Lessons from the Field
The silver-lining in the recently imposed quarantine for Covid-19 is that I am making my way through my reading list—and not just giving it a cursory look, but really looking at it, which has led to a new level of appreciation for the truly creative, innovative work being done by leading companies committed to sustainability. Top of the list this morning was “Creating the Circular Economy in the Great Lakes Region” by the U.S. Chamber of Commerce Foundation and Navigant, a Guidehouse Company.
While there are five generally accepted business models for the Circular Economy, the primary models in this report are Circular Value Chain (designing products and assets with low-footprint material selection and minimized resource use throughout the life cycle) and Recovery and Reuse (recovering and treating wastes and byproducts for reuse as inputs or cascading for other uses).
The report looks at three materials streams—steel, plastics, and pulp and paper—and identifies both the potential economic savings and environmental savings as measured in tons of CO2 by 2050 (the calculations made by Navigant are outlined in detail in the report). The economic savings range from $4.4B to $5.0B, with $2.5B from reducing steel scrap and $1.7B from mechanical recycling of plastics. The environmental savings range from 25 million tCO2 to 120 million tCO2, a very broad range, and in the latter, more than half attributable to plastics. (The ranges are based on ‘partial circularity’ and ‘ambitious circularity’).
The report summarizes five actions for scaling the circular economy in the Great Lakes Region, which are not particularly surprising, but it is helpful to have them so clearly articulated:
- Embrace the broader aspects of circularity (it’s a whole new world of opportunity not just savings)
- Encourage partnership and collaboration (looking first to your own potential value/supply chain)
- Align the circular economy with mainstream practices (read, align it with core business processes)
- Develop traceable actions and targets (even if you have to set them yourselves)
- Develop incentive mechanisms (it’s helpful when good behavior is rewarded)
More insightful were the actual examples and case studies across the three industries, and lessons gleaned from that. In an analysis of waste, which the study cites, across four cities in the region, 60 percent of the waste is industrial; 40 percent is consumer, which surprised me, because much of the of the focus around the circular economy today seems to be heavily weighed on infrastructure and habits which enable consumer recycling. Is post-industrial waste the overlooked but ‘lower hanging’ fruit? Three case studies in this report highlighted the power of using post-industrial waste and the indication that it could be scaled faster and more efficiently. This is demonstrable ‘industrial symbiosis,’ where the byproduct/waste of one industry serves as raw materials for another.
- Schnitzer Steel has approximately 100 metal and recycling facilities throughout the U.S. which diverts and reuses millions of tons of materials—avoiding burying used metal and the need to dig up new. Through Schnitzer’s Pick-n-Pull brand, it operates an industry-leading chain of over 50 self-service used auto parts stores providing millions of recovered, affordably priced auto parts to retail and wholesale customers on an annual basis. And in it’s extremely efficient manufacturing plants, it also actively markets the by-products of its processes (EAF dust and slag) to other companies which find value in those materials.
- Steelcase recycles plastic film in their plants by bundling it and sending it to Trex, a major manufacturer of wood-alternative decking, railings and other outdoor items made from recycled materials. Notably, this started locally, in West Michigan and required collaboration internally as well as externally. It took a wholesale change in Steelcase operations to collect, bale, and transport the material to Trex, which involved buy-in from multiple internal stakeholders like Steelcase’s logistics, materials, plant managers, and sustainability teams.
- Kohler is featured in the study with both examples in steel and plastic. Engine housings were identified early as a potential to replace virgin plastic with recycled, but numerous attempts to do that with post-consumer plastic was not effective. Not until the company used post-industrial regrind were they able to get the quality of material that ensured the end product as well as reducing the risk to damage equipment.
These are all particularly good examples of creating and/or leveraging existing value chains, places where companies are quite used to partnering and collaborating with one another, and aligning with mainstream practices (in other words, what they want to accomplish anyway).
In addition, all of these companies had strong leaders who established—and enforced—targets. Setting clear goals and measuring progress are essential to the advancement of the circular economy. It’s helpful to have external incentive mechanisms and recognition as well, of course, like the Global Reporting Initiative (GRI) who are issuing new guideline for circular this month. Such standards enable greater accountability and transparency for investors, thereby rewarding companies with good ESG performance a lower cost of capital. But local rewards and incentives can also be powerful, especially if co-created with the companies most proactive in embracing the behaviors and processes for a circular economy.
The other three as identified by Accenture and the World Business Council for Sustainable Development are Lifetime extension (extending the lifetime of products and assets through a greater focus on maintenance, upgrade, and repair, as well as reverse logistics, product take back, and remanufacturing); Service models (offering products as a service through pay-per-use models and employing sharing and leasing platforms to maximize utilization of products and assets); and Digital Platforms (dematerializing by replacing physical services with virtual).
The January 2020 report was made possible from contributions from Steelcase, Kohler, Whirlpool, the American Forrest and Paper Association, and the Great Lakes & St. Lawrence Governors and Premiers. It was further supported by the Sustainability and Circular Economy Shapers and Supporters of the U.S. Chamber of Commerce Foundation: Dow, DSM, and Kroger. Link to the full report here.