The model we use to teach MBAs about production is the value chain. But there's a problem: It imagines a linear world in which materials can be constantly pushed through an assembly line with no consequence.
In the previous installment, we discussed Biosphere Rule #1 — Materials Parsimony, which is about limiting the types of materials used in your products. Once you have your pallet of carefully selected parsimonious materials, your next task is to cycle those materials through repeated, high-value uses, which is the focus of Biosphere Rule # 2 — Value Cycling.
The biosphere has been value cycling its parsimonious materials pallet for billions of years. The carbon, hydrogen, oxygen and nitrogen (CHON) in your body today was once found in our ancient human ancestors, in prehistoric dinosaurs and even the first cyanobacteria that marked the start of life on earth. The truth is, you are made of recycled stardust that came out of the Big Bang and the subsequent stellar explosions that forged the universe’s fundamental elements. Matter in the universe is just transformed over and over again, a fact that is replicated by life in the biosphere. This fundamental understanding, however, has not been incorporated into the way we have built businesses in our industrial world.
The model we use to teach MBAs about production is the value chain. It's been very successful in helping business people to understand the value-adding steps needed to produce a product. But there's a problem: It imagines a linear world in which materials can be constantly pushed through an assembly line with no consequence. Its predicated on a “sell it and forget it” ideology. Of course, sustainability problems arise because value chains are embedded here on planet earth. Nothing going through a value chain disappears. It all ultimately ends up as waste, pollution and contamination.
The business case for regenerative strategies
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The biosphere does not operate in a “sell it and forget it” value chain. It functions on a Value Cycle, which is the constant cycling of enduring materials from one high-value use to another. It is a cycle that has operated continuously for billions of years, so we know the model works.
The way nature cycles materials (along with their embedded energy and information) through the biosphere is modeled by ecologists as the Trophic Pyramid (see figure below). At the base of the pyramid are primary producers — autotrophic plants that capture the sun’s energy and use it to structure CHON into plant biomass. The next level of the pyramid is occupied by primary consumer herbivores, such as cows and deer, that feed on plants. The upper reaches of the pyramid are inhabited by secondary consumer predators, such as wolves and sharks, that feed on primary consumers.
Circular economists can envision an analogous Product Pyramid for building value cycles. At the base of the pyramid is the materials level, where we take natural capital and refine it into the materials we use to build products. The next level would be the component level, which are the parts and subsystems of a larger product — as an electric motor is part of an electric vehicle. Then the fully integrated product would be the top level, the product level, which could be a fully assembled Tesla. The product pyramid then presents opportunities for value-cycling strategies and each of these different levels.
At the highest product level, we can engage in Epicycling — the cycling of entire products from user to user, from use to use. This is something we also see in the biosphere, as when a hermit crab reuses a snail’s discarded shell. As the crab grows, it will jettison a shell that has become too small and find a larger one to occupy. Here the biosphere maximizes the productivity of the investment made in producing the original shell by cycling it from one user to the next.
This, of course, happens in our economy whenever a construction company rents a crane or you rent a moving van. Epicycling like this optimizes asset productivity. But we are seeing an innovative boom in Epicycling models, thanks to information technology and the rise of the sharing economy. The potential gains can be jaw-dropping. Take your car: It's estimated that the typical automobile is parked upwards of 90 percent of the time, leaving the investment in materials, energy and information sitting idle; creating no value.
What’s true for cars is true for most items; just think about what’s in your garage or lawn shed. Innovations in the sharing economy are finding ways to unlock those languishing assets. Sharing-economy platforms such as Uber, Bird and Airbnb are dramatically lowering the transaction costs of connecting asset owners with asset users, creating economic efficiency as well as environmental, human health and societal benefits.
Moving down the product pyramid, we find the component level, where we can engage in shallow-loop value cycling — the reutilization of product subsystems such as parts and components. It's a long-standing strategy in many industries; as we've seen before, there are new opportunities to use shallow-loop value cycling to refurbish, remanufacture and reuse components of an entire product. Again, digital innovations are enhancing the possibilities of shallow-loop value cycling. The use of so-called “digital twins” can dramatically improve the operation and maintenance of products and components. Sensors embedded in product provide real-time performance data that can be modelled as a virtual digital twin and analyzed using artificial intelligence. From their performance signatures, operators can predict when components need to be refurbished to maintain optimal performance and minimize downtimes.
The final level of our product pyramid is the materials level and the home of deep-loop value cycling. What's important to recognize is that no matter how effective your epicycling and shallow-loop strategies are, at some point you're going to need deep-loop value cycling. This is because eventually your products components, and the materials that make them up, will wear out. Just think about that term, “worn out.” It comes from clothes that we wear so long that they become frayed, develop holes and degrade to a point that they are no longer useable. What’s true for your clothes is true for everything. Even the best designed product will, at some point, require the deep-cycling restoration of your materials.
Humans have long used the biosphere’s deep-loop value-cycling system. Every time we compost a grocery bag or our coffee grounds, we are surfing nature’s existing value-cycling technology. And we are expanding our use of nature’s system through innovative development of biomaterials and bioplastics that are designed to be composted at the end of their useful life. Industry has also developed technology to value cycle geologic materials, including metals such as aluminum and steel. These can be effective approaches for regenerating and reusing materials. It's estimated, for example, that over 60 percent of all the aluminum ever produced is still cycling in our economy today.
The same cannot be said for synthetics materials, however — especially plastics, as not all plastics can be deep-loop value cycled. There are basically two types of plastics recycling: One is a thermomechanical or physical recycling, where you re-melt the plastic and then use pressure to form it into a new product. Feetz shoes, for example, uses 3D printing to produced customized shoes. Its system can recover old shoes, grind them up and cycle them back into another print run; the company claims it can cycle as shoe as many as 20 times. If you cycled a shoe twice, you would double your material productivity, so a 20x gain is truly impressive.
At some point, however, plastic properties become too degraded and physical, thermomechanical cycling is no longer possible. At this point, you need chemical recycling, where you break down the molecules of the plastic and reform them to restore their properties. Basically, you unzipped the chemical bonds, breaking the plastics into monomers and re-form them back into polymers. An example of this deep loop value cycling is Italian-based company Aquafil, which chemically recycles nylon-6, a plastic commonly found in clothing, sporting goods, fishing nets and carpets. Aquafil passes nylon through its Econyl depolymerization process, and turns it into restored nylon yarn that can be used for the next generation of products.
The problem is, not all plastics can be chemically recycled, so this becomes an important design and materials-selection criteria. And even some plastics that can be chemically cycled are uneconomic, because they demand so much energy in the process. Energy is another key element in both economics and environmental concerns, so it’s no wonder that nature has figured an environmentally sustainable solution, as we will see in our next installment.
Dr. Gregory C. Unruh is the Sustainability Editor for the MIT Sloan Management Review and author of the new book, The Biosphere Rules: Nature’s Five Circularity Secrets for Sustainable Profits. For a limited time, Sustainable Brands subscribers can download a complimentary digital copy of the book here.