company

• Part 1: Mapping and development of action plan

• Initial mapping of each company

– Important environmental aspects of company and its products and services

– Business strategy and environmental strategy

• Assessment of potentials and challenges from circular economy principles

• Development of action plan aiming at considering a business strategy integrating principles of circular economy

– Proposals for further internal analyses and external dialogues

– Proposals for experiments with changes in products and services and business model

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Initial mapping and analysis • Environmental mapping of company in life cycle perspective • Analysis competitive position based on Michael Porter’s

”Five Forces” model • Resource consumption and environmental aspects in life

cycle • Aspects of power and learning in relation to suppliers,

customers, and users – The roles of environmental concerns – Analyses of competitors’ environmental strategies

• Threats from new (more environmental friendly) varieties of competiting products and services entering the market?

• Relation to existing and future environmental regulation – local, national and international

• Relations to citizens and environmental organisations – locally, nationally and internationally

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Analysis of forces shaping the competitive position of a company

43 Source: Michael Porter, 2008

Life cycle perspective: life cycle screening /assessment

Nanospeed racket

Raw material extraction

Production Use Disposal

Materials Fossil fuels Waste resin Energy Vacuum pump Melting and

curing

Chemicals Chlorinated and other solvents

Nanoparticles released from waste?

Other aspects, including occupational health and safety

Occupational handling of nanoparticles

Table1: Presentation of the Materials, Energy, Chemicals and Others (MECO) matrix for

the different life cycle stages of a “nanospeed” badminton racket

Identifying environmental aspects through literature, databases and dialogues

DESIGN IMPORTANT FOR

CIRCULAR ECONOMY Design for end-of-life • Avoid substances that make

recycling expensive / problematic

• Product take-back + organise

waste streams to avoid down-

cycling

• Reuse of components

Business models • Leasing

• Product-service systems

• Extended guarantee (spare parts)

• Service agreements to ensure

durability

Design and materials •Avoid heavy metals as cadmium, lead, and

dangerous substances (RoHS)

•Use of recycled materials (metals, etc.)

•Recyclability and recoverability

•Reduction of weight (dematerialisation)

Design, durability and repair •Modular design, standard component, easy

to repair and to up-grade

•Easy to dismantle with common tools

•Bill of Material (BoM)

•Mono-materials and few different materials

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20 specific business development projects (B)

• Part 2: Implementation of action plan

• Researchers facilitate dialogues with suppliers, customers, users, etc. about possibilities and limitations to a more circular business strategy

– Including dialogues with public authorities, waste management companies, civil society organisations, etc.

– In relation to environment, quality, occupational health and safety, etc.

• Open and internal workshops for development for development of possible solutions

• Involvement of students for course projects and thesis projects

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Prolonging product life time through repair

• Western countries: – Many local repair sshops closed – Repair through conventional retailers often expensive

compared to new product – ‘Bad’ product design part of background for expensive repair

• Community-based repair activities – Denmark: repair network initiated by NGO + waste

management company – Local repair cafés + dissemination about professional repair

shops – International Repair Café network (750 cafées) – initiated

from the Netherlands – 10-15 cafés in some Dutch cities

• Commercial activities in developing countries and newly industrialized countries?

Circular clothing initiatives in Denmark (A)

• Civil-society based initiatives and entrepreneurial initiatives:

• Small clothing store as ‘sharing economy’ with bi-yearly subscription allowing you to exchange as many dresses you want

– Require you provide some of your own dresses to be part of the ‘shared closet’

• Share Your Closet: ‘sharing economy’ without a physical store

– Subscribers make photos of clothes they put into the virtual wardrobe => other subscribers borrow

• High fashion clothing library developed by Red Cross Center: subscribers borrow high fashion clothing provided by designers

– Mostly run by volunteers => surplus for social work among refugees

• Waste management company organises local clothes swapping events

Circular clothing initiatives in Denmark (B)

• Clothing businesses – fighting back?

• Large-scale commercial clothing retail chain encourage to bring back old, used items for material re-cycling in return for a small gift-certificate offering a 15% discount on one piece of new clothes

• Danish Fashion Institute: annual public ‘swapping-market’

• Joint project with waste management company, social organisations and fashion retailers about material recycling of not re-usable clothes

Activity 3: Developing methods, concepts and inspiration from case studies

• Evaluating aspects of changes in environmental impacts,

business economy, innovation and network relations

– The roles of internal and external actors during the development

project

• Case report from each business development projects

– Internal version

– External version for inspiration and teaching material

• Systematising experiences from development projects into

methods and concepts for circular business analysis and

development 50

Activity 4: Dissemination and embedding of results and experiences among multipliers

• Train-the-trainer workshops based on materials from

Activity 3

– For consultants, business organisations, public authorities,

business incubators, waste management companies etc.

• Workshops for university teachers for development of

education strategies and elements

• Advisory group, website, newsletter

• Workshops for members of two regional environmental

business network

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