Lezing Walter Stahel, Plan C Community Day 2013


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Presentation by professor Walter Stahel about the Circular Economy and the Performance Economy

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Lezing Walter Stahel, Plan C Community Day 2013

  1. 1. Circular Economy and Performance Economy Plan C Community day Antwerpen, 29 November 2013 Dr h.c. Walter R. Stahel Visiting Professor, University of Surrey Founder-Director, The Product-Life Institute, Geneva www.product-life.org, wrstahel2014@gmail.com 1 1
  2. 2. Four topics • The Circular Economy – closed loops of a regional economy • The Performance Economy – selling goods as services, retained ownership of goods and embodied resources • Drivers of the Circular Economy • Creating sustainable framework conditions – do not tax renewable resources including human labour, – do not levy VAT on value preserving activities
  3. 3. Reminder: today’s linear industrial economy is driven by the bigger-better-faster-safer syndrome of fashion, growth means more throughput zero-life products resources materials manufacturing distrib. P.O.S. micro-economic profit optimisation use waste P.O.S. CONSUMER STATE At the P.O.S., property and liability are transferred to the CONSUMER and the STATE
  4. 4. 1 The Circular Economy Business models: reuse and service-life extension of goods and components, recovery of molecules, •Tool to build stronger regional economies and more resilient communities (with reduced disaster risk), •Drivers are waste legislation, mining legislation; economic autonomy, cooperation and partnerships, •Impacts are local job creation, reductions in GHG emissions and in waste volumes, •Result is the decoupling of wealth creation and resource consumption.
  5. 5. A Circular Economy is managing manufactured stock (capital) All infrastructure, buildings, equipment, many durable goods and catalytic goods, through •Reuse and remarketing (2nd hand), including waste heat and water, •Repair, operation & maintenance, remanufacturing and re-refining including lubrication oils, •Technologic upgrading and fashion upgrading of goods and components, •Material recycling.
  6. 6. The economics of loops local is beautiful in a Circular Economy A Circular Economy has it own rules: • the smaller the loops the more profitable and resource efficient they are, • loops have no beginning and no end, • the low speed of the circular flow is crucial, the law of reverse compound interests applies, • it substitutes manpower for energy and material resources, • It manages manufactured stocks, not flows, it thrives on preserving existing values. 6
  7. 7. The main impacts of the C.E. less energyintensive activities X less environmental impairment resource conservation security job creation X less regional economy environmental Source: Stahel, Walter (EU report) 1976 impairment 7
  8. 8. Main impact job creation: product-life exten-sion is a strategy to substitute manpower for energy 10 years 20 years labour factory factory 30 years labour labour parts parts parts Source: Stahel, Walter 1976 8
  9. 9. The main environmental impacts of the C.E. A 2004 sectoral study on restoring used automotive engines compared to a like-new condition showed, compared to manufacturing new engines: • • • • • Lower economic costs (30-53%), Lower raw material consumption (26-90%), Lower waste generation (65-88%), Lower energy consumption (68-83%), Lower emissions (50-88%) • • • • • 73-78% less carbon dioxide (CO2), 48-88% less CO, 72-85% less NOx, 71-84% less SOx, 50-61% less non-methane hydrocarbons emissions. Source: Smith, VM and Keolian, GA (2004) The value of remanufactured engines, life-cycle environmental and economic perspectives, Journal of Industrial Ecology, 8(1-2) 193-222 9
  10. 10. Another main impact - GHG reduction mio t GHG emissions 800 mio t 550 mio t 100 mio t Source: WRAP (2009) Lifetime optimisation Circular Economy Performance Economy German EEG 10
  11. 11. The quality angle of the C.E. The circular economy is • regional, meaning less transport volumes and shorter distances in the processing chain, • more labour-intensive than manufacturing because economies of scale are limited, • a high-quality world: Stradivari instruments and expensive watches do not live forever by design, but through periodic remanufacturing, • the knowledge and know-how of past technologies are necessary for retrofitting infrastructure, goods and equipment (i.e. jobs for silver workers), • foster a caring attitude (stock optimisation is based on preserving existing values). 11
  12. 12. Think $$ not waste - remarketing used seats for reuse is the challenge, not finding the cheapest recycler! 05/12/13 The Performance Economy 12
  13. 13. CARING, sociocultural innovations a new stewardship relationship with goods NEW ? 13
  14. 14. 2 The Performance Economy Business models: selling performance, selling goods as services: •Tools are systems innovation and retained ownership of goods and their embodied resources, •Drivers are corporate strategy, changes in attitude from fashion to function, from toys to tools, •Impacts are an internalisation of the costs of risk and of waste; and a performance guarantee for customers, •Results are a higher future resource security; a transition from supply chains to supply circles.
  15. 15. Systems innovation, not product innovation! Lighthouses have done more for the safety of shipping than any technical improvement to ships. 16
  16. 16. The Performance Economy selling goods as services • is the most profitable and competitive business model of the Circular Economy, • is sustainable and preventive as economic actors (fleet managers) internalise the cost of risk and of waste, • leads to radical and rapid new product design for take-back and reuse of goods and components, • achieves the highest resource efficiency and security as it maintains ownership of goods and embodied resources, • achieves higher profits as sufficiency and efficiency solutions can both be exploited profitably. 17
  17. 17. libraries 18
  18. 18. B2B: where do corporate customers buy goods as services - pay-per-use • Rolls Royce sells power-by-the-hour for jet engines and gas turbines, • Michelin sells tyre use-by-the-mile to haulage companies and armed forces, • Textile leasing for hotel textiles and uniforms / professional apparel, • Operational leasing: Xerox and Ricoh sell customer satisfaction for a fixed price per copy, • IT: Software-as-a-service, cloud computing, payfor-capacity (HP)
  19. 19. Example: Private Finance Initiatives (PFI) Le Viaduc de Millau, a 2001 78-year contract to design, finance, build and operate the bridge till 2079, with a maintenance contract until 2121 Le pont de Millau, France
  20. 20. Reuse needs a Corporate Reuse Strategy: learing from pioneers, XEROX Corp., 1993 21
  21. 21. 3 Drivers for change to the C.E. • People: persistent unemployment, ageing populations, shift of working population, • Scientific and technological progress, • Commercial innovation in saturated markets, • Social innovation – caring as a quality, keeping (teddy bear) goods for life, • Legislation on resource efficiency, waste, • Resource security - regarding stocks of goods as giant regional stockpile to reduce disaster risk (pandemics, volcanoes, solar storms, etc.), • Rising commodity prices.
  22. 22. Why now? A circular economy is a sustainable alternative to production in saturated markets (cars, Germany) new car registrations number of scrapped cars new registrations cars scrapped 21st C 1960 1995 24
  23. 23. The (EU) drivers of a Circular Economy less energyintensive activities and environmental impairment Resource security EU Resource Tax Proposal 2011 U.S. SEC rules Source: Stahel, Walter (EU report) 1976 less waste UN mercury Agreement EU waste directive 2008 EU Marshall plan for REE 25
  24. 24. Why now? The small loops of a circular economy (C.E.) will become law in the EU EU Waste Directive 2008, to be transformed into national legislation by 31 Dec 2013, stipulates: Re-using goods and extending the service-life of goods are the two strategies listed to fulfil the priority of waste prevention. PS REE in nanotechnology applications might only be recoverable by reusing the components.
  25. 25. Drivers for change toward the P.E. are: • Public procurement buying service, not hardware – NASA, Pentagon, • Commercial innovation give your customers the function, utility, performance of the goods, • Scientific and technological progress, • Economic innovation – stock as societal wealth, • Cultural changes – from ownership to use, from fashion to function (e.g. car sharing), • Corporate resource autonomy: The goods of today are the resources of tomorrow at yesterday’s prices.
  26. 26. The shift from sinking to rising resource prices 21st C
  27. 27. Economic innovation: stock as societal wealth The wealth of societies is based on stocks (quantity and quality), not flows: •Natural capital and environment (global commons, water, soil, biodiversity, fish, forests), •Cultural capital (material and immaterial goods), •Human capital (including health, education), •Acquired capital (knowledge, capabilities, skills), •Manufactured capital (infrastructure, buildings, goods), •Financial capital (incl. investments, savings).
  28. 28. The governing principle of stock management is caring Caring activities •are labour intensive and decentralised, •have to be done where the clients are, •cannot easily achieve economies of scale. Examples are education & health services, organic farming, Stock management enables to redefine growth (and wealth) as increase in the Q&Q of stock.
  29. 29. Some of my teddy bears: Toyota Corona 1800, MkII, 1969 Jaguar XJ6, 1969 What are your teddy bears?
  30. 30. 4 Creating sustainable framework conditions Sustainable taxation promotes all caring activities including a Circular Economy : •Do not tax renewable resources, including labour/work, tax non-renewable resources instead, •Do not levy VAT on the value preservation activities of the Circular Economy, •Give carbon credits to carbon emission prevention (preservation of embodied carbon)
  31. 31. Sustainable taxation promotes a Circular Economy and the use of human labour, work, Human labour is the most versatile, creative and adaptable resource, able to be educated but perishable if unused, • Continuity of work and continued learning are essential to maintain and upgrade the acquired capital of knowledge, skills and capabilities embodied in people, • Human labour is a low-carbon energy (and has the same resource consumption if working or idle), The Circular Economy enables a better use of the stocks of human, acquired and manufactured capital of all technologies and skills, including silver workers. 34
  32. 32. Sustainable taxation is a booster to increase: resource security, and jobs prevent GHG emissions Copyright/author: Walter R. Stahel 2011 RESOURCE SECURITY SUSTAINABLE JOB TAXATION CREATION GHG EMISSION REDUCTION
  33. 33. Sustainable taxation is a booster for: REGIONAL CARING ACTIVITIES HUMAN CAPITAL SUSTAINABLE and the use TAXATION of human, cultural, natural and manufactured capital Copyright/author: Walter R. Stahel 2013 MANUFACTURED CAPITAL CULTURAL CAPITAL NATURAL CAPITAL EMBODIED RESSOURCES
  34. 34. 5 Conclusions • The Circular Economy is a supplement to the industrial production economy, • The Performance economy is a substitute of the industrial economy in regions with saturated markets, • A regional Circular Economy creates a more resilient society, less vulnerable to uninterrupted global supply chains, • Sustainable taxation is a booster for all caring activities, including the Circular Economy. • Obstacles include missing university curricula in e.g. operation and maintenance engineering (O&M E).
  35. 35. Where to find more information: The Performance Economy Walter R. Stahel published by Palgrave Macmillan London March 2010 ISBN 978-0-230-58466-2 38
  36. 36. Thank you for your attention Dr h.c. Walter R. Stahel Visiting Professor, University of Surrey Founder-Director, The Product-Life Institute, Geneva www.product-life.org, wrstahel2014@gmail.com 1 39 39