Zero is circular

A circular economy is starting to roll towards zero carbon in Ireland. Geraldine Brennan writes.

Since the 1970s global resource use has tripled, reaching some 92 billion tonnes in 2017, with 90% of biodiversity loss, water stress and over half of global climate change impacts attributed to resource extraction and processing. These are some of the findings from the United Nations’ recently published Global Resources Outlook. It makes for sobering reading.

Now more than ever, the urgency to scale up action has never been greater. We have a narrowing window of just over a decade to implement radical reductions – 45-to-50% – in global greenhouse gas emissions (GHGs) to stay well below 1.5°C.

Business is starting to embrace new economic models, like the circular economy, which radically reduce resource extraction and processing and associated GHGs. The circular economy should be seen as a group of strategies that enable us to decouple economic growth from consumption of resources. Circular strategies optimise resource flows and enable the recirculation of products, components and materials in our economies. Circular strategies include, but are not limited to: eco-design; life-cycle optimisation; product-service systems (see below); collaborative consumption; industrial symbiosis; re-use; repair; remanufacturing; resource recovery and recycling.

This alternative circular economic model has risen to prominence globally over the past decade, driven largely by volatility in resource prices and scarcity of resources. But uptake of the model at scale is patchy due to gaps in capacity building, knowledge and implementation of the circular economy. More broadly speaking, this is the “circular innovation gap”.

One example of a circular business model which has been around for a while is the so-called product-service-system whereby the customer leases a product along with (say) maintenance and similar associated services. In 1995, carpet manufacturer and sustainability pioneer, InterfaceFLOR, launched a scheme to lease its carpets for a monthly fee with retained ownership of their carpets after a few years.

While many of InterfaceFLOR’s clients were interested in this “Evergreen Leasing” scheme it failed for several reasons:

  • the leasing model was more complicated then just buying the carpet outright;
  • barriers related to moving budget out of capital expenses into operating expenses;
  • a 7.5-year lease was seen by some as too long; and
  • securing external financing was challenging due to US financial accounting standards for operating leases.

To overcome the external financing hurdle, InterfaceFLOR offered its own financing in a bid to kick-start the model, but it only ever sold six Evergreen Lease agreements.

“A shift has started away from traditional single transaction sales-based business models.”

InterfaceFLOR’s challenges in implementing an alternative business model highlight how successfully designing and implementing circular configurations which encompass circular products, circular production systems, circular supply-chains demands an understanding of not only material science, engineering, environmental science, ICT, behaviour change and public policy. It also financial norms and standards. Another significant factor which cannot be overlooked is timing – InterfaceFLOR was decades ahead of their time.

Now, a shift has started away from traditional single transaction sales-based business models to performance-based, product-as-a-service business models. While the model is not yet mainstream, examples in Europe include: chemical leasing (Janssen Pharmaceuticals) to pay-per kilometre truck tires (Michelin Solutions fleet tire management); lighting as services (Philips); furniture-as-a-service (FaaS) (Gispen); clothing subscription services (Rent the Runway and Mud Jeans); and car-sharing services (Volkswagen WeShare and Zipcar).

It seems that one of the key enablers of circular business models is timing – underpinned by technological advances and shifts in public policy, coupled with evolving norms and acceptance of use-models instead of ownership.

Most circular business models are dependent on one or more digitisation strategies like: Internet of Things, block-chain, 3-D printing, artificial intelligence. Another key driver is policy – the circular economy is now a central pillar of policymaking in Europe.

The EU Circular Economy Package, launched in 2015, has been a success. Three years after adoption it delivered almost €147 billion in added value and about four million people became employed in circular economy related jobs. So this alternative economic model is not going away. Circular economy is core to the European Green Deal as it is a key climate mitigation strategy, representing almost half of the EU’s effort to achieve net zero emissions by 2050. This policy shift towards circular economics sends a strong signal to industry to adapt or prepare to be disrupted over the next five-to-ten years.

The fruits of the circular economy transition are emerging in Ireland. Consumers can access clothing as a service through Borrower Boutique or Nu Wardobe and car-sharing service through GoGar. The Rediscovery Centre is providing upcycling furniture workshops and manufacturers can buy light-as-a-service through innovative start-ups like Urban Volt.

But these examples make up a tiny fraction of the circular economy potential. There are numerous opportunities for scaling-up implementation of circular strategies and circular business models in every sector of the Irish economy. In particular, there are significant material and GHG reduction opportunities in Ireland’s manufacturing sector which has more than 4,000 players throughout the country and represents some 25% of Ireland’s gross domestic product – higher than the EU average.

According to the Irish Environmental Protection Agency (EPA) over 100 million tonnes of materials are utilised in the Irish economy every year. In 2013, an EPA-funded study found that a 5% material improvement could yield €2.32bn a year for the country. To date, this opportunity remains largely uncapitalised on, as illustrated by Ireland, with a circularity rate of 1.7%, being ranked by Eurostat as having the third lowest of EU Member states in 2016.

“This alternative economic model is not going away.”

It is nevertheless an exciting time to be working in this area as the circular movement in Ireland is gaining momentum. Recently the government of Ireland committed to addressing the Irish circular economy innovation gap in the National Climate Action Plan (2019) and set out its ambition to make Ireland a global leader in the circular and bioeconomy (Future Jobs Ireland, 2019)). Aligned with this national policy, independent research organisation, Irish Manufacturing Research, is incubating the Irish National Platform for Circular Manufacturing (NPCM) to accelerate the adoption and growth of circular business models in manufacturing.

The Irish NPCM is a national, cross-sectoral public-private partnership, and its vision is to accelerate the transition towards a zero-carbon circular economy in Ireland by embedding system innovation in manufacturers and their supply-chains. NPCM is a three-year initiative with the ambition to use the manufacturing sector as a role model for the circular transition across the entire Irish economy through demonstration projects which contribute to closing the Irish circular innovation gap. It launches in 2020 – so watch this space.

Geraldine Brennan

Geraldine is the Circular Economy Lead at Irish Manufacturing Research (IMR) an Enterprise Ireland and IDA Supported Technology Centre who are incubating the Irish National Platform for Circular Manufacturing (NPCM). Geraldine supports …

Read More »

One Comment on “Zero is circular”

  1. There is no alternative but for the economy to be circular. This is because the money in it is continuously passing from hand to hand until it gets back to where it started.

    In the social system of our macro-economy, it is possible to make a model (in the form of a diagram and by 3 other ways, too), to illustrate how this human situation is experienced. You will find the diagram in my two working papers: SSRN 2600103 “A Mechanical Model for Teaching Macroeconomics” and in SSRN 2865571 “Einstein’s Criterion Applied to Logical Macroeconomics Modelling”.

    The other 3 kinds of models of this circulation state are through a compound balance as in the above mentioned machine solution, by a set of simultaneous equations and by the use of a square matrix of the kind that Nobel Laureate Wassiley Leontief proposed. Each of these methods for illustrating our social system is able to bring out different aspects of how macroeconomics works.

Leave a Reply

Your email address will not be published. Required fields are marked *