ABN AMRO : From layman to advocate. Getting to know the Circular Economy

I recently came across an analysis by Ecofys and Circle Economy stating that only seven percent of all materials used globally are recycled and reused. Yes, only seven percent! Worried about how our linear economy is ravaging our planet, I wondered how much we actually use?

In the Circular Economy, less really is more, much more.Alexa KrayenhoffInnovation Manager, Innovation Centre

Haas et al (2015) estimated that roughly 62 billion tonnes of raw materials are used each year to cater for our global needs. Since the industrial revolution we have become more and more wasteful, using items during their - often short - lifetime and then discarding them without a second thought. Leading us to overexploit our planet. This year's Earth Overshoot Day - the day we used more resources than the Earth can produce in a whole year - was August 8th. How much longer can our planet and our economy sustain this rate of consumption?

Thinking twice

What about thinking twice and starting to change the way we design, produce, use and dispose of goods, but also the way we partner in this process? A McKinsey article predicts that the benefits of moving to a Circular Economy could reach up to €1.8 trillion by 2030 in Europe alone, with an increase of up to 11% in disposable income. For the Netherlands, TNO puts this figure at €7.3 billion, not to mention the creation of an additional 54,000 jobs.

Relieved to see there is actually more value in us all thinking twice and moving towards a new economy, I wanted to explore how we can unlock this value and create the ultimate win-win for both ourselves and the world we live in.

Nature as inspiration

We can learn a lot from the Earth's natural ecosystem where 'waste' is nearly always reused. Fallen leaves provide fertile soil. Cow dung is haute cuisine for flies. Carbon dioxide breathed out by animals is absorbed by plants, which later release oxygen. Everything around us seems to be designed for reuse, not for waste. How can we build 'reuse' into the design of the products we use?

Nature is very simple in its efficiency, yet very complex in its detail. It is a balancing act performed by countless species. For humans to copy that, partnerships will need to be set into motion. Two hundred nations of the world have made a good start with the Paris Climate Agreement which aims to prevent us from reaching dangerous and irreversible levels of climate change. The Dutch government has initiated the 'Netherlands Circular in 2050' plan. The intention to protect and follow nature is there, the action will need to follow.

Business opportunities galore

On exploring the Circular Economy further, I discovered that it is actually packed with opportunity and new business models. Value Hill is the tool I like best for its simplicity (Circle Economy 2016). It identifies three phases in which change will need to be orchestrated to achieve the benefits of the Circular Economy on both an economic and an ecological level.

The pre-use phase is where we select reusable or biobased materials, apply circular design or offer a digital version of the product (i.e. e-books vs books). In the use phase, we can get more out of our products through sharing platforms, sell-and-buy-back models, the sale of products as a service and life extension with repair and maintenance. In the post-use phase, more value can be generated by creating multiple use cycles through second hand sales, product refurbishment and recycling.

Key to the success of the Circular Economy will be the cooperation between consumers, producers and resellers to ensure that this secondary product and/or material flow is initiated and has a destination. From a consumer perspective, a mind shift is required away from the constant desire for newly manufactured products.

Design for sustainable value

One element from Value Hill that I find very interesting is circular design. Designing for one-off use is very different from designing for circular use. The Design-Thinking methodology can be very useful to support the process of designing products that are based on customer needs as well as on circular principles such as longevity, reusability and recyclability.

Circular design thinking begins with fully understanding customers and their needs. This starts with making a thorough observation of the way they use the product. It then continues with a line of questioning to see whether products can be made out of different materials, digitised or altered in any other way to follow the circular principles.

Partner with purpose

In my reading about the Circular Economy, one theme keeps recurring: partnerships. This new economy is all about forging new partnerships and networks. Partnerships outside of your regular linear value chain, partnerships that will enable you to gain more value out of the materials you use and thus contribute to the circular flow within your product's ecosystem.

A difficulty is that economic value often requires economies of scale, which are hard to achieve when you are one of the first movers towards a new economy. Therefore, before you team up with partners in a different phase of the Value Hill, it may be more effective to partner with peers first. ABN AMRO's Circular Pavilion has the ambition to encourage and facilitate these new partnerships by bringing parties together in one hotspot.

Impact and happy ending?

Once companies have mastered the Circular Economy, benefits should arise on many different fronts. Circular design thinking will increase your value for your customers and partners and enhance your relationship with them. The products you create will last longer and will be easier to reuse/recycle afterwards. This optimises the value gained out of the materials used, delivering a payback in both economic and ecological terms. Finally, using less raw material and producing less waste will have a massively positive impact on our planet.

In the Circular Economy, less really is more, much more. When considering what it costs to participate, bear in mind that it is not our generation but the generations to come that will pay the price if we do not.