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Circular economy as strategy for sustainable development and business innovation


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Critical introduction to circular economy and how possiiblities and limitations for application in Danish businesses' strategies are analysed in a Danish research project

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Circular economy as strategy for sustainable development and business innovation

  1. 1. Circular economy Possibilities and limitations as strategy for sustainable development and business innovation UFRJ – 20 July 2015 Michael Søgaard Jørgensen Center for Design, Innovation and Sustainable Transition (DIST) Department of Development and Planning Aalborg University Copenhagen
  2. 2. 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 2
  3. 3. 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. 4. 4 Total EU resource consumption - not only national – measured in terms of mass Source: European Environmental Bureau, 2015
  5. 5. 5 Source: European Environmental Bureau, 2015
  6. 6. 6
  7. 7. 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. 8. 8 Findings from Ellen MacArthur case study about circular economy opportunities in Denmark Conducted together with Danish stakeholders
  9. 9. 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 9
  10. 10. 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 10
  11. 11. 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 11
  12. 12. Decoupling economic development, ressource consumption and environmental impacts 12 Source: European Environmental Bureau, 2015
  13. 13. 13
  14. 14. 14 Assumptions in modeling? No losers?
  15. 15. 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 15
  16. 16. 16 Source: European Environmental Bureau, 2015
  17. 17. A lot of technical possibilities not implemented 17 Source: European Environmental Bureau, 2015
  18. 18. 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
  19. 19. Case: The co-evolutionary history of renewable energy transition in Denmark Source: Elle et al , 2015
  20. 20. 20 What is produced? Why is waste generated? Globalised cheap production challenges repair and upgrading
  21. 21. 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 21
  22. 22. Impact of production AND consumption of products 22 Source: European Environmental Bureau, 2015
  23. 23. 23 Source: European Environmental Bureau, 2015
  24. 24. Policy-maker kit for national circular economy strategy 24 Source: Ellen MacArthur Foundation, 2015
  25. 25. 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. 25
  26. 26. 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 26
  27. 27. 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 27
  28. 28. 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
  29. 29. (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?
  30. 30. 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.)?
  31. 31. 31 Re-designing the value chain: Feasibility of circular environmental business strategy Source: Sanchez, Wenzel and Jørgensen, 2004
  32. 32. 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 32
  33. 33. 33 One of the global partners of Ellen MacArthur Foundation
  34. 34. 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
  35. 35. 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
  36. 36. Information network for integration of environmental concerns in innovation processes Knowledge resource Communication linkage Source: Lenox & Ehrenfeld 1997: Environmental Design Capability Interpretive structure? 36
  37. 37. 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
  38. 38. Coloplast’s process for medical device development Product knowledge Room for innovation Economic investment Environmental involvement User needs Idea Concept Product
  39. 39. 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. 39
  40. 40. 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) 40
  41. 41. 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 41
  42. 42. 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 42
  43. 43. Analysis of forces shaping the competitive position of a company 43 Source: Michael Porter, 2008
  44. 44. 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
  45. 45. 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 45
  46. 46. 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 46
  47. 47. 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?
  48. 48. 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
  49. 49. 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
  50. 50. 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
  51. 51. 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 51