Since the Industrial Revolution, the world’s major economies have continued to develop more efficient ways to extract and process a diverse array of natural resources that are available to society. While the availability and affordability of different resources has fluctuated over the years, due to a combination of economic and geopolitical factors, accessibility has increased as a result of technology enablers and innovation.
Despite these advances, however, externalities such as waste generation, reducing greenhouse gas emissions and overall impacts on the natural environment have largely remained outside the core focus of organisations, instead managed as cost and regulatory issues.
Fast forward to today and it is clear that we must adapt our current way of life and business models if we want to be part of a sustainable future. Across all areas of the economy and within all industries, significant opportunity exists to limit our generation of waste and consumption of environmental capital – which is becoming increasingly scarce – in favour of circulating resources and identifying commercial opportunities to partner across economic sectors to reuse materials after their initial ‘useful life’.
The concept of a circular economy is not new. At the recent United Nations climate conference, COP21 in Paris, circular economics were at the heart of the event with an emphasis on the ‘three Rs’, namely reduce, reuse, recycle. By reducing the consumption of resources, finding value in products that would otherwise go to waste and promoting recycling, there are numerous opportunities to be realised across many industries.
[quote style=’1′ cite=”]Innovative ideas and thinking more creatively about a product or service at the design phase can have advantages including stronger growth, improved productivity and reduced waste.[/quote]
Businesses incorporating this long-term strategic view to sustainable operations are realising the benefits – economically, environmentally and socially. It has been estimated by the World Economic Forum that, by 2025, the circular economy will represent $1 trillion globally. Within Australia, this is estimated to be worth $26 billion.
The key drivers for harnessing the circular advantage include:
- increasing price volatility and supply restrictions
- environmental and producer responsibility regulations
- changing consumer culture, and
- an intensified rate of technological change.
The resource opportunity hierarchy represents the value spectrum in the circular economy. Where the highest value lies is in prevention and minimisation. Forward-thinking companies looking across their value chain will look to embed the principles of circular economics in all areas.
Designers and entrepreneurs have the opportunity to take the lead. Bringing innovative ideas and thinking more creatively about a product or service at the design phase, for example, can have advantages including stronger growth, improved productivity and reduced waste.
How can materials be used more creatively to promote secondary uses and extend product life beyond its intended use? Can the provision of services be redesigned so consumers can effectively share resources? Can unlikely partnerships be formed to link sectors such that value is found in products where seemingly there was none?
One company that is viewed as a leader in successfully incorporated circular economics throughout its business is Unilever.
Case Study 1: Unilever – seizing the opportunities presented by embracing the circular economy
Unilever, the Anglo-Dutch multinational consumer goods company, with a portfolio of over 400 brands ranging from nutritionally balanced foods to ice-creams, affordable soaps, shampoos and everyday household care products, understands the opportunities presented by a circular economy. Unilever is using circular economy thinking to challenge its approach to design – by moving away from the linear ‘cradle to grave’ model, to a circular model that eliminates waste by design.
Unilever is increasingly designing products so that they can be used in a cyclical way, rather than being used once and discarded. Through embedding this thinking at the design stage, Unilever is doing more than diverting waste generated from landfills; instead it is looking to eliminate the concept of waste entirely by making smart sourcing a number one priority and ensuring any materials not used up in the manufacturing process are reused.
Some materials are reused on-site, some traded into other industrial supply chains, and organics are composted. Achieving zero waste in Unilever factories has saved the company $226 million, according to an article published on Greenbiz.com.
Some of the key initiatives implemented by Unilever over recent years to embed circular thinking across the organisation have included:
- the introduction of ‘Design for Recyclability’ guidelines in 2014 to help the company’s packaging engineers better understand how best to put materials together
- organising day trips to recycling facilities for employees to provide them with a first-hand view of some of the challenges facing recycling
- hosting pilot workshops to develop innovation solutions focused on circular economy principles across Unilever’s categories
- encouraging senior management to complete an executive education circular economy course by Bradford University School of Management and the Ellen MacArthur Foundation
- continuing to increase the use of recycled plastic in their packaging – in 2014, Unilever reported on its website that it used 3951 tonnes of recycled plastic in its packaging (as Unilever is able to embed the circular model further, one of the goals is to recapture its own used packaging as opposed to purchasing recycled products)
- in developing countries, where Unilever’s single-use sachets provide an economic way for local populations to access essential hygiene products, Unilever is working on innovative solutions to capture and repurpose the sachet packaging to prevent it ending up in landfills, and
- despite the above achievements, one of the key challenges that Unilever currently faces with respect to further embedding circular economy thinking across its operations is access to recycled packaging products at an affordable price; however, as companies across industries become aware of the economic opportunities associated with the recycling and repurposing of key materials, such as plastic, it is expected that the current supply issue will be addressed, in turn providing further circular opportunities.
Reuse and recycle
Materials recovery and waste management is an industry with a growing footprint. We are a materialistic society, which increasingly puts pressure on landfills and waste facilities. In Australia, landfill pricing has been one factor contributing to our dependence on waste facilities as a final destination.
One of the challenges for products is that disposal becomes more cost-effective than recovery. When it comes to profitability, where is the impetus for companies to rethink disposal? It is often this short-sightedness and desire for short-term gains that continues to herald the end of the traditional linear growth model that we see today – one of ‘take, make, dispose’. For example, where manufacturers previously saw waste as a final step, it now presents an opportunity for new partnerships. Effective management of waste can yield materials that can be used as inputs for other products.
Case Study 2: tyre recycling – turning old tyres into repurposed and valuable goods
With car ownership rates in Australia continuing to grow at an average annual rate of 2.4 percent, the quantity of old and used tyres requiring management is also increasing at a significant rate, according to the Australian Bureau of Statistics’ 2015 Motor Vehicle census. This is coupled with the quantity of large tyres and belt conveyors at mining companies that are also reaching the end of their useful lives and are requiring disposal.
At present, thousands of tonnes of scrap tyres are illegally dumped every year in Australia alone, which not only costs millions of dollars annually to manage, but also produces severe health hazards and environmental damage. From a health perspective, dumped tyres can create a dangerous breeding ground for mosquitoes that transport disease, such as Dengue fever and the Ross River virus, while from an environmental perspective – regardless of whether they are dumped, burnt or landfilled – every tyre that isn’t properly recycled leaches significant toxins and hazardous compounds into the environment.
When recycled in a responsible manner, however, the rubber and steel in old tyres have the potential to be recycled and repurposed in a diverse range of products of benefit to companies across a range of sectors. For example, recycled rubber granules can be an important component in athletics tracks, brake pads, building insulation, civil engineering, new tyre manufacturing and road surfaces.
[quote style=’1′ cite=”]One of the challenges for products is that disposal becomes more cost-effective than recovery. When it comes to profitability, where is the impetus for companies to rethink disposal?[/quote]
Tyrecycle, a leading tyre recycling and repurposing company with operations in Australia, has understood the economic and associated environmental and health opportunities presented by responsible tyre management and recycling, featuring this as a core business mission on the company’s website. Tyrecycle currently collects and processes over 50 percent of waste tyres generated in Australia. In addition to turning old tyres into the above listed range of products, Tyrecycle also produces tyre-derived fuel (TDF), which can be used by industry rather than reliance on traditional fossil fuel sources.
It is expected that we will see an increasing number of companies developing innovative solutions to manage waste generated in other high impact sectors over the coming years as the economic, environmental and health benefits associated with such initiatives become increasingly clear.
Responsible businesses have realised the benefit of incorporating circular economics in their operating models. Organisations need to be adaptable and resilient, and recognise the impact on profitability and longevity. Looking beyond their primary operating boundaries, supply chains can become supply circles as organisations seek opportunities to strengthen connections with suppliers and loop materials that have fulfilled their primary use.
Case Study 3: coal mining companies – producing electricity from coal mine waste gas
The presence of the Australian Carbon Pricing Mechanism from July 2012 to June 2014, and existence of a price per tonne of carbon dioxide released during this period, presented coal mining companies with the challenge of identifying opportunities to reduce the emissions intensity of their operations.
One option that has been pursued by several coal mining companies located in Australia’s Hunter Valley region has been investment into on-site power generation facilities, which have enabled coal mine waste gas to be converted into power for on-site use, thus reducing the need to purchase electricity from the grid. Other companies have engaged in partnerships with neighbouring power generation companies enabling them to transport their coal mine waste gas off-site to be used in local power generators.
These activities have allowed coal mining companies to reduce their emissions footprint while also transitioning a waste product into an energy source – one of the core tenants of the circular economy approach.
As Australia continues to shift towards a low-carbon economy following the recent emissions reduction commitments made at COP21, it is expected that investment in such initiatives will continue. Increasingly, both businesses and consumer attitudes are shifting, forcing business models to change.
The author, Shailesh Tyagi, is APAC sustainability partner at Deloitte Sustainability.