Circular Economy: How To Kill The Big Elephant In The Room

Stefan Guertzgen

The circular economy is getting more and more traction across the globe as leading players work to reduce waste and maximize resource use. Here are the major reasons why:

  • Resource scarcity is becoming a serious issue. Essential raw materials like lithium, cobalt, and rare earth metals are either limited in availability or concentrated in critical countries.
  • Environmental pollution and waste are reaching critical limits. According to the Ellen MacArthur Foundation in 2017, the oceans could have more plastic than fish by 2050. Moreover, waste already exceeds the capacities of landfills and recycling. This serious situation worsened when China decided to stop all imports of foreign waste in 2017.
  • Consumer expectations are changing. Consumers are becoming more environmentally conscious and demanding ecologically labeled food and goods. Large global players like Walmart have started certification programs for suppliers to ensure the environmental compliance of raw materials.

These elements are coming together to create a perfect storm prompting company executives and government authorities to embed these factors into their strategies and risk assessments.

Major initiatives

In response to these issues, multiple consortia have formed around the circular economy, such as:

  • The UN launched its 17 development goals to transform our world.
  • The Ellen MacArthur Foundation is working with industry, government, and academia on a framework for a regenerative and restorative economy.
  • The Ocean Plastics Leadership Summit, sponsored by SAP and Dow Chemical, provides emotional, relational, strategic, and tactical pillars to develop three core solutions to the ocean plastics problem: new business models, better global recycling options, and improved chemical recycling and waste management within the supply chain.

Here are some concrete-industry initiatives in progress:

  • In raw material sourcing, activities geared towards reuse and recycling of conflict minerals are helping companies become independent from countries that are politically unstable or using unethical practices.
  • In research & development, collaborations are in development to use modular concepts to ensure proper dismantling and reuse of materials after products’ end of life. Terms like Development for Compliance, Build to Last, or Build to Repair are fostering open innovation and suggesting the use of blockchain.
  • In production and asset management, joint ventures are recycling waste polymers and feeding them back as monomers into polymerization processes. Predictive maintenance is anticipating the failure of asset parts (e.g., pumps, engines) and initiating early backhauls for repair instead of scrapping them. In addition, companies including Covestro are using carbon dioxide as valuable raw material and turning it into plastics in production processes. BASF invested in a company called Lanzatech that owns a fermentation technology for converting carbon monoxide and hydrogen-containing off-gases into ethanol.
  • In supply chain management, initiatives on waste collection and trading, as well as “cradle to cradle” concepts for battery components, rare earth, and precious metals, are being pursued. Moreover, “material passes” for construction and building materials are being discussed to document via blockchain the quality and quantity of substances that have been used in buildings, along with guidance for decomposition and recycling.
  • In services, leasing models are using hazardous chemicals in a closed loop. The company SAFECHEM, for example, offers solvents, risk-management solutions, and services for reliable industrial parts (e.g., wafers) cleaning. Also under discussion is using leasing models for more expensive batteries with a longer lifespan than e-vehicles.

The path forward

An Accenture study suggests two options for the chemical industry to contribute to the circular economy:

  • Enabling circularity: Driving maximum utility in the end use (e.g., higher durability of goods, making products suitable for sharing, and increasing energy efficiency)
  • Circulating molecules: Maximizing utility of existing molecules (e.g., reusing/recycling molecules, such as reusing PET bottles)

A roundtable discussion at Sapphire/ASUG 2019 determined that local prerequisites for collecting and processing waste, commercial viability, and educational and political aspects will determine the pace of adoption, and business networks will play a pivotal role for success. Platform providers and network orchestrators are destined to drive new business models, enable innovative business processes, and provide the underlying IT framework in support of the circular economy.

Read how Intelligent Enterprises enable new strategies and business models for the chemical industry.

This article was originally posted on ChemInfo.

About Stefan Guertzgen

Dr. Stefan Guertzgen is the global director of Industry Solution Marketing for Chemicals at SAP. He is responsible for driving industry thought leadership, positioning & messaging, and strategic portfolio decisions for chemicals.