Part 2 of 2 of thinkstep-anz’s circular economy series

By Dr. Jim Goddin

In last month’s issue we introduced the circular economy’s inner and outer ‘loops’. Unlike the outermost loops, which focus on avoiding waste and recycling, the inner loops focus on recovering the significant value (manufacturing, intellectual property, branding, advertising, and services) that is lost when products are recycled.

We called for greater ambition from New Zealand businesses and the Government to tackle these inner loops and set out the circular and economic advantages of doing this.

Here we share local and international examples of companies tackling the inner loops – through their products, supply chains and business models.

1. Designing products and systems with circularity in mind

Reusabowl: circular products and systems

Reusabowl provides a solution for waste created by single-use takeaway containers. The reusable food container goes far beyond recycling.

The Wellington-based company has a reuse network that consists of many of the city’s eateries, making it easy for customers to pick up and drop off bowls at various locations.

Reusabowl has also designed the systems around their product with circularity in mind. The Reusabowl container is made with a by-product of the rice-making process that would otherwise go to waste.

At the end of their useful life, the bowls are collected and commercially composted. Lids for their containers are made of food-grade silicone and get recycled into headphones at the end of their life.

XFrame: circular design tackling waste in the building industry

Another example is XFrame, a structural wall framing system that allows walls to be deconstructed and reused many times. XFrame’s circular design tackles the source of New Zealand’s single largest contributor to landfills: the building industry.

The Sustainable Business Network notes that construction projects using XFrame reduce the quantity of waste sent to landfills during construction by up to 86%.

2. A circular supply chain needs responsible sourcing

Responsible sourcing is one of the ultimate endpoints of the circular economy. We become comfortable with disposing of the materials we use partly because we underestimate their value.

In a circular economy, materials are more valuable and, consequently, we source them more carefully. This includes considering the ecosystems their sourcing disrupts and the social and ethical issues involved in producing them.

There is no such thing as waste in a circular economy; waste is materials in the wrong place. A fully circular supply chain finds and eliminates or monetises waste. Every operation in a circular supply chain becomes a source of raw material for another operation. For example, Reusabowl’s responsible sourcing uses rice husk — a waste product from the rice-processing industry — as a raw material for their containers.

Using another’s waste as input for your own production is known as industrial symbiosis. For Reusabowl, this industrial symbiosis allows the rice-processing industry to monetise their waste and Reusabowl to create a circular product.

3. A circular business model focuses on delivering services

A circular business model provides the benefits a customer requires, instead of selling products which they are fully responsible for. Some companies, like Rolls-Royce, have used circular business models for decades.

Since 1962, Rolls-Royce has been using a ‘power-by-the-hour’ model for their aerospace engines. Instead of buying the engine and being responsible for repairing and maintaining them and replacing parts, airlines pay for power delivered.

This service-based model was born from realising that airlines did not want to manage fleets of different engines but wanted to concentrate on getting passengers from A to B as effectively as possible.

Shifting to a service model frees up airlines from this added responsibility and incentivises Rolls-Royce to optimise how they perform their services.

Other examples of circular models in action include the United Kingdom start-up Riversimple’s service model for hydrogen-powered vehicles, and Mud Jeans’ leasing model for denim products.

Inner loop opportunities: greater profits, lower risks, stronger businesses

Actions in the inner loops focus on avoiding consumption, reducing materials and energy required to create products, and redesigning business models, systems, and products to support a circular future. A zero-waste vision drives some businesses to take this step, but many are motivated by profitability and business resilience.

Disputes over waste exports and the supply of raw materials needed to produce electric vehicles, energy, agricultural outputs and medical equipment are increasingly frequent and bring with them the risk of price volatility and disruptions to business.

Therefore, as well as offering greater profitability, a transition towards the inner loops of a circular economy can be an effective way to reduce supply chain risks.

Businesses that do not prepare for where the world is heading will find themselves struggling to keep up with increasing regulations overseas that directly or indirectly relate to circular principles.

As our key export markets introduce regulations focussed on circular economy New Zealand businesses that adopt the inner loops of a circular economy model will position themselves well for the future.

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