The 2015 Paris Agreement united 195 countries behind a commitment to limit the rise of the earth’s average temperature to no more than 1.5C. In order to achieve this, global emissions must be cut by 26bn tonnes annually by 2030, according to UNEP. Unfortunately, the climate policy packages proposed thus far can only deliver about half the emission reductions that are needed. However, a recent report published by Circle Economy and Ecofys, illustrates how implementing the circular economy globally can help to reduce the remaining emissions by half.There is no doubt that climate change poses a significant risk to society, our planet and the ability for future generations to thrive. Increasingly, investors are moving funds and implementing mitigation strategies but in order to truly alleviate climate change, new paradigms must be explored. We must move beyond incremental improvements and reimagine the ways we generate and deliver goods and services. The focus on climate change and the reduction of emissions so far has rightfully been on renewables and efficiency improvements, yet the circular economy shifts our attention to retaining value and making efficient use of the resources we already have by re-entering them into a system that is continuous and long lasting. The shift away from fossil fuels to renewables has engaged investors, industry players and pioneering entrepreneurs. The next step requires a similar transition. One which addresses our material use and draws inspiration from companies like Spotify, Zipcar and Peerby.Here are the top five ways the circular economy can play a part in fighting climate change.
Roughly 60bn tonnes of raw materials are extracted from the earth annually. That is the equivalent of 22kgs per person per day. Half of these materials are the fuels we burn and the food we eat and a significant portion of the other half is used to build our homes, offices and roads. The remainder is used for a variety of products from cars and clothing to cleaning agents and personal care products. Of all these raw materials used by the global economy only 7% are reused. The circular economy, as a principle, promotes the reusing of materials through repair, refurbishment and upgrading. If a car engine can be taken out, upgraded, and installed back into the car as good as or even better than new, the opportunities for saving on materials is significant.
The cement industry alone is responsible for approximately 5% of current emissions globally. In order to incentivise energy efficiency measures, typical climate policies focus on reducing emissions per tonne of cement produced. This mentality only lessens the amount of emissions instead of finding a safe alternative for the product and too often ignores other solutions such as substituting concrete or designing modular buildings.An example of this forward thinking approach is Park 20|20, a business estate in Amsterdam that strives for closed material, energy, waste and water cycles. During the construction of the building, modular materials were used so that they can be reused indefinitely. Alternatively the use of low-carbon alternative building materials like Cross-Laminated Timber (CLT) are being used to construct skyscrapers such as the proposed 35-storey Baobab tower in Paris designed by Vancouver architect Michael Green.If cement and construction companies can take these innovative approaches into account, they can engage in the circular economy while future-proofing their business.
In developed countries, 55% to 65% of greenhouse gas emissions are related to the extraction, transport and processing of raw materials, according to the OECD (pdf). Increasing circularity means reducing our dependence on raw materials and results in a reduction in the amount of energy needed to extract, transport and process these materials. As energy needs in these stages decrease so too does the need for energy infrastructure, pipelines, coal terminals and refineries. Although we’re far from ending our reliance on fossil fuels, this would free up material embedded in our fossil energy infrastructure for other purposes and create a positive domino effect from one sector into another.
An often heard counterargument is that although improved efficiency reduces costs it also leads to increased demand. This rebound effect has been studied in detail in regards to energy efficiency and it has been found that only 5% to 30% of the efficiency gains are lost through greater use. This rebound effect is likely to be similar for resource efficiency.
Established business models are beginning to be replaced and the circular economy is adding to the increased momentum of this new, disruptive age. Physical services are being replaced by online equivalents, effectively dematerialising services. For example, in the music industry, compact discs have essentially been replaced by unlimited access to music online, thanks to iTunes, Spotify, and even now obsolete websites such as Myspace. This reduction in material use due to service delivery is optimising resource use and maximising value.This article was originally published on The Guardian.
Although the opportunities for investing in circular business models are widely available, current investment methods do not match the needs of these unique businesses.
To finance these business models, companies as well as the financial sector need to adapt. Businesses need to create an attractive business model for financiers, and financiers need to change the way they perceive the risks and opportunities associated with these models.
To help businesses position themselves in a circular context and develop future strategies for doing business in a circular economy, Sustainable Finance Lab, Circle Economy, Nuovalente, TUDelft, and het Groene Brein got together to create the Value Hill.
The Value Hill proposes a categorisation based on the lifecycle phases of a product: pre-, in- and post- use. This allows businesses to position themselves on the Value Hill and understand possible circular strategies they can implement as well as identify missing partners in their circular network. The Value Hill provides an overview of the circular partners and collaborations essential to the success of a circular value network.
This report is the first in a series of three reports that will help you to finance a successful circular business model:
To gain insight into the maturity of circular economy strategies and initiatives that are being undertaken by large Dutch organisations, Accenture, Circle Economy, DuurzaamBedrijfsleven and MVO Nederland joined forces to develop the Circular Economy Index of Dutch Businesses.
This research provides insight into the progress being made in the Dutch business environment and challenges organisations who have not yet integrated circularity into their operations to discover and implement the solutions that exist.
The city of Amsterdam has made a major step in the transition to become one of the world’s first circular cities. Commissioned by the city, Circle Economy implemented its newly developed City Circle Scan to identify areas in which Amsterdam can make the most significant, tangible progress in realising a circular economy. The first City Circle Scan to be done at this scale globally, the resulting report identifies areas in which circular business models can be applied and highlights strategies to accomplish practical implementation of these sustainable solutions.
“The potential of a circular economy is enormous, and that is why we focused on research and are willing to support anyone who strives to make the circular economy a reality in our city. Globally, we are the leader in this field.” - Alderman Abdeluheb Choho of Amsterdam
The report outlines the details of the city’s system processes and identifies the construction and organic waste chains as potential drivers of the transition to circularity and long term effects each will have on Amsterdam’s current linear economy.
“Practical implementation of the circular economy is critical if we are to address the great environmental and social challenges highlighted at COP21 and incorporate solutions to these challenges into the daily activities of citizens and businesses. Amsterdam is the first of many cities around the globe implementing the City Circle Scan and developing road maps for a transition to a circle economy.”- CEO of Circle Economy, Andy Ridley
Concluding with a vision of the future, including a roadmap and action agenda, the report provides guidance on how the city’s value chains can be altered to stimulate innovation, business opportunities, and job creation in both established and newly created sectors. The municipality is inviting interested parties to submit ideas and suggestions to aid in the implementation of these relevant, circular projects.If you have an idea to help aid the city with this transition please click here.
Circle Economy would like to sincerely thank our partners TNO and Fabric for their dedication to making this City Circle Scan possible.
‘Money makes the world go round’, the new report on financing the circular economy, provides directions for overcoming financial barriers that circular businesses encounter. Answers lie in collaboration throughout the value chain and creating financial instruments to invest in a chain or network of businesses rather than in a single business. This way, risks and rewards can be shared and incentives to collaborate arise with the aim of creating a circular chain in which all participants earn a piece of the pie.PGGM took the lead in organizing the working group FinanCE, consisting of PGGM, Intesa SanPaolo, Rabobank, ING, ABN AMRO, EIB, EBRD, Circularity Capital, RSM Erasmus University, Ellen MacArthur Foundation, KPMG Luxembourg, Banking Environment Initiative of Cambridge, Circle Economy and Sustainable Finance Lab.The FinanCE working group was founded in order to understand the implications of the circular economy on business models and corresponding financing of circular business. The motivation behind this is the need for funding of circular business in order to take off and accelerate the transition. The report identifies opportunities for financial institutions to learn how to recognize and to invest in the winners of the future. The most important opportunities are: increased profitability through higher asset utilisation, risk mitigating potential of circular businesses, and long-term relationships that increase margin stability.
The third and final whitepaper, 6 Guidelines to Empower Financial Decision-Making in the Circular Economy, in our finance reporting series, 3 Essential Steps to Financing Circular Business Models, is finally out! The whitepaper, authored by, Sustainable Finance Lab and Circle Economy and powered by Nederland Circulair!, provides financiers with practical guidelines to prepare for their new role in the circular economy.
The emergence of digital technology and social media has given consumers more power than ever before. With smart devices connecting every aspect of their lives, they are increasingly controlling how and where they engage with companies. With increased access to information and transactions occurring in real time, consumers have come to expect more, making it harder for businesses to keep up. Greater trust, convenience, and a sense of community are pushing the adoption of the sharing economy forward. Lower entry barriers for technology are resulting in rapid innovation and this is expected to speed up in the future. These trends are having an significant impact on the automotive industry.
"Private ownership of cars will disappear - though not completely - and cars will be owned by the manufacturer in the next 10-15 years. This will result in fewer cars, due to the fact that cars will be more heavily utilised through sharing."- Thijs Jasink - COO, ACtronics
The growing role of consumers is transforming the function of cars, making them smarter and more connected. The ever more rapid development cycles of new products and services and increasing technological complexity, require a complete restructuring of the automotive supply chain. As a result, car manufacturers are pursuing new differentiation strategies and engaging with their supply chains in order to meet these new, consumer demands.
"Suppliers need to be able to adapt to these changes quickly in order to stay relevant and avoid becoming the ‘Kodak’ of the automotive industry."- Ralph Ramaekers - Marketing Director Automotive, DSM Engineering Plastics
The report On the Road to the Circular Car, published by ABN AMRO and Circle Economy argues that car parts manufacturers are in a unique position to answer to these rapidly changing and increasingly dominant consumer demands by adopting circular strategies.
"Together with ABN AMRO and industry leaders we have created a vision for the automotive sector, showing them that by introducing circularity into their manufacturing practices and business models they can become future proof and stay successful in a fast paced, ever-changing industry".- Marc de Wit - Director of Strategic Alliances, Circle Economy
Circular strategies include using materials that can be easily reused, integrating modularity into the design of the car in order to make quick and affordable repairs and upgrades and shifting ownership so that car manufacturers remain owners of the cars themselves.
"Consumer needs require new business models that radically alter the traditional automotive chain. We have to redesign the car completely and reorganise the chain". - Jan-Paul Kimmel, CLAUT
To drive successful innovation, the automotive industry needs to collaborate across the entire value chain; this is where bottom-up, circular innovation from parts and component suppliers will play a crucial role.
Read the full report featuring examples of leading circular innovators and recommendations on how to future proof the Dutch automotive industry with circular business strategies through the link below.
The emergence of digital technology and social media has given consumers more power than ever before. With smart devices connecting every aspect of their lives, they are increasingly controlling how and where they engage with companies. With increased access to information and transactions occurring in real time, consumers have come to expect more, making it harder for businesses to keep up. Greater trust, convenience, and a sense of community are pushing the adoption of the sharing economy forward. Lower entry barriers for technology are resulting in rapid innovation and this is expected to speed up in the future. These trends are having an significant impact on the automotive industry.
Around 600 trucks full of solid waste are incinerated in the greater Amsterdam region daily. The residue from this incineration process is known as bottom ash. If separated properly, the ash can provide valuable metal and mineral resources that can be used as a raw material input. However, the ash must be cooled by wet extraction making it sticky and difficult to separate its components. Due to the complicated separation process the ash is usually sent to landfills where the valuable materials within the mixture become useless.
Inashco's team realized that the extensive amount of value being disposed of each day could be reintroduced into the supply chain if the metals and minerals were extracted properly from the incinerator's ash residue.
“With our strong fundament of shareholders and partners, Inashco has the capabilities and ambition to close the loop of the Waste to Energy sector and so reducing the need for primary mining.” - Arno de la Haye, CEO, Inashco
Founded 8 years ago, in close cooperation with the Technical University Delft, Inashco developed a breakthrough technology which separates metal particles, such as aluminum, copper, and iron, from the ash based on weight. A magnetic current then categorizes the metals based on their magnetic properties. The resulting stable, long-lasting, metal scraps and stronger, more porous cement mixtures meet the reusability requirements established by local laws allowing for these recycled materials to be continuously circulated throughout the supply chain.
https://vimeo.com/174175783
Operating worldwide with over 200 employees, Inashco's team now processes over 4 million tonnes of bottom ash from municipal waste incineration annually. Valuable metals and minerals are reintroduced into the supply chain, preserving our earth’ valuable natural resources and thanks to Inashco’s technology, landfilling is no longer needed to dispose of the City of Amsterdam’s waste.
The process has maximized the output of urban mine’s, eliminating sludge being sent to landfills, reducing CO2 emissions by bringing valuable raw materials back into the economy and creating recycling jobs, thus providing a comprehensive positive impact on the economic, environmental and social spheres of the industry.
“We believe that the key to success is the combination of advanced technology and the access to metal markets worldwide.” - Business Development Director, Inashco
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