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Towards Circular Economy by J. Aponen

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Jyri Arponen
Jyri Arponen

This document discusses the circular economy and highlights several key points: 1. It presents a diagram showing the technical and biological material cycles of a circular economy, including reuse, maintenance, refurbishment, remanufacturing, and closed material loops. 2. It notes that substantial value can be unlocked for organizations through circular practices like cost savings, revenue growth, and strategic repositioning. 3. It lists some of the building blocks needed for a circular economy, including skills in circular product design and new business models. 4. It provides several examples of companies implementing circular models through practices like product servitization, reuse/remanufacturing, and performance-based models.

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Towards Circular Economy Jyri Arponen, Sitra 28.1.2015
2 The Circular Economy a system restorative by design to retain more volume and value within the economy SOURCE: Ellen MacArthur Foundation CE team 1 Hunting and fishing 2 Can take both post-harvest and post-consumer waste as an input 3 Refurbish/remanufacture and recycle across value chains, i.e., materials do not reenter own value chain anymore Biochemical feedstock Parts manufacturer Product manufacturer Service provider Biological materials Technical materials Consumer User Landfill Biosphere Farming/ collection1 Reuse/ redistribute Maintain CollectionCollection Mining/materials manufacturing Extraction of biochemical feedstock2 Restora- tion Cascades Biogas Anaerobic digestion/ composting Energy recovery I II Leakageto be minimized Yieldto be maximized RecycleIV Refurbish/ remanufacture III Cyclesto be tightened Other value chain続 V Cas- cade3
3 Substantial value pools can be unlocked for organizations by going circular Detailed on next page SOURCE: McKinsey's CE Special Initiative Renault cut the total costs of ownership of cutting fluid (input and process) by 33% through CE collaboration with suppliers Cost savings Reduced material volume Reduced material prices Reduced input prices Revenue growth Reduced material price volatility Participation in secondary sales Capturing premium via non-sales based services Growing market share Strategic reposi- tioning Stimulating innovation Regulatory strategy Tighter control of supply chain Sources of value creation Vodafone Red Hot program gives access to latest phone and helped stabilize market share dilution SABMiller helps maintain market dominance in South Africa due to the use of returnable glass bottles Ricoh established a "GreenLine" product achieving significant sales volume in otherwise untapped market segments and high profitability (twice that of new products) Bosch hedged material price volatility by bringing material back at pre-agreed prices Supplier of H&M is able to substitute 40% of virgin fibers with recycled ones, which would otherwise be lost to waste Teijin developed the ECOCIRCLE and developed proprietary process to recycle polyester creating strategic lock-in with Patagonia Philips committed to using 10% recycled plastics in their products by 2015, staving off potential EU EcoDesign regulations B&Q/Kingfisher collaborated closely with raw material supplier and manufacturer to develop and source for circular product line Impact case examples Lend Lease used scaffolding wood from construction process in furnishing and landscaping of the London Olympic Village
4 Building blocks of a circular economywhats needed to win Skills in circular product design and production New business models Skills in building cascades/ reverse cycles Enablers to improve cross-cycle and cross- sector performance CBA D
5 Rolls-Royce Maximizing downtime and minimizing maintenance cost for its airline customers THE CIRCULAR MODELS IN ACTION
66666666 Caterpillar Reman Avoiding competition and reputation risk from the gray market SOURCE: Company web site THE CIRCULAR MODELS IN ACTION
7 Bosch eXchange Serving cost-conscious owners of older vehicles THE CIRCULAR MODELS IN ACTION
8 Michelin Escaping commoditization and locks in customers with a pay-per-kilometer program Text THE CIRCULAR MODELS IN ACTION
9 DriveNow Addressing dwindling car ownership SOURCE: Company web site THE CIRCULAR MODELS IN ACTION
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Towards Circular Economy by J. Aponen

  • 2. 2 The Circular Economy a system restorative by design to retain more volume and value within the economy SOURCE: Ellen MacArthur Foundation CE team 1 Hunting and fishing 2 Can take both post-harvest and post-consumer waste as an input 3 Refurbish/remanufacture and recycle across value chains, i.e., materials do not reenter own value chain anymore Biochemical feedstock Parts manufacturer Product manufacturer Service provider Biological materials Technical materials Consumer User Landfill Biosphere Farming/ collection1 Reuse/ redistribute Maintain CollectionCollection Mining/materials manufacturing Extraction of biochemical feedstock2 Restora- tion Cascades Biogas Anaerobic digestion/ composting Energy recovery I II Leakageto be minimized Yieldto be maximized RecycleIV Refurbish/ remanufacture III Cyclesto be tightened Other value chain続 V Cas- cade3
  • 3. 3 Substantial value pools can be unlocked for organizations by going circular Detailed on next page SOURCE: McKinsey's CE Special Initiative Renault cut the total costs of ownership of cutting fluid (input and process) by 33% through CE collaboration with suppliers Cost savings Reduced material volume Reduced material prices Reduced input prices Revenue growth Reduced material price volatility Participation in secondary sales Capturing premium via non-sales based services Growing market share Strategic reposi- tioning Stimulating innovation Regulatory strategy Tighter control of supply chain Sources of value creation Vodafone Red Hot program gives access to latest phone and helped stabilize market share dilution SABMiller helps maintain market dominance in South Africa due to the use of returnable glass bottles Ricoh established a "GreenLine" product achieving significant sales volume in otherwise untapped market segments and high profitability (twice that of new products) Bosch hedged material price volatility by bringing material back at pre-agreed prices Supplier of H&M is able to substitute 40% of virgin fibers with recycled ones, which would otherwise be lost to waste Teijin developed the ECOCIRCLE and developed proprietary process to recycle polyester creating strategic lock-in with Patagonia Philips committed to using 10% recycled plastics in their products by 2015, staving off potential EU EcoDesign regulations B&Q/Kingfisher collaborated closely with raw material supplier and manufacturer to develop and source for circular product line Impact case examples Lend Lease used scaffolding wood from construction process in furnishing and landscaping of the London Olympic Village
  • 4. 4 Building blocks of a circular economywhats needed to win Skills in circular product design and production New business models Skills in building cascades/ reverse cycles Enablers to improve cross-cycle and cross- sector performance CBA D
  • 5. 5 Rolls-Royce Maximizing downtime and minimizing maintenance cost for its airline customers THE CIRCULAR MODELS IN ACTION
  • 6. 66666666 Caterpillar Reman Avoiding competition and reputation risk from the gray market SOURCE: Company web site THE CIRCULAR MODELS IN ACTION
  • 7. 7 Bosch eXchange Serving cost-conscious owners of older vehicles THE CIRCULAR MODELS IN ACTION
  • 8. 8 Michelin Escaping commoditization and locks in customers with a pay-per-kilometer program Text THE CIRCULAR MODELS IN ACTION
  • 9. 9 DriveNow Addressing dwindling car ownership SOURCE: Company web site THE CIRCULAR MODELS IN ACTION