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Slide 1

ENT202 / Innovation: Strategies and Systems

Week 9: Circular Economy

College of Business and Law

Karmen Lužar

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Recognition of Traditional owners and Indigenous cultures

Charles Darwin University acknowledges the traditional custodians of the land on which we’re meeting and pays respect to Elders both past and present and extends that respect to all Aboriginal and Torres Strait Islander people.

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Slide 3

Introduction

• The industrial revolution is characterised by a linear model of production and consumption, following a “take-make-dispose” pattern.

• Estimated 2,500 and 4,000 billion kg of waste is annually discarded in the world.

• Australia generated 76 million tonnes of waste in 2018-19. Over half of all waste was sent for recycling (38.5 million tonnes), while 27% was sent to landfill for disposal (20.5 million tonnes). Sectors generating the most waste were: • Manufacturing: 12.8 million tonnes (16.9%)

• Construction: 12.7 million tonnes (16.8%)

• Households: 12.4 million tonnes (16.3%)

• Electricity, gas and water services: 10.9 million tonnes (14.4%)

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Slide 4

From linear to circular economy

LINEAR FLOW OF MATERIALS

CIRCULAR FLOW OF MATERIALS

Adapted from Samples, C & Hoffmann J 2013

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Circular economy (CE)

• A new industrial system that replaces the “end-of-life” concept by restoration and regeneration by intention and design.

• Shift toward the use of renewable sources of energy, reduction or elimination of the use of toxic materials.

• By redesigning products, services or processes, a waste/previously unvalorised resource is transformed into a productive one that may be reused in closed-loop systems.

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Circular economy (CE) cont.

• Traditionally based on the 3R principle:

• Reduce: Eco-efficiency is a precondition to any circular approach.

• Reuse: maximum material can be preserved for the longest possible time.

• Recycle: to revalorize maximum materials contained in products.

• However, circular economy is much more than recycling as we consider it traditionally. The concept of waste is indeed eliminated, products being designed and optimized for a cycle of disassembly and reuse.

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Cradle-to-cradle (C2C) philosophy

• Classifies all materials entering productive processes around two metabolic logics:

• Biological metabolism

• Technical metabolism

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Biological metabolism

• Based on the ‘biological nutrient’ - material or a product is designed from the beginning to reintegrate the biological cycle, by being 100 percent biodegradable.

• Many applications, e.g. a natural cotton T-shirt, biodegradable cell phone case, etc.

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Technical metabolism

• The industrial metabolic principle

• Materials that are not biodegradable are designed in such a manner to be recovered and reintroduced in a closed productive cycle, without any loss of quality.

• ≠ Recycling

• Demands a whole new product design upstream that supports downstream disassembly and recuperation of materials for their rehabilitation and further reuse.

• Needs to guard against any contamination or any mixture of substances that would be irreversible.

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Slide 10

Sources of value creation

• Circular economy allows four clear-cut sources of value creation, based on increased material and energy productivity:

1. Power of the inner circle

2. Power of circling longer

3. Power of cascaded use

4. Power of pure circles

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Power of the inner circle

• Minimising material use compared to the linear production system.

• Tighter the circle and the faster a product returns to use:

-> higher the potential savings on material, labor, energy and capital embedded in the product and on the associated externalities (such as GHG emissions, water, toxicity).

-> higher virgin material substitution effect, generating another source of value.

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Power of circling longer

• Maximising the number of consecutive cycles (be it reuse, remanufacturing or recycling) and/or the time in each cycle.

• By keeping products, components and materials in use longer in closed loop systems, the revenue generated by unit of mobilised resources is increased, as is the generated value.

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Power of cascaded use

• If the materials/components cannot be maintained in the same economic cycle, an assessment should be made to cascade the resources across different product categories, by diversifying reuse across the value chain.

• Example: cotton clothing may be reused first as second- hand apparel, then cross to the furniture industry as fiber- fill in upholstery, the fiber-fill being later reused in stone wool insulation for construction.

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Power of pure circles

• Uncontaminated material streams increase collection and redistribution efficiency while maintaining quality, particularly of technical materials, which, in turn, extends product longevity and thus increases material productivity.

• Need for a new approach of designing goods and services in a way that allows the quality of components across the same economic cycles to be maintained, which facilitates the disassembly processes.

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CE and innovation

• CE offers a broad space for innovation, related to:

• Product redesign

• Economic valorization of waste by a diversification of activity

• The creation of partnerships

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Circularity in product innovation

• Redesigning a product to allow the recovery of its components while maintaining the quality.

• Generally, cannot be made without a relatively major reconfiguration of the company and its business model.

• Example: Xerox - organised a circular material flow of its photocopiers, allowing it to recover 70–90 percent of the components of old machines to reintroduce them into the new generations of photocopiers.

• Sometimes it is possible though to apply the circularity principle just to the perimeter of the product.

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Example: Green Kitchen

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Circularity in economic valorisation of waste • By-product to be revalorised, directly or indirectly.

• Direct valorisation: direct economic value from building a value proposition for a new company activity (waste = resource).

• Indirect valorisation: waste reduction = reduction of waste treatment costs (profitability medium to long term).

• Example: a house entirely built out of urban waste.

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Slide 19

Circularity in local innovation systems • Application to a specific geographical area.

• ‘Eco-districts’ or ‘eco-parks’, e.g. Kalundborg in Denmark, Tianjin in China, Masdar City in the UAE

• Technology can be a major facilitator for developing such initiatives, e.g. SYNERGie.

• Alternative to parks: single entrepreneurial initiatives.

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Kalundborg, Denmark

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New economic activity

• SBMC help to structure the development and the strategic design.

• Value proposition = an optimised provision of qualified and quantified organic materials on a given territory.

• Web platform as a contact and distribution channel (IT competences and equipment constitute another key resource).

• Automatic management of customer relation/partner (personalised direct relation for the establishment of the initial contacts).

• A second market: the material holders.

• A sales force necessary to launch the project.

• Key activities: the cartography of available materials, the development of a platform and specific modules.

• Partnership with a logistic operator, Chambers of Commerce and Environmental Government Agencies.

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The economic model

• Multiple options (business cases must be carried out to establish the economically viable and profitable scenarios).

• Various scenarios depending on resources.

• Various methods to generate revenue streams, e.g. recovering economically the exchanged material, collecting the monetary flows and managing the remuneration of the actors, by taking a fee for the intermediation OR a fixed monthly or annual subscription, plus a variable fee depending on the amount offered or demanded.

• Various price fixing of the material.

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Towards triple bottom line

• The profitability of such a project must be measured by triple bottom line metrics, but also through an evaluation of the project’s environmental and social surpluses, based on relevant indicators.

• On a national level the main environmental economic instruments are natural resource prices and environmental fees; resources, energy and environmental taxation; green trade policy; emissions trading; green consumption; eco-compensation; green fiscal policy; and green finance.

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CE industry report

• Ellen MacArthur Foundation (EMF)

• First CE report in 2012.

• The potential to transform several economic sectors, e.g. buildings, mobiles and smart-phones, light commercial vehicles and washing machines – global impact.

• A subset of the EU manufacturing sector could realise net materials cost savings worth up to US 630 billion per annum towards 2025—stimulating economic activity in the areas of product development, remanufacturing, and refurbishment.

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CE industry report cont.

• 2013, the EMF released its second report focusing on fast- moving consumer goods that have a lower unit cost, are bought more often and have a much shorter service life than durable goods: • Food and beverage

• Clothing and footwear

• Packaging

• The full value of these circular opportunities for fast-moving consumer goods could be as much as USD 700 billion per annum in material savings all net of materials used in the reverse-cycle processes. Those materials savings would represent about 20% of the materials input costs incurred by the consumer goods industry.

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Triggers for change

1) Resource scarcity and tighter environmental standards;

2) Information technology enabling traceability in the supply chain (e.g. connected devices); and

3) A shift in consumer behavior from ownership to access.

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New CE business models

• For the consumer goods industry:

• Volume aggregators, e.g. Asos

• Technology pioneers, e.g. Veolia

• Micro-marketers, e.g. Woolworths

• Urban-loop providers, e.g. The Plant

• Product-to-service converters, e.g. Patagonia

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EMF since…

• 2021: Universal circular economy policy goals: enabling the transition to scale

• 2020: Upstream Innovation: a guide to packaging solutions

• 2020: The circular economy: a transformative Covid-19 recovery strategy

• 2019: Circular Economy in Cities

• 2017: The New Plastics Economy: Rethinking the future of plastics & catalysing action

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To conclude

• Waste, by definition, is deprived of any value.

• Waste should be reconsidered as a resource, way beyond mere recycling.

• Waste valorisation requires changes – in production and consumption processes.

• Vision past immediate financial gain required.

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Slide 30

Bibliography

• Australian Bureau of Statistics 2020, Waste Account, Australia, Experimental Estimates, https://www.abs.gov.au/statistics/environment/environme ntal-management/waste-account-australia-experimental- estimates/latest-release

• Ellen MacArthur Foundation 2021, Publications, https://www.ellenmacarthurfoundation.org/publications

• Sempels, C & Hoffmann J 2013, ‘Chapter 4’ in Sustainable Innovation Strategy: Creating Value in a World of Finite Resources, Palgrave Macmillan.

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Slide 31

Next week…

• Use-oriented Services

• Tutorial reading for today (read before the tutorial): None.

• Tutorial reading for week 10 (read before the tutorial): None.

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