The circular economy moves from theory to practice
Kimberly-Clark, General Motors and Bill Gates are among those pushing forward a closed-loop economy.
Practically speaking, the goals of the circular economy are to shift the take-make-waste linear industrial system in big and meaningful ways to create closed loop systems. The result is a net positive or restorative impact measurable at the scale of an economy, creating shared value with environmental, economic and social benefits.
How are these benefits realized? At a Case Western 2014 Global Forum for Business, initiated by the former CEO of Unilever, CEOs from across industrial sectors, management scholars and sustainability practitioners envisioned creating "flourishing local economies that are connected globally through knowledge and technology."
But how do the sectors work together to accomplish this? How does a global company participate to develop efficient closed loop systems that improve their production efficiencies while delivering benefits such as carbon emission reductions and improved local economies?
New standard or passing fad?
Mainstream business leaders are engaging in circular thinking and the evidence is everywhere, from their blogs to the commitments made at major global forums.
Bill Gates' blog, Gates Notes, recommended the University of Cambridge textbook "Sustainable Materials: Eyes Wide Open" as a top read from 2015. The renewed business commitment to fighting climate change at COP21 in Paris will require all sectors address not only fossil fuel power plants and vehicle emission sources but also examine the material management options that are necessary to achieve the reduction goals.
Global greenhouse gas emissions from burning fossil fuels to generate energy, along with those released directly in industrial processes, account for 64 percent of greenhouse gas emissions. According to the University of Cambridge researchers, 35 percent of these emissions (the largest segment), arise in industry during the making of goods, buildings and infrastructure.
Recycling, dematerialization and use of local recycled feedstock are some practical ways to achieve greater emissions reductions while simultaneously achieving reductions in both supply chain risk and raw material costs over the long run.
Over 50 percent of businesses have greenhouse gas reduction commitments; over 2,000 companies already have publicly reported their commitments on Non-State Actor Zone for Climate Action, launched to register climate action by companies, cities, regions and investors.
The United Nations' Sustainable Development Goals published last year will become the next reporting requirement for corporate sustainability officers. Managing materials through the circular economy model will help companies address many of the 17 SDGs.
Circular economy is not a simple cut-and-paste, one-size-fits-all fad. It goes beyond the walls of a single corporation and emphasizes the full interconnected system. It requires an understanding and a dependency on those within the system to collaborate — success of the circular economy means success for its players.
How to collaborate: Map the recovery value chain
The key to productive collaboration lies in mapping the recovery value chain around the materials with actual or potential market value. The value chain then becomes the hub for collaboration and resource leveraging to achieve better material recovery efficiency through identifying common interests.
The major flows of material in the circular economy (putting aside organics for a moment) are steel, cement, plastics, paper and aluminum. For many commodities, there are two places where recovered material flows are breaking down: 1) Quality recycled feedstock is not available, despite increasing manufacturer demand for domestic, local feedstocks; and 2) Recyclable materials are not efficiently collected and processed, despite efforts to collect these materials after use and aggregate them into a quality product.
For plastic, paper and aluminum, this is typically a bale of some sort for sale or donation. For these materials, this breakdown occurs whether the consumption occurs at home, the office, the loading dock or on-the-go. For residential recycling, 50 to 60 percent of recycling costs are in collection according to the Solid Waste Association of North American. Manufacturing facilities in many areas throughout the U.S. often struggle to obtain collection services for their recyclables and byproducts.
A company’s role to implement circular economy projects must be based on its contribution in the value chain to make a compelling business case for participation. The Circular Economy Value Chain and Key Drivers diagram below represents a basic recovery value chain. Note, there are nine key players and different drivers from which to identify shared interests from their different vantage points. Notice how many of these interests overlap.
Reprocessors and manufacturers are trying to meet customers’ requirements for recycled content but are dealing with quality issued from commodity bales. Retailers and brands both place a spotlight on supplier commitments and zero waste goals while trying to meet consumer demands and balance reputation risk.
The consumer wants environmentally responsible products but is confused by the plethora of materials and recyclability. The recovery part of the chain — municipalities, haulers and material recovery facilities — is burdened with an ever-growing barrage of materials using limited resources while trying to provide a community service, create a quality commodity for sale and stay in the black.
Brands, both consumer and retailer private label, need domestic feedstock. For example, Kimberly-Clark Corporation and General Motors want this feedstock for manufacturing operations in Tennessee. They are also working hard to achieve zero waste goals and count on robust recycling infrastructure to successfully divert their recyclable materials from landfills.
Municipalities have the opportunity to become the head of their supply chains by providing a stable local supply of product bales for this feedstock, replacing reprocessors in China who imposed the Green Fence a couple years ago, rejecting contaminated shipments of recycled materials from abroad.
Matching supply and demand
Circular economy solutions are found through identifying and acting upon such shared interests. The primary shared goal throughout the recovery value chain is material recycling efficiency for the obvious cost benefits. Efficiency results in supply, and markets demand a predictable flow.
Where does valuable material flow accumulate in significant volumes to meet efficiency expectations and deliver the volume needed for market development? In city-regions — defined as the geographic area that represents a greater metropolitan area.
Unfortunately, recycling infrastructure planning is not very functional at the regional level; states often play a regulatory role and municipal governments provide waste services. Material flows are optimized in city-regions through "hub and spoke" systems of collection from residential and commercial locations and centralized processing so that recycling at a minimum pays for itself, and as commodities values go up, cash flow positive.
Companies in demand of recycled feedstock must take an active role in developing sources, while the public sector works to attract those end markets to their local recycled feedstock supply. Yes, it is work, but the opportunities are real.
Opportunities – U.S. recycling infrastructure
Some say recycling already has been done, but that is a myth, according to the EPA. Just over one-third of our trash in the U.S. is recycled, leaving a lot of room for efficiency improvements. The challenge for many businesses is that recycling infrastructure is inadequate in regions where they operate and they don’t know how to engage in collaborative projects that will result in meaningful improvements.
Yet these companies now understand municipalities are at the head of their supply chain as sources of recycled feedstock. The private sector’s practical knowledge in optimizing systems, efficiency and logistics is the best possible community investment they could make to deliver economic benefits and quality-of-life improvements where they operate.
The Coalition to Accelerate Recovery in Tennessee (CART) recycling project is an example of circular economy collaboration at the local level. Tetra Pak, General Motors, Veolia, Kimberly-Clark, Tennessee Department of Environmental Control (TDEC), the Tennessee Environmental Council and local champions formed CART to identify gaps in priority material flows and identify solutions in Memphis and Nashville city-regions.
They have conducted local optimization workshops and are planning a best practices opportunity assessment this year to prioritize projects into a recycling business plan eligible for TDEC, Closed Loop Fund or other financing. The companies hope to scale solutions to other markets based on the results of CART.
Knowledge sharing tools to identify business-to-business byproduct synergies are also part of the solution. The U.S. Business Council for Sustainable Development, in collaboration with the World Business Council for Sustainable Development and the Corporate Ecoforum, won the 2015 Circular Economy award for its Material Marketplace software tool. The CART working group is exploring how to leverage this tool regionally to close the loop and capture more material.
Collective strength works. By bringing global resources to bear locally in markets where you operate, and scaling pilot efforts across all markets, companies can reap the business benefits of the circular economy.
After the value chain has been mapped and system gaps with costs identified, how much valuable material gets recycled ultimately will depend on local policies and the strength of local markets. For most city-regions, recycling is generally desirable but it's not automatically good, efficient or cheap. The private sector’s active participation through value chain optimization and engagement on local policy is critical to success.
That brings us back to moving from the antiquated linear industrial system and toward the closed loop circular economy delivering benefits, not waste, on multiple fronts. Kimberly-Clark, General Motors, CART collaborators and more are demonstrating its practical application.
The circular economy requires participation, collaboration and shared understanding throughout the value chain. Not only is this not a fad, it is essential for sustainability and zero waste goal achievement.