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Towards the Circular Economy:

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Genevieve DiGiulio

on 29 April 2014

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Transcript of Towards the Circular Economy:

Towards the Circular Economy:
Accelerating the scale-up across global supply chains
Submitted By: Genevieve DiGiulio

The Circular Economy
Transitioning Away from a Linear Economy
Steps Towards the Circular Economy
Make the Change
The linear economy concept has hardly changed since the early days of industrialization following a take-make-dispose pattern. In terms of volume 65 billion tonnes of raw materials entered the economic system in 2010, and 82 billion tonnes is expected in 2020. Mounting pressures on resources have lead to sharp price increases in commodities since the turn of the millennium. Adopting the restorative circular approach has the potential to save $1 trillion by 2025 in material costs.

The Concept
The circular economy is an industrial system that is restorative or regenerative by intention and design. At its core a circular economy aims to design out waste, products are designed and optimized for a cycle of disassembly and reuse maximizing embedded energy.
Arbitrage Opportunities through the Power of...
The tighter the
inner circle
the less a product has to be changed in reuse, refurbishment, and remanufacturing, and the faster it returns to use, the higher the potential savings on the shares of material, labor, energy and capital still embedded in the product, and the associated externalities (such as greenhouse gas emissions, water and toxicity).
The power of
cascaded use
refers to diversifying reuse across the value chain, as when cotton clothing is reused first as second-hand apparel, then continues to the furniture industry as fiber-fill in upholstery and fiber-fill is later reused in stone wool insulation for construction-substituting for an inflow of virgin materials into the economy in each case-before the cotton fibers are safely returned to the biosphere.
The power of
circling longe
r refers to maximizing the number of consecutive cycles (be it repair, reuse, or full manufacturing) and/or the time in each cycle. Each prolonged cycle avoids the material, energy and labor of creating a new product or component.
The power of
pure inputs
lies in the fact that uncontaminated material collection streams increase collection and redistribution efficiency while maintaining quality, particularly of technical materials, which in turn extends product longevity and thus increases material productivity.
Terra Cycle
Terra Cycle embodies the circular economy concept through the power of the inner circle, circling longer and cascaded use.
Identify Leakage Points
losses due to geographic dispersion
material complexity and proliferation
linear lock-in
linear-based models
Geographic Dispersion
Products are made using many components from multi-tier supplier networks spanning the globe.
Archetypes of Supply Chain Loops
Geography matters-embedded value is subject to distance costs.
Leakages due to materials complexity and proliferation
Material complexity compounds the obstacles to scaling up the circular economy.
Material Complexity has increased exponentially over recent years.
Additives for heat stabilizers, pigments, antimicrobial, or impact modifiers have been the driver of major innovations in material science.
There are four major categories of polymers; PE, PET, PP and PVC (there are 900 additives used in PP alone)
It is difficult to identify and separate, maintain quality and ensure purity.
Without reliable classification it is hard to collect materials at sufficient scale and supply to create arbitrage opportunities.
Innovations in Plastics Timeline
Increased Product complexity lead to significant material losses
Trapped in the linear lock-in
We've become entangled in the decisions we've made along the way.
Overcoming the leakages and barriers
to the scale up of the circular economy will be tough but not insurmountable. There are many examples where these barriers have been overcome.
Aligned incentives
need to be implemented on a systems wide level
Incentives to customers to tip the scales in favor of the product with better cost of ownership.
can establish a more circular business model by transitioning to a usage based model and incorporate a reverse supply chain (including incentives for the customer to return products to the company) Internal issues for companies include fear of cannibalization, capitol required to change a product design, and simplification of material variation across the different customer segments.
Along supply chains
by reducing the number of materials at the start of the chain to ultimately increase the end of use value of the finished product.
Across geographies
a strong case can be made for investing in regional remanufacturing in local communities.
Markets of scale
do not yet have systems in place for reverse cycles making it hard to impossible for companies to secure quality and reliable secondary materials to complement or replace stock.
Reverse cycle infrastructure and logistic capabilities
will be essential to close the geographic between points of (re)manufacture and usage.
are needed to pave the way for new business models
Prepared in Collaboration with the Ellen MacArthur Foundation and McKinsey & Company
18 Leading companies form the partnership networks of both the World Economic Forum and the Ellen MacArthur Foundation provided support for this research.
Rioch's Comet Circle
Copiers and printers returning from Ricoh’s leasing program are inspected, dismantled, and go through an extensive renewal process — including key components replacement and software update — before re-entering the market under the GreenLine label with the same warranty scheme that is applied to new devices.
Ricoh’s objectives are to reduce the input of new resources by 25% by 2020 and by 87.5% by 2050 from the level of 2007
Rioch embodies the circular economy concept through the power of the inner circle, circling longer and pure inputs.
The Solutions
Set up global reverse networks for products and components
Reorganize and streamline pure material flows
*Golden Oldies *High Potentials *Rough Diamonds * Future Blockbusters
Innovate business models on the demand side
Transfer business model solutions
Mainstream the sharing economy and collaborative usage models.
Focus on pure material stock management at the onset.
Reorganization of Pure Material Flows - Steel Example
Reverse Cycle -Power Drill Example
The community of Circular Economy Champions will need to take the lead.
The Ellen MacArthur Foundation and World Economic Forum will act as a catalyst for the acceleration towards the circular economy. They will act as a partner with companies/academics/ governments to provide:
quality control for the framework
platform for collaboration
co-design a process for systematic change
program management within cross-institutional setup
among other benefits
A Collaborative Effort
The circular economy is a restorative concept for both biological and technical materials which has the potential to eliminate waste through superior design of materials products and business models.
Project Charter
The forum and the foundation pledge to accelerate the the transition from an expected 30-35 years for an undertaking of this size to 5-10 years for major materials.
The collaboration will commit players that control 5-10% of global volume in four selected material categories.
These players will reap the rewards of becoming first-movers and become flagships that demonstrate excellence to peers and customers.
The initiative aspires to realize economic and non-economic value.
The aim is to reap net benefits of at least $500 million and 100,000 new jobs, as well as to avoid/valorize 100 million tonnes of materials waste within 5 years!
Progress will be quantified on a regular basis using the circularity calculator, along the dimensions of materials, labor and energy inputs, as well as carbon emission and balance of trade.
A Clear Plan of Action
Create a list of pure, high quality materials with cross industry applications as the central concept.
Proof of concept with a few materials.
Enable mechanisms to facilitate pure material flows.
These will enable a self-reinforcing cycle, and make the process easier to replicate for additional materials.
Create a preferred list and achieve proof of concept
Create a preferred list of pure, high quality materials as the building blocks of tomorrow.
Select materials and confirm rationale
high volume / high value materials (Golden Oldies/ High Potentials)
future materials such as bio-based or 3D printing (Future Blockbusters) and carbon dioxide (Rough Diamonds)
Understand material flows to identify and quantify leakage points.
Define the intended use and defined use for each material and related products.
Derive approaches for addressing leakage points or scaling up.
Design building blocks and conversion methods for each flow.
How to set up a reverse loop to ensure quality of the materials recovered.
Jointly develop an action plan to implement the most impactful and feasible approaches.
Define mechanisms for continuous improvement of value creation and cost reduction.
Identify who else in the system can aide in finding solutions.
Provide proof of concept with a couple material flows.
Have a few leading companies commit to applying the mechanism.
Estimate the potential economic impact.
Examples of the power of inner circle, circling longer and pure inputs.
Identify Benefits
Quantify economic impact and secondary benefits.
Size the economic benefits of achieving pure material flows.
Use of 'circularity calculator' comparing the linear to a regenerative circular system on five key areas.
Material Inputs- comparison between "linear to 'circular' version.
Labor Inputs- labor required to make a new product compared to a circular loop, by geography.
Energy Inputs- difference in energy needed between new and 'circular.'
Carbon Emissions- the carbon footprint of the manufacturing process compared to with the footprint of a circular loop.
Balance of Trade- The exports and imports of input and finished goods across trade routes are quantified for both versions.
Innovation will also flourish as a result, benefits include higher rates of technological development, improved materials, labor, and energy efficiency, more new business models, and profit opportunities.
Measure potential for reducing waste.
Mobilize the public sector and other stakeholders
Drive regulatory change
Regulation is necessary to quickly scale up pure flows.
Govt and public sector to foster cross-industry collaboration for establishing regulation.
Standards and transparency of material content. -"Product Passport"
Catalyze investment in new business models and innovations.
Methods to mobilize capital through public-private partnerships of crowdfunding
Mobilize advances in Information Technology
Tracing materials, organizing reverse logistics and accelerating innovation through Information sharing and crowsourcing.
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