December 19, 2022

Circle Economy discussed the circular future for European industries

On the 22nd of November, we launched three reports on the circular future of three European industries: automotive, machinery and equipment and construction.  Developed in collaboration with Bain & Company, the studies were presented during webinars featuring industry leaders as well as authors from Circle Economy and Bain & Company.  

The webinars were kicked-off by Marc de Wit, our Director of Businesses, who linked the reports to unparalleled challenges people and businesses encounter today: ‘We are confronted with what the linear economy has brought us. Forest fires, floods, droughts, famine—these are all negative impacts of 1.1-degree warming, with huge ramifications for personal lives, livelihoods and industries. It is our responsibility to fix this’.

Based on our Circularity Gap Reports, we identified key ‘broken elements’ in the global economy and teamed up with Bain & Company to zoom in on three of them: mobility, built environment and machinery. By implementing circular solutions across these systems, businesses can slash emissions and material use while bolstering profitability and supply chain resilience. However, circular transformation requires tackling specific challenges. 

One of them, as noted by Harry Morrison, Environmental, Social and Governance (ESG) Partner  at Bain & Company, is the misaligned incentives across different economic actors. In a linear economy, companies address only one part of the value chain while disregarding the rest—be it production, sales or waste management. In contrast, bringing pre-used materials back into the loop requires closer collaboration between stakeholders. Sharing takeaways from Bain & Company’s survey, Harry Morrisson named the lack of collaboration across value chains as the top barrier to circularity for the machinery and equipment industry. ‘But the top success factor was having built an ecosystem and having the right partnerships in place’, pointed out the analyst.  

His assessment was mirrored by Adrien Bron, Partner at Bain & Company, who spoke about the European construction sector. According to Adrien, three parties in a typical construction project—designers, construction companies and owners—have been struggling to align their interests. This impedes a wider deployment of novel and secondary materials, for example. To address this bottleneck, Adrien Bron suggested implementing policies and fiscal interventions that can challenge the status quo in the sector.

Another  valid solution for all three industries is, as Giuseppe Della Greca, Circular Economy expert at Enel Group put it, ‘increasing the transparency of material flows through the value chain’. For the built environment, this can mean an ‘online booking system’ that allows for tracking and tracing of building components for potential reuse and recycling. Christian Veddeler, Senior Associate at 3XN Architects, highlighted that one should know what materials are locked in buildings, adding: ‘This also helps during the lifetime of a building when it comes to maintenance and repair because you can anticipate what the life cycle of a building component is so it can be properly addressed and replaced’. 

Owain Griffiths, Head of Circular Economy at Volvo Cars, spoke about the challenges that car-makers encounter while going circular.

Experts agreed that raising the costs of linear production and incentivising circular solutions is key to behavioural change both for consumers and producers. Speaking about the mobility-as-a-service model, Owain Griffiths, Head of Circular Economy at Volvo Cars, pointed out that some customer segments might not switch to car-sharing until the use of personal vehicles becomes pricier through increased taxes, for example. 

As added by Adrien Bron, new buildings today are ‘awfully cheap’ because they don’t include the costs created after the construction is completed. On the contrary,  retrofit projects, which imply adding new components to existing buildings, are pricey. According to the analyst, tackling this problem will require ‘increasing the cost of new build by internalising the costs and, at the same time, decreasing the cost of retrofit by making the processes more efficient and more modular’.

However, businesses and policymakers should also think about ‘carrots’. According to Luc Delestrade, Head of Energy and Environment at Distinct Energies, customers must be offered some boons to opt for a circular house. ‘The idea is to go back to the original design of a building and preserve the best of it while making it attractive to modern customers. The attractiveness will come from comfort and affordability, so it’s just about finding what area might be improved. It might be energy performance, insulation or just retrofitting the windows’, said the expert. 

Luc Delestrade, Head of Energy and Environment at Distinct Energies, spoke about ways to increase the attractiveness of circular construction projects.

For the automotive industry, such an advantage can be flexibility which comes with the mobility-as-a-service model. Especially for city dwellers who can, for example, rent a car for a weekend while bypassing traffic jams with public transport during the working week.  As Björn Noack, Partner at Bain & Company, argued: ‘Flexibility is of such high value for the younger generation, at least in urban areas. If we have the right services to offer to these people, I clearly see the balance shifting’.  

Curious to learn more? Read the full reports and watch the recordings of the webinars.

Beyond recycling: The circular opportunity for passenger cars in Europe

Read the report here.

Watch the recording here.

A circular future for the European machinery & equipment industry

Read the report here.

Watch the recording here.

A circular future for the European construction sector: light commercial and residential buildings

Read the report here.

Watch the recording here.

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