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ITS TIME TO CHANGE FOR A BETTER
FUTURE
CIRCULAR ECONOMY
The Story So Far!
The last 150 years of industrial evolution have been dominated
by a one-way or linear model of production and consumption in
which goods are manufactured from raw materials, sold, used
and then discarded or incinerated as waste.
Under Linear Model of Production, goods can be broadly
classified into two types namely,
1. Biological
2. Technical
Life cycle of Biological
products where products are
produced, used & discarded
Circular economy - a new paradigm in manufacutring
Life Cycle of the technical
products where products are
produced, used & discarded
Circular economy - a new paradigm in manufacutring
What is happening at macro level?
Resources
Waste
Depleting Natural Resources!
Prices bouncing faster than Economies
• Success:
 Between 1900 and 2000, global GDP
grew twenty times and created
hitherto unknown levels of material
prosperity
 This model has been exceptionally
successful in providing affordable
products to consumers and material
prosperity to billions.
 The biggest economic downturn
since the Great Depression briefly
dampened demand, but since
2009, resource prices have
rebounded faster than global
economic output.
 Within this linear model, resources are extracted from the earth for
production and consumption on a one-way track with no plans for reuse
or active regeneration of the natural systems from which they have been
taken
 In a world of soon to be 9 billion consumers who are actively buying
manufactured goods, this approach will hamper companies and
undermine economies.
 Some three billion consumers from the developing world will enter the
middle class by 2030.
Limitation/ Threats of Linear Consumption
Circular economy - a new paradigm in manufacutring
Circular economy - a new paradigm in manufacutring
What is Circular Economy?
The circular economy refers to an industrial economy that is
restorative by intention;
aims to rely on renewable energy;
minimises, tracks, and hopefully eliminates the use of toxic
chemicals; and
eradicates waste through careful design.
Take Make Dispose Waste Circular
Model
Take
Make
Use
Return
Linear Model of
consumption
Circular Economy
Founding principles of circular economy
Design out waste
Waste does not exist when the
biological and technical
components of a product are
designed by intention to fit
within a biological or technical
materials cycle designed for
remarketing, remanufacture,
disassembly or repurposing.
Build resilience through
diversity
Modularity, versatility and
adaptivity are prized features that
need to be prioritised in an
uncertain and fast-evolving world.
Production systems should be
flexible—able to use many
different inputs.
Work towards using energy
from renewable sources
Systems should ultimately
aim to run on renewable
energy—enabled by the
reduced threshold energy
levels required by a
restorative, circular
economy.
Think in ‘systems’
The ability to understand how
parts influence one another
within a whole, and the
relationship of the whole to the
parts, is crucial. Elements are
considered in relation to their
environmental and social
contexts.
Think in cascades
For biological materials, the
essence of value creation lies in
the opportunity to extract
additional value from products
and materials by cascading
them through other
applications.
Technical
Cycle
How does a Circular Economy Works ?
Circular economy - a new paradigm in manufacutring
How Circular Economy is framed?
Biomimicry by Janine Benyus : “a
new discipline that studies the
nature’s best ideas and then
imitates these designs and process
to solve human problems.
Industrial Ecology: “ Science of
Sustainability”-Study of material
and energy flows through industrial
systems.
Cradle to Cradle : Created by Michael
Braungart and American architect Bill
Mc Donough
It considers that all material involved in
industrial and commercial processes
can be seen as nutrients, of which
there are two main categories:
technical and biological.
Technical Nutrients should include only
materials that do not have a negative
impact on the environment.
Biological nutrients are organic and can
be returned to the soil without specific
treatment to decompose and
eventually become food for the
ecosystem
Blue Economy Initiated by
Former Ecover CEO and Belgian
businessman Gunter Pauli,
states “using the resources
available in cascading systems,
the waste of one product
becomes the input to create a
new cash flow”.
The report, commissioned by
the Ellen Mac Arthur
Foundation and developed by
Mc Kinsey & Company was the
first kind to consider the
economic and business
opportunity for the transition
to a restorative, circular model
in January 2012
Benefits of Circular economy
Net materials savings
On a global scale, the net savings from
materials could reach $1 trillion a year. In the
European Union alone, the annual savings for
durable products with moderate life spans could
reach $630 billion.
 The benefits would be highest in the
automotive sector ($200 billion a
year), followed by machinery and equipment
Mitigated supply risks
If applied to steel consumption in the
automotive, machining, and transport
sectors, a circular transformation could
achieve global net materials savings
equivalent to between 110 million and
170 million metric tons of iron ore a year
in 2025. Such a shift could reduce
demand driven volatility in these
industries.
Innovation potential
Redesigning materials, systems,
and products for circular use is a
fundamental requirement of a
circular economy and therefore
represents a giant opportunity
for companies, even in product
categories that aren’t normally
considered innovative, such as
the carpet industry .
Job creation.
 By some estimates, the remanufacturing and
recycling industries already account for about
one million jobs in Europe and the United
States.
Yet we see signs that a circular economy
would—under the right circumstances—
increase local employment, especially in entry-
level and semiskilled jobs, thus addressing a
serious issue facing many developed countries.
Ricoh’s remanufacturing plant, for
instance, employs more than 300 people.
Circular Economy at World wide
• At the 44th World Economic Forum
Annual Meeting at Davos-
Klosters, Switzerland Ellen Mac
Arthur said: “ The Circular Economy
opens up ways to reconcile the
outlook for growth and economic
participation with that of
environmental prudence and
equity”.
• “We need to Shift our thinking away
from the idea of consumption and
eliminate the whole idea of waste.
This means thinking about meeting
people’s needs through services
rather than consumption”-William
Mc Donough, Consulting professor
of civil and engineering, Stanford
university, USA
• The Netherlands, which has half its
surface area under sea level and a
population that is aware of the
importance of respecting the nature
has embraced the approach
• China, too is a leader and has
adopted the circular approach in its
latest five year plan.
• This “Circular” approach effectively
decouples growth from rising
resource constraints in a world that
will add 3 billion middle class
consumers over the next 15 years
Renault’s factory in Choisy-le-Roi, in the Paris area, specialises in the remanufacture
and recycling of automotive parts, allowing substantial savings to be made in terms
of raw materials. It thus offers clients remanufactured parts at very low prices;
almost 6,000 tonnes of metal are also recycled there each year
A Successful Company specializing in circular
economy
The plant’s remanufacturing operations use 80 percent less energy and
almost 90 percent less water (as well as generate about 70 percent less oil
and detergent waste) than comparable new production does.
And the plant delivers higher operating margins than Renault as a whole
can boast.
More broadly, the company redesigns certain components to make them
easier to disassemble and use again.
It also targets components for closed-loop reuse, essentially converting
materials and components from worn-out vehicles into inputs for new
ones.
 To support these efforts, Renault formed joint ventures with a steel
recycler and a waste-management company to bring end-of-use expertise
into product design.
 Together, these moves help Renault save money by maintaining tighter
control of its raw materials throughout its vehicles’ life cycles—or use
cycles.
Renault also works with suppliers to identify “circular benefits” that distribute value
across its supply chain. For example, the company helped its provider of cutting fluids (a
coolant and lubricant used in machining) to shift from a sales to a performance-based
model.
By changing the relationship’s nature and terms, Renault motivated the supplier to
redesign the fluid and surrounding processes for greater efficiency .
The result was a 90 percent reduction in the volume of waste discharge. This new
arrangement benefits both companies: the supplier is moving up the value chain so that
it can be more profitable, while Renault’s total cost of ownership for cutting fluids fell by
about 20 percent.
Renault’s experience is just one data point in a growing body of evidence suggesting
that the business opportunities in a circular economy are real—and large
Biological
Cycle
Technical
Cycle
Let us Commit to improve the state of the World
Sources & References
 “Remaking the industrial economy”- McKinsey & Company
http://www.mckinsey.com/insights/manufacturing/remaking_the_industrial_economy
 “Towards the Circular Economy reports”- Ellen MacArthur Foundation
http://www.ellenmacarthurfoundation.org/business/reports
 “Circular Economy”- Wikipedia the free encyclopedia
http://en.wikipedia.org/wiki/Circular_economy
Prepared by
Ranjani.j
Audit Executive
R. Venkatakrishnan & Associates
assurance@rvkassociates.com
With Guidance of
R. Venkatakrishnan FCA DISA(ICAI)
Partner
R. Venkatakrishnan & Associates
No.1/4 “Rangas”
Fourth Main Road,
R.A.Puram,
Chennai-600028

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Circular economy - a new paradigm in manufacutring

  • 1. ITS TIME TO CHANGE FOR A BETTER FUTURE CIRCULAR ECONOMY
  • 2. The Story So Far! The last 150 years of industrial evolution have been dominated by a one-way or linear model of production and consumption in which goods are manufactured from raw materials, sold, used and then discarded or incinerated as waste. Under Linear Model of Production, goods can be broadly classified into two types namely, 1. Biological 2. Technical
  • 3. Life cycle of Biological products where products are produced, used & discarded
  • 5. Life Cycle of the technical products where products are produced, used & discarded
  • 7. What is happening at macro level? Resources Waste
  • 8. Depleting Natural Resources! Prices bouncing faster than Economies • Success:  Between 1900 and 2000, global GDP grew twenty times and created hitherto unknown levels of material prosperity  This model has been exceptionally successful in providing affordable products to consumers and material prosperity to billions.  The biggest economic downturn since the Great Depression briefly dampened demand, but since 2009, resource prices have rebounded faster than global economic output.
  • 9.  Within this linear model, resources are extracted from the earth for production and consumption on a one-way track with no plans for reuse or active regeneration of the natural systems from which they have been taken  In a world of soon to be 9 billion consumers who are actively buying manufactured goods, this approach will hamper companies and undermine economies.  Some three billion consumers from the developing world will enter the middle class by 2030. Limitation/ Threats of Linear Consumption
  • 12. What is Circular Economy? The circular economy refers to an industrial economy that is restorative by intention; aims to rely on renewable energy; minimises, tracks, and hopefully eliminates the use of toxic chemicals; and eradicates waste through careful design.
  • 13. Take Make Dispose Waste Circular Model Take Make Use Return Linear Model of consumption Circular Economy
  • 14. Founding principles of circular economy Design out waste Waste does not exist when the biological and technical components of a product are designed by intention to fit within a biological or technical materials cycle designed for remarketing, remanufacture, disassembly or repurposing.
  • 15. Build resilience through diversity Modularity, versatility and adaptivity are prized features that need to be prioritised in an uncertain and fast-evolving world. Production systems should be flexible—able to use many different inputs.
  • 16. Work towards using energy from renewable sources Systems should ultimately aim to run on renewable energy—enabled by the reduced threshold energy levels required by a restorative, circular economy.
  • 17. Think in ‘systems’ The ability to understand how parts influence one another within a whole, and the relationship of the whole to the parts, is crucial. Elements are considered in relation to their environmental and social contexts.
  • 18. Think in cascades For biological materials, the essence of value creation lies in the opportunity to extract additional value from products and materials by cascading them through other applications.
  • 19. Technical Cycle How does a Circular Economy Works ?
  • 21. How Circular Economy is framed? Biomimicry by Janine Benyus : “a new discipline that studies the nature’s best ideas and then imitates these designs and process to solve human problems. Industrial Ecology: “ Science of Sustainability”-Study of material and energy flows through industrial systems.
  • 22. Cradle to Cradle : Created by Michael Braungart and American architect Bill Mc Donough It considers that all material involved in industrial and commercial processes can be seen as nutrients, of which there are two main categories: technical and biological. Technical Nutrients should include only materials that do not have a negative impact on the environment. Biological nutrients are organic and can be returned to the soil without specific treatment to decompose and eventually become food for the ecosystem
  • 23. Blue Economy Initiated by Former Ecover CEO and Belgian businessman Gunter Pauli, states “using the resources available in cascading systems, the waste of one product becomes the input to create a new cash flow”.
  • 24. The report, commissioned by the Ellen Mac Arthur Foundation and developed by Mc Kinsey & Company was the first kind to consider the economic and business opportunity for the transition to a restorative, circular model in January 2012
  • 25. Benefits of Circular economy Net materials savings On a global scale, the net savings from materials could reach $1 trillion a year. In the European Union alone, the annual savings for durable products with moderate life spans could reach $630 billion.  The benefits would be highest in the automotive sector ($200 billion a year), followed by machinery and equipment
  • 26. Mitigated supply risks If applied to steel consumption in the automotive, machining, and transport sectors, a circular transformation could achieve global net materials savings equivalent to between 110 million and 170 million metric tons of iron ore a year in 2025. Such a shift could reduce demand driven volatility in these industries.
  • 27. Innovation potential Redesigning materials, systems, and products for circular use is a fundamental requirement of a circular economy and therefore represents a giant opportunity for companies, even in product categories that aren’t normally considered innovative, such as the carpet industry .
  • 28. Job creation.  By some estimates, the remanufacturing and recycling industries already account for about one million jobs in Europe and the United States. Yet we see signs that a circular economy would—under the right circumstances— increase local employment, especially in entry- level and semiskilled jobs, thus addressing a serious issue facing many developed countries. Ricoh’s remanufacturing plant, for instance, employs more than 300 people.
  • 29. Circular Economy at World wide • At the 44th World Economic Forum Annual Meeting at Davos- Klosters, Switzerland Ellen Mac Arthur said: “ The Circular Economy opens up ways to reconcile the outlook for growth and economic participation with that of environmental prudence and equity”. • “We need to Shift our thinking away from the idea of consumption and eliminate the whole idea of waste. This means thinking about meeting people’s needs through services rather than consumption”-William Mc Donough, Consulting professor of civil and engineering, Stanford university, USA
  • 30. • The Netherlands, which has half its surface area under sea level and a population that is aware of the importance of respecting the nature has embraced the approach • China, too is a leader and has adopted the circular approach in its latest five year plan. • This “Circular” approach effectively decouples growth from rising resource constraints in a world that will add 3 billion middle class consumers over the next 15 years
  • 31. Renault’s factory in Choisy-le-Roi, in the Paris area, specialises in the remanufacture and recycling of automotive parts, allowing substantial savings to be made in terms of raw materials. It thus offers clients remanufactured parts at very low prices; almost 6,000 tonnes of metal are also recycled there each year A Successful Company specializing in circular economy
  • 32. The plant’s remanufacturing operations use 80 percent less energy and almost 90 percent less water (as well as generate about 70 percent less oil and detergent waste) than comparable new production does. And the plant delivers higher operating margins than Renault as a whole can boast. More broadly, the company redesigns certain components to make them easier to disassemble and use again. It also targets components for closed-loop reuse, essentially converting materials and components from worn-out vehicles into inputs for new ones.  To support these efforts, Renault formed joint ventures with a steel recycler and a waste-management company to bring end-of-use expertise into product design.  Together, these moves help Renault save money by maintaining tighter control of its raw materials throughout its vehicles’ life cycles—or use cycles.
  • 33. Renault also works with suppliers to identify “circular benefits” that distribute value across its supply chain. For example, the company helped its provider of cutting fluids (a coolant and lubricant used in machining) to shift from a sales to a performance-based model. By changing the relationship’s nature and terms, Renault motivated the supplier to redesign the fluid and surrounding processes for greater efficiency . The result was a 90 percent reduction in the volume of waste discharge. This new arrangement benefits both companies: the supplier is moving up the value chain so that it can be more profitable, while Renault’s total cost of ownership for cutting fluids fell by about 20 percent. Renault’s experience is just one data point in a growing body of evidence suggesting that the business opportunities in a circular economy are real—and large
  • 34. Biological Cycle Technical Cycle Let us Commit to improve the state of the World
  • 35. Sources & References  “Remaking the industrial economy”- McKinsey & Company http://www.mckinsey.com/insights/manufacturing/remaking_the_industrial_economy  “Towards the Circular Economy reports”- Ellen MacArthur Foundation http://www.ellenmacarthurfoundation.org/business/reports  “Circular Economy”- Wikipedia the free encyclopedia http://en.wikipedia.org/wiki/Circular_economy
  • 36. Prepared by Ranjani.j Audit Executive R. Venkatakrishnan & Associates assurance@rvkassociates.com With Guidance of R. Venkatakrishnan FCA DISA(ICAI) Partner R. Venkatakrishnan & Associates No.1/4 “Rangas” Fourth Main Road, R.A.Puram, Chennai-600028