Circular Economy: How to Kill the Big Elephant in the Room

Circular Economy is gaining more and more traction across the globe.

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Stefan Guertzgen, Global Senior Director Industry Solution Marketing and Communications for Chemicals, SAPStefan Guertzgen, Global Senior Director Industry Solution Marketing and Communications for Chemicals, SAP

Circular Economy is gaining more and more traction across the globe, and here are the major reasons why:

  • Resource scarcity has become a serious issue. Essential raw materials like Lithium, Cobalt, or Rare Earth metals are either limited in availability or concentrated in critical countries.
  • Environmental pollution and waste reach critical limits. According to the Ellen MacArthur Foundation 2017, the oceans could have more plastic than fish by 2050. Moreover, waste exceeds capacities of landfills and recycling. This became even more serious when China decided to stop all imports of foreign waste in 2017.
  • Consumer expectations are changing. Consumers start to become more environmentally conscious and demand ecologically labelled food and goods. Large global players, like Walmart started certification programs for their suppliers to ensure environmental compliance of their raw materials.

These three elements are coming together to create a perfect storm prompting company executives, but also governmental authorities, to embed those factors into their strategies and risk assessments.

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Major Initiatives

What’s happening in response to these issues? Multiple consortia have been formed around the Circular Economy, just to name a few:

  • The UN launched their 17 development goals to transform our world.
  • The European Community kicked off a quite ambitious Circular Economy initiative.
  • The Ellen MacArthur Foundation works with industry, government and academia on a framework for a regenerative and restorative economy.
  • The AEPW (Alliance to End Plastic Waste) formed in fall last year with 30 companies, among those were four of the five biggest global chemical players.
  • The Ocean Plastics Leadership Summit, sponsored by SAP and Dow Chemical, with the goal to provide emotional, relational, strategic, and tactical pillars enabling the participants to develop three core solutions to the ocean plastic 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 currently in progress:

  • In Raw Material Sourcing activities geared towards re-use/recycling of conflict minerals are already in progress to become independent from critical countries being politically unstable or using unethical practices.
  • In Research & Development collaborations are started using modular concepts already in the early development stage to ensure proper dismantling and re-use of materials after product end of life. Terms like “Development for Compliance,” “Build to Last,” or Build to Repair” are coined along those initiatives, fostering also open innovation suggesting the use of a Blockchain.
  • In Production and Asset Management joint ventures are formed to recycle waste polymers and feed them back as monomers into the polymerization processes. Predictive maintenance is used to anticipate failure of assets parts (e.g. pumps, engines) and initiate early backhauls for repair instead of scrapping them. In addition, companies like Covestro are using carbon dioxide as valuable raw material and turn it back into plastics. into their production processes. BASF invested in a company called Lanzatech which 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 already pursued. Moreover, “Material Passes” for construction and building materials are discussed documenting quality and quantity of substances, which have been used in buildings via Blockchain, along with guidance for decomposition and recycling.
  • In Services leasing models are applied to use 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 leasing models for expensive batteries with a longer life time than e-Vehicles are under discussion.

The Path Forward

A study of Accenture suggests 2 options for the Chemical Industry to contribute to Circular Economy:

  • Enabling circularity - driving maximum utility in end usage (e.g. higher durability of goods, making products suitable for sharing, and increasing energy efficiency)
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As recently discussed in a Round Table at Sapphire/ASUG 2019, local prerequisites in terms of collecting and processing waste, commercial viability, as well as educational and political aspects will finally determine pace of adoption. As the Round Table further revealed, Business Networks will play a pivotal role for success. Platform providers and network orchestrators are predestined to drive new business models, enable innovative business processes and provide the underlying IT framework in support of the Circular Economy.

Stefan Guertzgen is the global senior director of Industry Solution Marketing and Communications for Chemicals at SAP.

 

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