No less than a revolution from business models to mindsets

Sensemaking / No less than a revolution from business models to mindsets

What will it take to unlock the circular economy?

By Anna Simpson / 10 Mar 2017

A couple of centuries after most societies accepted the idea of the world as a planet, rather than a disc, we still run our economies as if the world was flat. Value chains stretch on to some distant point in which the value ‘drops off’, into landfills and oblivion. Bringing it back requires a revolution: in our business models, our infrastructure, our economies, and – perhaps most importantly – our mindsets.

‘How can we give ourselves permission to reimagine all of that?’, asked Martin Hunt, Forum’s circular economy lead, at the start of our latest network webinar, ‘Going full circle: How the circular economy can help your business prosper’. The concept of the circular economy is already gaining traction, he added. The pressures of a rising population and shifting consumption patterns on land, energy and water, climate change, the accumulation of waste, ongoing degradation of ecosystems, and rapid loss of biodiversity, continue to threaten our carrying capacity at a planetary level – and the linear supply chains that most businesses depend risk falling short as a consequence.

The idea is simple enough: its implementation isn’t. The challenge is that this isn’t just about changing supply chains one at a time: it’s about innovating whole systems.

In response, we’re seeing a fairly rapid emergence of disruptive technology and business models to decouple growth from resource use. The idea is simple enough: its implementation isn’t. The challenge is that this isn’t just about changing supply chains one at a time: it’s about innovating whole systems. This changes everything: the mindset and skills we’ll need; technical, legal and financial systems; governance structures; ownership models…

The webinar brought together two circular economy pioneers from our network: Andy Doran, who works on Sustainability and Government Affairs and leads on recycling development in the European market for Novelis, the world’s largest aluminium recycler, and Keith Lawton, a Director with Amec Foster Wheeler’s Environment & Infrastructure team, and currently the project director on the Scottish Government’s Circular Economy business support framework.

What did we learn?

 

1. Viability is an incentive

For Novelis, as well as all the pressures listed above, there was simple recognition of the company’s dependence on primary aluminium, and the uncomfortable fact that in 2011 it was producing a tonne of waste for every tonne of aluminium it sold. This was far from the vision of being a viable, or even leading, business in a resource-constrained world. A $250 million investment in the Nachterstedt recycling plant has since enabled it to take in low-grade scrap and convert it into high-value alloys for mainstream use in just 5 hours, with a capacity of 400,000 tonnes.

2. Recycling isn’t enough

Recycled content now makes up over 50% of Novelis’ stock. But this plant is only the visible tip of the iceberg – in the context of the change required, Doran explained. A huge amount of work is going into developing and reworking partnerships to build another closed loop, bringing the stock back into the factory. This affects everything from product design to consumer behaviour to waste collection to scrapping. So Novelis looked for ways to bring back post-consumer beverage cans, and to change the specifications of alloys so that more of the recycled stock could be bought. Some key relationships have helped move things along – such as Jaguar Land Rover’s interest in recycled aluminium for car manufacture.

3. Success demands skills and leadership

Keith Lawton has been watching businesses like Novelis tackle this sort of challenge for the last 15 years, and asking why some succeed and while others don’t. What success factors underpin the transformation to a circular economy? Having seen over 20 circular economy pilots at Amec Foster Wheeler, he emphasised the right combination of skills and leadership. It takes people who can drive policy, who can rework business models, and who can find new ways forward in technology and materials.

In the context of rising protectionism, there’s a real risk of leadership failure – Lawton added: “The EU has been pushing forward on the circular economy agenda and it has made a difference. Retrenchment from that will show in sharp relief the leadership required.”

4. Relearning is a journey

On top of skills, and at all levels, it takes people at all levels of the economy who can think in systems. Often the senior management backs the idea in principle, but lacks awareness of the complex system in which the organisation operates. Understanding this is a journey in itself: learning to ask the right questions, acknowledging what you don’t know, and finding those who can help.

The way we learn is really important, Lawton said. We need three things to come together: cognitive understanding; the psychomotor aspect of actually doing things differently; and the supportive context of the organisation’s identity and values.

5. There’s no quick fix

Building skills and infrastructure takes time. There’s a prevalent bullishness about building a circular economy that underestimates the time required, as well as the cost. Even when the market demand for the final product is there, the supporting market to collect and process the resources is nascent.

The sort of collaborations required take a lot of time to build, Doran observed. You need to build trust, demonstrate your track record, work out the various roles of everyone involved. It’s a big issue in a circle, he quipped: who leads, who has the power? It helps to have examples of success up your sleeve, but you also need to have a reality lens handy – and be prepared to fail.

How to begin?

So much for the challenges. How can we accelerate the change?

Giving businesses just a small platform to start from is vital, Lawton observed. It would help to have a map of skills and competencies needed to create the circular economy: the sort of framework that can give companies a starter for ten.

Hunt observed that a lot of companies are going where there’s already clear commercial value. But in the longer term, we’ll need proper diagnosis of the systems, to identify the more obscure hurdles.

For this, Doran added, business needs to continue to step up given the challenge of global leadership. We need more support for systems thinking at scale, and a louder voice for emerging visions.

To find out more about Forum's Circular Economy work, contact Martin Hunt: [email protected]

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