A clear plan of action
1. Create a preferred list and achieve proof of concept
Detailed specifications will make the difference. Business leaders and other stakeholders will specify precise criteria for assembling building blocks for four to five different materials. Subgroups will focus on each of these materials flows, and then take at least two – possibly three – ‘live’.
Create a preferred list of pure, high-quality materials as the building blocks of tomorrow. The first stage will involve outlining solutions (or mechanisms)—together with initiative participants—that can address the leakage points quickly, covering the following analyses:
- Select materials to focus on and confirm the rationale for selecting these signature materials with participants. The materials fall into two general groupings. The first covers current high-volume, high-value materials stocks: products such as paper and cardboard for the Golden Oldies and polypropylene for High Potentials. The second encompasses materials relevant for future manufacturing processes, such as bio-based materials/materials for 3D printing in the Future Blockbusters category, and carbon dioxide in the Rough Diamonds category. These materials have different starting points in terms of current volume, collection rate, quality of materials recovered, and technologies to improve scale-up (both available and upcoming). Once a firm decision on these materials has been made, subgroups are set up for each material, and carry through the actions with that material specifically.
- For the first material class, understand the current materials flows for these selected materials, leveraging existing knowledge to identify and quantify leakage points, which will give an indication of the potential benefits of closing the gaps for all parties involved. For the second class of materials, the technological landscape will be mapped out to identify the most promising areas (with a wide range of applications and high potential volume) to scale up and understand what is required to get there. While the details will differ by the material in question, the main barriers will be technical, infrastructural, commercial, or regulatory in nature. Some technical and regulatory barriers should be analysed from a cross materials flow perspective, as these will ideally be addressed at a systemic level.
- Define the intended use and defined use for each material and related products.123 These are important because the preferred list of materials and their building blocks, or additives, depends on what they are intended to do and where they are intended to go.
- Intended use describes what the product is practically intended to do for the user. For example, Desso working with EPEA identified a new value-added Intended Use for carpets; cleaning the air. By focusing on Intended Use Desso was able to generate new markets and revenues.
- Defined use describes the pathway of products or materials as technical nutrients and biological nutrients (see Figure 2). As part of this, the defined use period describes how long the product or material is used before being discarded, to facilitate replacement and recovery. Defined use and defined use periods are optimized after intended use is clarified.
- Derive approaches for addressing the leakage points or scaling up, including how to design building blocks and conversion methods for each flow. A list of non-toxic polymer additives that are easy to separate during recovery—only mechanical mixed additives, perhaps—would be one such example, or changes in product design to allow easy disassembly. Another aspect to cover will be how to set up the reverse loop to ensure quality of the materials recovered (including potential changes to the business model). Also, what other applications can the materials be used for? The approaches will be prioritized by impact and feasibility.
- A number of existing initiatives already make inroads into this space including EPEA in Hamburg, Germany with a catalogue of defined usage scenarios for products and materials with description of building blocks that are safe and/or recyclable to be used in production.124 Such database can be leveraged and scaled up across the materials in focus.
- Jointly develop an action plan to implement the most impactful and feasible approaches with relevant internal and external stakeholders, ensuring cross-functional involvement from departments such as R&D, Procurement, and Marketing & Sales. Players will be involved from the entire cross-supply cycle, including suppliers, contractors, recyclers and logistics suppliers, as well as cross-industry players. In addition, a road map to phase out toxic materials across the supply cycle is needed as the pure material toolbox scales up.
- Define mechanisms for continuous improvement of value creation and cost reduction. The former will focus on seeking higher-value applications for the same materials flows, and valorizing a broader set of material flows. Cost reduction will concentrate on improving scale, logistics, and processes—both how the waste stream is created, and how waste/by-products are best processed to recover value.
- If solutions are not available today, identify who else in the system can provide support in the short, medium, and long term. This may include local, regional or national authorities, universities and research institutions, or industry associations.
Mobilizing multiple stakeholders is always a challenge. Actions need to rely on a commonly agreed fact base around which the business case is built, with the benefits shared among everyone involved. Capability building for all stakeholders involved would also be required to ensure that all parties are up to speed with the circular economy concepts and applications. This would include:
- Initial education/training on the circular model
- Provision of a series of sector-relevant case studies
- Provision of a series of tools for identifying and capturing opportunity (e.g. hotspot tools)
The Foundation’s CE100 programme already has the capability to provide many elements of a practitioner platform to support the Forum’s executive-level platform to bring together a range of participants and showcase real-world case studies.
Provide proof of concept. Two or more materials flows will be selected to demonstrate proof of concept. This phase is critical to understand the feasibility of the approach taken, not just for the materials flows tested, but also for others in the broader context, and would entail the following actions:
- Have a few leading companies commit to applying the mechanism identified to one (or several) of their products using only materials from the preferred list. This would mean changing their product design to allow better reuse and recycling of the components, and setting up a reverse loop
- Estimate the potential economic impact once the end goal is reached, and the costs of getting there
- Identify the partners required to organize the supply cycle from forward to reverse loops, and obtain commitments from these partners
- Jointly agree on business models to allow benefit sharing across the supply cycle
- Jointly set up a roadmap to achieve the end goal with partners
The flagship players can showcase their success stories for global and regional policy-makers as well as investors to encourage them to participate and motivate systemic change. Learnings from the proof-of-concept phase will provide valuable input for the full rollout of all materials flows.
2. Identify benefits and catalyse enabling mechanisms
The second key objective (covered by a different working group) will be to quantify economic impact/secondary benefits from the materials focus workstreams and catalyse cross-cutting enablers to address the leakage points and sustain change.
Quantify economic impact and secondary benefits. The significant potential benefits that the circular economy could yield for each of the stakeholders involved were highlighted in the two ‘Towards the Circular Economy’ reports. The research for the first report, looking only at the sectors of medium-lived complex goods (such as motor vehicles or consumer electronics) revealed estimated cost savings of up to US$ 630 billion in Europe after 2020. The second report considered fast-moving consumer goods (e.g. food and beverages, apparel, and packaging) on a global scale, and extrapolated an economic opportunity worth more than US$ 700 billion per year, or materials savings of roughly 20%.125 Quantifying these benefits specifically for the materials selected in the pilots will provide targets and extra impetus.
- Size the economic benefits of achieving pure materials flows. The ‘circularity calculator’ described in the first ‘Towards the Circular Economy’ report can be used, with a materials rather than a product focus. The calculator compares the inputs needed to make a new product in today’s linear system with those required to make the same product using pure materials flows. The analysis focuses on five key areas of economic and environmental impact:
- Materials inputs. The materials intensity of a ‘linear’ version is compared with the materials intensity of a ‘circular’ version, calculated in terms of various circular options (reuse, refurbishing, remanufacturing, recycling).
- Labour inputs. The labour required to make a new product is compared with that required to make a circular loop, by geography.
- Energy inputs. The difference in energy needed to make a new product is quantified versus a circular product.
- Carbon emissions. The carbon footprint of the process of manufacturing a new product is compared with the emissions generated to make a circular loop.
- Balance of trade. The exports and imports of input and finished goods across trade routes (including all geographies involved) are quantified for both the linear and circular versions.
The analysis will be conducted for one specific product in each industry. Informed assumptions will then be used to project the result to determine the total savings on materials, labour, energy, and carbon emissions as well as the trade balance effect at a market level. The premise will be that producers across a specific product industry (e.g. the mobile phone market) adopt the pure materials flows approach. The combined effect of all relevant industries for each materials flow will yield the total economic impact (for that materials flow).
- Assess the economic benefits from enhanced innovation. Innovation will also flourish as a result. The transition towards pure materials flows will lead to more blue skies thinking across the economy. The benefits of this include higher rates of technological development, improved materials, labour, and energy efficiency, more new business models, and more profit opportunities for companies. Indicators will be developed to quantify these benefits.
- Measure the potential for reducing waste. In the steady state, the volume of products and components associated with the materials flows examined that would otherwise end up in landfills will be significantly reduced. The waste elimination potential can be estimated by understanding the leakage points in the materials flows.
Mobilizing the public sector and other stakeholders. Enablers will be required to accelerate the transition, addressing both common leakage points across the materials and specific issues highlighted by the proof-of-concept activities. The momentum and findings from the commitment of key players in the private sector will be leveraged to draw in policy-makers and other key stakeholders (such as investors and thought leaders). These will be encouraged to examine the systems enablers needed to scale up the circular economy, including regulatory change, investment focus, and R&D effort, and advances in information technology. The public sector and other stakeholders are critical to the transition towards an economy with pure materials flows, and would have at least two important roles to play in the transition period:
- Drive regulatory change. Changes in regulation are required to quickly scale up pure flows and sustain the new economy. Government and public sector entities can help to foster cross-industry collaboration by establishing appropriate regulations, standards and guidelines. Governments could re-examine certification programmes to enable new ways of confirming the viability or safety of circular products; optimize and control the use of incinerators to avoid negative effect on materials recycling; and revisit current trade barriers and regulatory gray zones to facilitate transboundary materials flows. This would require standards and transparency of materials content. Product passports could help to address this issue as they would provide information about the components and materials a product contains, and how they can be disassembled and recycled at the end of the product’s useful life.126 In July 2013, the European Resource Efficiency Platform recommended ‘product passports’ in its interim set of recommendations, among other measures.
In addition, full transparency on materials pricing, that reflects the real costs of materials (including externalities) needs to be established to drive the efficient use of resources.
Access to finance and risk management tools will support capital investment and R&D for all players across value chains. Governments can create further funding stimuli by underwriting some of the risks associated. In Brazil, for instance, the Ministry of Agriculture’s ABC program provides access to preferred credit conditions to companies that undertake innovative initiatives.
- Catalyse investment in new business models and innovations. Businesses and entrepreneurs often cannot mobilize the capital required, however ripe for scale-up their technologies and business models look. Solutions range from brokering traditional investment through public-private partnerships to using more innovative solutions, including crowdfunding.
In parallel to this initiative, the Forum is launching a multi-stakeholder platform to facilitate a global agenda on science, technology and innovation. The goal is to bring together business, policy and scientific leaders and institutions to collaboratively drive the innovations needed to address global challenges. One of the proposed areas of this platform is to broker a fund to help address complex global issues, with the circular economy as one of the pilot topics. The timeline for this platform fits well with this proposal, creating synergies especially on the innovation front.
Over 450 crowdfunding platforms127 now exist, including some well-known examples such as Kickstarter and Indiegogo. These platforms have provided many artists, charities, and start-ups with access to financing. Title II of the JOBS Act legislation in the US in July 2013 has now made it permissible for companies—for the first time in over 80 years—to raise investment via equity crowdfunding.128 This shift will encourage companies of all sizes to tap into a large pool of finance from small investors. The greater use of digital technology has made it easier for investors to identify and compare investment options. Transparency on the economic benefits of new business models and innovations in materials science will encourage the advance of these investment approaches to support transition to the circular economy.
- Mobilize advances in information technology. Information technologies (IT) play a key role in enabling the transition towards circular business models. This role ranges from tracing materials and products, organizing reverse logistics and accelerating innovation (with crowdsourcing and information sharing) to mining big data (for mapping resource and value flows and tracking indicators to measure progress). While some of these technologies are already advanced (such as sensors, the cloud, and social networks), there are enormous opportunities for the IT industry to work with businesses and other stakeholders on identifying critical areas for further improvement. The difficulty of ensuring the availability, quality and consistency of resource-related data remains a significant obstacle, especially at national and global levels. The enhanced mining of big data will help address this issue.
All stakeholders are aware that today’s model of wealth creation is built on excessive material and energy waste, and cannot be maintained indefinitely. As the shift towards a more circular model assumes clearer contours, the value of its design paradigm cannot be overrated. The time to act is now. Substantial scale-up will require the concerted effort of a few powerful leading institutions. We hope this initiative will create sufficient appeal for leaders to step forward and advance the joint agenda, not just for the common good, but also to reap first-mover advantage. Delivering on this agenda will enable us all to be better stewards of our supply flows and—eventually—of our planet.
Please contact the circular economy team ([email protected]um.org), if you are interested in learning more about this initiative.