Not a day goes by that we don’t hear about the need for us to end our reliance on linear business models and that we must all embrace more circular models of production, consumption and reuse/recycling.
We are still waiting for two seminal documents that should help push the debate forward, namely the Government Office for Science report on ‘waste as a resource’ and the Defra 25 year UK environment plan, but there has been no let-up in policy papers, think pieces and exemplars to help drive local activity in recent weeks.
The EU Circular Economy package looks set to drive our thinking for a good while yet, even post Brexit, if the noises from Government are to be believed, so we will have targets to aim for in terms of materials use, reuse and deign of products for dis-assembly, reuse and recovery.
We continue to hear good things from McKinseys about circular solutions both here in the UK and from wider afield, that could become the sparks that drive innovative change in many UK sectors. And of course most recently there has been the National Infrastructure Workshop (part of the UK Treasury) looking at the long term infrastructure needs of the UK across a range of key sectors, with waste infrastructure clearly being impacted by decisions in other parts of Government related to the circular economy, the rise of re-manufacturing, and critical decisions concerning our energy security.
The final recent paper of interest was the one from the Policy Exchange ‘Going Round in Circles’ which challenged many of the assumptions underpinning the EC Circular Economy Package and which demands that the UK Government devises its own resource efficiency strategy. Personally, I couldn’t agree more, we must take back control of our destiny, define our journey and get on with it.
What this all suggests is that there is a great deal of live and real interest, even if only from policy-makers, about the need for more resource efficiency and circular economy thinking and action in the UK. But are the industries and businesses that need to realign themselves aware of the issues, appreciative of the options available, and prepared to embrace the change needed to ensure that the UK remains competitive on the global stage, while ensuring we protect human and public health as well as powering the new economy? Unfortunately I think not.... but don’t give up reading just yet.
The rise of the circular economy
The concept of a circular economy is being driven faster than ever before, dating back almost a decade now, and as such is gaining significant traction with a number of large and well-known brands and businesses.
This is largely in response to increasing constraints on resources (the raw materials of any business) and the need to use these resources more sustainably (for environmental reasons and economic ones). M&S, IKEA, Tesco are all embracing elements of the circular economy to underpin their planned evolution and continuing existence as front line brands and major economic powerhouses, but deep down they are simply more aware of the many threats facing UK (and global ) businesses. Today there are a number of key threats facing businesses across the UK, including:
- Waste is an increasing cost to business – collection, treatment and disposal;
- Raw material prices are rising, so wasting these resources is more costly; and
- There is only one planet’s worth of resources, yet we use more significantly than this and time is running out to redress this balance.
- There is the potential loss of jobs if manufacturing companies cannot secure an affordable, reliable supply of raw materials and thus cannot compete in their markets
- Potential increased food and material poverty if household food and everyday items become too expensive for segments of the public to buy.
- Increased raw material mining and associated environmental impacts is becoming a major global concern and has hit the headlines recently
- Rising global greenhouse gas levels due to our high consumption levels is threatening the planet
- Continued destruction globally of wildlife species because of habitat loss caused by our high consumption levels of specific products / raw materials.
In response to these increasing concerns many businesses are now opening themselves up to adopt more ‘circular thinking’, with the economic threats of increasing raw material costs and higher waste management costs at the forefront of this shift in attitude.
Big businesses, with large supply chains, and significant raw material costs and back-end waste management costs have been the first movers towards greater circularity, recognising the obvious benefits of keeping materials ‘alive’ in their economic system for longer. The press has been full of stories in the last few years about the likes of Coca Cola, Ikea, Sainsbury’s et al making significant strides to improve their supply chains and close the loop with regards their waste products.
Circular thinking (and subsequent action) will result in the development of a more resilient economy which is better protected against resource supply risks and commodity price fluctuations, but will also enable job creation and deliver environmental benefits associated with closed loop recycling of materials. It’s a win-win, but still much of UK industry and commerce remains unaware of the opportunities or the support that is out there. This needs to change if our expectations are to be met.
But what about SMEs and their adoption of circular thinking?
Small businesses are the backbone of the UK economy, and represent over 99% of businesses. As such they are key to the successful adoption of a future UK circular economy, one where many materials and products are re-circulated, recycled, and re-used, but they have not been at the fore of the shift towards more circular business models thus far.
SMEs are increasingly aware of the benefits of improving resource efficiency, a message that has been actively promoted across the UK for the last 20 years or so through active Government programmes like Envirowise and WRAP’s Business Resource Efficiency support package, through to the current Zero Waste Scotland led Resource Efficiency Scotland programme. They know that reducing raw material usage and saving material costs, and the benefits of increased recycling make sense financially and from a public relations perspective. But still many have failed to actively implement change. Perhaps the effort to change has outweighed the short term benefits? That may be true but many businesses are at threat of becoming uncompetitive if they do not adopt and evolve in the near future, so why is it they aren’t listening?
It’s all about the business models, stupid
While an increase in recycling is an essential component of a move to a circular economy, reducing the use of resources through alternative business models has the potential to make a much bigger impact. Circular Economy Business Models (CEBMs) are more aligned with the top of the waste hierarchy – enabling waste prevention and reuse. A circular economy requires a more systems thinking-led approach and an increased focus on specific areas of ‘circularity’ – i.e. repair, remanufacturing and the sharing of resources. This provides a real opportunity for SMEs to access new markets and create competitive advantages. A few examples of CEBMs include:
- Service systems: providing a service based upon delivering performance outputs that are linked to products or services. Products could also be designed for disassembly, remanufacture and re-use. Under this approach the manufacturer retains ownership, and thus has more interest in producing a more durable and reliable product. Examples include Philips ‘pay per lux’ service and Juice’s leasing model for lighting [http://www.zerowastescotland.org.uk/content/juice].
- Hire and leasing: long term hire and leasing to drive a longer service life and to increase product durability – leasing of IT equipment is a common example of this.
- Collaborative consumption: rental of products or services between organisations / consumers where each partner only needs limited use of the service/product, for example AirBnB and agricultural machinery rings.
- Incentivised return and reuse: encouraging the return of used items through take-back or re-use schemes, for example Re-tek repairs and refurbishes functional used IT products and sells on to new owners, sharing the revenue with the previous owner [http://www.zerowastescotland.org.uk/content/juice].
- Asset management: improving the internal management of items, by collection, re-use, and refurbishment or resale, and we have delivered a project which looked at opportunities for increased re-use within universities, as well as potential for resale and re-use of redundant equipment.
- Collection of used products: collection by a service provider to ensure products/materials are passed on to an appropriate re-use system, and there are a number of organisations that provide bulky waste collections from households, and then refurbish and repair items for resale.
- Long life: products designed to have a long-life time with durability, reducing overall consumption and raw material mining, for example Patagonia aim to make clothing with a long life and also provide a repair service.
- Made to order: manage production to minimise material requirements and avoid potential losses from over-stocking products, for example Duo Boots make boots to size and order depending on customers measurements.
- Valorising waste products: maximising the value from waste, where we have been working with a brewery in Scotland to understand the opportunities for diversification through investigating alternative uses for by-products from its process.
What’s stopping you from getting on board?
There are increasing opportunities to adopt alternative systems, and many public sector organisations are actively adopting sustainable procurement principles which are creating new opportunities for business to propose alternative business models in their outline solutions to the public sector (from schools and universities to local libraries). However, there are a number of barrier that SMEs face in terms of the current development of CEBMs, including:
- Lack of financial resources: The upfront costs of any type of investment and the anticipated pay-back period are key aspects for SMEs, as they are generally more sensitive to additional financial costs, particularly in the recent economic climate, and may not know about possible funding sources.
- Time and resource constraints: SMEs often don’t have sufficient staff or time to research and investigate alternative business models.
- Lack of awareness/ knowledge of the potential benefits: because they are ‘flat out’ delivering on a daily basis they may not have researched or appreciate the opportunities that are out there.
Lending a helping hand?
There are three critical areas that are vital to drive the adoption of circular thinking among SMEs. These are:
- Provision of technical support to SMEs to assist them with the initial thinking and action
- Clear drivers and signals from government that lead the direction of travel
- The inclusion of circular economy principles within public sector procurement processes.
There are a number of programmes of support being delivered in parts of the UK to support SMEs to identify opportunities that the circular economy can provide to their business, including national programmes such as the Zero Waste Scotland Resource Efficiency Advisory Service (delivered by my Ricardo Resource Efficiency Team in Glasgow) and their grant funding support available via the Circular Economy Investment Fund, WRAP’s REBus project, as well as regional examples such as that provided in London by LWARB.
The provision of such technical support particularly around CEBMs is vital for engaging and empowering these businesses due to the time and resource constraints that SMEs often highlight as a key barrier to any form of research or investigation into business changes, and it is important that this support continues, targeting specific sectors where CEBMs are most suited and the momentum can be built quickly, including the automotive, electrical items, and construction sectors.
It is also critical that any programme of support provides materials to promote the successful outcomes of the support provided, through the use of social media, articles in the trade press, case studies etc. - success breeds success! In presenting the outcomes of this type of support, it is vital that barriers are openly discussed and how they were overcome, and the benefits presented from an economic, social and environmental perspective. It is also important to use language that SMEs consider as relevant to their business rather than terms such as ‘circular economy’ as this may not be readily understood.
Further drivers to encourage the development of a circular economy are also needed; Scotland and Wales have strong policies in place to encourage the development of the circular economy, in conjunction with the provision of technical support but this is not the case in England which is most disappointing.
However, Defra have confirmed that it is working under the assumption that the EU’s Circular Economy Package will apply to the UK, which may provide additional drivers and more certainty to businesses for investment purposes in the coming years.
Public sector procurement also has a key role in driving change through the supply chain, through the inclusion of circular economy principles within the procurement process; thus driving SMEs to consider change as a means of securing public sector contracts. But as highlighted previously, the language used within procurement documents must avoid terms that may not be familiar to SMEs.
Follow the yellow brick road
Providing practical examples of the circular economy in action, and at various scales and in different sectors, is vital to gain traction among SMEs of the benefits that the circular economy can provide. However, we also need to provide sufficient resources and networking opportunities so that SMEs can explore the benefits of circular economy opportunities themselves and with their supply chains.
But for that to work effectively we need a strong government agenda, supported by programmes designed to engage, enlighten and encourage SMEs to think and act differently. With this type of programme in place, the progress being made in London and Manchester and Leeds, and the obvious ongoing success in Scotland could be replicated across the UK and more widely across England in particular, which is where many of us believe the real need and opportunity lies.
If you are interested in hearing more about some of the example examples of the circular economy in action and in the innovation and adoption processes being used in a range of UK businesses and sectors then join our webinar (hosted in partnership with Recycling & Waste World) on 7 November 2017 by visiting our registration page – http://ee.ricardo.com/cms/Taking-resources-forward?source=footer
But what role for local government in the circular economy agenda?
Noting you might say, this is about UK industry and government leadership, but I would challenge you and say it has everything to do with an evolving UK public sector.
We have recently hosted a workshop on behalf of one local authority waste partnership, bringing together collection, unitary and disposal authorities and some of their key partners to consider their role in facilitating greater progress towards the circular economy in their region. What this showed was a great deal of misunderstanding on just what the circular economy could look like at a local level, and how elements of it could be promoted, prioritised and facilitated. Local government has been over-fixated on recycling targets in recent years, and the circular economy is a little harder to grasp than this simple metric, but the opportunities are almost endless in terms of what you could drive locally – supporting new hubs for business innovation and action.
On the whole, and based on our work with a large number of local authorities in recent months, local government would embrace a new waste hierarchy where ‘design’ sits proudly above waste prevention – so let’s make it happen.
Local government would generally support a move towards carbon-based targets, enabling them to target specific materials (food, textiles, etc.) rather than the heavier products streams – is that really too much to ask? And local authorities would support differential taxation to drive recycled, reused and remanufactured products – that’s a no-brainer.
So if they are willing to play ball, then why won’t the UK Government get on board and follow suit given the exemplary leadership being shown in Wales and Scotland? Come on Whitehall, it is time for some real leadership ......
We need revolution.... all aboard!
I believe that what we need is greater clarity and leadership from the UK Government on the circular economy in general, and perhaps specifically on how local authorities while addressing real concerns like austerity and budget cuts can help embrace and drive circular economy thinking through their networks and supply chains.
However, it is far from all doom and gloom. It remains early days for the adoption and adaptation of circular business models in the UK, so if we can get the foundations right, set a clear and appropriate policy direction, and put in place the right support for businesses and communities, then we have a great chance of making this more than a just a wild leap of faith.
We need to build the evidence base, we need to produce materials and share them to support local thinking, but most of all we need clarity from sector’s leaders that this is the right journey and the end destination is worth a leap of faith or two. Do you believe?
If you are interested in the role of local government in harnessing circular economy thinking in your region, then please get in touch email@example.com as I am putting together some ideas for a new webinar series addressing this, and I would like some case studies to participate – so don’t be shy!
As with all my ‘comments’ they are mine and mine alone. If you would like to get in touch or share your opinions then email me on firstname.lastname@example.org. For more of my blogs please refer to http://www.ricardo-aea.com/cms/resource-efficiency-and-waste-management-3/
Dr Adam Read is global practice director for Ricardo Energy & Environment’s resource efficiency and waste management practice, and is a Fellow of the Chartered Institution of Wastes Management and the Royal Geographical Society. He has more than 20 years of waste sector strategy, service design, procurement and communications experience, both in the UK and overseas, and is a regular industry commentator, author and conference speaker, both in the UK and around the world.