Circular Economy

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--By Vaijayanti Khare

A circular economy is one that is restorative and regenerative by design, and which aims to keep products, components and materials at their highest utility and value at all times, distinguishing between technical and biological cycles.

The traditional model of take-use-dispose is being replaced by the models that take less-  use and re-use to optimum- eliminate-dispose or recycle waste. 

Does it make business sense, is it suitable for all industries, does it make environmental sense, is it here to stay, how does an organisation go about this transition to circular economy.  In this series of six selected industries focused on, we shall go into the relevance, the mechanism and the sustenance of bringing about the paradigm shift from a linear to a circular economy.  The manufacturing sector is the first one we shall focus on in this article.
Sustainable manufacturing seeks to profitably produce goods while minimising a firm’s environmental impact, natural resource use, and energy consumption. Evidence shows that companies that use both environmentally and economically sound manufacturing practices can gain significant competitive advantages. There are three broad areas of good practices, and each has good examples of successful implementation.

Reducing inputs for production in the first place
• Solvent use reduction by finding alternatives 
• Used materials for aesthetics and to reduce impact (Wausau Tile, US)

Improving the efficiency of facility operations
• Modifications in plant to reduce resource use 
• Manufacturing in harmony with nature (Sanden Corporation, Japan)
• Plant improvements to cope with rising energy price 

Improving products to reduce impact in use and at the end of life
• Greener products to enhance competitiveness and help consumers reduce ecological footprint 

In 2002, Sanden Corporation, an automotive equipment and electronics manufacturer, established a complex consisting of a manufacturing area and a forest on a 641 thousand square metre tract of land north of Tokyo. This site was established with the concept to make ‘the factory of the 21st century in harmony with nature’. Only half of the site has been allocated for the factory area, while the other half comprises a forest. The complex currently has facilities for manufacturing vending machines, refrigerated display cases and car air-conditioning compressor components as well as logistics processing centres. In constructing this complex, Sanden employed large-scale, close-to-nature construction methods to improve the natural environment and ecosystems. For example: biotope ponds were created as reservoirs in the complex, the stones and timbers found in the site were used for its own construction, and the discovered rare species of plants were replanted in ideal locations within the site with appropriate maintenance and care.

These efforts provided economic benefits of more than USD 6.5 million owing to a reduction in the use of concrete and reduced cost of waste management. The company set a goal to increase the number of species in the local ecosystem beyond the level when the construction of the site was started in 1998. In a natural environment survey conducted in 2008, the site’s biodiversity had recovered and surpassed the levels of 1998. The complex is also used for nature experience educational programmes and more than 5000 students visit every year. Closer to home, the Chaudhary Udyog Gram at Nawalaparasi was conceptualised on similar lines of eco-system friendly manufacturing practices but then for some reason lost the drive and direction; the newer assembling and engineering units of the Golchha Organisation are being modeled on such eco-sustainable lines. 

Wausau Tile, manufactures architectural products for the global market, such as concrete pavers, terrazzo tile and precast terrazzo. The company sought to reduce the use of natural raw materials and save costs at the same time as part of its “green initiative”. It investigated the possibility of finding alternative aggregates to mix with concrete, where gravel is normally used. Of all the collected post-consumer materials, glass has been one of the most difficult to recycle and much of the used glass ends up in landfills. Even though using broken glass can lead to additional costs, the company believed that any extra cost could be offset by the decorative value of the material, by developing new products, attracting new customers and reducing the environmental impact. With this in mind, the company managed to include large glass chips in their products that were large enough to be architecturally and aesthetically valuable.

The company redesigned a number of their products incorporating used glass as an aggregate such as benches, tables, planters, concrete pavers and terrazzo tiles. The glass aggregate accounts for up to 56 percent of the total product weight or volume in some products. In 2009, the company used about 450 tonnes of post-consumer/post-industrial glass, creating a market for used glass and attracting customers. Following this success it has recently introduced a new line of products like sinks, bathtubs and toilet bowls as an aggregate. Closer to home, the IL&FS, India has made similar inter-locking pavers and tiles from construction debris for public sector and industrial infrastructure.   

The manufacturing sector may not be the engine of economy and growth in our country, in fact, the share of manufacturing in the GDP gradually declined from 9 percent in 2000/01 to 6.2 percent in 2012/13 and continues to hover and stay. The Central Bureau of Statistics conducts a national census of manufacturing establishments (CME) every five years and the latest one of 2011-12 published in 2014 reveals that there has been an 18.3 percent increase in the number of operating establishments since the last census. 

It is clear that there is enough manufacturing activity with good scope to bring in a circular economy model. If your question is: does it make any business sense – the answer is a resounding, Yes. 

Let us look at some of the successful circular manufacturing business models.  

Circular supplies model: A business model particularly relevant for companies dealing with scarce commodities, in which scarce resources are replaced with fully renewable, recyclable or biodegradable resource inputs. Royal DSM has developed a cellulosic bio-ethanol in which agricultural residue (baled corn cobs, husks, leaves and stalks) is converted into renewable fuel. The cellulosic bio-ethanol created a new source of revenue for DSM, while reducing emissions, creating jobs and strengthening national energy security.

Resource recovery model: A model that leverages technological innovations and capabilities to recover and reuse resource outputs that eliminates material leakage and maximises economic value. Examples include closed loop recycling, industrial symbiosis whereby waste materials are re-processed into new resources.

Walt Disney World Resort sends food waste, including grease, cooking oils and table scraps, from select restaurants in its complex to a nearby 5.4 MW anaerobic digestion facility owned and operated by Harvest Power. The organic waste is converted into renewable biogas (a combination of carbon dioxide and methane) to generate electricity, with the remaining solid material processed into fertiliser. The energy generated helps to power Central Florida, including Walt Disney Resort’s hotels and theme parks.

Product life extension model: A model that helps companies extend the lifecycle of their products and assets to ensure they remain economically useful. Material that otherwise would be wasted is maintained or even improved, such as through remanufacturing, repairing, upgrading or re-marketing. By extending the lifespan of the product for as long as possible, companies can keep material out of the landfill and discover new sources of revenue.

Over the past 40 years, Caterpillar’s remanufacturing activity, through its Reman Program has focused on returning components at end of life to same-as-new condition or quality that reduces costs, waste, greenhouse gas emissions and need for raw inputs.

Sharing platforms: A model centred on the sharing of products and assets that have a low ownership or use rate. Companies that leverage this model can maximise the use of the products they sell, enhance productivity and value creation. 

Product as a service: A business model where customers use products through a lease or pay-for-use arrangement versus the conventional buy-to-own approach. This model is attractive for companies that have high operational costs and ability to manage maintenance of that service and recapture residual value at the end of life.

Philips sells lighting as a service in which the company aims to reach more customers by retaining ownership of the lights and equipment so customers do not have to pay the upfront costs of installation. Philips also ensures the sound environmental management of its products by taking them back at the appropriate time for recycling or upgrading.

To take a page from the Chinese leadership on such matters: “China can no longer afford to follow the West's resources-hungry model of development, so as not to repeat the mistakes by the industrial development of the west over the past 300 years." –  Pan Yue, Deputy Minister, State Environmental Protection Administration, (BBC and New York Times 2004). Leaders at the highest level are creating a new vision of China’s future by charting a fifty-year plan to achieve sustainability. Some key areas identified are: Developing a Circular Economy model with high resource efficiency and low pollution, Passage and implementation of the Cleaner Production law and growing recognition of the need to create a development path to meet the needs without following the model of western consumerism, inefficient resource consumption, and pollution.

In the face of sharp volatility increases across the national and global economy and proliferating signs of resource depletion, the call for a new economic model is getting louder. The quest for a substantial improvement in resource performance across the economy has led businesses to explore ways to reuse products or their components and restore more of their precious material, energy and labour inputs. The circular economy is here to stay. The time to act is now.

Vaijayanti Khare is known for her dynamic engagements in the corporate, academic, social and development fields in Kathmandu over the past decade. Her writings are a reflection of her hands-on work, insights, studies, success and challenges.

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