Circular Economy Business Models Implementation of Circular Economy
Circular Economy Business Models Implementation of Circular Economy Unit 3 A
Learning Outcomes The learner will be able to identify key types of business models that are effective in delivering the circular economy and how these are innovated and developed to provide added value and business sustainability. You will also learn the applicability of the models and some of their benefits through selected case studies.
Introduction The circular economy is a concept that is designed to bring a transformative power to the way business is carried out. Given the unsustainable nature of the existing linear economy, and the need for economies to generate value and enhance value, the various business models outlined in this unit, provide bit of theory and practical examples of how these models work in practice.
The Definition of a Business Model “Value” is a key theme in area of Business Models “The Business Model describes the design or architecture of the value creation, delivery and capture mechanisms employed. ” Teece, 2010.
Circular Economy Principles for Business There are two principal CE business frameworks that are widely reported. There are many crossovers but each has unique characteristics. Accenture Models Ellen Mac. Arthur Foundation Models Circular Supply Regenerate Resource Recovery Share Product life Extension Optimise Sharing Loop Virtualise
(Consideration of CE at Design Stage) Extraction of resource Manufacturing Recycling Distribution Residual waste at sustainable level Collection Consumption, reuse, repair
Accenture Model Description Examples Circular Supply To work with a company’s supply chain to support the use of fully renewable, recyclable or biodegradable materials. CRAi. LAR and AKzo. Nobel Resource Recovery To undertake traditional waste reduction and recycling activities within an organisation to support the use of materials within the business. P&G, GM and Kroger Product life Extension Maintain and improving products by repairs, upgrades, remanufacturing or remarketing keeps them economically useful for as long as possible Dell and Caterpillar Sharing Platforms The Sharing Platform model enabled by digital technology allows consumers, companies and micro -entrepreneurs to rent, share, swap or lend idle goods. Reducing overall resource use Airbnb, Uber, Lyft and Peerby Product as a Service Where manufacturers and retailers bear the total cost of ownership. Performance, durability and relationships are key components of the business Michelin Solutions and Phillips
Ellen Mac. Arthur Foundation Mod el Description Examples Regenerate There is a demand for a shift towards renewable materials and energy sources as well as investments into natural capital by returning to nature renewable materials British Sugar Share This model includes shared usage of goods amongst users but also maximising resource use in the product life cycle (e. g. reuse, increased durability, design for repair/upgrade) Girl Meets Dress. TM Optimise This model involves improving products and process efficiency Desso Loop This model implies the closing of production loops by returning technical materials to use (via repair, remanufacturing, recycling) and renewable materials to cascading usage and ultimately to nature. Ecovative Virtualise This model involves the delivery of a utility in the absence of a physical product. Amazon, Audible, Kindle, Spotify, Netflix Exchange This is the use of innovative technologies and materials that enable more resource efficient industrial processes Interface
Discussion Compare the Mac. Arthur Foundation and the Accenture business models and discuss what they have in common. Identify differences if any.
Circular Supplies Case Study 1 - CRAi. LAR Technologies • The company produces renewable and environmentally friendly biomass resources using flax, hemp and other bast fibers for the making of high-quality clothing items by the fashion industries. • The garments are as soft and durable as cotton. • Eliminating the environmental risks associated with cotton’s cultivation • While it costs 20, 000 to 29, 000 litres of water to produce 1 kg of cotton, CRAi. LAR uses about 17, 000 litres. • The products are renewable and biodegradable
Circular Supplies Case Study 2: Akzo. Nobel • A large-scale paint and coating company that uses plant based oils and recycled PET bottles to produce coating. • Collaborated with cleantech company Photanol to develop a process for harnessing the energy from the sun to make chemicals. • The technology simulates photosynthesis to produce a “green” chemical that will eventually replace fossil-based linear raw materials.
Resource Recovery Case Study 1: Procter & Gamble (P&G) and General Motors (GM) • Proctor & Gamble is operating about 45 facilities now on a zero-waste basis. This means that all of the manufacturing waste at those sites are either repurposed, recycled, or converted into energy. • General Motors on the other hand, currently recycles 90% of its worldwide manufacturing waste and has landfill-free facilities …generating $1 billion in revenue yearly from by-product recycling and reuse.
Resource Recovery Case Study 2: Kroger (A US Grocery Supply Chain) • Converts about 150 tonnes of wastes produced daily to biofuel through anaerobic digestion. • The energy powers campus Kroger’s offices as well as the distribution center that occupies about 49 -acre. • Power more than 150 zero-emission forklifts. • Gain revenue by diverting food waste from landfills, whilst preventing emissions
Product Life Extension Case Studies 1 and 2: Dell Inc. and Caterpillar Dell Inc. • Modular design that allows for repairs • Recycles and refurbish old/dented computers and resale • Uses plastic litters to produce packaging Caterpillar • Designs equipment to be refurbished. • Equipment parts are collected and serviced instead of manufacturing a brand new one. • Eliminating obsolence and resource consumption. • Improving energy efficiency, revenue and employment
Sharing Platforms Case Studies • 92% of cars in the EU are parked most of the time. When in use just 1. 5 out of 5 seats are used. • Think about. . . Maximising the value of stuff, space and services you own by making and saving money through online/apps/ other sharing platforms. . . • Uber and lyft (share rides) • Airbnb (share homes/space) • Peerby (Share household equipment)
Discussion What are the benefits of sharing? Reflect on any idle stuff you own that could be shared.
Discussion answers for sharing platforms • Reduces wastes (Arbnb saves 30 -50% waste, 50% water, 90% CO 2 waste compared to hotels) • Reduce environmental impacts • Saves costs including those associated with ownership • Maximise the value of a product • Generates revenue
Product as a service Case studies: Michelin and Philips Light • As a manufacturer, imagine bearing the "total cost of ownership of your product" what will you do differently to maximise profit? • Think about. . . Designing your product to last, reusable and ease of maintenance. Michelin • Charges customers per service and kilometers driven rather than charging for the tires. • Managing over 300, 000 tires, they reduce fuel consumption and CO 2 emissions through embedded pressure monitoring systems to optimize preventive maintenance and reduce downtime. • Extending the life of the product Philips' Light Philip’s provides ‘pay per lux’ lighting service for lease to Amsterdam Schiphol Airport and National Union of Student (NUS) house London. The lighting system is energy-efficient and reduces 80% energy consumption compared to the conventional lighting
Summary CE business models are practicable as seen in various case studies. The main elements of the models are • Circular Supply • Resource Recovery • Product Life extension • Sharing platforms • Product as Service They offer environmental and economic benefits to both the manufacturers and the consumers.
Reference Links • https: //www. interreg-central. eu/Content. Node/Chain-reactions/CHAIN-REACTIONS--Innovation-brief-2. pdf • http: //www. biomassmagazine. com/articles/9040/food-waste-derived-biogas-powerskrogers-distribution-center • https: //www. accenture. com/t 20150523 T 053139__w__/usen/_acnmedia/Accenture/Conversion. Assets/Dot. Com/Documents/Global/PDF/Strategy_6/Accenture-Circular-Advantage. Innovative-Business-Models-Technologies-Value-Growth. pdf • https: //thecirculars. org/content/resources/Accenture-Waste-Wealth-Exec-Sum. FINAL. pdf • Lacy P, Rutqvist, J Waste to Wealth: The Circular Economy Advantage, ISBN 978 -1137 -53068 -4 • https: //link. springer. com/book/10. 1057/9781137530707 • https: //corporate. delltechnologies. com/en-us/social-impact/advancingsustainability/sustainable-products-and-services/circular-design. htm#scroll=off • https: //www. ellenmacarthurfoundation. org/case-studies/selling-light-as-a-service
Quiz Question 1 Which of the following is a Circular Economy Business Model (according to Accenture) A. Waste Prevention A. Sharing Platforms A. Extended Product Life A. Improved competitiveness A. Circular Supplies
Quiz Question 1 - Answer Which of the following is a Circular Economy Business Model (according to Accenture) A. Waste Prevention A. Sharing Platforms A. Extended Product Life A. Improved competitiveness A. Circular Supplies
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