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

1. Circular economy
Possibilities and limitations as strategy for
sustainable development and business
innovation
UFRJ – 20 July 2015
Michael Søgaard Jørgensen
msjo@plan.aau.dk
Center for Design, Innovation and Sustainable
Transition (DIST)
Department of Development and Planning
Aalborg University Copenhagen

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. 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
Total EU resource consumption - not only national – measured in terms of mass
Source: European Environmental Bureau, 2015

5. 5
Source: European Environmental Bureau, 2015

6. 6

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
Findings from
Ellen MacArthur
case study about
circular economy
opportunities
in Denmark
Conducted
together
with Danish
stakeholders

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. 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. 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. Decoupling economic development, ressource
consumption and environmental impacts
12
Source: European Environmental Bureau, 2015

13. 13

14. 14
Assumptions in modeling?
No losers?

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
Source: European Environmental Bureau, 2015

17. A lot of technical possibilities not implemented
17
Source: European Environmental Bureau, 2015

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. Case: The co-evolutionary history of
renewable energy transition in Denmark
Source: Elle et al , 2015

20. 20
What is produced?
Why is waste generated?
Globalised cheap production
challenges repair and upgrading

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. Impact of production AND consumption of products
22
Source: European Environmental Bureau, 2015

23. 23
Source: European Environmental Bureau, 2015

24. Policy-maker kit for national circular economy strategy
24
Source: Ellen MacArthur Foundation, 2015

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. 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. 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. 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. (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. 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
Re-designing the value chain: Feasibility of circular
environmental business strategy
Source: Sanchez, Wenzel and Jørgensen, 2004

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
One of the global partners of
Ellen MacArthur Foundation

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. 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. 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. 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. Coloplast’s process
for medical device development
Product knowledge
Room for innovation
Economic
investment
Environmental
involvement
User
needs
Idea Concept Product

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. 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. 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. 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. Analysis of forces shaping the
competitive position of a company
43
Source: Michael Porter, 2008

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. 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. 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. 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. 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. 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. 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. 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