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Global Partners:

2. THE ROLE OF BUSINESS STRATEGIES IN CATALYSING THE TRANSITION TOWARDS A CIRCULAR ECONOMY
North London Waste Prevention Exchange, 16 February 2017
Hello
Thank you for inviting me.
Core Philanthropic Partner:
Global Partners:

3. THE LINEAR SYSTEM Production largely relies on virgin materials.
Goods are manufactured from raw materials, sold to customers, then discarded
Finite materials
Parts manufacturer
Production largely relies on virgin materials.
High amounts of (non-renewable) energy are used.
Little consideration is given to recovery of products and materials.
Waste levels are chronically high.
Product manufacturer
Service provider
Collection
Collection
Energy recovery
Landfill
The global economy’s evolution has been dominated by a linear model of production and consumption:
goods are manufactured from raw materials,
sold to customers who use them until they no longer work or are no longer wanted,
and then discarded.
While this model has driven economic prosperity and great strides have been made in improving resource efficiency,
any system based on consumption rather than on the restorative use of resources entails significant losses along the value chain.

4. ECONOMIC LOSSES & STRUCTURAL WASTE
DRIVERS FOR CHANGE (1/3)
The power of the linear model is increasingly being challenged
ECONOMIC LOSSES & STRUCTURAL WASTE
PRICE RISKS
SUPPLY RISKS
Additionally, a number of factors indicate that the linear model is increasingly being challenged by the very context within which it operates, and that a deeper change of the operating system of our economy is necessary.
Economic losses and structural waste.
The current economy is surprisingly wasteful, even in mature sectors that are considered optimised.
For example:
in Europe the average car is parked 92% of the time,
31% of food is wasted along the value chain,
the average office is used only 35-50% during working hours.
In the fast-moving consumer goods industry, the value of materials used per year is USD 3.2 trillion, but 80% – or USD 2.7 trillion – of these end up in a landfill or an incinerator.
The circular economy represents a net material cost saving opportunity of up to $380 billion per annum at EU level for a transition scenario, and up to $630 billion per annum for an ‘advanced scenario’, in both cases net of the materials used in reverse-cycle activities.
Price risks
In addition, the 20th century saw the highest price volatility for metals and agricultural output.
This was then topped by price volatility levels for metal, food and non-food agriculture output being higher in the first decade of 21st century than in any single decade in the 20th Century. (WEF – limits of linear consumption)
Meanwhile circular economy aims to decouple growth from our dependence on resource consumption.
It has the potential of generating €1.8trillion benefits per annum in Europe by 2030, as well as bringing environmental and social benefits.
Supply risks.
Added to this, many parts of the world possess few natural non-renewable resources and are forced to rely on imports.
For example, the EU imports 6 times the amount of natural resources that it exports.
The OECD reported that 65 billion tonnes of raw materials were used in 2010, a figure expected to grow to 82 billion tonnes in (OECD towards a circular economy page 6)
This limited supply and uneven distribution of resources further contributes to great fluctuations in commodity prices and can cause economic instability.
(95% of all heavy earth metals held by China (European Parliament))

5. NATURAL SYSTEMS DEGRADATION
DRIVERS FOR CHANGE (2/3)
The power of the linear model is increasingly being challenged
NATURAL SYSTEMS DEGRADATION
REGULATORY TRENDS
Natural systems degradation.
A fundamental challenge to long-term global wealth creation is the set of negative environmental consequences related to the linear model.
Depletion of low-cost reserves and the degradation of natural capital are affecting the productivity of economies.
Elements contributing to these environmental pressures include:
Climate change
Loss of biodiversity: There has been an overall decline in species of 52% over the last 40 years.
Land degradation: Soil quality losses are expected to cost USD 40 billion annually worldwide and affects ¼ of land globally. (Towards a circular economy)
Ocean pollution: An estimated 8 million tonnes of plastic waste enter the oceans every year, a figure predicted to rise to 17.5 million tonnes per annum by By 2050 oceans are expected to contain more plastic than fish by weight. (New Plastics Economy)
Regulatory trends.
These long-term challenges leads to increasing efforts by regulators to reduce negative externalities, by pricing them to reflect real costs.
Since 2009, the number of climate change laws has increased by 66% from 300 to 500.
In Europe 20 countries levy landfill taxes.
In 2016, Sweden announced tax breaks on certain repairs (clothes, bicycles, fridges, washing machines – mix of VAT reductions and claim back on income tax)
There is also a growth in Extended Producer Responsibility schemes – from over a dozen existing in France to China planning to introduce such regulations by These 'regulatory trends' can be interpreted as 'regulatory risks' from a business perspective.

6. ACCEPTANCE OF ALTERNATIVE BUSINESS MODELS ADVANCES IN TECHNOLOGY
DRIVERS FOR CHANGE (3/3)
An unprecedented favourable alignment of technological and societal factors is now making the transition possible
ACCEPTANCE OF ALTERNATIVE BUSINESS MODELS
ADVANCES IN TECHNOLOGY
URBANISATION
On the other hand, an unprecedented favourable alignment of technological and societal factors is now making the transition to a new model possible at scale.
Acceptance of alternative business models.
Customers are starting to embrace models that enable them to access the services that products provide rather than owning them.
This has already been successfully demonstrated in certain markets, for example in the car industry, where auto firms are increasingly moving into the car sharing market. ZipCar being one such example, and the practice of shared ownership is spreading: eg. Library of Things (one in West Norwood). Buying lux not light bulbs.
Advances in technology.
Ever-improving information and industrial technologies are now coming online or being deployed at scale, allowing more efficient collaboration and knowledge sharing, better tracking of materials, improved logistics set-ups, and increased use of renewable energy. This allows the creation of new business approaches that were previously not possible.
Urbanisation.
For the first time in history, over half of the world’s population resides in urban areas, and this trend is continuing with expectations of bringing the proportion of people living in cities to 66% by 2050.
This makes investment in asset-sharing services and reverse supply chains more attractive, as it allows for a much higher drop-off and pick-up density, simpler logistics, and greater appeal and scale for service providers.

7. THE COMPELLING ECONOMIC CASE
€1.8tn total annual benefits expected by 2030 in mobility, food & built environment on a circular development path
Current development path
Circular development path
OVERALL BENEFITS
EUR 0.9 trillion1
EUR 1.8 trillion1
DISPOSABLE INCOME 7%
18%
GDP 4%
11%
RESOURCES AND EXTERNALITIES
31% emissions
22% primary material consumption
48% emissions
32% primary material consumption
Ample opportunities to use the value creation potential of a circular economy.
This infographic is drawn from the 2015 report ‘Growth Within: A Circular Economy Vision for a Competitive Europe’.
Looking at mobility, food and built environment in Europe it contrasted a circular development path with the current development path until 2030.
The results provide considerably higher benefits in the circular development path: EUR 1.8 trillion in total benefits per year (reduction in resource costs, other expenditures and externalities) compared to EUR 0.9 trillion in the current development path.
These benefits are experienced by businesses (increased GDP), households (increased disposable income) and the environment (decreased CO2 emissions and material consumption).
1 Reduction in resource, non-resource and externality cost
SOURCE: “Growth Within: A Circular Economy Vision for a Competitive Europe”, Ellen MacArthur Foundation, SUN (Stiftungsfonds für Umweltökonomie und Nachhaltigkeit) and McKinsey Center for Business and Environment, 2015

8. RETHINKING VALUE CREATION
A circular economy rests on three principles
Preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows
Optimise resource yields by circulating products, components, and materials at the highest utility at all times in both technical and biological cycles
Foster system effectiveness by revealing and designing out negative externalities
1: Preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows.
* Ideally: dematerialising utility – delivering utility virtually, whenever optimal.
* Resources are chosen wisely and chooses technologies and processes that use renewable or better-performing resources, where possible.
* A circular economy also enhances natural capital by encouraging flows of nutrients within the system and creating the conditions for the regeneration of, for example, soil.
2: Optimise resource yields by circulating products, components, and materials at the highest utility at all times in both technical and biological cycles.
Technical cycle:
* This means designing for remanufacturing, refurbishing, and recycling to keep technical components and materials circulating .
These systems also maximize the number of consecutive cycles and/or the time spent in each cycle, by extending product life and optimising reuse.
Sharing in turn increases product utilisation.
Biological Cycle
In the biological cycle, products are designed to be consumed and safely restored to the biosphere.
3: Foster system effectiveness by revealing and designing out negative externalities.
Effectively, this means that the system produces no waste. It is designed out.
This includes reducing damage to systems and areas such as food, mobility, shelter, education, health, and entertainment
managing externalities, such as land use, air, water and noise pollution, release of toxic substances, and climate change.

9. Minimise systematic leakage and negative externalities
OUTLINE OF A CIRCULAR ECONOMY
A circular economy distinguishes between technical and biological cycles
Biological cycles
Finite materials
Renewables
Technical cycles
Farming/ collection
Parts manufacturer
Biochemical feedstock
Product manufacturer
Regeneration
Recycle
Service provider
Refurbish/ remanufacture
Share
Cascades
Reuse/redistribute
Biogas
Maintain/prolong
Extraction of biochemical feedstock
Collection
A circular economy distinguishes between technical and biological cycles:
Technical cycles involve the management of stocks of (non-renewable) finite materials. Emphasis is on the ‘utility’: Products are used instead of consumed and customers can be provided with access to – rather than ownership of – a product. Products, components and materials are maintained, reused, refurbished and (as a last resort) recycled
Biological cycles encompass the flows of renewable materials. Consumption only occurs for those materials. If not consumed, renewable (biological) nutrients regenerated into the biosphere.
Minimise systematic leakage and negative externalities

10. THE RESOLVE FRAMEWORK REGENERATE LOOP SHARE VIRTUALISE OPTIMISE
A tool with which to identify circular strategies and growth initiatives.
REGENERATE
LOOP
Regenerating and restoring natural capital
Keeping products and materials in cycles
SHARE
VIRTUALISE
Maximising asset utilisation
Displacing resource use and delivering utility virtually
OPTIMISE
EXCHANGE
Optimising system performance
Selecting resources and technology wisely
SOURCE: Adopted from: ‘Growth Within: a circular economy vision for a competitive Europe’, Ellen MacArthur Foundation, SUN, McKinsey Center for Business and Environment

11. RESOLVE FRAMEWORK (1/2) Regenerate Share Optimise
Business models for making the transition
Regenerate
Reclaiming, retaining and restoring health of ecosystems
Returning recovered biological resources to the biosphere
Share
Sharing the usage of assets
Reusing assets (sequential sharing, resell, redistribution)
Optimise
Prolonging the time products are used
Decreasing resource usage
Optimising the delivery system
REGENERATE
Reclaiming, retaining and restoring health of ecosystems
Returning recovered biological resources to the biosphere
SHARE
Sharing the usage of assets
Reusing assets (sequential sharing, resell, redistribution)
OPTIMISE
Prolonging the time products are used
Decreasing resource usage
Optimising the delivery system

12. RESOLVE FRAMEWORK (2/2) Loop Virtualise Exchange
Business models for making the transition
Loop
Remanufacturing and refurbishing products and components
Recycling materials
Virtualise
Replacing physical products by virtual services
Replacing physical with virtual locations
Delivering services remotely
Exchange
Shifting to renewable energy and material sources
Using alternative material inputs
Replacing old with advanced technical solutions
LOOP
Remanufacturing and refurbishing products and components
Recycling materials
VIRTUALISE
Replacing physical products by virtual services
Replacing physical with virtual locations
Delivering services remotely
EXCHANGE
Shifting to renewable energy and material sources
Using alternative material inputs
Replacing old with advanced technical solutions

13. REGENERATE: CAMBRIAN INNOVATION
Cambrian Innovation’s wastewater treatment solutions solve critical resource challenges for industry. Powered by our award-winning EcoVolt product suite, Cambrian’s simple, distributed installations extract resources like clean energy and clean water from wastewater, radically reducing wastewater management costs while improving environmental outcomes.
Designed a container sized water cleaning facility that is removing 90% of pollutants of grey water with electro-methanogenesis process and producing gas and electricity at the same time
The nutrients can safely be returned to the biosphere
Alternative to conventional water treatment
At the Foundation we have begun further work on understanding how opportunities in the urban biocycle can scale.

14. SHARE: VIGGA Ce100 emerging innovator:
VIGGA solves a problem every parent faces - no matter where she or he lives: The child grows, the clothes do not. Price, convenience and healthy baby clothes are relevant selling points in every home all over the Western world.
For a monthly subscription fee, € 48, the customers will always have at their disposal 20 pieces of VIGGA clothes in their right size
When the clothes are becoming too small, they will be replaced by a new package of clothes one size bigger
After a strict quality inspection the returned clothes are washed at a professional laundry
The clothes are subsequently delivered to another baby, and the circulation process is now in action.
The concept motivates the textile companies to produce in as high a quality as possible.
The higher the quality, the more children can make use of the same piece of clothes and the better the profit become, and the textile waste is reduced by 70-85%.
Vigga sees great opportunities for scaling such as:
- Adding more (baby) products in the circular subscription model, like more clothing options, strollers, small bikes, baby cribs etc
- Scaling internationally, either through a franchise model or in corporation with one or more big players in the foreign markets
- Adding a social aspect to the concept through creating a socioeconomic subsidiary that takes care of distribution, washing, caring and repairing using workforces that have a tough time on the traditional job market (elderly people, immigrants, disabled etc)
- Implement the service in other sectors, like the healthcare, car sharing or toy sector
Another example is Riversimple:
The hydrogen-powered fuel cell electric vehicles being developed in Wales.
The cars are available on a service contract model.
Riversimple always own the vehicle.
They apply the same to their suppliers from whom they lease.
Done so that all parts of their supply chain are focused on the resources being used at maximum utility and the users of the resources get the maximum function.
“It’s much easier to design a model to suit the 21st Century, than to tweak a model that was designed to do something fundamentally different. The old model is not sustainable financially, environmentally or socially”
Hugo Spowers, Riversimple*
Riversimple is a United Kingdom-based car manufacturer of hydrogen-powered fuel cell electric vehicles. It is based in Llandrindod Wells, a town in Wales, where there is a research & development centre and the company's offices. Foundation

15. OPTIMISE: SPOLSH Splosh
Producer of sachets of high concentration soap, added to water to refill soap bottles
Sachets are water soluble, they and the soap contain no toxic byproducts, and less fuel is needed to transport them
Splosh was set up in 2012 based on the idea that there must be an opportunity to sell household cleaning products outside of the one-time-sale supermarket model.
Rather than buying new bottles every week, customers purchase a reusable bottle containing a dissolvable sachet of concentrated liquid. Customers simply add warm water to create the cleaning product. Bottles are used repeatedly and new concentrate sachets are delivered through the post when needed.
This new system necessitated a complete redesign of many standard household cleaning products:
First, completely new, concentrated forms of cleaning liquids had to be developed.
The dissolvable sachet is made of Polyvinyl Aclohol. More than simply packaging, the material actually improves the final product, adding viscosity and mild cleaning action to the solution.
The bottles had to be designed to be durable and appealing to customers so that they would reuse them.
Finally, containers for the sachets had to be designed to be compatible with the postage system.

16. LOOP: RENAULT Ce100 GP: Renault Remanufacturing
Renault began remanufacturing at its plant in Choisy-le-Roi, near Paris, in and now remanufacture six different product families – including injection pumps, gearboxes and turbocompressors
Remanufactured parts are 30-50% less expensive, have the same guarantee and are submitted to the same quality control tests as new parts.
The remanufactured parts are used exclusively for the repairing vehicles currently in-use.
Renault has achieved reductions of 80% for energy, 88% for water, 92% chemical production and 77% for waste from remanufacturing rather than making new components.
In 2013, 28,200 engines, 20,100 gearboxes and 16,840 injection pumps were reconditioned and given a second life
Components (such as gearboxes) are redesigned to increase the reuse ratio and make sorting easier by standardizing parts.
Renault works together with a local network of SMEs, e.g., 100 French dismantlers
While more labour is required for remanufacturing than making new parts, there is still a net profit because no capital expenses are required for machinery, and no cutting and machining of the products, resulting in no waste and a better materials yield.
As of July 2013

17. VIRTUALISE: PHILIPS PAY-PER-LUX
Ce100 member GP
Philips Pay-per-Lux
In 2011 architect, Thomas Rau, Turntoo and Philips developed the novel concept of selling light as a service - or Pay-per-Lux.
Instead of buying light fittings, customers only pay for the light they use. Philips retains ownership of the fittings and responsibility for the performance and durability of the system. Philips are also able to recover materials when necessary.
The Washington Metro in the United States signed a 10-year contract for light as a service with Philips, which will be funded through the annual $2 million savings in energy and maintenance resulting from the LED upgrade. The deal will see the replacement of 13,000 fixtures. Philips will manage the lighting system from installation right up until the end of the contract.
Schiphol Airport, Europe's fourth busiest airport, has also recently opted for ‘light as a service’ in its terminal buildings.

18. EXCHANGE: ECOVATIVE CE100 member
Ecovative is an example of a company developing products that are created using biological ingredients.
Ecovative’s produces fully compostable alternatives to synthetic materials such as petroleum-based expanded plastics.
They produce packaging made out of agricultural feedstock (parts of plants that cannot be used for food or feed) and mushroom tissue. The packaging performs a lot like plastic, can take any shape needed, and is often used to replace styrofoam.
At the end of use, the material can be simply composted at home without needing any special equipment.
Ecovative’s products address issues such as water, soil pollution and contamination.
Grows fungi on agricultural waste to produce packaging materials
Alternative to fossil-fuel based Styrofoam
The nutrients can be safely returned to the biosphere
Vegware would be another such example – offices in Edinburgh and Bristol and operation in UK, USA, Australia, UAE and HongKong with distribution throughout Europe and North America.

19. BUILDING BLOCKS OF A CIRCULAR ECONOMY
To start capturing the economic opportunities, business need to consider four inter-related building blocks
DESIGN FOR CIRCULARITY
NEW BUSINESS MODELS
ENABLERS & FAVOURABLE SYSTEM CONDITIONS
REVERSE CYCLE
Want to draw out the first and last here:
DESIGN FOR CIRCULARITY
- Circular Design Guide
NEW BUSINESS MODELS
- ReSOLVE framework
REVERSE CYCLES -
ENABLERS AND FAVOURABLE CONDITIONS
While businesses can largely drive the building blocks of design for circularity, new business models and reverse cycles, a number of enabling conditions can greatly help the transition. These include:
Education to prepare future professionals for a new economic paradigm and to create the skill base to drive circular innovation
New financing models and a stable regulatory environment to enable investments in to new circular (business) models
Collaborative platforms to enable cross-chain and cross-sector collaboration
A new economic framework to set the right incentives for a transition to a circular economy in the long run, for example by shifting taxation from labour to resources.

20. DESIGNING FOR CIRCULARITY
Agency of Design another company we’ve come across.
Amongst other things, this is a brilliant project reimagining design for the toaster:
The first is high cost but super durable
The second is modular
The third pops apart under vacuum pressure so that the components are easily recoverable.

21. DESIGNING FOR CIRCULARITY
Would recommend having a brows of the Circular Design Guide we recently developed with IDEO.
It has 24 different methodologies and tools for helping anyone from those working on product design to communications to the business case. A support for those thinking through their circular economy challenges and opportunities.
The 24 methods grouped into:
Understand
Define
Make
Release
Free to use.
“See things different: co-create the circular economy.”
Feedback has focused on how it helps to make practical what seem like impossible challenges and/or open oneself to new ways of looking at things.

22. ENABLING TRANSITION Corporations Emerging Innovators
Governments and cities
Pioneer Universities
Affiliates
Collaboration a key:
Eg – working together to look at common challenges:
LWARB a member
Others in the audience
Examples of enabling and favourable system conditions include: 
Direct collaboration
Collaboration at an individual level between businesses and partners is an important enabler to circular business models.
Finance for Circular Economy
Built Environment – case studies and business opportunities
Reverse logistics
Empowering Repair
The New Plastics Economy
The report ‘The New Plastics Economy – Rethinking the Future of Plastics’ developed out of Project MainStream, an initiative by the Ellen MacArthur Foundation /World Economic Forum / McKinsey. The aim of this project, driven by a steering board comprising the CEOs of several large corporates, is to fast-track the transition to a circular economy by taking collaboration to a new level, focusing on stalemates that individual organisations cannot resolve alone.
For this report, major players from across the entire plastics value chain (plastic and packaging producers, brand owners, retailers and recyclers, as well as academics, NGOs and innovators) were brought together to rethink the future of plastics and develop a vision for the new plastics economy.
Toolkit for Policymakers
In 2015, the Ellen MacArthur Foundation produced the report ‘Delivering the circular economy – a toolkit for policymakers’. This actionable toolkit is designed for policymakers who wish to create the right systems condition for the transition to a more circular economy. It requires businesses, policymakers, academics and other society stakeholders to work together to identify circular economy opportunities. The toolkit demonstrates its application through a case study in Denmark.

23. INNOVATORS
“It’s much easier to design a model to suit the 21st Century, than to tweak a model that was designed to do something fundamentally different. The old model is not sustainable financially, environmentally or socially”
Hugo Spowers, Riversimple*
A The goods of today are the resources of tomorrow, at yesterday’s prices
Walter Stahel
The new status symbol is not about accumulation and material wealth, it is about being a “flow champion” and catalyst within the network
Simon Widmer
Infinite growth of material consumption in a finite world is not a possibility
Ernst Schumacher
A shift in mindset from linear and mechanistic to systemic and holistic
Jo Miller
Waste = Food
Mother Nature
A rising tide lifts all boats
John F Kennedy *