FICCI
Circular Economy Symposium 2018
Accelerating India’s Circular Economy Shift
A Half-Trillion USD Opportunity
Future-proofing growth in a resource-scarce world
Contents
Foreword . . . 1
From NITI Aayog . . . 1
Preface . . . 3
From FICCI . . . 3
From Accenture . . . 5
Executive Summary. . . 7
Introduction. . . 11
What is Circular Economy? . . . 12
Circular Supply Chain . . . 14
Recovery & Recycling . . . 15
Product Life Extension . . . 16
Sharing Platform. . . 17
Product as a Service . . . 18
Circular Economy Opportunity in India. . . 20
Size of the prize in India. . . 21
Metals and Mining Sector . . . 27
Electronics and High-Tech Sector. . . 35
Agriculture, Food and Beverages Sector . . . 41
Enablers and Success Factors . . . 47
Better Awareness . . . 47
Disruptive Technologies . . . 48
Enabling Policy Landscape . . . 50
Innovative Funding Models . . . 51
Collaboration & Partnerships . . . 51
Call for Action . . . 53
Appendix A - Illustrative Circular Economy Initiatives in India . . . 54
Appendix B - Methodology to compute GDP at Risk . . . 56
Acknowledgment - Participating Organizations. . . 57
Contents
Foreword . . . 1
From NITI Aayog . . . 1
Preface . . . 3
From FICCI . . . 3
From Accenture . . . 5
Executive Summary. . . 7
Introduction. . . 11
What is Circular Economy? . . . 12
Circular Supply Chain . . . 14
Recovery & Recycling . . . 15
Product Life Extension . . . 16
Sharing Platform. . . 17
Product as a Service . . . 18
Circular Economy Opportunity in India. . . 20
Size of the prize in India. . . 21
Metals and Mining Sector . . . 27
Electronics and High-Tech Sector. . . 35
Agriculture, Food and Beverages Sector . . . 41
Enablers and Success Factors . . . 47
Better Awareness . . . 47
Disruptive Technologies . . . 48
Enabling Policy Landscape . . . 50
Innovative Funding Models . . . 51
Collaboration & Partnerships . . . 51
Call for Action . . . 53
Appendix A - Illustrative Circular Economy Initiatives in India . . . 54
Appendix B - Methodology to compute GDP at Risk . . . 56
Acknowledgment - Participating Organizations. . . 57
List of Tables List of Figures
Figure 1: Resource use vs. economic development (2014, 166 countries) . . . 11
Figure 2: Value realization potential from circular business models by 2030 . . . 12
Figure 3: Adopting circular business models - a shift in mindset . . . 13
Figure 4: Five business models to mainstream Circular Economy . . . 13
Figure 5: The ve circular business models . . . 19
Figure 6: Rising material use and economic development in India. . . 20
Figure 7: Current resource constraints in India - an illustration . . . 21
Figure 8: Reward for adopting circular business models in India (2030) . . . 21
Figure 9: Exploring circular opportunities in India - prioritization of resources for analysis . . . 22
Figure 10: Application of CE models across the metals and mining value chain . . . 29
Figure 11: Global steel use by the type of equipment in 2016 - an illustration. . . 31
Figure 12: Recycling of steel from automobiles - a huge CE opportunity in India. . . 32
Figure 13: Application of CE models across the electronics and high-tech value chain . . . 37
Figure 14: Extracting gold from e-waste in India - a huge untapped CE opportunity in India . . . 39
Figure 15: Application of CE models across the FMCG value chain. . . 43
Figure 16: Recycling of discarded plastic - a huge CE opportunity in India . . . 45
Figure 17: Key technologies for circular business models . . . 48
Figure 18: Illustration of how digital technologies are enabling CE models . . . 48
Figure 19: Illustration of how physical technologies are enabling CE models . . . 49
Figure 20: Illustration of how biological technologies are enabling CE models. . . 49
Table 1: Critical resources to tap India's Circular Economy opportunity . . . 23
Table 2: Overview of strained metal supply in India . . . 28
Table 3: Key CE opportunities across the Metals and Mining sector. . . 33
Table 4: Key CE opportunities across the Electronics and High-Tech sector . . . 40
Table 5: Key CE opportunities across the Agriculture, Food and Beverages sector. . . 46
Table 6: Circular Economy related regulations in India . . . 50
Table 7: Transition to Circular Economy - Call for action . . . 53
List of Tables List of Figures
Figure 1: Resource use vs. economic development (2014, 166 countries) . . . 11
Figure 2: Value realization potential from circular business models by 2030 . . . 12
Figure 3: Adopting circular business models - a shift in mindset . . . 13
Figure 4: Five business models to mainstream Circular Economy . . . 13
Figure 5: The ve circular business models . . . 19
Figure 6: Rising material use and economic development in India. . . 20
Figure 7: Current resource constraints in India - an illustration . . . 21
Figure 8: Reward for adopting circular business models in India (2030) . . . 21
Figure 9: Exploring circular opportunities in India - prioritization of resources for analysis . . . 22
Figure 10: Application of CE models across the metals and mining value chain . . . 29
Figure 11: Global steel use by the type of equipment in 2016 - an illustration. . . 31
Figure 12: Recycling of steel from automobiles - a huge CE opportunity in India. . . 32
Figure 13: Application of CE models across the electronics and high-tech value chain . . . 37
Figure 14: Extracting gold from e-waste in India - a huge untapped CE opportunity in India . . . 39
Figure 15: Application of CE models across the FMCG value chain. . . 43
Figure 16: Recycling of discarded plastic - a huge CE opportunity in India . . . 45
Figure 17: Key technologies for circular business models . . . 48
Figure 18: Illustration of how digital technologies are enabling CE models . . . 48
Figure 19: Illustration of how physical technologies are enabling CE models . . . 49
Figure 20: Illustration of how biological technologies are enabling CE models. . . 49
Table 1: Critical resources to tap India's Circular Economy opportunity . . . 23
Table 2: Overview of strained metal supply in India . . . 28
Table 3: Key CE opportunities across the Metals and Mining sector. . . 33
Table 4: Key CE opportunities across the Electronics and High-Tech sector . . . 40
Table 5: Key CE opportunities across the Agriculture, Food and Beverages sector. . . 46
Table 6: Circular Economy related regulations in India . . . 50
Table 7: Transition to Circular Economy - Call for action . . . 53
FOREWORD NITI AAYOG
FOREWORD NITI AAYOG
PREFACE FICCI
Dilip Chenoy
Secretary General FICCI
T
he phrase “Circular Economy” is often used these days in the context of initiatives aimed at driving resource efficiency. The key word here being “Circular”, as these business models encourage a shift from linear value chains to circular value chains, thereby enabling more efficient and fuller utilization of resources. This, we believe, is a critical need of the hour to address the acute resource shortage confronting the country.However, despite its immense relevance, the industry today has a somewhat varied (and at times limited) understanding of Cir cular
Economy principles. This poses a signi cant challenge with respect to the adoption of circular business models at scale in India. As the voice of India's industry and business, FICCI is committed to address this challenge – the Circular Economy Symposium 2018 represents our continued efforts in this direction.
We are pleased to share this study of national importance jointly conducted by Accenture Strategy and FICCI. The study seeks to demystify the Circular Economy principles and outlines different business models that organizations and FICCI members ca n adopt to
improve their resource efficiency. We are particularly enthused by the 'size of the prize' as indicated by this study – there is almost half-a- trillion-dollar worth of GDP value at stake that can be protected through the adoption of Circular Economy principles in India by 2030. The study also presents several global and local case studies to showcase the good work already happening in this space.
We would like to take this opportunity to thank Accenture Strategy and all the organizations that have contributed to this critical study. We hope their efforts and contributio ns, as captured through this
study, will pave way for the much-needed transformation and impact at scale in the coming years.
Dilip Chenoy
Secretary General FICCI
PREFACE FICCI
Dilip Chenoy
Secretary General FICCI
T
he phrase “Circular Economy” is often used these days in the context of initiatives aimed at driving resource efficiency. The key word here being “Circular”, as these business models encourage a shift from linear value chains to circular value chains, thereby enabling more efficient and fuller utilization of resources. This, we believe, is a critical need of the hour to address the acute resource shortage confronting the country.However, despite its immense relevance, the industry today has a somewhat varied (and at times limited) understanding of Cir cular
Economy principles. This poses a signi cant challenge with respect to the adoption of circular business models at scale in India. As the voice of India's industry and business, FICCI is committed to address this challenge – the Circular Economy Symposium 2018 represents our continued efforts in this direction.
We are pleased to share this study of national importance jointly conducted by Accenture Strategy and FICCI. The study seeks to demystify the Circular Economy principles and outlines different business models that organizations and FICCI members ca n adopt to
improve their resource efficiency. We are particularly enthused by the 'size of the prize' as indicated by this study – there is almost half-a- trillion-dollar worth of GDP value at stake that can be protected through the adoption of Circular Economy principles in India by 2030.
The study also presents several global and local case studies to showcase the good work already happening in this space.
We would like to take this opportunity to thank Accenture Strategy and all the organizations that have contributed to this critical study.
We hope their efforts and contributio ns, as captured through this study, will pave way for the much-needed transformation and impact at scale in the coming years.
Dilip Chenoy
Secretary General FICCI
T
he Indian economy today is at a critical stage of its growth journey – a stage that is characterized by rising demand-supply constraints, fast changing consumer preferences and an increasing stakeholder scrutiny. Given the rapidly depleting natural resources and changing stakeholder expectations, business leaders are often confronted with questions about longevity and sustainability of their business models.This manifests as an interesting business context for organizations to operate – interesting, because it represents a huge challenge and o pportunity at the same time. Organizations that are willing to
innovate and re-invent themselves may identify new business models and gain competitive advantage over their peers, while organizations that are slow to respond could face challenges with respect to license to grow.
Amidst this exciting business context, Circular Economy presents a window of opportunity to not just address the existing resource constraints, but also drive transformative bene ts for businesses and consumers, alike. Our research suggests around half-a-trillion dollars worth of India's GDP value at risk by 2030, which could be protected through the adoption of circular business models in India.
As is often the case, there is no “one size ts all” solution when it comes to embracing circular business models. The nature of opportunities would differ based on the industry context. Through this study, our endeavor is to provide organizations a good reference framework to appreciate the art of possible. We hope that it will help develop a better understanding of the circular business models, global case studies and critical success factors for their ad option in India.
We congratulate FICCI for initiating this position paper as a part of the Circular Economy Symposium 2018. We also express our sincere gratitude to all the participating organizations for their valuable contributions and insights. This study couldn't have been completed without their support.
Last but not the least, we would like to thank Peter Lacy, Accenture's Strategy and Sustainability lead, for his pioneering work on Circular Economy. Peter is a co-author of the book “Waste to Wealth – The Circular Economy Advantage”, which explores th e enormous
opportunity from circular business models globally. Peter's work has served as a huge inspiration for us to dive deeper into the Circular Economy opportunity for India.
PREFACE ACCENTURE
Vishvesh Prabhakar
(Managing Director - Communications, Media & Technology, and Sustainability
Accenture Strategy, India)
Sundeep Singh
(Senior Principal – Sustainability, Accenture Strategy, India)
T
he Indian economy today is at a critical stage of its growth journey – a stage that is characterized by rising demand-supply constraints, fast changing consumer preferences and an increasing stakeholder scrutiny. Given the rapidly depleting natural resources and changing stakeholder expectations, business leaders are often confronted with questions about longevity and sustainability of their business models.This manifests as an interesting business context for organizations to operate – interesting, because it represents a huge challenge and o pportunity at the same time. Organizations that are willing to
innovate and re-invent themselves may identify new business models and gain competitive advantage over their peers, while organizations that are slow to respond could face challenges with respect to license to grow.
Amidst this exciting business context, Circular Economy presents a window of opportunity to not just address the existing resource constraints, but also drive transformative bene ts for businesses and consumers, alike. Our research suggests around half-a-trillion dollars worth of India's GDP value at risk by 2030, which could be protected through the adoption of circular business models in India.
As is often the case, there is no “one size ts all” solution when it comes to embracing circular business models. The nature of opportunities would differ based on the industry context. Through this study, our endeavor is to provide organizations a good reference framework to appreciate the art of possible. We hope that it will help develop a better understanding of the circular business models, global case studies and critical success factors for their ad option in India.
We congratulate FICCI for initiating this position paper as a part of the Circular Economy Symposium 2018. We also express our sincere gratitude to all the participating organizations for their valuable contributions and insights. This study couldn't have been completed without their support.
Last but not the least, we would like to thank Peter Lacy, Accenture's Strategy and Sustainability lead, for his pioneering work on Circular Economy. Peter is a co-author of the book “Waste to Wealth – The Circular Economy Advantage”, which explores th e enormous
opportunity from circular business models globally. Peter's work has served as a huge inspiration for us to dive deeper into the Circular Economy opportunity for India.
PREFACE ACCENTURE
Vishvesh Prabhakar
(Managing Director - Communications, Media & Technology, and Sustainability
Accenture Strategy, India)
Sundeep Singh
(Senior Principal – Sustainability, Accenture Strategy, India)
iven the current resource
G constraints, business-as-usual is not sustainable and there is a need to decouple growth from resource requirements
Our analysis indicates a strong positive correlation between the level of economic development and per capita resource requirements of countries. This trend could have interesting implications for an emerging economy like India. On one hand, there is a need to sustain the industrial growth in our quest to become a fully developed economy; on the other hand, it is critical to identify innovative growth models that do not exacerbate the existing resource constraints in India (for instance, 5% of the population lacks access to drinking water and 20% of the population lacks access to electricity).
Circular Economy, through its innovative business models, offers a unique window of opportunity to decouple growth from resource requirements.
At the core of Circular Economy lays a shift towards complete elimination of waste – i.e. waste not in the traditional sense of junk, but any kind of
underutilization of assets and resources
Organizations can adopt ve distinct models to introduce circular initiatives in their operations:
Executive Summary
Message from the Chair of
Circular Economy Symposium 2018
India is experiencing environmental degradation in extreme measure. Even the holy river Ganga has not been spared. As the economy struggles with supply – demand issues, with greater urbanization and greater generation of “waste”, it is time to consider a new way of dealing with the material cycle. If we look at “waste” as a by-product or even nutrients in a different form, we would probably nd a better way to use it instead of disposing it off. Reduce, reuse, recycle and other such ideas would gain ground and Circular Economy practices would become mainstream.
In this context, this theme paper aimed at businesses, talks about the future of Circular Economy models in India and provides economic arguments towards moving the conversation from efficiency within a product lifecycle to maximising efficiency across lifecycles. The need of the hour clearly is for a coherent, focused and systematic framework that can help lay a clear direction and roadmap, spur innovation and encourage private sector participation towards
achievement of a Circular Economy. This paper hopes to help that cause!
Anirban Ghosh Mahindra & Mahindra
iven the current resource
G constraints, business-as-usual is not sustainable and there is a need to decouple growth from resource requirements
Our analysis indicates a strong positive correlation between the level of economic development and per capita resource requirements of countries. This trend could have interesting implications for an emerging economy like India. On one hand, there is a need to sustain the industrial growth in our quest to become a fully developed economy; on the other hand, it is critical to identify innovative growth models that do not exacerbate the existing resource constraints in India (for instance, 5% of the population lacks access to drinking water and 20% of the population lacks access to electricity).
Circular Economy, through its innovative business models, offers a unique window of opportunity to decouple growth from resource requirements.
At the core of Circular Economy lays a shift towards complete elimination of waste – i.e. waste not in the traditional sense of junk, but any kind of
underutilization of assets and resources
Organizations can adopt ve distinct models to introduce circular initiatives in their operations:
Executive Summary
Message from the Chair of
Circular Economy Symposium 2018
India is experiencing environmental degradation in extreme measure. Even the holy river Ganga has not been spared. As the economy struggles with supply – demand issues, with greater urbanization and greater generation of “waste”, it is time to consider a new way of dealing with the material cycle. If we look at “waste” as a by-product or even nutrients in a different form, we would probably nd a better way to use it instead of disposing it off. Reduce, reuse, recycle and other such ideas would gain ground and Circular Economy practices would become mainstream.
In this context, this theme paper aimed at businesses, talks about the future of Circular Economy models in India and provides economic arguments towards moving the conversation from efficiency within a product lifecycle to maximising efficiency across lifecycles. The need of the hour clearly is for a coherent, focused and systematic framework that can help lay a clear direction and roadmap, spur innovation and encourage private sector participation towards
achievement of a Circular Economy. This paper hopes to help that cause!
Anirban Ghosh Mahindra & Mahindra
Business model Description Illustration Circular
Supply Chain Provide renewable energy, bio-based- or-fully recyclable input materials to replace single life-cycle inputs
BASF is replacing nite fossil resources with
sustainably produced renewable resources through its innovative production Verbund Biomass Balance approach
Recovery &
Recycling
Product Life Extension
Recover useful resources / energy from disposed products or by-products
Nike reuses and recycles footwear manufacturing scrap and post-consumer shoe wastage, converting it into raw material for other sports equipment manufacturing players
Extend working lifecycle of products and components by repairing, upgrading and reselling
Patagonia launched an online store where customers trade-in their used clothing in return for store credit, thereby extending the life of products
Sharing Platform
Product as a Service
Enable increased utilization rate of products by making possible shared use, access or ownership
Airbnb operates as an online marketplace for people to lease or rent short-term lodging, facilitate tourist experiences or make restaurant reservations
Offer product access and retain ownership to internalize bene ts of circular resource productivity
Philips offers lighting as a service, wherein users are required to pay for the consumed intensity (rather than for the product)
Our analysis indicates approximately half-a-trillion dollars worth of economic value that can be unlocked through Circular Economy business models in India by 2030
The enormous circular opportunity in India will manifest itself in the form of different resources. From prioritization perspective, resources with signi cant economic impact and environmental footprint are the natural choices for organizations to focus their CE initiatives. Our research highlights eight such priority resources for India. These are: (i) petrochemicals, (ii) plastics, (iii) food, (iv) gold, (v) iron & steel, (vi) copper, (vii)
bers, and (viii) cement. It is noteworthy that there is no standard model that applies across all industries and the opportunities exist in diverse forms. For instance:
Urban mining from e-waste: There is ~$1bn of value that can be realized from the extraction of
n
gold from e-waste in India.
Plastics recycling: Currently, ~40% of plastic waste in India ends up being uncollected for recycling.
n
Proper management of this waste can create ~14 lakhs jobs and could potentially represent a ~$2bn opportunity.
Steel recovery from end of life vehicles: There is over 8mn tons of steel that can be potentially
n
extracted from end of life vehicles in India in 2025, representing a ~$2.7bn opportunity.
From implementation perspective, there is a need for an enabling ecosystem – one that fosters the spirit of disruption and innovation
There are ve factors that would be critical for the acceleration of Circular Economy models in India:
Better awareness
n Better consumer awareness required to drive adoption of new interaction models (between suppliers and consumers)
n Educating entrepreneurs, designers, engineers, procurement officers, and product managers about the art of possible
n Intervention in school and university curriculums to in uence mindset
Disruptive
technologies Enabling policy
landscape Innovative funding
models Collaboration and partnerships
n Emerging technologies can accelerate a shift towards CE models– for example, enabling cleaner resources (bio-materials), enabling extended lifecycles (through predictive maintenance) and enabling shared platforms (through IoT)
n Three types of technologies would be critical– digital
technologies (such as IoT), physical technologies (such as 3D printing) and biological technologies (such as bio-based materials)
n Favourable policy landscape can help accelerate adoption through elimination of barriers and driving behavioural change
n Several policy measures already introduced in India – for instance, Zero Defect, Zero Effect, scheme, plastics waste management rules, e-waste rules, BIS standards for CE principles
n Funds required to drive R&D and capital investments
n Illustrative examples of best practices – ESG investing (such as green bonds), CE innovation fund introduced by Finnish Government
n Need for both cross-sector partnerships and partnerships across different players (for example, MSMEs, government, urban local bodies, NGOs and consumers)
n For instance, MSTC and Mahindra partnering for India’s rst auto shredding business
Business model Description Illustration Circular
Supply Chain Provide renewable energy, bio-based- or-fully recyclable input materials to replace single life-cycle inputs
BASF is replacing nite fossil resources with
sustainably produced renewable resources through its innovative production Verbund Biomass Balance approach
Recovery &
Recycling
Product Life Extension
Recover useful resources / energy from disposed products or by-products
Nike reuses and recycles footwear manufacturing scrap and post-consumer shoe wastage, converting it into raw material for other sports equipment manufacturing players
Extend working lifecycle of products and components by repairing, upgrading and reselling
Patagonia launched an online store where customers trade-in their used clothing in return for store credit, thereby extending the life of products
Sharing Platform
Product as a Service
Enable increased utilization rate of products by making possible shared use, access or ownership
Airbnb operates as an online marketplace for people to lease or rent short-term lodging, facilitate tourist experiences or make restaurant reservations
Offer product access and retain ownership to internalize bene ts of circular resource productivity
Philips offers lighting as a service, wherein users are required to pay for the consumed intensity (rather than for the product)
Our analysis indicates approximately half-a-trillion dollars worth of economic value that can be unlocked through Circular Economy business models in India by 2030
The enormous circular opportunity in India will manifest itself in the form of different resources. From prioritization perspective, resources with signi cant economic impact and environmental footprint are the natural choices for organizations to focus their CE initiatives. Our research highlights eight such priority resources for India. These are: (i) petrochemicals, (ii) plastics, (iii) food, (iv) gold, (v) iron & steel, (vi) copper, (vii)
bers, and (viii) cement. It is noteworthy that there is no standard model that applies across all industries and the opportunities exist in diverse forms. For instance:
Urban mining from e-waste: There is ~$1bn of value that can be realized from the extraction of
n
gold from e-waste in India.
Plastics recycling: Currently, ~40% of plastic waste in India ends up being uncollected for recycling.
n
Proper management of this waste can create ~14 lakhs jobs and could potentially represent a ~$2bn opportunity.
Steel recovery from end of life vehicles: There is over 8mn tons of steel that can be potentially
n
extracted from end of life vehicles in India in 2025, representing a ~$2.7bn opportunity.
From implementation perspective, there is a need for an enabling ecosystem – one that fosters the spirit of disruption and innovation
There are ve factors that would be critical for the acceleration of Circular Economy models in India:
Better awareness
n Better consumer awareness required to drive adoption of new interaction models (between suppliers and consumers)
n Educating entrepreneurs, designers, engineers, procurement officers, and product managers about the art of possible
n Intervention in school and university curriculums to in uence mindset
Disruptive
technologies Enabling policy
landscape Innovative funding
models Collaboration and partnerships
n Emerging technologies can accelerate a shift towards CE models– for example, enabling cleaner resources (bio-materials), enabling extended lifecycles (through predictive maintenance) and enabling shared platforms (through IoT)
n Three types of technologies would be critical–
digital technologies (such as IoT), physical technologies (such as 3D printing) and biological technologies (such as bio-based materials)
n Favourable policy landscape can help accelerate adoption through elimination of barriers and driving behavioural change
n Several policy measures already introduced in India – for instance, Zero Defect, Zero Effect, scheme, plastics waste management rules, e-waste rules, BIS standards for CE principles
n Funds required to drive R&D and capital investments
n Illustrative examples of best practices – ESG investing (such as green bonds), CE innovation fund introduced by Finnish Government
n Need for both cross-sector partnerships and partnerships across different players (for example, MSMEs, government, urban local bodies, NGOs and consumers)
n For instance, MSTC and Mahindra partnering for India’s rst auto shredding business
The strong positive correlation between resource intensity and economic development has signi cant implications. It implies that the emerging economies of today may not be able to adopt the traditional growth models as it could strain the nite pool of natural resources. The point becomes clearer when one considers the ability of earth to replenish natural resources - there is a threshold rate at which earth can replenish natural resources. Any consumption beyond this threshold pushes the world into an ecological debt mode, where it starts relying on resources allocated for the future generations. For instance, in 2017 the world exhausted the entire “budget” of natural resources available for the year on 2 August 2017 (a day nd
referred to as Earth overshoot day). Research indicates that if the global economies continue to operate in the business-as-usual mode, then by 2030 the world would be over utilizing natural resources by a factor of three.
Clearly, the business-as-usual state is not sustainable and there is a critical need to identify innovative models to ensure sustainable growth without straining the nite pool of natural resources. Circular Economy,
through its different business models does precisely that. It provides businesses an opportunity to decouple growth from resource requirements – thereby enabling much more efficient and effective utilization of resources.
Introduction
A
close look at the global economies suggests a strong linkage between levels of economicdevelopment and resource intensity. Accenture's analysis reveals that the developed countries like Germany, Australia and Sweden have a signi cantly higher per capita resource consumption as compared to countries like Bangladesh and Nigeria.
Chile Australia
Brazil China
Germany
Sweden
Colombia India
Bangladesh Nigeria
Resource use (Tons per capita)
Economic development (GDP per capita) 100
10
1
100 1,000 10,000 100,000
Figure 1: Resource use vs. economic development (2014, 166 countries)
The strong positive correlation between resource intensity and economic development has signi cant implications. It implies that the emerging economies of today may not be able to adopt the traditional growth models as it could strain the nite pool of natural resources. The point becomes clearer when one considers the ability of earth to replenish natural resources - there is a threshold rate at which earth can replenish natural resources. Any consumption beyond this threshold pushes the world into an ecological debt mode, where it starts relying on resources allocated for the future generations. For instance, in 2017 the world exhausted the entire “budget” of natural resources available for the year on 2 August 2017 (a day nd
referred to as Earth overshoot day). Research indicates that if the global economies continue to operate in the business-as-usual mode, then by 2030 the world would be over utilizing natural resources by a factor of three.
Clearly, the business-as-usual state is not sustainable and there is a critical need to identify innovative models to ensure sustainable growth without straining the nite pool of natural resources. Circular Economy,
through its different business models does precisely that. It provides businesses an opportunity to decouple growth from resource requirements – thereby enabling much more efficient and effective utilization of resources.
Introduction
A
close look at the global economies suggests a strong linkage between levels of economicdevelopment and resource intensity. Accenture's analysis reveals that the developed countries like Germany, Australia and Sweden have a signi cantly higher per capita resource consumption as compared to countries like Bangladesh and Nigeria.
Chile Australia
Brazil China
Germany
Sweden
Colombia India
Bangladesh Nigeria
Resource use (Tons per capita)
Economic development (GDP per capita) 100
10
1
100 1,000 10,000 100,000
Figure 1: Resource use vs. economic development (2014, 166 countries)
I
n simple terms, Circular Economy seeks to eliminate any kind of waste in the market. When viewed from the lens of Circular Economy, waste doesn't refer to the usual connotation of “junk”, but it refers to any kind of underutilization of resources or assets. There are four distinct types of waste that circular models seek to eliminate. These are:n Wasted resources - Material and energy that cannot effectively be regenerated over time
n Wasted capacities - Products and assets that are not utilized fully
n Wasted lifecycles - Products reaching end of life prematurely due to planned obsolescence or lack of second life options
n Wasted embedded values - Components, material and energy not recovered from waste streams Tremendous value can be potentially realized by eliminating these four types of waste through the adoption of circular business models. Accenture's research estimates the size of this new business opportunity to be around $4.5tn of GDP globally by 2030 .
So, what exactly are the circular business models that organizations can adopt? There are ve distinct types of Circular Economy business models – (i) Circular Supply Chain, (ii) Recovery and Recycling, (iii) Product Life Extension, (iv) Sharing Platform, and (v) Product as a Service.
What is Circular Economy?
It is interesting to note that identi cation and adoption of circular business models requires a shift in approach– a shift from linear “take-make-waste” mindset to a multi-life-cycle “circular” mindset. There is a strong focus on identifying opportunities to continually extract value from resources through business model innovation.
Globally, adoption of these ve business models has grown substantially in the last decade. This is also re ected in the Global CEO study jointly conducted by Accenture and United Nations Global Compact in 2016. According to this study, one-third of the global CEOs are actively trying to implement Circular Economy models as a part of their core strategy.
The following section provides a detailed overview of each of the ve types of CE business models.
Introduce renewable energy, fully recyclable and bio-based fuel, chemicals and materials Substitute wasted resources
Manufacturing Logistics
Marketing
& sales
End of life disposal Reverse
logistics Sourcing
$1,700bn
$1,300bn
Increase recycling, upcycling, component reuse and energy recovery
Increase sharing, co-owning, co-using, and resource pooling
Market lifecycle services for resell, maintain, repair, remanufacture in used markets Lengthen wasted lifecycles Recover wasted embedded values
$600bn Monetize wasted capacity
$900bn Circular
Economy Opportunity
by 2030 Product
use
Figure 2 : Value realization potential from circular business models by 2030
Figure 3 : Adopting circular business models - a shift in mindset
Linear Take-Make-Waste mindset...
From To
...Multi lifecycle Circular mindset
Retail
Linear Value Chain
Product Usage Manufacture
Virgin Resources End-of-life
Sell, Lease & Resell
Product, Component, Material Return or Biological Degradation Manufacture &
Remanufacture Extended
Product Usage Circular Value
Chain Virgin &
Recycled Resources
Reduce waste – Strong focus on operational cost reduction and waste management
Manage resources in production – Focus on resource productivity
Typical activities - lean manufacturing, energy and procurement cost control
Monetize waste – Strong focus on transforming waste-to-wealth
Manage resources in markets – Focus on leveraging spare capacities in markets
Typical activities - business model innovation, value chain redesign, product development
Repair, Refurbish &
Reuse
5 BUSINESS MODELS
Figure 4 : Five business models to mainstream Circular Economy
Circular
Supply Chain Recovery &
Recycling Product Life
Extension Sharing Platform Product as a Service
Provide renewable energy, bio-based or fully recyclable input material to replace single-lifecycle inputs
Recover useful resources / energy out of disposed products or by-products
Extend working lifecycle of products and components by repairing, upgrading and reselling
Enable increased utilization rate of products by making possible shared use / access / ownership
Offer product access and retain ownership to internalize bene ts of circular resource productivity
I
n simple terms, Circular Economy seeks to eliminate any kind of waste in the market. When viewed from the lens of Circular Economy, waste doesn't refer to the usual connotation of “junk”, but it refers to any kind of underutilization of resources or assets. There are four distinct types of waste that circular models seek to eliminate. These are:n Wasted resources - Material and energy that cannot effectively be regenerated over time
n Wasted capacities - Products and assets that are not utilized fully
n Wasted lifecycles - Products reaching end of life prematurely due to planned obsolescence or lack of second life options
n Wasted embedded values - Components, material and energy not recovered from waste streams Tremendous value can be potentially realized by eliminating these four types of waste through the adoption of circular business models. Accenture's research estimates the size of this new business opportunity to be around $4.5tn of GDP globally by 2030 .
So, what exactly are the circular business models that organizations can adopt? There are ve distinct types of Circular Economy business models – (i) Circular Supply Chain, (ii) Recovery and Recycling, (iii) Product Life Extension, (iv) Sharing Platform, and (v) Product as a Service.
What is Circular Economy?
It is interesting to note that identi cation and adoption of circular business models requires a shift in approach– a shift from linear “take-make-waste” mindset to a multi-life-cycle “circular” mindset. There is a strong focus on identifying opportunities to continually extract value from resources through business model innovation.
Globally, adoption of these ve business models has grown substantially in the last decade. This is also re ected in the Global CEO study jointly conducted by Accenture and United Nations Global Compact in 2016. According to this study, one-third of the global CEOs are actively trying to implement Circular Economy models as a part of their core strategy.
The following section provides a detailed overview of each of the ve types of CE business models.
Introduce renewable energy, fully recyclable and bio-based fuel, chemicals and materials Substitute wasted resources
Manufacturing Logistics
Marketing
& sales
End of life disposal Reverse
logistics Sourcing
$1,700bn
$1,300bn
Increase recycling, upcycling, component reuse and energy recovery
Increase sharing, co-owning, co-using, and resource pooling
Market lifecycle services for resell, maintain, repair, remanufacture in used markets Lengthen wasted lifecycles Recover wasted embedded values
$600bn Monetize wasted capacity
$900bn Circular
Economy Opportunity
by 2030 Product
use
Figure 2 : Value realization potential from circular business models by 2030
Figure 3 : Adopting circular business models - a shift in mindset
Linear Take-Make-Waste mindset...
From To
...Multi lifecycle Circular mindset
Retail
Linear Value Chain
Product Usage Manufacture
Virgin Resources End-of-life
Sell, Lease &
Resell
Product, Component, Material Return or Biological Degradation Manufacture &
Remanufacture Extended
Product Usage Circular Value
Chain Virgin &
Recycled Resources
Reduce waste – Strong focus on operational cost reduction and waste management
Manage resources in production – Focus on resource productivity
Typical activities - lean manufacturing, energy and procurement cost control
Monetize waste – Strong focus on transforming waste-to-wealth
Manage resources in markets – Focus on leveraging spare capacities in markets
Typical activities - business model innovation, value chain redesign, product development
Repair, Refurbish &
Reuse
5 BUSINESS MODELS
Figure 4 : Five business models to mainstream Circular Economy
Circular
Supply Chain Recovery &
Recycling Product Life
Extension Sharing Platform Product as a Service
Provide renewable energy, bio-based or fully recyclable input material to replace single-lifecycle inputs
Recover useful resources / energy out of disposed products or by-products
Extend working lifecycle of products and components by repairing, upgrading and reselling
Enable increased utilization rate of products by making possible shared use / access / ownership
Offer product access and retain ownership to internalize bene ts of circular resource productivity
n Circular supply chain adoption for the supply chain partners: Companies can develop and market circular supplies like renewable energy and recyclable materials through its upstream or downstream partners.
For instance, AkzoNobel, a leading global paints company, is focusing on sourcing bio- based materials from suppliers and supplying customers with recyclable products. Another example is that of Ecovative, an
entrepreneurial startup, which provides environmentally responsible, biodegradable and home-compostable mushroom-based alternatives to plastic foam packaging and other synthetic materials.
n Circular supply chain for own operations: Companies can also produce circular supplies and use them for their own operations. As an illustration, consider the case of DSM, which embarked on the journey to transition from fossils to renewables, thereby making sustainability an integral element of its business strategy.
The advancements in biological technologies and green chemistry are enabling organizations to identify much more sophisticated circular supply chain initiatives – the use of bio-based raw materials and bio- degradable products is an example. The biological nutrients can replace non-renewable and toxic inputs and safely degrade in the natural environment after use. Some organizations are deploying technical nutrients, which are inputs like metals and minerals that are capable of being reused and recycled in nitely, if they are not contaminated or leaked in the value chain.
Recovery & Recycling
This model enables organizations to capture value from waste stream (end-of-life products, waste products / by-products), thereby eliminating the concept of waste altogether. For instance, consider the following examples:
n Extracting value from end-of-life products: Companies can recover value from end-of-life products through recycling, refurbishment and restoration initiatives. For example, Nike is driving circularity at scale through the implementation of a design and manufacturing process that reuses and recycles footwear manufacturing scrap and post-consumer shoe waste, converting it into Nike Grind material.
This material is recycled into athletic surfaces such as courts and tracks through partnership with companies like Astroturf (32+ projects so far) as well as footwear (71% of Nike shoes have material made from waste products).
n Extracting residual value from waste products: Companies can also disassemble the waste product to unlock the residual value in the form of valuable material. An interesting example is that of medals being planned for the 2020 Olympic games. Japan plans to manufacture gold, silver and bronze medals for the 2020 Olympics games by extracting precious metals from the electronic waste .
From execution perspective, the model often requires organizations to establish reverse supply chains to be able to aggregate waste streams at scale. The same is then transformed through initiatives such as recycling, upcycling (converting old products or materials into something more valuable), industrial symbiosis (sharing by-product resources among industries), downcycling (converting products to something of a lesser value) as well as cradle-cradle design (disposed products are reprocessed without any resource loss).
Circular Supply Chain
The Circular Supply Chain model introduces fully renewable, recyclable or biodegradable materials that can be used across lifecycles. For instance, replacing a fossil-fuel based energy source with a renewable energy source is a simple illustration.
An organization can implement circular supply chain model through its supply chain partners or within its own operations.
Carlsberg in partnership with Danish company EcoXpac has developed the world's first fully biodegradable beer bottle made from wood fiber and coated with biologically inert materials like chalk and clay. This bottle will be able to enter a recycling cascade before returning to the source as future raw material. Carlsberg also focuses on end-of-life collection and recycling of their bottles. In fact,
~40% of all bottles they put in the market are made from refillable packaging.
BASF is replacing finite fossil resources with sustainably produced renewable resources through its innovative production Verbund Biomass Balance approach. The production Verbund is a set of six BASF sites globally with intelligently networked production facilities, energy flow, logistics and infrastructure.
They maintain a closed chain of custody from renewable feedstock to final product. According to a third-party certification, BASF has substituted 100% of fossil fuels with renewable materials in their Verbund production sites.
Johnson Controls uses a circular supply chain and reverse logistics network to design, make, transport, recycle and
recover vehicle batteries. It has reached 99% recycling rate for conventional batteries in North America, Europe and
Brazil, whilst their sold batteries are now made up of 80% recycled materials.
n Circular supply chain adoption for the supply chain partners: Companies can develop and market circular supplies like renewable energy and recyclable materials through its upstream or downstream partners.
For instance, AkzoNobel, a leading global paints company, is focusing on sourcing bio- based materials from suppliers and supplying customers with recyclable products. Another example is that of Ecovative, an
entrepreneurial startup, which provides environmentally responsible, biodegradable and home-compostable mushroom-based alternatives to plastic foam packaging and other synthetic materials.
n Circular supply chain for own operations: Companies can also produce circular supplies and use them for their own operations. As an illustration, consider the case of DSM, which embarked on the journey to transition from fossils to renewables, thereby making sustainability an integral element of its business strategy.
The advancements in biological technologies and green chemistry are enabling organizations to identify much more sophisticated circular supply chain initiatives – the use of bio-based raw materials and bio- degradable products is an example. The biological nutrients can replace non-renewable and toxic inputs and safely degrade in the natural environment after use. Some organizations are deploying technical nutrients, which are inputs like metals and minerals that are capable of being reused and recycled in nitely, if they are not contaminated or leaked in the value chain.
Recovery & Recycling
This model enables organizations to capture value from waste stream (end-of-life products, waste products / by-products), thereby eliminating the concept of waste altogether. For instance, consider the following examples:
n Extracting value from end-of-life products: Companies can recover value from end-of-life products through recycling, refurbishment and restoration initiatives. For example, Nike is driving circularity at scale through the implementation of a design and manufacturing process that reuses and recycles footwear manufacturing scrap and post-consumer shoe waste, converting it into Nike Grind material.
This material is recycled into athletic surfaces such as courts and tracks through partnership with companies like Astroturf (32+ projects so far) as well as footwear (71% of Nike shoes have material made from waste products).
n Extracting residual value from waste products: Companies can also disassemble the waste product to unlock the residual value in the form of valuable material. An interesting example is that of medals being planned for the 2020 Olympic games. Japan plans to manufacture gold, silver and bronze medals for the 2020 Olympics games by extracting precious metals from the electronic waste .
From execution perspective, the model often requires organizations to establish reverse supply chains to be able to aggregate waste streams at scale. The same is then transformed through initiatives such as recycling, upcycling (converting old products or materials into something more valuable), industrial symbiosis (sharing by-product resources among industries), downcycling (converting products to something of a lesser value) as well as cradle-cradle design (disposed products are reprocessed without any resource loss).
Circular Supply Chain
The Circular Supply Chain model introduces fully renewable, recyclable or biodegradable materials that can be used across lifecycles. For instance, replacing a fossil-fuel based energy source with a renewable energy source is a simple illustration.
An organization can implement circular supply chain model through its supply chain partners or within its own operations.
Carlsberg in partnership with Danish company EcoXpac has developed the world's first fully biodegradable beer bottle made from wood fiber and coated with biologically inert materials like chalk and clay. This bottle will be able to enter a recycling cascade before returning to the source as future raw material. Carlsberg also focuses on end-of-life collection and recycling of their bottles. In fact,
~40% of all bottles they put in the market are made from refillable packaging.
BASF is replacing finite fossil resources with sustainably produced renewable resources through its innovative production Verbund Biomass Balance approach. The production Verbund is a set of six BASF sites globally with intelligently networked production facilities, energy flow, logistics and infrastructure.
They maintain a closed chain of custody from renewable feedstock to final product. According to a third-party certification, BASF has substituted 100% of fossil fuels with renewable materials in their Verbund production sites.
Johnson Controls uses a circular supply chain and reverse logistics network to design, make, transport, recycle and
recover vehicle batteries. It has reached 99% recycling rate for conventional batteries in North America, Europe and
Brazil, whilst their sold batteries are now made up of 80% recycled materials.
Product Life Extension
Consumers often discard products that they no longer value because the products might be broken, out of fashion or no longer needed. But many of these products still have considerable value, and the Product Life Extension model seeks to recapture this value.
n Companies can take up the role of an industrial manufacturer which produces these goods with extended life-cycles.
n Companies can also act as intermediary channel players providing a platform to connect buyers and sellers of used goods. OLX and Quickr are good examples of companies playing this role.
n Lastly, companies can play the role of eld service company which uses local branches to provide repair, upgrade, refurbishment and maintenance services. This role can be played both by big corporates through their licensed stores or by local actors in the informal sector.
By maintaining and improving products through repairs, upgrades,
remanufacturing or remarketing, companies can keep them economically useful for a longer time duration. Hence, there is a shift in the business model from merely volume of sales to longevity of life-cycle and actively keeping them alive and relevant. It also means moving customers from transactions to relationships, incorporating multiple interaction points to facilitate tailoring of upgrades and alterations to speci c needs.
There are six distinct activities that can help organizations extract all possible embedded residual value through an extended product life-cycle:
n Build to last: This involves creating high quality durable products charging the customers either a premium or using alternate revenue models like pay per use.
n Refurbish: This model entails restoring products to an almost original state or remanufacturing them in industry-setting.
n Trade-in: Setting up reverse logistics to take back pre-owned goods for trade and reselling.
n Upgrade: This involves adding new features and functionalities, keeping the core product the same.
n Refill: Replacing the functionality that may have depleted/degraded faster than the core product.
n Repair: This is the simplest model, involving xing broken functions to extend product longevity.
There are different roles a company can play in implementing the Product Life Extension business model. For example:
Patagonia's Worn Wear program encourages product life extension, through the repair and reuse of Patagonia and non-Patagonia products. In 2017, Patagonia launched an online store where customers trade-in their used clothing in return for store credit and can buy previously-owned Patagonia gear at a lower price point and give it a second life. All second-hand products are covered by their Ironclad guarantee ensuring strict quality standards. The company repaired 30,000 products in the first 18 months after launch of their campaign and sold used clothes worth $1mn in the first six months of the launch of the website.
Caterpillar has been remanufacturing and repairing construction equipment under its Cat Reman business. The model is integrated in the entire value chain with incorporation of modular design principles and setting up of reverse logistics to collect used equipment in return for customer credit. The remanufacturing business employs 4000 people across 17 locations worldwide, refurbishing millions of components, thereby using 93% lesser water, 86% lesser energy and emitting 61% lesser emissions.
Airbnb is an interesting example of a C2C sharing platform which operates as an online marketplace for people to lease or rent short-term lodging, participate or facilitate tourist experiences or make restaurant reservations. The company has more than 4 million listed lodgings in 65,000 cities, and an annual turnover of $2.6bn.
FLOOW2 is a B2B sharing marketplace that enables companies and institutions to share, rent out, buy or sell equipment, services, and personnel skills. The company positions itself as the World's reset button, matching supply and demand for 25,000 types of assets and services from construction, healthcare, agriculture, real estate and professional services.
Sharing Platform
Research shows that, in developed economies up to 80% of the things stored in a typical home are used only once a month⁴. This leads to signi cantly low utilization of assets. The sharing platform model seeks to address this challenge by connecting two or more parties to drive-up the net asset utilization through co- access or co-utilization.
The model typically leverages digital technologies to forge new relationships and business opportunities for consumers, companies and micro-entrepreneurs, who rent, share, swap, lend or barter their idle goods.
Hence, this business model provides consumers a new way of making and saving money while offering an asset light business opportunity for the organizations.
The model manifests itself in two ways currently:
n C2C: According to a survey conducted by Nielsen, 68% of global online consumers are willing to offer their personal items to sharing communities in return for payment and 66% are likely to use resources/products from such sharing platform. The items they are willing to share include electronics (ex. Rent-2-Own), bicycles (ex. Mobycy), clothing (ex. Designerex), householditems (ex. KRRB), cars (ex. BlaBlacar), furniture (ex. Furlenco), sports equipment (ex.
Sharewood) and homes (ex. AirBnB).
n B2B: Although the sharing economy started as a C2C model, it is slowly gaining traction in the B2B space as well. This is especially useful for businesses with expensive assets and low utilization rates.
