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The Next Economy
Racing to Zero, Part 2:
It’s the (Circular) Economy, Stupid.

Many organisations have not yet connected the dots between climate-change mitigation and a circular economy — the successful shift to which could be our greatest tool. Here, we examine the climate math for circular strategies, and the role of the humble car door in radical climate action.

Last time out, we explored some of the key challenges in the race to zero, and how we some serious heavy lifting across the complete value chain — beyond quick wins and offsetting — towards deeper decarbonisation in the near term, if we are to have any chance of keeping within a 1.5°C average global temperature rise. We also recognised the need for pragmatism — exploiting solutions that are available and work now, rather than gambling on unknown future technological breakthroughs. So, what can be done, today?

Squaring the circle?

A key strategy, which appears to be overlooked by many organisations, is the opportunity to explore the virtuous link between radical climate action and a circular economy. Some project that going circular could enable up to 40-50 percent of our necessary emissions reductions. This currently undervalued circular option could become an increasingly important strategy — arguably, the most powerful single instrument for delivering radical reductions in carbon emissions we have.

As ever, there are a few leading lights, pushing the boundaries of possibility; companies including IKEA, H&M and Groupe Renault are all making major circular commitments, and following through with genuinely exciting plans, initiatives and new investments. BMW also appears to be on the right road. As Dr. Thomas Becker — their VP for Sustainability and Mobility — asserts, "We will not get on a Paris-compliant pathway just by replacing energy in primary consumption. The circular economy is absolutely necessary for companies with climate targets that cover the supply chain, as ours do.” BMW is now aiming to integrate 50 percent reused and recycled content into vehicle production by 2030 — a major contribution to its emissions-reduction programme.

Yet, surprisingly, circular solutions appear to be strangely absent from so many climate-action strategies. Our global economy is still only 8.6 percent circular, revealing a massive opportunity gap that could yet be exploited in our efforts to resolve the climate crisis — so, why have so few businesses made this important connection?

Is the boardroom lacking in vision, awareness and knowledge on circular business strategies? Are we experiencing a circular skills shortage within the workforce? Are there constraints on funding and investment? Or, is going fully circular simply considered as just too difficult to achieve, involving too much change to the business model and how we make money? Could it be down to our single-minded focus on carbon and a lack of joined-up-thinking? All of the above, perhaps?

Carbon business case

Lauren Phipps rightly picks up on another important issue — the need for robust carbon business cases, rather than simply taking a leap-of-faith, when seeking to justify circular strategies. Does ‘going circular’ actually save more emissions than it uses — is there a net benefit? A good question — we certainly need to take care of the climate math.

To illustrate the point, Phipps shares a very helpful consideration of recycling plastics: “The process of sorting, reprocessing, and manufacturing consumer plastics will often outweigh sourcing cheap and lightweight virgin films (that would eventually be landfilled) from a pure carbon emissions perspective.” She’s right; looking through the lens of carbon-accounting, there could be occasions where the cumulative process emissions of recycling could overshadow any embodied product emissions savings involved.

And, if the numbers don’t work out in practice, there are major implications for the entire circular economy movement: “If all circular economy initiatives were adopted only if they offered near-term carbon reductions, many might not get off the ground.”

So, why bother to go circular, if the carbon business case doesn’t stack up?

This worthy challenge resonates greatly, not least because of our recent work with eBay in developing holistic impact models for a number of recommerce categories within eBay’s B2B portfolio in the UK.

The eCAP Project

eBay has certainly made progress on its sustainability journey — with a range of important initiatives, including a serious commitment to circularity. Through the scale of its reach, eBay’s platform can help improve the sustainability impacts for millions of customers, by encouraging responsible consumption and keeping used and refurbished products in use — helping to avoid millions of tonnes of embedded carbon emissions associated with the production and consumption of new products.

The eCAP Project (enabling circular automotive parts) focused on the impacts delivered within the B2B used and refurbished vehicle parts category in the UK. The scale of activity is quite impressive, here: eBay sells just under one million used and refurbished vehicle parts each year, to a range of B2B customers, including garages and repair workshops. eBay had understood, intuitively, that every time a vehicle part is reused, there should be significant savings in embodied carbon emissions, resulting from the avoidance of manufacturing new automotive parts. The question was, what level of savings in net emissions would be experienced through this scale of activity, while fully accounting for process emissions?

To address this, we certainly needed to develop robust, holistic, complete and accurate models of impacts and benefits. And, by taking a complete value-chain perspective — rather than a narrow focus on products — we were looking to develop an extended analysis of key resources, material flows, useful product lifecycles and ultimate destinations, along with an exciting range of further circular and commercial opportunities for eBay and its value chain partners.

Big numbers

The results are conclusive. Driving circularity drives big carbon savings: eBay UK’s B2B platform for reused and refurbished parts saved almost 29,000 tonnes of CO2e in 2020, compared with buying new parts — based on an assessment of the Top 115 items sold and accounting for process emissions through harvesting, cleaning, refurbishment, logistics and eBay’s contribution. The total net saving is equivalent to the emissions arising from the electricity used by 13,200 UK homes each year — or, if expressed in more regenerative terms, the carbon sequestered by almost 14,200 Hectares of forest in one year.

Yet, as we know, sustainability is not just about carbon. Just as Phipps calls for a broader view — not just based on one data set — we need holistic decision-making based on all dimensions of sustainability and business performance.

eBay UK has also amassed a wider range of sustainability impacts, including resource conservation, along with a range of positive social and economic outcomes. In 2020, by keeping 4,510 tonnes of vehicle parts in use, the eBay model avoids the need to produce a range of important and carbon-intensive materials for the production of new parts, including: 1,800 tonnes of steel, 120 tonnes of iron, over 800 tonnes of aluminium, and 77 tonnes of copper.

The use of plastic represents a hot topic in these times — the eBay UK model currently avoids the further production of around 760 tonnes of new plastics each year; equivalent to the quantity of materials required to manufacture more than 82 million plastic water bottles.

While savings in water use are fairly modest at 3,200m^3^ in 2020 — enough to keep 1.6 million people hydrated for one day — the savings in electricity through avoiding the manufacture of new parts are quite impressive at 2,500 MWh in 2020, enough electricity to power around 816 UK homes for a year. The associated energy cost-avoidance saving would amount to almost $400,000.

There are also significant social impacts arising: eBay’s B2B reused vehicle parts platform supports 1,000 skilled jobs in the real economy, along with their corresponding wages and tax contributions.

So, on an aggregate level, a circular economy — in terms of reused vehicle parts — appears to work exceptionally well for climate action and in support of a wider range of sustainability impacts.

But, let’s see if the climate math stacks up at the micro level, too — as we reflect on the performance of a car door and the relative impacts arising from reused and recycled, versus new vehicle parts.

The humble car door

Each time a business customer buys a used car door on eBay UK, they will experience net emissions savings of around 120kg CO2e in comparison with buying a new product. For the 2,300 doors sold on eBay UK’s platform in 2020, this scales-up to deliver a total net saving of almost 278 tonnes of CO2e — equivalent to the emissions generated in recharging 34 million smartphones.

Yet, recycling the door leads to a saving of only 62kg of CO2e. While not a bad performance in itself — preserving existing base resources and avoiding the need to extract and process virgin materials — recycling, effectively, represents a 48 percent net loss in carbon-emissions savings potential, when compared with the reused door. The climate math definitely works in favour of the more circular ‘reuse’ option.

We also need to think about commercial value. The assessment of the financial side of the equation also makes for interesting analysis; recycling — or perhaps more appropriately, downcycling — leads to a reduction in asset value by 98.6 percent, when compared with the selling price of a reused car door. Of course, smashing-up products into base resources will result in a major loss of utility and value.

So, following the maxim of the circular economy, we’re definitely better-off in keeping assets at their highest level of use, for as long as practicable. Recycling is fine, where necessary, but delivers sub-optimal performance — environmentally and economically — in comparison with reuse.

The essential link

The eCAP Project proves the essential link between increased circularity and the ability to deliver more effective climate action, at least for reused vehicle parts.

The numbers stack up in the eBay case, because reuse involves keeping assets at their highest level of utility, with minimal losses in carbon emissions and asset value, compared with the downcycling option. This helps to explain why, in the plastics recycling example, the carbon business case didn’t work out. It all comes down to our treatment of assets and resources, reinforcing the need to maximise circularity when building the essential link with climate action.

The eCAP Project further highlights the huge potential for the automotive sector to turbo-charge its journey towards net zero and beyond. With their current emphasis on downcycling end-of-life vehicles and using recycled content in new vehicles, automotive producers are currently missing 48 percent of the net carbon savings opportunity afforded by re-use/refurbishment of appropriate parts.

Taking a broader view, going circular presents a major opportunity for any organisation, serious about taking radical climate action while generating business opportunity — especially those dependent on scarce and non-renewable resources. And, given our current progress on the essential road towards net zero and beyond — with only one in 20 European companies on track to meet net-zero climate goals — it would make good sense for more organisations to explore how the alignment between circularity and climate action might work for them, rather than waiting for expensive and unknown future technologies.

Keeping our eye on the macro carbon business case, eBay’s circular model for used and refurbished vehicle parts already delivers more emissions savings than seven combined Orca CCS plants, and at a fraction of their total cost of $70 million. The eBay model delivers many additional societal and economic benefits, too.

But, of course, going circular means change — and this is not always easy, especially for large incumbents. In the third and final part of this series, we’ll explore how organisations can take concrete steps towards meeting the circular climate action challenge, with a focus on the construction sector.

Six takeaways for aligning circular economy with radical climate action:

1. Going circular can provide a major contribution, enabling up to 40-50 percent of our emissions reduction targets.

2. Our global economy is still only 8.6 percent circular, revealing a massive opportunity gap that could yet be exploited in our efforts to resolve the climate crisis, as well as enabling many other environment, social, business and economic benefits.

3. Organisations need to develop robust carbon and sustainability business cases, when making informed decisions on circular strategy options. We need to take care of the climate math!

4. By taking a complete value chain perspective, organisations can develop an extended analysis of key resources, material flows, useful product lifecycles and ultimate destinations, along with an exciting range of further circular and commercial opportunities.

5. The humble car door reinforces the maxim of the circular economy; we’re definitely better off in keeping assets at their highest level of use, for as long as practicable. Recycling is fine, where necessary, but delivers sub-optimal performance in comparison with reuse.

6. Given our current progress on the essential road towards net zero and beyond, organisations should explore how the alignment between circular economy and climate action might work for them, rather than waiting for expensive and unknown future technologies.