Anthesis Executive Director Lisa Grice illustrates the case for a circular economy and outlines steps in shifting business frameworks from a linear to a circular model.
The Circular Way of Thinking
The circular economy is one of the biggest business opportunities in a century. And like any of the economic revolutions that preceded it, it can also be the end of the line for your business. The difference is how you fit your business in the new model.
The concept of a circular model versus a linear one has gained more mainstream awareness at this point: the use of end-of-life products as input to make something else useful, then when that product is no longer useful, recover, re-manufacture or recycle it to make it into something new. It’s not just a feel good concept, it’s the core element of this new industrial revolution. I purport that the internet, digitization and the bioeconomy are the tools of this new revolution, they’re the steam engines and the cotton gins. But the big picture change is a way of thinking: a circular way of thinking.
So, what’s the problem with the linear model? Let’s start with an example. Neodymium (neo-dim-yim) is a rare earth metal that is used as a powerful magnet, the strongest in relation to their mass. These magnets are used in computer hard drives, speakers and headphones, MRI devices, wind turbine generators, and electric vehicle motors. But demand for neodymium is beginning to outstrip supply, prices are expected to rise, sourcing from China, is insecure. And that’s a problem since China produces over 80% of the world’s neodymium but would rather sell us the finished products that use the neodymium than sell us the raw material itself. So enter circular thinking. What’s happening to all those computer hard drives and speakers and such at the end of their use? There’s a company called Urban Mining Company that built a 100,000 square foot facility in Texas to use those end of life products as their feedstock where they’ll reprocess scrap magnets into new. Circular thinking created their business opportunity.
The “Take” side of the linear model puts us at risk in so many ways. Resource extraction can impact local communities and ecosystems – polluting water, displacing peoples and wildlife…Then of course we have the risk of becoming reliant on those lucky geographies that are blessed with the natural resources we want. And we run the risk of running out of those resources, or at least reaching a point where the price becomes unacceptable.
The “Waste” side of that linear approach has risk as well. We’re generating more trash…5 pounds per person per day goes into landfills (not including recycled, composted or combusted). EPA estimates that between 1990 and 2010 we increased the MSW generated in the United States by 20 percent. Landfilling that trash can present health risks to residents, vegetation damage, unpleasant odors, landfill settlement, ground water pollution, air pollution, and risk of fires and explosions. The International Solid Waste Management Association notes that the average landfill site has a 60% risk of fire each year. And in some areas of the U.S. we’re running out of landfill capacity, for example New York could run out of capacity in about 20 years, causing waste to travel further – that means more GHG emissions and more costs. In fact landfill tipping fees have increased 250% over the last 30 years (and that’s in constant dollars).
However, to further illustrate the potential opportunity in all this waste, the company Waste Management estimates that if it could effectively separate and resell all the material in the garbage it collects each year it could literally double in size.
3 Steps to Circular Thinking For Your Business
Here are my recommendations for the 3 steps for integrating circular thinking in your business. And for each recommendation where you think “we can’t do that”, I encourage you to consider how you CAN do that.
1. How can you change your inputs?
The two approaches are either:
- Being more resource efficient, or
- Using recycled or recovered inputs.
Being more resource efficient typically saves money not only in material costs, but also in labor and disposal costs. Sometimes you don’t have a choice, regulators make you be more efficient– for example the Liquor Control Board of Ontario Canada mandates that glass wine bottles be lighter weight.
Using recycled or recovered inputs usually goes hand in hand with innovation. Here’s a good example from Huber Engineered Materials – they figured out that they could take spent filter media from automotive paint booths and after de-agglomerating and further processing they create a calcium carbonate product that can be used in building products and carpet backing.
2a. Change your outputs: First your waste.
Why do you have waste? Can you redesign your processes so you don’t have any waste or at least so that whatever waste you generate is recyclable if not reusable?
2b. Change your outputs: Now your product.
How does your product or service generate waste – during use? End of life? Can you design your product so that it creates less waste and can easily be reused or at least recycled at its end of life?
Example: If you throw away food that reaches its sell by date because you think it’s unsafe, you’re usually wrong, and you and the other 84% of Americans that do that are wasting about 20% of your household food due to this label confusion. That’s a product wastage problem that Nestle wants to address so they have set a goal that by 2020: they’ll make date labels more understandable to reduce the likelihood you’ll pitch their product out prematurely.
Can you change your business model to include taking your product back?
Here’s an example, consider the medical device company Stryker. They have a Sustainable Solutions division that collects single use medical devices for reprocessing and sells them, good as the new product but at a discount. In 2017 they diverted nearly 13.4M pounds of waste from landfill, and by selling reprocessed devices back to their customers at lower costs, they’ve saved customers some $326M in supply costs.
3. Finally – innovate into an entirely new business model.
What made you successful today may not be your success tomorrow. Think of companies that didn’t do that – Blockbuster? Eastman Kodak? Consider for example selling the function that your product provides rather than the product. Companies like Philips have starting offering Lighting As A Service for example. They provide, maintain and replace lights and control systems for their customers, and that ideally results in optimal energy performance and recycling of light fixtures. Navigant says LaaS revenue globally is expected to grow from an estimated $662.6 million in 2017 to $2.6 billion by 2026, experiencing a compound annual growth rate of 16.6 percent.
Here’s an example of bringing it all together from the life sciences division of Merck KGaA, MilliporeSigma, where they’ve embedded Design for Sustainability into Product Design : They redesigned a laboratory filtration manifold applying DfS they created a product that uses 47% less material, which because of lighter weight means 38% reduction in shipping emissions, the new design also reduces manufacturing scrap by 20%, in use 91% reduction in autoclave energy use, 100% recyclable packaging, 99% of the product can be recycled, oh and the product is lighter and easier for the customer to use.
The Call to Action
So where does that leave you? Those that provide a service, can your service enable circularity? If you make a product – well then think the full product lifecycle at the design phase, or even shifting from product to service. And for all of you, your buying choices are impactful, can you be more resource efficient or at least buy recycled or recovered products?
This grand opportunity starts with a small change. The power lies in the shift in your thinking to re-imagine your business as part of a circular economy instead of a linear one.
 Heck, Stefan and Matt Rogers; Resource Revolution, How to Capture the Biggest Business Opportunity in a Century, p.90, Melcher Media 2014.