»TheCircularEconomy PoweredbyCradletoCradle®

RETHINKInnovationNewUses

REUSEWithHighQuality

UPCYCLEQualityImprovement

RECYCLEDowncycling

REDUCEIncrementalReduction

Qua

lity

&V

alue

Time

Effectiveness

Efficiency

Fig. 1: The pursuit of positive impacts by a Circular Economy powered by Cradle to Cradle®.Effi ciency means doing things right but only effectiveness means doing the right things. (Source: EPEA)

» Thescarcityofresourcesisalreadythreateningmanyindustries.Onlyifacompanysolvesthisproblemcanitpavethewayintoa fertile future. The Circular Economy powered by Cradle toCradle® isasustainableandprofitablealternative toa lineareconomywhichisthreatenedbyscarceresourcesandpopulationgrowth. The Circular Economy powered by Cradle to Cradle®(C2C)isaninnovationplatformforcreatingpositiveimpactsbyimproving quality and decoupling growth from primary rawmaterials.Itisastepforwardfromthelineareconomywhichisleadingtoeconomicvolatilityandsystematicimbalances.

» The economic concepts supporting Cradle to Cradle® weredevelopedbythechemistProf.MichaelBraungartandscientistsat EPEA, then further developed with architect WilliamMcDonough.TheunderlyingconceptwasawardedtheU.S.E.P.A.PresidentialChallengeAward,TheOcevanderGrintenPrizeforEconomics,theB.A.U.M.award,andmanyothers.

» The concept is designed to create positive impacts for the

economy,theenvironment,andhumanculture.Itmimicsnaturebyeliminatingtheconceptofwaste.

- Productsandprocessesaredesignedtobecomeproductiveforabiologicalortechnicalcycle.

- Byfocusingoncustomerbenefits,theproductdesignensuresthatattheendofthecyclethematerialisrecoveredathighresidualvaluefornextuse.

- However,C2Cisnotonlyaboutmaterials;itequallyfocusesonacceleratingcost-effective renewableenergyand impro-vingorganizationalresiliencethroughdiversity.Thisholisticapproach generates added value across the organizationalspectrum.

» Experienceinbusiness,governmentandinstitutionsdemonstra-tes that a Circular Economy powered by Cradle to Cradle®motivatesmanagementandemployees,improvesperceptionoftheirorganizations,andleadstosustainedvaluewhichother-wisewouldnotbecaptured.

Whydoit?

ThelogicofaCircularEconomypoweredbyCradletoCradle®

» The Circular Economy powered by Cradle to Cradle® has anenormous potential for innovation and savings, with a solidtrackrecordofenterprisesandgovernmentsgeneratingpositiveimpactsbyupcyclingtonewdesignsorre-designsofprocessesandproducts.Asaresult,companiessignificantlyreducetheirmaterialandenergycostsandsecurecompetitiveadvantagesand higher yields/returns. In addition, due to more effectiveresource use and reuse of formerly waste products, positiveenvironmentaldividendsareattained.

» For one thing, a new awareness of the Circular Economypotential is on the political agenda of the European Union,leadingindustrialpowers,andemergingpowerhouseeconomiessuchasBrazilandChina.

» For another thing, leading international companies such asKingfisher,H&MandIKEAseethebenefitforsolvingresourcevolatility and significantly improving product innovation andquality.Theyalsoseeitasawaytocost-effectivelyinternalizecostswhichuntilnowwereexternalisedbutarebeingpushedontocompanybalancesheetsbygovernmentregulations.

» ByconsistentlyfocusingoncustomervaluetheCradletoCradle®service approach opens completely new customer potential;forexamplebankinghigh-qualitymaterialsatcustomersitestoimproveresidualvalueandachievesecurityfromvolatileprices.Thisultimatelyreduces investmentcostsforthecustomerandmanufacturer.

» Forexample,theleadingcarpetmanufacturer,Desso,recognizedtheproblemofpoorairqualityandcreatedbyre-designofitsmainproductconsistingof100percentrecyclablematerialthecarpetwhichcleanstheair.TherealignmentoftheproductrangeincreasedtheEBITbyafactorofnine(from1to9percent)andincreasedDesso‘sEurope-widemarketshareby7percentpointsto23%(StuartCrainer,LondonBusinessSchool:Agoodyarn).TheimprovementswereachievedbyDessoworkingwithEPEAtoaddnewfunctionalitiestoitscarpets.

Addedvalueforcompanies,institutionsandgovernments

How to achieve continuous growth without relying on linearprimaryrawmaterialsuse?

» In the Circular Economy powered by Cradle to Cradle®, con-tinuous and healthy growth is an option. The potential foracceleratinggrowthishighifgrowthisredefined.Themessageis distinct from the traditional ‘growth is limited’ message.Anewtypeofgrowthisachievedinasystemwhichregeneratesresourcesanduses innovationforcreatingmoreoptionsthanexisttoday.

» CradletoCradle®providestheconceptualandmethodologicalframeworkthatmakesthecirculareconomywork.ItisdrivingaddedvalueforbillionsofEurosworthofproductsandsystems.LeadingcirculareconomyorganizationsaswellastheEuropeanCommissionciteC2Ccyclesasabasisforthecirculareconomy.C2C tools to implement those cycles are central to businesssuccess.

» CradletoCradle®enhancesthequalityandpositiveimpactsofproductsandsystemssotheyare…

-morepracticalfortheuser,-healthierforeveryoneaffectedbytheproduct,-beneficialfortheeconomyandtheenvironment.

» Toenhancequalityandaddvalueforstakeholders,C2Cpromotesinnovationpartnershipsalongthevaluechainincludingmanu-facturing,distribution,use,disassembly,recoveryandreuse.

» C2Chasalreadyprovidedapracticalyetinspirationalscientificand business model for improving quality by characterizinghundreds of products and thousands of materials for theirhumanandenvironmentalhealthattributes,aswellasdefiningsystemstosafelyandfullycyclematerialsintonewproducts.

WhatistheCircularEconomypoweredbyCradletoCradle®?

ThelinkbetweenCircularEconomyandCradletoCradle®

CradletoCradle®Categories

Philosophye.g.,aquality-basedinnovation platformforeconomy,ecologyandsocialequity.

Principlesthataretranslatedintomeasurable criteriatoguidethecirculareconomy.

Applicationtools.

Howtoachievecontinuousgrowthwithoutrelyingonlinearprimaryraw

materialsuse?

ThethreeprinciplesofCradletoCradle®

EverythingisDesignedasaResource forSomethingElse.

UseCurrentSolarIncome.Energy thatcanbeRenewedasitisUsed.

CelebrateDiversity.Biodiversity, Cultural,andInnovationDiversity.

Positiveimpactsareachievedby

focusingontheseinnovationprinciples:

IntheCircularEconomypoweredbyCradletoCradle®,systems,products,components,materialsandingredientsaredesignedfortwo main pathways: consumption pathways in the Biospherewhere products are designed to safely enter biological systemsandservicepathwaysintheTechnospherewhereproductssafelyentertechnicalsystemstobepartoffutureproductgenerations.

Biosphere Products for consumption are designed that they ortheir degradation by-products generated during their use (e.g.abrasion or dilution in air, water or soil) support the biologicalsystems they enter in the Biosphere. Those resources can berenewed throughagriculture, reforestation,aquacultureorotherecosystemprocesses,eachleadingtonextgenerationsofproducts.

Examples of consumption products are: biodegradable textiles,cosmetics,orvehiclebrakepadsthatwearout.Howeverconsump-tionproductsalsocontaininertmaterialslikesand,whichdonotbiodegradebutsupportbio-processeslikesoilformation.Aswell,metals like zinc and magnesium are usable in the Biosphere ifdesignedforcompatibilitywithbiosystems.

Technosphere Products are designed to be chemically stableduringuseandgetdismantledintoTechnosphereresourcesaftertheyfulfilltheirfunction.Theingredientsarecarefullydefinedasresources for next generations of service products. Examples oftechnical resources are found in electronic appliances and per-sonaldevices.Forexample,itistechnicallypossibletoproduceamobilephonewhichworks formore than20years,butnobodywants a product whose technology is obsolete after 2 years.Thematerialsintheproductaredesignedtoberecoveredthroughflexibledesignwithoutlossinvalueandquality.

BiosphereandTechnosphere

Fig. 2: Cycle of consumption in Biosphere and cycle of service in Technosphere. (Source: EPEA)

Figure3describesmaterialflowsinaCircularEconomypoweredbyCradletoCradle®.Theprocessoftenstartswithdesignorre-design.Thisphasedeterminesifasystemorproductwillbepartofthetechnosphereorbiosphere.Abiosphereproductisconsumed,butbeforethatitcangothroughmanycascades.Forexamplea

high-quality sheetofpaperwillbe recycled toa sheetofpaperwith shorter fibers, then after many other steps return to thebiosphereasanutrientviacompostingorcleancombustioninacontinuous cycle. Materials and additives are designed for thebiosphere.

Fig. 3: Illustration of the material fl ows in the Circular Economy powered by Cradle to Cradle®. (Source: EPEA and Returnity Partners)

Service

Consumption

Know-howfeedbackloopforTechnosphereproductdesign

Disassembly/Recycling/Upcycling

Disassembly/Remanufacture/ComponentHarvesting

Refurbishment

Re-distribution

Maintenance

RenewableEnergy

Know-howfeedbackloopforBiosphereproductdesign

Cascadestoregeneratefeedstockindustrially

Bio-nutrientdispersal&emmission

Bio-nutrientreprocessing&

renewableenergyproduction

Bio-basedregenerationbynatural

environment

Agriculture,aquaculture,

forestry

Harvesting&processingbio-based

resourcesforBiosphereandTechnosphere

materials

Redesign&Prototyping

Material&Additives

Formulation

ComponentProduction

ProductAssembly Distribution Collection

Technosphere

Biosphere

OvercomingChallengesonthewaytoaCircularEconomy poweredbyCradletoCradle®

WhichchallengesareonthewaytotheCircularEconomypoweredbyCradletoCradle®?

» Lineareconomyrunningincircles?Agrowingwaveofconsul-tancies present themselves as circular economy experts, butwithoutpractical experience theyoftendefault to traditionalwaste management which represents the linear economyrunningincircles,insteadoftrulyproductiveinnovation.

» Rethinkingbusinessmodels: Findingapathway froma lineartowards a circular model which allows the company to fulfillobjectivesbetterthanwithalinearmodel.Thetransformationgenerates quick wins but might also take years to complete.Tokeeptherightdirection,practicalroadmapsareused.

» Adapting supply networks: Essential circular components areoftenmissingfromalinearvaluechain.Desso,forexample,hadtodevelopandestablishatakebackprocessandrecyclingwithdifferent partners in the course of the new product develop-ment.

» Employeemotivation:Atransformationfromone-waytocircularisofteninspirationalbutalsochallengingforemployees.Estab-lished target systems and processes are called into question.Itiscrucialtoimplementfirstsuccessfulproductdevelopmentsandclearpositivebusiness caseswith theemployeesbypro-vidingthemwiththerightskillsandtools.Onlydemonstrable,tangibleresultswillconvinceemployeestosharethechangeofthebusinessmodel.

A strongand intuitivebusiness case standsbehind theCircularEconomypoweredbyCradletoCradle®intheshortandlong-term.Every organization wants to reduce its dependence on volatilenaturalresourcesandpreservethevalueofsecondaryresources.Inaddition,thedemandsofcustomersfor“green“productsismetasanaddedside-benefitandacloserrelationshipwithsuppliers isestablished.

Atapracticallevel,thisissometimeschallengingtoimplement.Organizationsareoftennotpreparedtocapitalizeonpossibilities.

Kingfisher’sCEO,SirIanCheshire,said:“Thebiggesthurdleisthatwe need to completely rethink our business model. Companiestend to optimize the existing business model in small steps.”Their strategies, structures and business activities are deeplyrootedinthelinearapproachforgrowth.

Companies are not islands; they are anchored in a complexnetworkofsuppliersandcustomers.Inordertomasterthetrans-formationtowardsasuccessfulcyclicalmodel,supplychainsmustbeincluded.Withoutconsideringthewholevaluechainitismostlynotpossibletorealizethemaximumpotential.AnexampleofasuccessfulintegrationofthesupplychainistheCarlsbergCircularCommunity in which the beer producer Carlsberg has collabo-ratedwithselectedsuppliersinordertorealizethetransformationtoaCircularEconomypoweredbyCradletoCradle®.

Sincetheturnof themillenniummorecompaniesaregainingacompetitiveadvantagefromre-usingmaterialsandresourcestore-designproducts,processesandservices,aswellasgeneratingcost-effective renewable energy. Improved market share andmaterialandenergycostsavingsareresults.

New producer responsibility rules by national and EU govern-ments are forcing companies to deal with the issue becausebusiness-as-usualisleadingtoaddedcosts.Findingconventionalsolutions for problems by using the „Take-Make-Waste“ linearsystem is costly.Anenterprisewhich reacts faster thancompe-titorstodevelopproductsandprocessesforacircularsystemwillhaveanunequivocalcompetitiveadvantage.

Cradle to Cradle® design gives a positive/added value to aproductorprocess.

In addition to smaller companies with clearly structured valuechains, leading internationalcompanies likeKingfisher,H&MorIKEAarestartingtousethecirculareconomyconcept.Theywanttosolvesupplychainrisksandachievesignificantimprovementsinproductinnovationandquality.ThechangeovertotheCircularEconomy increasingly distinguishes these companies as inno-vators.

AddedvalueoftheCircularEconomy poweredbyCradletoCradle®

TheTransformationConcept–fromlineartocircular

1.Evaluate your mission and goals, and if necessary re-statethem:Startfromwhereyouwanttoberatherthanwhereyouare today.Do thepresentgoals statewhere theorganizationwantstobeinafewyears?Iftheydo,howtotranslatethoseintoC2Cintentions?”Firstdotherightthing,thenafterthatdoittherightway.“

2.Quick Scan: A Quick Scan allows economical assessment ofwhereyouare,whatyouaredoing right,andpotentialquickC2C wins. As well a rough description is co-developed onhow the organization might align with the circular economyapproach.Topicareasandprojectsareidentifiedtodemonstrateasquicklyaspossible theaddedvalueof thecircular system.FromthisfollowsthereturnoninvestmentassessmentforthetransitiontotheCircularEconomy.InmostcasesaquickROIispossible.

3.Motivation and Culture Screening: Transformation readinessoftheleadershipandemployeesisevaluated.Adaptingtothecultureoftheorganizationandtheattitudesofstaffisessentialforasuccessfultransformation.

Thechangeoverfromalineartoacircularsystemdoesnottakeplaceovernight.Toachieveit,EPEAdecidedtobringKienbaumManagement Consultants, a leading company in the field oftransformation,onboardaspartners.Kienbaumknowsthat forsustainable change, not only processes and products must bechangedbutchangemustalsobeanchoredincorporatestrategyaswellasinthemindsofemployees.

Howdoesatransformationprocessbegin?

WeguaranteesuccessfultransformationstoaCircularEconomypoweredbyCradletoCradle®byfocusingonorganizationsandpeopleadvice.

C2CDimensionofTransformation ConsultingConcept

Alignment&Strategy

C2CPrinciples

Structures&Management

PositiveMotivation

Processes&Systems

ValueStreams

Competences&Culture

ProductasaService

Kienbaum Competences

EPEA Competences

» Reliableimplementationandresultswiththeintegratedmanagementofallleversoftransformationandsuccessfactors

» Professionalandinnovativetrans-formationmanagement

» Integratedteamswithindustry,C2C,andHRcompetence

» Indepthknowledgeofsafeandtoxicmaterialdependingonthedefineduse

» Areliablesetofcombinedtools,EPEAandKienbaum,toenableapositivefootprint

Results

C2CTransformation

PositiveFootprint

SuccessFactors

Organization

REThinkREADY

forChange

People

DiversityMotivation/

Mindset

Fig. 4: Cooperation of Kienbaum and EPEA

TheStepsofTransformationtowardstheCircularEconomy poweredbyCradletoCradle®

Transformationoccursinsevenphases.

IntheignitionphasemotivationfortheCircularEconomypoweredbyCradletoCradle®isgeneratedwiththerelevantstakeholders.Thequestionof“why“forstakeholderscomestotheforeground.AsubsequentQuickScanallowsabaselineandfirstassessmentofpotential pathways from linear towards circular models. Thesketchingofa roughgoalandthewillingnesstochangewithinthecompanyareanalyzed.Aswell,hypothesesareformulatedonhowthecompanycanmovefromlineartocircular.Inthisphase,thebusinesscaseispresentedingreaterdetail.

In the Quick Scan opportunities for improvement are identifiedandintheanalysisphasefurtherinvestigated.PotentialsforC2Care identified by, for instance, materials diagnostics, interviewswith stakeholders, basedonC2Cprinciples, imagineeringwork-shops, and value stream mapping. In addition, the culture andwillingnesstochangearedeeplyanalyzedandthebusinesscaseisdefined.

IntheBuy-Inphase,thetransformationisactivelypursued.C2Ctools are linked with tools from the transformation domain.Thetransformation iscommunicatedacrossalldivisionsandallemployeesarecloselyinvolved.Iftheemployeesareconvincedbyrapid, tangible results, a transformation will have significantsuccess.

KienbaumandEPEAprovideaconceptandpartnershipnetworkthatisuniqueinthemarket.Byworkingwithknowledgeacquiredby EPEA over decades in diverse companies and under chal-lenging conditions, organizations will profit from the CircularEconomy.ThetransformationexpertiseofKienbaumensuresthatasustainabletransformationofthecompanyleadstheenterpriseintothefutureeconomy.

Fig. 5: Illustration of the transformation concept

Ignition QuickScan Analysis Buy-in+Concept PilotQuickWins RollOut

0,5Day 2-3Days 3-6Weeks 1-6Months Months Years

InterestinCircularEconomy

poweredbyCradletoCradle®

TransformationScope–

Whatstageistheorganizationat?

PreliminaryStakeholder

Identification

IfHowWhen

ChangeReadiness/

Risk/CultureAnalysis

IdentificationofOpportunities

Product/Service

Culture,Stakeholder

FinancialStructure

ManagementSystem(BSC)

ValueChain

Value&SellingProposition

WithinCompany/EntityinValueChain

10Steps

10Steps

10Steps

10Steps

10Steps

....

SectorialBenchmarking

Securityinweakmarketphases.TheCircularEconomypoweredbyCradletoCradle®isaninnovationdriverwhichhelpsto“crashproof“organizations.TheDutchcarpetmanufacturerDessohasimpressivelydemonstratedthis.Duringthefinancialcrisisin2009Dessoputonthemarketacarpetwhichcleanstheair.Thecarpetcommandedahighervaluethanothermodelsonthemarketdueto theperceivedvaluebycustomers,andat thesametime thecarpetmanufacturer increaseditsmarketshareinEuropeto23percent–inanabsolutecrisisperiod.

Securityagainstvolatility.Geopoliticallyinducedscarcitieslikee.g. tradebarriersare causing resourceandprice volatility. TheCradletoCradle®conceptisanexcellenttooltomitigaterisksofmarket andpricefluctuations.A re-designofproductshelps torecoversecondaryrawmaterialsforreuseatthesamelevelofquality.Savingsofprimaryrawmaterialsareachievedatthesametime.

Cost-effectiveinternalizationofexternalities.Internalizingthecosts of external impacts of organizations is being driven byregulations that provide financial incentives to create positive

external effects, and punish negative impacts. The CircularEconomy helps to strengthen positive effects and diminishnegativeones.

Reputationmanagement:Companiesarepressuredtomaintainapositivepublicperception,especiallyregardingbiggerandmorewell-knownfirms. Scandals cannotonlydestroy the company’simage,butalossinreputationcanultimatelybeofdetrimenttothefirm’s sharevalue. The systematic focusonafirm’spositiveimpactonpeople,environment,andorganizationoftheCradletoCradle®-conceptisavitalfactorforastableandhonestpositiveimage;whilstthecompanyexercisescorporatesocialresponsibilityduediligence.

Improvedsavings.Productinnovationandimprovedqualityleadtosignificantcostsavingsformaterialswhicharethehighestcostfactorsformanymanufacturers.IntheCircularEconomypoweredbyCradletoCradle®rawmaterialscanbeusedagainandagainorberecovered.Throughtheirownenergyproductionorenergysavings,costsarereduced.

ValuepropositionsoftheCircularEconomy poweredbyCradletoCradle®

Increased corporate attractiveness. The attractiveness andvalueoforganizationsrisewithCradletoCradle®(seeM&AofthecompanyTarkettwiththecompanyDesso).Alsomotivationandproductivityofemployeesisfurtherincreased.

Advantageofsupplychainpartnerships.Transformingproductportfolios and services along the whole value chain leads tosavingsbetweencompanies.Additionally,thedeepenedrelation-ship results in enhanced knowledge exchange and thus fostersinnovation.Completelynewvalue creation structuresoffernewbusiness and service models. At the same time the motiva-tionandproductivityofemployeesisenhanced.

Customer relationships redefined. The service concept opensnew customer relationships. Banking of high-quality materialswith customers creates a new customer touch point withoutcreatingaddedcosts.High-qualitymaterialsarealsorecoveredasrawmaterialsandthroughdefinedusageperiodsoftheproductsthe quantities and qualities of the materials are known andpredictable. The clear focus on client value improves productportfolioandsecuresincreasedmarketshareeveninweakmarketphases.

Fig. 6: Value proposition of Circular Economy powered by Cradle to Cradle® broken down by industries. (Source: Kienbaum and EPEA)

Industry

Market&PriceVolatility

MaterialSupplySecurity

Improvedproductivity/motivation

ROI/Savings/Revenues

ProductMulti-

functionality

EnergyGeneration/

Savings

Risk/ReputationManagement

ImprovedResidualValue

CostBenefit

Automotive

Manufacturing

Chemicals

LifeSciences

Institutional&Public

Retailing

....

InternalizingExternalCosts

CorporateSocialResponsibility

EPEA Internationale Umweltforschung GmbH is the award-winning developer of Circular Economy concepts powered byCradletoCradle®formorethan20yearsandcitedbytheWorldEconomicForumaswellasother circulareconomy leaders. Theinstitutehasknow-howthatisuniqueworldwide.Thecooperationbetween EPEA and Kienbaum, linking the C2C knowhow andtransformationexpertise,enablesapowerfulapproachinadding

value to the business. Kienbaum success factors “People andOrganization”andthein-depthknowledgeofthedimensionsoftransformation makes a smooth transition possible. The com-paniesworkwithadiverserangeofindustries,governmentsandinstitutionsonvaluepropositionstotransformtheeconomiccyclewithsupportfromafar-reachingpartnernetwork.

EPEAandKienbaum– yourpartnersforaddedvalues

Contact

MatthiasBreyPhone: +492119659-338Fax: +492119659-335Mobile:+491728810483matthias.brey@kienbaum.com

KienbaumManagementConsultantsGmbHHafenspitze,Speditionstraße2140221Dusseldorf

www.kienbaum.com

KatjaHansenMobile:+4917659704341hansen@braungart.com

EPEAInternationaleUmweltforschungGmbHTrostbrücke420457Hamburg

www.epea.com

Picturecredits|Cover photo: © B. Wylezich – Fotolia.com; page 2: © marigold_88 – Fotolia.com; page 5: © Rainer von Brandis – istock.de; page 6: © Thomas Vogel – istock.de; page 11: © photokey – istock.de; page 13: © sunara – istock.de

KienbaumManagementConsultants