The Ellen MacArthur Foundation has been spearheading the evolution of the Circular Economy in Europe. Today, many large global companies are beginning to embrace the principles of the Circular Economy as a resource efficient model that generates economic progress and improves innovation, while doing “more with less” compared to our current traditional incremental “wasteful” economy mindset. Why are companies attracted to these new business and economic principles? What makes these principles work and why? In this article we will look at the 3 guiding principles and how companies, organizations, and even cities, are developing new strategies around the Circular Economy to address systemic sustainability issues and establish transformational change. From a European perspective, did you know?
- For Mobility Systems, the typical European car is parked 92% of the time, with greater than 95% of all accidents from human error.
- For Food Systems, 31% of food produced is either lost or wasted, 95% of fertilizers do not provide nutrients to the human body, and greater than 50% of the European population is overweight.
- For the Built Environment, 10-15% of building material is wasted during construction, 60% of European offices are not used even during working hours, 20-40% of energy used in existing buildings can be profitably conserved, and >50% of demolition materials are landfilled.
These are European statistics, but I wonder if a US comparison in mobility, food, and the built environment systems would look any different? Waste is still a major issue everywhere, and will be for some time. The real question is what companies and organizations are leading the charge with disruptive innovation in their industry sector to combat these issues? What industries and markets have the biggest opportunities?
Let’s start with the 3 guiding principles of the Circular Economy that cover suppliers, manufacturers, customers, consumers, and service providers.
- Principle 1: To preserve and enhance the natural capital by controlling finite existing resources and materials, and shifting the balance to renewable resources.
- Principle 2: To optimize resource yields by circulating all materials used at their highest utilization rates in both the technical and biological cycles of use patterns.
- Principle 3: To catalyze the total system effectiveness by determining and designing out negative impacts.
Disruptive innovation connected with the Circular Economy is already ongoing globally, and those companies connected with the supply chain in specific industry sectors are already beginning to feel the effects. The Circular Economy model has developed a platform to follow and combat these issues called the RESOLVE framework – Regenerate, Share, Optimize, Loop, Virtualize, and Exchange. By using the RESOLVE framework there are significant economic and business opportunities for aligned industry sectors. What industries and market segments have the greatest potential for positive change?
- Regenerate strategies offer the opportunity to shift to the use of renewable energy and materials with the capabilities to recover, reclaim, retain, restore, and return to the natural environment. The manufacture and supply of wood products, furniture, textiles and apparel, water, mining materials, and power generation all have significant potential impact with this strategy. A good example is the utility industry and the move toward the use of renewable energy technologies, both for established and distributed grid applications. •
- Share strategies deal with the maximum utility of products through durable design, shared use, reuse, and extended life through maintenance and service. Industries including real estate, lodging, mobility and transportation, and construction all have great upside opportunities. An example in Grand Rapids is Airbnb which now has over 1 MM rental opportunities in 34,000 cities worldwide, across 190 countries. Another example is bike sharing programs such as with Spokefly locally in Grand Rapids.
- Optimize or enabling strategies improve the overall efficiency and effectiveness of product performance through lean processes, as well as reducing waste throughout the supply chain from sourcing to end-oflife. These strategies do not necessitate changing the product technology. Nearly all industry and market sectors can benefit by implementing these strategies. The automotive and furniture industry in Michigan are examples where optimization is a key strategy. Also, the City of Grand Rapids has implemented lean and green processes as evidenced in the City Sustainability Plan, including asset management practices.
- Loop strategies ensure products and materials continue to flow within a closed loop system including recycling and remanufacture. Industrial products and services such as transport equipment, electronics, machinery, rubber and plastics, mining, as well as food and beverage are attractive industries to pursue this strategy. Louis Padnos Iron and Metal and Kellogg are examples of local companies pursuing loop strategies.
- Virtualize strategies can be seen everywhere in the market today, from online marketing and selling of products and services to the digital delivery of content information. Industry sectors currently embracing this strategy include education, online shopping, arts and entertainment including books, music, newsprint etc. Local examples include Office Depot, the Grand Rapids Press, and many others. In the future can we all imagine the driverless car?
- Exchange strategies are directed towards the replacement of older outdated materials and components with the use of multi-purpose products and services, as well as the use of new disruptive clean and innovative technologies such as 3D printing. Industry sectors that could gain from these strategies are automotive, construction, furniture, plastic and rubber. Ford Motor and GM in the automotive industry, as well as the furniture industry suppliers, are all pursuing the use of these disruptive new technologies.
Overall, the RESOLVE framework allows many industries, market segments, and suppliers to follow and pursue the Circular Economy for both competitive and growth positioning. Significant opportunities are in the food, construction, and mobility sectors, as these industries make up a significant amount of everyday household budgets.