How collaboration drives the circular economy

Necessity is the mother of innovation, to paraphrase the famous
adage. We need a new circular economy model to build truly
sustainable businesses – a fact that is recognized by the
business leaders gathering at the World Economic Forum in
Davos this year.
The circular economy is high on the agenda, including the vital
question of how to develop the new value chains that will
underpin it. In our business, we have regular discussions with
our partners, coming up with new “circular “approaches, such as
“second-life markets”, where goods are refurbished and
marketed to new customers, extending the life of the product and
building new revenue streams.
The fact is, climate change and resource scarcity won’t go away
unless we change things. More renewable energy usage and a
smarter use of the planet’s resources is at the heart of the
circular model, in which re-manufacturing, recycling and reuse
methods are adopted in greater number. We will need this shift
as the world gets ever more crowded, and more people become
wealthy enough to consume new goods and services.
It is predicted that there will be 5 billion middle-class consumers
on the planet by 2030. This shift also promises to be highly
profitable, with research from McKinsey and the Ellen MacArthur
Foundation calculating that circular-business methods could
generate a trillion dollars a year in cost savings.
We are at the foothills of this revolution, but we can see the
need, and all the ingenuity we can muster will help get us there.
One of the challenges in making this transformation is adapting
the value chains that connect the world’s commerce networks
for the circular process. We need material flows that go around
in closed loop systems: we need to be able to take products
apart easily and use all the materials when they are taken back.
We need new reconditioning and remanufacturing models,
driving new revenue streams in the second-life market.
Underpinning all this will be more service-based approaches.
Rather than owning assets, customers will lease them, getting
the manufacturers to service and maintain them. They will take
them back at the end of their first lifecycle and get them ready
for their second life.
Being part of a business that provides solutions to underpin
these new circular value chains, it is exciting to see them taking
shape. In a wide range of sectors – healthcare, agriculture,
industry and construction – we see lifecycle asset-management
arrangements taking root. It is bringing to life the dream of the
circular economy visionaries who have long argued that we have
to shift from an asset-owning culture to a service-based one.
The manufacturer stays in charge of the asset – be it an MRI
scanner, forklift truck or combine harvester – and can with the
help of the other partners in the value chain plan how to extend
the life of the product.
A major manufacturer of trailers that we work with is developing
a successful refurbishing arm, which prolongs the life of its
products and reduces the cost for its customers. The CEO
declares the new second life business has strategic value for its
end customers. These refurbishing businesses are also thriving
in other manufacturing industries we work with, such as forklifts
and MRI scanners.
People’s attitudes are changing. We can begin to see a world in
which the users of expensive yet vital equipment in the
construction industry, for instance, will be willing to lend out their
machinery to other companies when they don’t need it. The
ability to use assets like these more efficiently will be a huge
boost to businesses and the economy.
We find that working closely with our partners on how to unlock
the circular economy leads to solutions. In one case, our mobility
arm Athlon initiated “the green tire debate”, where members of
the tire supply chain, NGOs, customers and other stakeholders
were brought together to increase the percentage of recycled
tires, redesign the material composition of the future tyre and set
the stage for future discussions.
As a partner, we have also experienced the power of working
together in an initiative called the Circular Economy Challenge ,
initiated by our parent, Rabobank, in which nine organizations
from the food and agriculture industry and the automotive sector
joined together in looking for ways to develop circular models.
These invariably led to two key questions: how partners in the
value chain can agree to spread the extra costs involved in going
circular, and how to make it happen through innovative financial
solutions.
Through collaboration and through working together with our
partners through the value chain, we are finding we can make
the shift to the circular economy.