At least 30% of our CO2 emissions are associated with the manufacture and usage of things. Hence the things we own truly do contain a great deal of energy. And so we will need to change the way we deal with materials if a climate-neutral society is our aim. It is for good reason that the circular agenda enshrined in the Green Deal is an important element in the international climate agenda.
The industrial sector is facing the substantial challenge of going green. For example, industry must be climate neutral by 2050, although the demand for industrial basic products will remain. Furthermore, by 2030, emissions of greenhouse gases must have been cut by at least 55% (compared to levels in 1990). How can industrial firms implement circularity and sustainability and how can you ensure that your business premises are made climate-proof and future-proof? In this series of blogs, our experts will examine a whole range of issues such as these. This second part discusses the 5 success factors for the transition from linear to circular industry.
Forward-looking companies recognise the need to change and to consider new business models. They are looking for suitable products and services in the circular society towards which we are heading. TAUW helps companies in this regard. There is no set script, but what we do know is the ingredients that constitute the bare minimum to ensure a successful transition.
A circular society needs a circular value chain, with your business being part of that. You depend on a wide array of parties, such as suppliers, logistics companies and resellers. Hence it is important to gain proper insight into the value chain, including in a quantitative sense. What journey do your products take as they move on from customer to their waste phase? What considerations play a role when it comes to disposing of a product? You will preferably be one step ahead of that waste phase in future, through better product maintenance and repurposing after an initial usage phase. Thus avoiding the need for the product to be carted off and discarded at the end of its life cycle. The first step is to chart the flow of materials through the value chain to remedy any knowledge gaps.
A thorough understanding of the end-to-end value chain will enable you to reflect better on introducing circularity into your organisation’s business model. What circular models best fit your organisation and the value chain in which you are operating? It is highly likely that this will have consequences for the design, logistics and ownership of your products. After all, an awareness of the fact that you are part of a big chain also means that responsibility is not relinquished once the product reaches the end of the conveyor belt. The most significant change could be at the front end of the organisation, in procurement, or it may be important to keep an eye on products in the usage phase to be in a position to retrieve these for recycling. What factors in your organisation present a barrier to this change, or will actually serve to expedite it? This will provide a framework for action in this change process.
With this in mind, we envisage companies transforming from product sales organisation to service provider. It is a process that starts small, with potential to scale things up after success is demonstrated. They abandon the traditional linear model, which entails them producing and selling something and then leaving it to society to process the waste (e.g. making packaging recyclable without a recycling process being in place). Instead, companies will increasingly retain ownership of their products through a leasing arrangement (for instance). These companies will take products back prior to the end of their life cycle so that the materials can be recycled. Well-known examples include a carpet factory that now leases out its floor tiles, photocopier manufacturers that offer printing as a service, and a lamp manufacturer that has switched from being a manufacturer of light bulbs to being a supplier of light as a service. These make clear the fact that such a transition cannot solely be approached on the level of products or materials, but instead needs to consist in a genuine change to an overall business model with a new balance sheet and attendant cash flow. The question is always which circular model will suit your business and your role in the value chain.
A new business model will also entail consequences for collaboration with partners in the value chain. From the perspective of the traditional linear chain, we are very adept at transporting products to distribution centres and then on into society via an intricate distribution network. To date, however, we have been far less adept at getting the products back. In a circular society, products need to be retrieved and amassed at a site where they will be given a second life. For the most part, that is not something that companies can do on their own. It needs to be done at sectoral level, and some aspects will even have to be arranged at suprasectoral and international level.
In order to be able to manage change, it is obviously important to render circularity a measurable quantity and to formulate objectives. Several international monitoring frameworks have been developed in recent years, which make it possible to create a dashboard encompassing circular indicators. This facilitates data-driven circularity management within the organisation.
Ready to get started? TAUW can help identify circular models that suit your organisation and compile the systems required for the change. We adopt an integrated approach to the task. After all, the aforementioned ingredients for a successful circular transition attest to the fact that this is so much more than an environmental matter. Above all, it is a business task. TAUW has the right expertise in-house to help you along.