Discussions on the circular economy always trigger great interest, even on the final afternoon of the action-packed SB’16 Copenhagen conference, judging from the enthusiastically packed room at this breakout on circular business models.
Moderator Andy Ridley, CEO of consultancy** Circular Economy**, first shared his confidence in the model’s potential to close the gap to reaching the 2-degree goal. He then introduced his company’s programs on textiles, cities and strategic partnerships, both domestically and internationally. Most remarkable to me is their work on the “city circular scan” of Amsterdam and Glasgow, great demonstrations of systems thinking in applying the circular economy vision.
Then the five companies on the panel shared their progress toward closing their material loops, as well as remaining challenges they are facing.
Raphael Stermann, Program Leader for Sustainable Systems Innovation at Steelcase, then continued the discussion in the built environment. Steelcase has a great vision to transform from a company that only make products to one that also creates experiences for customers and builds better relationships with them. Such business model optimization requires reinvention: The company is exploring trying to co-create with its customers, and using tools such as smart product design and leveraging the Internet of Things (IoT) to close the material loops. To transform from selling products to selling services, complete organizational change is needed.
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Speaking of selling service, Barbara Kreissler, Director of global public and government affairs at Philips Lighting, has great stories to tell.
We are now witnessing LED lighting’s dramatic transformation of the entire lighting industry from 82 percent conventional in 2012 to 75 percent LED in 2020. In this time of great change, Philips sees sustainability as a great opportunity to re-evaluate how they look at business. In this process, they realized that LED’s energy-saving potential is great (53 percent) but only a low-hanging fruit, as the future of lighting is not in the product but in the service – hence the idea of circular lighting.
By selling the service and forming a leasing relationship with the customers, they are able to focus on performance and providing better upgrading services, which then fosters long-term contracts, cultivates brand loyalty by making customers feel good and retains more value in the service cycle. Earning higher margins at the same time is merely an added benefit.
The story continued with Louise Koch, corporate sustainability lead at Dell, who shared Dell’s ongoing efforts towards implementing circular strategies. Despite the fact that 93 percent of Dell’s packaging materials are from renewables sources such as straw and mushroom, it has the largest tech-recycling program, powered by its global network.
Dell computers are wiped for data at end of life, then resold or donated. If no longer usable, the products are recycled with full traceability: from collection at customer drop-off, disassembly, processing (melt, mix and mold into new parts) in China, to re-assembly and sales to new customers to achieve the full circle.
In the end, Miriam Turner, Assistant VP of Co-innovation at Interface, showed us how a circular economy is not just a solution to lower our environmental impact but also an opportunity to address social inequality.
Interface’s business model is probably one of the most widely known circular economy examples in which wastes are turned into opportunities. Turner updated attendees on the company’s Net-Works initiative, in partnership with the Geological Society of London and Aquafil, which empowers Philippine coastal communities by turning reclaimed fishing nets into carpets.
After the presentations, the audience and the panel engaged in an active discussion around various aspects of their circular economy ventures. A few takeaways are:
- Circular economy strategies are proving to be surprisingly good at both engaging customers and creating business value.
- Technology is becoming increasing relevant for circular strategies. Trends such as IoT has huge potential to facilitate this transition.
- There is still huge room for improvement in product design and traceability.
- Great challenges still remain: for example, the un-recyclability of certain aged products due to stricter current regulations.
The road to a circular economy is not straightforward; the more transparent companies are at their failed attempts, the faster the whole community can learn and move forward.