Circularity in Action

In the previous article, we explored some of the issues surrounding Circularity and a few of the barriers to realising a circular economy. Here we will look at how businesses can begin to integrate Circularity in a way that aligns with their current and/or future business model(s).

As stated in the second law of thermodynamics, we can never eliminate waste. Entropy in this case, is the villain. So when products do reach the end of their life, which all products must. It is important their obsolescence is planned for in a circular way. How to utilise the embedded value within products that will be defined as waste in such a way that it displaces the need for primary production in new product cycles or innovations is critical to reducing society’s raw material consumption. If the life of resources is considered in terms of ‘loops’ there are three ways in which Circularity can be increased:

1. Close resource loops // use the end of life resources as inputs.
2. Extend resource loops // keep products in use for longer.
3. Shrink resource loops // use less resources.

Or alternatively, the waste hierarchy defined by circular principles can be used to frame the main aspects and priorities of Circularity.  What many companies lack however, is the HOW which is required to apply these concepts and develop feasible frameworks which will enable Circularity to be implemented on a micro level.

The Waste Hierarchy

Looking for a coherent waste hierarchy definition leaves many sustainability professionals going in circles. Like the myriad definitions of Circularity, there exist an almost innumerable amount of R’s that do not always together form a sensible story. There are, however, similarities and a convergence between many of the frameworks around the R’s of Circularity which more or less point to a circular way of thinking and allow the conceptualisation of the fundamental principles of Circularity. The IMechE define the 5Rs in order of decreasing Circularity as:

Part of the difficulty when working with Circular concepts is understanding how these different frameworks and ideologies contribute to a more sustainable future and more importantly how businesses can adapt their current ways of working to adhere to one of the (many) Circularity frameworks available (e.g. EU Circular Economy Action Plan (CEAP) [2], UN Environment Program (UNEP) [3] & International Organization for Standardization (ISO) [4] amongst many others). In order to be effective, a business must decide on their strategy for Circularity in the conceptual phase of a product or service development. Grafting Circularity onto an existing product is difficult, messy and usually results in compromises and/or halfway houses that increase cost and do very little to mitigate the negative environmental impacts associated with non-Circularity.

Circular Strategies

Number 1 on most waste hierarchy pyramids is usually reduce/refuse/rethink. Which aims to challenge whether a product or service is actually needed. In reality, this is confusing and is based more in theory and ideology than anything practical. Without getting caught in a web of ‘abstractness’, it is important to point out that the ‘Reduce’ part of the pyramid really goes without saying. In most cases businesses strive for efficiency, whether that is in mass and/or part complexity reduction, or waste prevention for example, which all directly influence profit/performance etc. On a product level, asking companies to ‘reduce’ can then only be understood to mean reducing their product offerings or functionality which usually must be ignored because someone sees a need for the product, or the product represents a potential revenue stream for a company. In order to be effective and align with a profitable business model, selection of a particular aspect of the waste hierarchy must be made. Put another way, companies offering a specific range of products or services should target and focus on a select few of the waste hierarchies suggested – not all of them. An example of such contradiction lies in the drive for using an increasing quantity of recycled materials whilst also expecting products to last longer. However recycled materials in all but a few cases have reduced mechanical properties which means they will weather or degrade faster. The added complexity within Circularity comes as a result of attempting to cover all aspects regardless of the product or service being offered. Not only does this lead to inefficiencies, but it can also significantly impact the potential for profit. In the transition to a more sustainable world, it is important that companies integrate circular thinking into existing processes and make the changes necessary whilst maintaining their ability to do business. In regards to potential circular strategies, Harvard Business Review offers an interesting starting point based on how easy it is to access a product once in the use phase versus how easily value can be recovered from the product.

The Automotive Context

Passenger vehicles contain an almost unbelievable amount of high value materials, components and systems. In order to boost Circularity, each of these areas should have a Circularity strategy which should largely depend on the business model of the company, the available technology as well as the value embedded in the components.

Battery Systems

Of all the components in Electric Vehicles (EVs), batteries contain the highest concentration of material and economic value. However, due to prioritisation of performance requirements, manufacturing methods and legacy business models, Circularity of batteries is difficult to achieve. Furthermore, due to the rate of change in battery technology and chemistry, ‘old’ designs become redundant and cannot be used in new vehicle models. Looking at Figure 2 the battery would be in the top right box with ‘High embedded value’, therefore vehicle Original Equipment Manufacturers (OEMs) could focus their Circularity efforts in extending loops or prolonging the product lifetime to ensure less resource is required over time (Hard to process and hard to access). Alternatively, OEMs could modify their business models to retain ownership of the high value commodities, this would allow them to build material stock (in collaboration with their partners) or focus on the re-use of batteries for the second hand market for example. The benefit of RPO also includes the learning opportunity from data that could be collected and analysed at the ‘end-of-life’ to further optimise battery design and performance. Caterpillar do this effectively with their exchangeable cores [6]. Or jet engines, where the ‘customer’ or airline only pays for maintenance and overhaul of the critical components whilst the engine manufacturer retains ownership of the precious commodity. With the incoming Extended Producer Responsibility (EPR) this should be an increasingly attractive option for OEMs.

Interior Systems

A typical vehicle interior contains 30+ different types of plastic, which contributes to the extraordinarily low recycling rate of interior systems for passenger vehicles.  Despite the recycling of plastics being relatively easy (sort, grind, then extrude), the low recycling rate is  influenced by two main factors:

1) The recycling process has been optimised for the sorting and separating of high value materials i.e metals. Therefore only basic plastics with a repeatable density can be separated and sorted from the Automotive Shredder Residue (ASR).

2) Plastics have a relatively low commodity value, compounded by the high labour cost of sorting, cleaning and disassembly required, means there is very little economic incentive to prioritise their recycling.

Referring to Figure 2 again, the interior system would lie in the top right box however representing a ‘Low embedded value’, therefore focus could be placed on DFR. This would require the simplification of the quantity and types of plastic and composite used in order to aid sorting and separating whilst also increasing the per vehicle quantities of certain plastics which would increase the economic attractiveness for dismantlers and recyclers.

In Summary

Due to the growing focus on sustainability, ‘costs’ that were previously externalised [7] such as environmental impact and human rights are no longer seen to be external and businesses are now increasingly being held accountable for all costs associated with the manufacture of their products (e.g. EU taxonomy, CSRD etc). Circularity not only offers a way of reducing these ‘costs’ by utilising already mined, refined and primed materials and products into new innovations. The Circularity Matrix proposed by Harvard Business Review is just one way to consider integrating Circularity into a business strategy, it is an example used to highlight the need for more granular assessment of what Circularity means in a specific context. If Circularity is considered at the beginning of product development cycles, the cost and environmental savings can be significant. The key is to decide which Circularity strategy is feasible and offers a ‘triple-win’ scenario for the environment, customer and business (ideally in that order).

References:

1. IMechE (2020), Waste as a Resource: A Sustainable Way Forward.
2. EU Circular Economy Action Plan (2023), A new Circular Economy Action Plan For a cleaner and more competitive Europe.
3. UN Environment Program (2023), Circularity.
4. ISO (2023) Circular economy, Measuring and assessing Circularity – ISO.
5. Harvard Business Review (2021), The Circular Business Model.
6. Caterpillar (2023), Caterpillar’s Remanufacturing Process.
7. Economics Online (2001), Externalities.