Praise for Waste to Wealth

‘As Waste to Wealth shows with case studies of leading companies across industries, the cir-
cular economy model works increasingly well for our customers and for us. You have to shed
your old habits and put in the initial effort to change, but it makes so much sense. We can
engineer products for a longer usage; we can recoup the residual value once the economic life
is over. The customer is foremost interested in the benefit of our products, so why not only
sell them the benefit as a service, while we retain ownership and operate the technology. And
what about you?’
– Frans van Houten, CEO, Royal Philips
‘Circular economy, circular responsibility, circular advantage. So simple, yet so powerful. This
book is a practical contribution to future proof your business models in an increasingly resource
constrained world. Not hard to see that in the age of transparency, citizens of this world will
demand this from all companies seeking a license to operate. Time to get on with it.’
– Paul Polman, CEO, Unilever
‘We need to face it: in order to make our economic system really sustainable, it is inevitable
that we redesign it. This book shows the steps we can make. We will need to switch from
a Linear to a Circular Economy. This means much more than recycling. The Circular Economy is
about new ways of creating value via innovation and new business models’
– Feike Sijbesma, CEO, Royal DSM
‘Waste to Wealth captures the spirit of one of today’s most significant business trends: the
circular economy. Lacy and Rutqvist approach the topic in a straightforward and practical man-
ner, underlining that the linear take-make-waste model is (or should be) on its way toward
extinction. They clearly set out the need to unleash the true value and potential of materials,
whether in their beginning-of-life, utilization, or end-of-initial-life phases. This approach has
also inspired our work in the Carlsberg Circular Community, and I believe that any company
pursuing sustainable growth can find valuable inspiration in this book.’
– Jørgen Buhl Rasmussen, President & CEO, Carlsberg

‘We already use more resources than the planet is capable of regenerating so we have to find
ways to utilize less energy, water, materials, and resources in general. In the chemical indus-
try we are searching for ways to close product life cycles, whether at the outset (by using
renewable sources), or at the end (by using recyclable materials). We need radical innovation
to develop new technologies and new business models. The circular economy is part of the
solution and this book will help us to take another step in the right direction.’
– Carlos Fadigas, CEO, Braskem
‘The relevance and importance of circular economy solutions are now being widely recognized.
The circular economy is an extremely powerful model for facing many of today’s challenges
in terms of jobs, growth, resource efficiency, and the fight against climate change. Some busi-
nesses have led the way toward circularity, such as Suez Environnement, a first-mover and key
player in this regard, notably in recycling and recovery. We now need all businesses to embark
in this transformation. This is where this book can make a difference.’
– Jean-Louis Chaussade, CEO, Suez Environnement
‘This book is a superb guide to what will become standard in 10 to 15 years. It says it all. As we
protect food through improving shelf life, protect shipments through damage elimination, and
protect life through hygiene at Sealed Air, we have long ago accepted that Sustainability was
the new definition of quality. The circular economy is now our new definition of integrated
value creation.’
– Jerome Peribere, President and CEO, Sealed Air
‘Authors Lacy and Rutqvist show important leadership in the transition toward adaption of the
circular economy. Their book illustrates that sustainability and the concept of circularity need
not be perceived as costs to the private sector but rather as performance-drivers that provide
strong competitive advantage. Waste to Wealth makes a compelling case for why “business
as usual” is no longer a viable option in a time of scarce natural resources and constrained
economic growth. A worthwhile read by any standard.’
– Peder Holk Nielsen, President and CEO, Novozymes
‘Sustainability is a pre-requisite in the food industry. And the circular economy is a critical part
of enabling sustainable agriculture and fishery to support a growing population. Adopting cir-
cular practices involves challenging existing values, finding new uses for what was “waste” and
building an ecosystem for long-term competitive advantage. Tohoku, since the tsunami, is one
example of circular innovation. The region has little in terms of resources, so it’s perhaps ironic
that it is now a hotbed of innovation in areas like high-tech vegetable factories, co-working
spaces, and even work-sharing. It’s exactly the kind of innovation that Japan should, and will
excel at. Books like Waste to Wealth are pointing the way to a much more sustainable future
for Japan and countries around the world.’
– Kohey Takashima, CEO and Founder, Oisix
‘The 21st century is characterized by increased vulnerability. We have become more intercon-
nected and interdependent than ever, and our responsibility, individual and collective, has
enormously increased. It is clear that we must transform the way we produce and consume – the
way we live – no matter whether we call it sustainability, green economy, resource efficiency, or
circular economy. This book is a valuable contribution to the arguments behind this unavoidable
journey.’
– Janez Potočnik, Co-Chair International Resource Panel (IRP),
former European Commissioner for Environment
‘The development and scaling-up of circular economy needs a partnership of academia, gov-
ernment, and companies. Since the beginning of this century, China’s government has played a
role and done a lot to promote the circular economy in terms of policymaking, and for the next
stage we need business to make things happen in practice. In this context Waste to Wealth
is coming to us just in time. Understanding the five practical business models of the circular
economy and their related disruptive technology will be of big help for China’s business transi-
tion and for upgrading China’s Circular Economy to a new level.’
– Zhu Dajian, Professor and Director, Institute of Governance for Sustainability,
Tongji University
 y
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Ad e C
Waste to Wealth Th

Peter Lacy
Global Managing Director, Accenture Strategy – Sustainability Services
and

Jakob Rutqvist
Manager, Accenture Strategy – Sustainability Services
© Peter Lacy and Jakob Rutqvist 2015
Foreword © William McDonough 2015
Foreword © Ian Cheshire 2015
Softcover reprint of the hardcover 1st edition 2015 978-1-137-53068-4

All rights reserved. No reproduction, copy or transmission of this

publication may be made without written permission.
No portion of this publication may be reproduced, copied or transmitted
save with written permission or in accordance with the provisions of the
Copyright, Designs and Patents Act 1988, or under the terms of any licence
permitting limited copying issued by the Copyright Licensing Agency,
Saffron House, 6–10 Kirby Street, London EC1N 8TS.
Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
The authors have asserted their rights to be identified as the authors of this
work in accordance with the Copyright, Designs and Patents Act 1988.
First published 2015 by
PALGRAVE MACMILLAN
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registered in England, company number 785998, of Houndmills, Basingstoke,
Hampshire RG21 6XS.
Palgrave Macmillan in the US is a division of St Martin’s Press LLC,
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Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN 978-1-349-58040-8 ISBN 978-1-137-53070-7 (eBook)
DOI 10.1057/9781137530707
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managed and sustained forest sources. Logging, pulping and manufacturing
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country of origin.
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Lacy, Peter, 1978–
Waste to wealth : the circular economy advantage / Peter Lacy &
Jakob Rutqvist.
pages cm
Includes bibliographical references and index.

1. Sustainable development. 2. Economics. I. Rutqvist, Jakob, 1982–

II. Title.
HC79.E5L326 2015
338.9'27—dc23 2015012928

Typeset by MPS Limited, Chennai, India.

 This book is dedicated to: the World Economic Forum’s Young Global
Leaders community, the next generation of leaders who have inspired and
supported us throughout. It is also dedicated to those who have come
before us in shaping thinking and action on the circular economy. Finally
and most of all, it is dedicated to Jack, Sam, Felix, and Henny, our four
children. This book is ultimately for them and their bright future.
Contents

A Note from the Authors ix

Forewords x
Executive Summary xv

Section I The Case for the Circular Economy

1 On Borrowed Time 3
2 The Roots of the Circular Economy 19
3 Gaining the Circular Advantage 24
Section II Five New Business Models for Circular Growth
4 Circular Supply-Chain: “Right from the Start” 35
5 Recovery and Recycling: Making History of Waste 52
6 The Product Life-Extension Business Model:
Products that Are Built to Last 68
7 The Sharing Platform Business Model: Sweating Idle
Assets 84
8 The Product as a Service Business Model:
Performance over Ownership 99
Section III Creating Circular Advantage
9 Circular Business Models: Evaluation, Enablers, and
Ecosystems 117
i
vi
 ii
Contents

vi
10 Driving the Technology and Digital Edge in Circular
Advantage: Ten Transformational Plays 131
11 Five Circular Capabilities for Driving Value 148
12 The Power of Policy 168
Section IV Starting Now
13 Capturing the Advantage: Getting Started 191

Methodology 206
Appendix: Data Tables from Modeling 208
Acknowledgments 220
About the Authors 221
Notes 222
Index 256
A Note from the Authors

We wrote this book to inform and energize you, the reader, about a clear
way to gain your own advantage in a circular economy – a pro-growth, pro-
business idea whose time has come. Our hope? Through practical books like
this one, we will empower executives to make the circular economy a trans-
formation comparable to globalization and the digital revolution – and indeed
leveraging both of those two into a disruptive force that refocuses the lens on
a new era of growth and innovation, where business success no longer hinges
on exploitation of constrained natural and planetary resources, but instead
creates a global economy capable of providing enough for all forever.

This book is the result of an intense two-year journey that would never have
been possible without the amazing support of the World Economic Forum,
its Young Global Leaders (YGL) community and, above all, the YGL Circular
Economy Taskforce members and Peter’s co-chairs in the Taskforce, David
Rosenberg and Ida Auken. Its members are too numerous to mention, but
they know who they are. We have singled out David and Ida as inspirational
leaders not just from big business but as a leading entrepreneur and policy-
maker, respectively – exactly the kind of change agents the circular economy
will need to go to scale at speed.
ix
Forewords

Sir Ian Cheshire

Perhaps the most remarkable thing about the circular economy today is that
despite its radical challenge to existing systems and business models, it has
moved rapidly from a specialist concept, discussed in the ivory towers of think
tanks and academic institutions, to a mainstream movement beginning to be
understood by businesses and governments alike.

A key catalyst in this move from the rhetorical to the practical is the arrival
of the Internet of Things. The digital age has created an unparalleled level of
connectivity of devices, systems, and services that make the waste-to-wealth
business models discussed in this book not only possible but preferable over
the traditional linear models. The examples are legion. From the much hyped
x
 Forewords

xi
sharing platform models of Airbnb and Uber to the advances in extending
from products to services with companies from clothing manufacturers (Mud
Jeans) to automakers (Daimler, Renault, and BMW, among others), the circu-
lar economy holds the promise of business advantage.

Successes like these, featured in Waste to Wealth: Creating Advantage in a

Circular Economy, prove this model offers a way forward out of the limits of
our “take, make and dispose” system and create a sense of urgency as to why
businesses need to start – today – to re-perceive their own business models
through the lens of the circular economy. In doing so, companies can harness
the business models, technologies and capabilities that will launch their own
circular journeys to remain viable in this quickly shifting, much more innova-
tive business landscape.

These are exciting times as we go deeper into a transformation no less

dramatic, no less fundamental, than the shift from an agrarian to an indus-
trial economy. It’s a period rife with invention. Companies that grasp the
approaches described in this book and act on them before their competitors
will gain from first-mover advantage. There’s no “one size fits all” answer, and
few of us can totally blow up an entire business model in one go, but those
stepping outside their existing models will find new opportunity and can use
practical circular economy tools to secure real business advantage.

Sir Ian Cheshire

Former Group CEO, Kingfisher plc
January 2015
 Forewords

i
xi
William McDonough

Job one of business is to support customers by producing benefits and assets

for society, not liabilities and detriments. Unfortunately, especially in the last
century, commerce has created a legacy of problems, the solutions to which
are either deferred for generations or even fundamentally impossible within
any reasonable number of human lifetimes. One might say our first industrial
revolution linear production model – take, make, waste – has used unprin-
cipled commerce as a weapon to wage unintentional war with the planet
and all its creatures, and now, almost like a fearful retreating army, it is con-
tinuing to lay it all to waste. Any thinking person today recognizes the urgent
calamity of climate change and pollution. Now is the time to fiercely and
intentionally wage peace on the planet, with commerce as the only human
institution big enough, creative enough and fast enough to be the engine of
principled prosperity and beneficial change.

Design is the first signal of human intention, and exchange is the second.
If we consider how most products are conceived and marketed today,
companies and regulators still refer to a product’s “lifecycle” and its “end of
 Forewords

ii
xi
life,” which is often a short life story about sophisticated birth (attended by
global supply chains) and crude, even hazardous death in the form of refuse
piles and burial in land, in rivers, at sea or by cremation in burn piles or even
“waste to energy” plants. These are old stories of “throwing things away” in a
world with more than enough. But now, as we recognize the limited growth
of constrained resources in a shrinking world, perhaps we can admit when
seeing the Earth from space, “Away has gone away.”

Fortunately, modern business and social leaders who develop Cradle to Cradle
Certified™ products and use circular economy thinking offer customers the
perpetual, safe and beneficial harvest of sources and resources of materials,
energy, water and, especially, the urgent curiosity of creative people. Such
models replace the urgent thoughtlessness of planned short-term obsoles-
cence in a world of limits and constraints with the urgent thoughtfulness of
planned long-term use and reuse in a world of abundance, opportunity and
new business models.

Peter Drucker pointed out that it is a manager’s job to do something the right
way – to be efficient – but it is the executive’s job to do the right thing – to be
effective. Companies today often issue reports about being less bad by reducing
the amounts of materials, energy and water they use as well as having a goal of
zero badness. But the important message here, of course, is it is time to actu-
ally eliminate the entire concept of waste itself, because why would a business
intentionally make a thing that it can’t sell or is a liability? So, as presented in
Cradle to Cradle (2002) and more recently in The Upcycle (2012), co-authored
with Michael Braungart, the idea of being less bad is to be encouraged while
realizing the real power and hope will come from companies that execute on
being more good – to make the world better faster, not just worse more slowly.

Cradle to Cradle-informed design and circular economy practices represent

a fundamental shift in the first principle underlying the terms of commerce
itself. They move us beyond the simplistic, self-centered question, “How much
can I get for how little I give?” – the quantification of economic value in a
shrinking world of limits and fear – and instead put first the richly informed
and generous question, “How much can we give for all that we get?” – a new
commercial qualification of human values in an ever-expanding world of
abundance and hope.

From my perspective, abundance is, at its core, what Waste to Wealth is

about: addressing every link in economic value chains and eliminating the
concept of waste while creating the means and results for shared prosperity.
It provides an essay of clues for the leaders of all human industries large and
 Forewords

v
xi
small, helping them to redesign the supertanker of global business and set it
not just on slower courses to the same destinations but on innovative courses
to new places. The compass guiding it points to an honest awareness of what
we wish to leave behind and what compels us and our children to create as
we move forward. These enterprises see no incentive in being dragged down,
even right or left; they are only full speed ahead, onward and upward, pro-
pelled by the joy of striving for continuous improvement. This is not easy for
the same reason it’s so important:  it’s going to take us all, and it’s going to
take forever. But then, that’s the point.

Wherever you are on your own journey, Waste to Wealth can help guide you
along the way.

William McDonough
Founder, McDonough Innovation
Co-author, Cradle to Cradle: Remaking the Way We Make Things and
The Upcycle: Beyond Sustainability—Designing for Abundance
Chair, World Economic Forum Meta-Council on the Circular Economy
December 23, 2014
Executive Summary

The transition to a circular economy may be the biggest revolution and oppor-
tunity for how we organize production and consumption in our global econ-
omy in 250 years. It is a radical rethink of the relationships between markets,
customers, and natural resources. The circular economy also represents a huge
opportunity for companies to create competitive advantage, or as we put it,
“Circular Advantage,” disrupting the way we produce and consume through
innovative business models, digital technologies, and engineering, and the
enabling capabilities that support these systems.
Our research indicates a $4.5 trillion reward for turning current waste into
wealth by 2030. That’s not just waste in the traditional sense of rubbish, but the
enormous underutilization of natural resources, products, and assets. It’s about
eliminating the very concept of “waste” and recognizing everything has a value.
What about creating a $10 billion business renting property without using
any energy, metal or other resources to build a single house? Increasing a
company’s gross profit by 50 percent while reducing material use by 90 percent,
all by recovering and remanufacturing used components? Unlocking $1 billion
in previously wasted value by transforming material management in manu-
facturing? Or using a country’s underutilized biomass resources to tap into an
$80 billion market for advanced chemicals and energy?
Global industry leaders as well as innovative start-ups are already beginning
to reap huge rewards by tapping into these opportunities. And it’s just the
beginning. This book maps out how they’re doing it and what other leaders
can learn as they create their own circular advantage. We hope to transform
the circular economy from an abstract concept into an easy-to-understand,
practical and applicable business model for you.
For society as a whole, the need is even stronger to enable economic growth
and prosperity that do not, unlike our existing models and practices, depend
on increasingly constrained energy and material resources. The circular economy
xv
 Executive Summary

i
xv
is, in our experience of working with and advising governments, international
agencies and businesses, the only viable large-scale solution for prosperous,
green and thriving global growth and human development.
“Business as usual” is heading for trouble – and, in fact, has been for quite some
time. The indisputable fact: Earth’s resources are limited. Some, like precious
metals, are for all intents and purposes very limited due to pervasive mining
in the past 250 years – and they’re only getting more constrained. Others, like
water, air and forests, are technically renewable but are increasingly stressed.
Strong population growth, coupled with exploding demand among consumers
for more goods and services, will exhaust them to the breaking point if current
practices continue. Making matters worse, the current growth model still treats
the impact of waste as a matter for “someone else” to deal with. Meanwhile,
the planet’s ability to absorb and process this waste diminishes by the year.

Global Resource Use, 1900–2014

Ores and industrial minerals Construction minerals
Fossil energy carriers Biomass

BILLION TONNES
85
80
75
70
65
60
55
50
TOTAL GROWTH RATE:
45
+1,026%
40
35
30
25
20
15
10
5
0
1900 2014

Source: Accenture analysis based on data from Fridolin Krausmann, Simone Gingrich, Nina Eisenmenger,
Karl-Heinz Erb, Helmut Haberi and Marina Fischer-Kowalski, ‘Growth in Global materials use, GDP and
population during the 20th century’, Ecological Economics, Volume 68, Issue 10, August 15, 2009, http://
www.sciencedirect.com/science/article/pii/S0921800909002158.

The turn of the millennium saw the reversal of a 40-year-old pattern in which
natural resource prices decreased steadily as growth increased. Between 2000
and 2014, this inverse relationship gave way to a positive one, as growth and
real commodity prices rose in tandem over the period as a whole.1 Even with
 ii
Executive Summary

xv
oil prices falling in record pace at the end of 2014 due to geopolitical factors
and increased production of unconventional fossil fuels like oil shale and oil
sands, the real price of oil in December 2014 was 50 percent higher than in
December 2000.2 Companies and broader economies can’t proceed as if every-
thing is rosy and the impending resource crunch is merely a mirage. The reality
is that business operations today will soon mean not enough resources for
growth and global prosperity tomorrow. Fifty percent of the world’s population
– approximately three billion people – lives on less than $2.50 per day. Nearly
five billion people live on less than $10 per day.3 Any global growth model
that does not invite these five billion people to share in the world’s prosper-
ity is not fit to consider, but any model that does account for them clearly
requires a radical reformation of resource use. Something has to be done. And
that something, we believe, is embracing the circular economy.
The circular economy as a concept has been around for a few decades. As it’s
known today, it refers to the decoupling of economic growth from the extrac-
tion and consumption of constrained natural resources, i.e., scarce resources
with negative footprints, like fossil fuels or hard-to-recycle metals and
minerals, where dependency creates a competitive disadvantage over time.
Instead, “circular” approaches keep resources in productive use in the economy
for as long as possible. For business, it’s about turning waste into wealth.
Importantly, “waste” here refers to more than just physical waste, i.e., rubbish.
We see waste in four distinct forms:

1. Wasted resources are materials and energy that cannot be continually

regenerated, but instead are consumed and forever gone when used.
2. Products with wasted lifecycles have artificially short working lives or are
disposed of even if there is still demand for them from other users.
3. Products with wasted capability sit idle unnecessarily; for instance, cars
typically sit unused for 90 percent of their lives.
4. Wasted embedded values are components, materials, and energy that
are not recovered from disposed products and put back into use.

Together all this waste adds up to the biggest economic opportunity of our time.
Finding business solutions to turn waste into wealth not only makes financial
sense but also enables growing businesses and economies without growing the
need for increasingly constrained natural resources. It would effectively move us
away from resource-based growth to a new era of performance-based growth. In
the process not only waste but the very concept of waste will be eliminated, with
the realization that every resource has a potential value beyond its current use.

While some elements of the circular economy (such as recycling) are well
known, others are more obscure. But the fact is, circular principles that
 iii
Executive Summary

xv
emphasize a more rational use of resources are logical responses to the current
“linear” model’s shortcomings, with its “take, make, waste” focus.

The numbers bear it out. Our research and analysis reveal that by 2030 the
linear growth model’s inability to deal with growing demand for resources
will result in a gap of eight billion tonnes between supply of and demand for
constrained natural resources, nearly equalling the total resource use in North
America in 2014. In the most likely scenario we have modelled, this translates
into $4.5 trillion of lost growth by 2030, ballooning to $25 trillion by 2050. This
is after adjusting for the assumption that rising commodity prices will drive
resource-efficiency improvements and speed development of new types of
resources. In other words, if the circular economy can replace the linear econ-
omy and decouple growth from constrained resource use – our research shows
it can – it can also unlock $4.5 trillion in additional economic output by 2030.

This will happen while simultaneously improving the customer value proposi-
tion – that is, requiring no customer trade-offs between what is desirable in
the short term and what is viable in the long term. On the contrary, com-
panies in a circular economy enable customers to make the most out of
products; facilitate trade between users; supply services that monetize goods
not in use; offer convenient buy-back solutions; and sell services instead of
products. To deliver this, companies will need to learn more about how prod-
ucts are used, what customers really value and how they interact. Digital tech-
nologies are enabling this interaction at a scale and level of efficiency never
seen before. One example is the newfound scalability and convenience of car
sharing that monetizes reductions of wasted capacity. When waste is turned
into wealth, the benefits will be shared between companies and customers
alike.

At the high level there are three fundamental drivers of the circular economy:

1. Resource constraints – because the current economy is wasteful and

does not leave enough resources for all forever.
2. Technological development – because the introduction of new technol-
ogies, notably digital innovations (see box), is making the circular economy
increasingly attractive and viable for businesses.
3. Socio-economic opportunity – because decoupling constrained resources
from growth not only enables inclusive growth but also empowers custom-
ers to squeeze the most value out of products and assets.

The book you are about to read is, we believe, the first to tackle head-on the
issue of how companies, governments, and economies can address the issues
 Executive Summary

x
xi
just mentioned and turn waste into wealth at the levels of companies and
entrepreneurs. While other books have admirably called attention to the
problems facing the current growth model, we explore practical solutions to
those problems and the role of business, society and customers in fostering
enterprise and innovation. Based on exhaustive research we conducted on
more than 120 companies in 2013 and 2014, as well as on in-depth interviews
with 50 executives and thought leaders, practical experience with myriad
Accenture clients, and economic analysis and modelling, we have devised a
highly practical approach that companies can follow to begin capitalizing on
the “circular advantage.” We explore our insights and our approach in four
sections.

D I G I T A L T E C H N O L O G I E S
A C C E L E R A T I N G T H E
C I R C U L A R E C O N O M Y

Similar to most big transformations throughout history, technol-

ogy is playing a leading role in scaling the circular economy. The
most fundamental operational difference in a circular economy
compared to a linear one is that resources are managed exten-
sively into, within and back from markets, in addition to the
conventional resource-management focus on extraction and
production. Digital technology (including cloud, mobile, social,
machine-to-machine communication and big data analytics) is
enabling this management and its monetization while also col-
lecting data that can be analyzed to drive innovation and improve
the customer proposition over time. Some of the strongest contri-
butions and examples of digital technologies in this context are:
Smarter asset use: How can businesses use existing assets to
deliver services instead of growing resource consumption? This
is a pressing concern for mobility in urban areas where space is
an issue. Enter MyWays, piloted by global logistics giant DHL. It’s
a mobile app and delivery service connecting people who need
parcels delivered with people who can deliver them. Instead of
putting more vehicles on roads, MyWays matches supply with
demand using movements people are already making. A par-
cel is added to MyWays digitally using a tracking number. The
receiver specifies the delivery address and his or her willingness
to pay. Others can now find the job through the app, reserve it,
pick up the parcel at a DHL service point and deliver it. During
 Executive Summary

xx
the process, the deliverer and receiver can communicate via an
in-app chat function. At the conclusion of the delivery, the deliv-
erer earns digital points that can be turned into cash. Previously
wasted capacity in a mobility network has now been utilized –
one piece in the circular economy puzzle.4

Managing physical resource flows: How can a business keep

track of thousands of products in markets, operate a logistics
platform cost effectively and ensure goods are used as much
and for as long as possible? This was the key challenge facing
entrepreneur Jennifer Hyman when she started leasing high-end
clothes, aiming to become the Amazon of clothing rental. Five
million members later, with a valuation close to $1 billion, Rent
the Runway uses digital technology to manage the seemingly
impossible feat of moving more than 65,000 dresses and 25,000
pieces of jewellery among its members across the entire United
States. The company uses big data analytics to assess customer
behaviour and reviews to forecast demand and ensure items
move in optimal circles. What would just a few years ago have
been a practical nightmare is now a thriving business thanks to
digital innovation, enabling access and a common inventory
for a giant customer base.5 The win for the circular economy?
A redistribution model like this ensures products are used to their
full potential and customers co-use instead of personally own.

Optimizing performance of running systems: How can the

performance of equipment be optimized so replacement is
postponed and downtime minimized while still ensuring good
business for suppliers? SKF’s “intelligent bearings” hope to answer
this question by integrating intelligent wireless technology into
bearings so they can communicate their operating condition.
With this technology, SKF president and CEO Tom Johnstone, said
“our customers can get even better control over the lifecycle of
their machinery, leading to lower total costs with higher reliability
and machinery uptime.” Conventionally operators can monitor
damage only after it has occurred, but this technology enables
sensors to gauge parameters such as temperature, velocity, vibra-
tion and load, and to call for preventive maintenance only when
and where it’s needed. These types of solutions revolutionize
 Executive Summary

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xx
efficiency as well as viability of equipment over extended and
multiple lifecycles, and improve plan refurbishment and compo-
nent upgrade activities.6 This contributes to the circular economy
through longer product lifecycles, higher efficiency and the
development of “repair” as a more competitive solution than
“replace.”

Section I: The Case for the Circular Economy

In the first section of the book, we tackle the issue of why the linear growth
model, which has served companies so well for the past 250 years, has
become increasingly impractical and at some point in the near future will
run out of gas – literally. We discuss the circular economy’s evolution over
the past 50 years and why it is a fitting – and far superior – alternative to
the linear model, given its ability to help companies generate value in new
ways, decoupled from intensive use of constrained material and fossil energy.
Through existing and new research, we define the resource productivity
improvements needed from a new growth model (around 4x) and quantify
the impact on the global economy if nothing changes.

Section II: Five New Business Models for Circular

Growth

As we establish in Section I, there’s an intuitive business case behind the cir-

cular economy. What company wouldn’t want to reduce its dependence on
increasingly scarce and costly natural resources while generating revenue from
wasted opportunities?

But at a practical level, making the shift is not that easy. Most companies are
simply not built to capitalize on the opportunities the circular economy offers.
Their strategies, structures, operations and supply chains are deeply rooted in
the linear approach to growth – it’s in their DNA. Companies seeking the cir-
cular advantage will need to develop new business models that are free of the
constraints of linear thinking. In Section II, we describe the five main circular
business models that Accenture has identified in its analysis of more than 120
companies that are generating resource productivity improvements in innova-
tive ways.7 These models’ abilities to help companies enhance differentiation,
 ii
Executive Summary

xx
reduce cost to serve and own, generate new revenue and reduce risk – as well
as their impact on the rules of resource supply and demand – are the core
contributions of this book.

Circular Supply-chain

When a company needs resources that are scarce or environmentally destruc-

tive, it can either pay more or find alternative resources. The Circular Supply-
Chain introduces fully renewable, recyclable, or biodegradable materials that
can be used in consecutive lifecycles to reduce costs and increase predictability
and control.

Such thinking is the core of CRAiLAR Technologies’ business. The company

produces renewable and environmentally friendly biomass resources using
flax, hemp and other bast fibres that let apparel companies produce a gar-
ment that is as soft and durable as cotton, without the environmental risks
associated with cotton’s cultivation. Similarly, AkzoNobel, a leading global
paints and coatings company and a major producer of specialty chemicals, has
teamed up with cleantech company Photanol to develop a process for har-
nessing the power of the sun to make chemicals. The technology mimics the
way plants use photosynthesis to produce “green” chemical building blocks
that will eventually replace fossil-based linear raw materials. The end goal
of the partnership is commercial production of fourth-generation bio-based
chemicals – a market forecasted to surpass $80 billion by 2018.8,9

Recovery and Recycling

The Recovery & Recycling model creates production and consumption systems
in which everything that used to be considered waste is revived for other uses.
 iii
Executive Summary

xx
Companies either recover end-of-life products to recapture and reuse valuable
material, energy and components or they reclaim waste and by-products from
a production process.

Two leaders in the use of this model are Procter & Gamble and General
Motors. P&G has 45 facilities now operating on a zero-waste basis – meaning
all of the manufacturing waste at those sites is recycled, repurposed or con-
verted into energy10 – while General Motors currently recycles 90 percent
of its worldwide manufacturing waste and has 102 landfill-free facilities
(and generates $1 billion in revenue annually from by-product recycling and
reuse).11

Product Life-extension

Consumers discard products they no longer value – because the products are
broken, out of fashion or no longer needed. But many of these products still
hold considerable value, and the Product Life-Extension model seeks to recap-
ture it. By maintaining and improving products through repairs, upgrades,
remanufacturing or remarketing, companies can keep them economically
useful for as long as possible. This means shifting from merely selling things
to actively keeping them alive and relevant. It also means moving custom-
ers from transactions to relationships, tailoring upgrades and alterations to
specific needs.

Dell – a global leader in computer technology – is using this business model

to serve a wider set of customer segments, increase revenues and keep
technology out of the landfill. Through its Dell Outlet and Dell Refurbished
businesses, the company takes back and resells unused products (for exam-
ple, returns), certified refurbished products (for example, ones coming back
from leasing) and “scratch and dent” goods with cosmetic blemishes.12
Construction equipment manufacturer Caterpillar saves itself and its custom-
ers considerable money and up to 90 percent energy use by remanufacturing
millions of components each year in a profitable operation employing more
than 4,000 people and growing.13
 iv
Executive Summary

xx
Sharing Platform

In developed economies, up to 80 percent of the things stored in a

typical home are used only once a month.14 The Sharing Platform model –
increasingly enabled by new forms of digital technology – forges new rela-
tionships and business opportunities for consumers, companies and micro-
entrepreneurs, who rent, share, swap or lend their idle goods. Fewer resources
go into making products that are infrequently used, and consumers have a
new way to both make and save money.

A number of companies built on this business model have gained millions of

members, considerable media attention and in some cases $40 billion-plus
valuation.15 These include Airbnb (home sharing), Uber and Lyft (ride shar-
ing), Deliv (shipping services sharing) and Peerby (consumer goods sharing).
By making it easy for people and companies to use idle products, these busi-
nesses are squeezing much more value from the resources used to make them.

Product as a Service

What if manufacturers and retailers bore the “total cost of ownership”? Many
would immediately adjust their focus to longevity, reliability and reusability.
When consumers lease or pay for products by use through the Product as
a Service model, the business model fundamentally shifts – in a good way.
Performance trumps volume, durability tops disposability, and companies
have an opportunity to build new relationships with consumers.

Michelin solutions (www.michelin-solutions.com), a new business launched

by Michelin, the tire manufacturer, has embraced this model by enabling fleet
customers to lease instead of purchase tires outright – effectively selling “tires
as a service,” with customers paying per miles driven. Similarly, consumer
electronics giant Philips is selling “lighting as a service,” charging customers
 v
Executive Summary

xx
not for the LED diodes themselves but for their usage, in a push to improve
the customer value proposition in a market that will surpass $40 billion by
2020.16 Or what about SolarCity, which is marketing solar power systems as
a service so customers can pay for power, not panels? It’s already a $5 billion
company. In all three cases, the companies retain ownership of the products
while customers enjoy and pay only for the use.

Section III: Creating Circular Advantage

Adoption of the five circular business models has grown substantially in the
past decade, even if we are still at the foothills of the coming changes. Initially,
circular business model innovation was driven by start-ups. Now, large multi-
nationals are making serious moves as well – as illustrated by a joint Accenture
and United Nations Global Compact study, which found one-third of global
CEOs actively seeking to employ circular economy models.17 As they do so, they
are generating immediate business benefits and, perhaps most importantly, are
positioning themselves to capture circular advantage over the longer term.
In Section III, we explore what’s helping to drive these companies’ success:

They carefully choose the business model that is right for their business,
recognizing there is no one “right” answer for all companies to succeed
in the circular economy. In implementing new business models, they
make sure to identify and capitalize on external enablers and business
ecosystems.
They secure access to key enabling technologies to support and scale
new business models and use those technologies to effectively manage
resources within markets, ensure waste is eliminated and monetized, serve
customers, and drive business and product development over time.
They develop capabilities that effectively deploy and operate circular busi-
ness principles. We describe five distinct capability shifts that allow com-
panies to create a circular flow from product design to production, retail,
product use, take-back, and profitable regeneration and reuse.

Beyond these success factors, companies themselves can also positively influ-
ence the policy environment, which has much to say about how and when
the circular economy eventually takes off on a broader scale. We review a
number of policy actions that can have the most significant and immediate
impact in creating an environment conducive to the large-scale rollout of
circular business models in a city, country or region.
 vi
Executive Summary

xx Section IV: Starting Now

While the case for change is clear and there is considerable urgency to start
making the move to circular business models, many companies still wrestle
with how to get started. They’re stuck in “pilot paralysis,” trying to under-
stand what’s scalable and what’s not. For those organizations, we offer a
simple framework in Section IV that can help them assess this challenge.
We present a set of strategic options executives at any organization, regard-
less of industry, can use to begin a move toward the circular economy. We
argue that ultimate success hinges on five important initial actions:

1. Identifying and concentrating on the actual opportunity (as opposed to

the noise)
2. Rethinking how value is created and delivered to customers
3. Putting in place a focused set of new capabilities (and not trying to imple-
ment the “perfect” circular setup, at least not initially)
4. Investing in technology to make value chains circular
5. Timing the balance between capturing near-term, low-hanging fruit and
engendering long-term, large-scale change.

There’s little doubt that current trends are unfavorable to companies whose
livelihoods depends on the “take, make, waste” growth strategy. In fact,
there’s overwhelming evidence that the linear growth model will soon no
longer be viable; its ultimate extinction is truly a matter of when, not if. That
means the sooner companies can adopt circular principles, the sooner they’ll
minimize their reliance on natural resources whose increasing scarcity will
impede their ability to grow.

Transforming toward a circular economy will take time and effort. That’s why
a proactive strategy for how and when to make the move is critical. The first
step is to clearly understand the motives for abandoning the current linear
model and the benefits that circular business models offer – including the
technologies and capabilities that are critical to success.

For companies wanting to future-proof their growth agenda, the circular

economy and circular advantage are the places to look. And there’s never
been a better time to start.
 i
vi
xx
CREATING ADVANTAGE IN A CIRCULAR ECONOMY

THE OBJECTIVE:
TYPES OF WASTE TO ELIMINATE

WASTED WASTED WASTED WASTED

S
EM

UE
R S LI S ED

B
ES FEC CA L
O U R CE YC L E PACI TY D ED VA

THE SOLUTION:
THE CIRCULAR ECONOMY

STEP 1: BUSINESS MODELS

RCULAR COVERY PR
ODUCT
SH
ARI NG DUCT A
CI RE RO

S
N
LI

UP
N
S

I PL A
G

E-
&

RE EX TE N SI S ER V I CE
F

P LY-CH A CYCLI N ATF OR M

STEP 2: TECHNOLOGIES

MOBI LE E-TO-MAC CLOUD SOCI AL DA

BI G TA
IN
H

HI
MAC

N NE
CO

M CO
O

TI AN
MU
N I CA M P U TI N G ALY TI CS

DULAR VANCED & MATER E & RETU 3D

MO AD E AC
LI F

IA

RN
TR
L

RE SC SY PR
D E S GN
I CYCLI N G I EN C E S STE M S I N TI N G

STEP 3: CAPABILITIES

RCULAR N FOR M RCULAR TI NUOU UNI TY-D

CI IG CI ON RT
RI
C

O
S

S
AN
DE

OPP

VEN
Y

EN T
CUSTO
RS
LI F E

EM
SE

NE YC SU M TA
G K
C

U ER
TW O R K S LE S & P P LI ES E N GA K E-B AC

THE OUTCOME:
CIRCULAR ADVANTAGE
 I io
n
ct
Se

The Case for the

Circular Economy
 1
te
r
ap

On Borrowed Time
ch

The growth model favored by economies and most companies for the past
250 years is living on borrowed time. And so are companies that rely on it.
That’s the consensus of scores of different research efforts over the past two
decades, including reports like the UN’s International Resource Panel, which
noted, “Rapid urban and industrial growth in recent decades have placed
huge pressure on the world’s natural resources, leading to threats of resource
scarcity, price inflation, and degraded ecosystems.”1

Relationship Between Material Use and Economic Development

Across 163 Countries in 2010

GDP PER CAPITA (IN CURRENT US DOLLARS)

100,000

10,000

1,000

100
1 10 100
MATERIAL USE PER CAPITA (TONNES)

Sources: Accenture analysis based on data from: SERI and WU Vienna, Material Flows website, accessed
January 8, 2015, http://www.materialflows.net/home/; The World Bank, ‘GDP per capita (current US$)’,
accessed January 8, 2015, http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.
3
 Waste to Wealth

4
When resources are abundant and inexpensive and the impact on the
environment is not a prevailing concern, the current “linear” approach to sat-
isfying demand can be very successful. Companies can, with ever-increasing
efficiency, extract raw materials, use those materials to manufacture desired
products, and sell and ship them to as many customers as possible. Customers,
in turn, use and discard them after they’ve served their purpose. It’s an economy
built on the principles of “take, make, waste.”

However, we’re rapidly approaching a point where the linear model is no

longer viable: where, due to rising global population and affluence, the avail-
ability of many nonrenewables – metals, minerals, and fossil fuel – can’t keep
up with demand. The regenerative capacities of land, forests, and water are
becoming strained past their limits. And planetary boundaries are threatened
as never before. A situation illustrated with frightening clarity by the World
Wildlife Fund for Nature’s 2014 Living Planet Report that showed a measure-
ment of 10,000 populations of key species, designed to be representative of
global wildlife, had declined by 52 percent since 1970.2

Put simply, the current economic system is unsustainable. Economic growth,

long seen as a universal remedy for a range of ills – recession, for instance –
is now the source of the globe’s thorniest problems. Stopping or reversing
economic development is neither socially acceptable nor desirable. But the
growth engine of the past is simply incompatible with the complex needs of
today’s global environment, economy, and societies.

L I N E A R E C O N O M Y, C I R C U L A R E C O N O M Y A N D
C I R C U L A R A D VA N TA G E

The linear economy is a term for the current economic growth

model, where “linear” refers to the cradle-to-grave flow of most
natural resources (also described as “take-make-waste”). This
linear flow is the consequence of historically cheap and abundant
resource supplies leading companies and nations to focus on sup-
plying customers an ever-increasing throughput of goods. In the
linear model, environmental impact is largely unaccounted for and
incentives to minimize waste during use and product end-of-life
are weak. Little attention is paid to ensuring discarded goods are
put into new use or back into a production process as raw material.
The circular economy is a generic term for an economy where
growth is decoupled from scarce resource use. This model is
 On Borrowed Time

5
regenerative by design. Material use is of two types: biological
(renewable) materials, designed for reuse and ultimate return to
the biosphere; and technical (nonrenewable) materials, designed
to move back and forth between production and consumption
with minimal loss in quality or value. Companies in a circular
economy are primarily focused on value creation based on
managing resources in the markets, as opposed to managing
resources solely in production. Ultimately, the circular economy
results in zero-waste value chains powered by regenerative
(renewable) energy, and natural resources are used in connected
loops rather than consumed and discarded in linear flows.
The circular advantage is the competitive edge gained by organi-
zations adopting circular economy principles as a core element
of their growth strategies. By decoupling scarce resource use and
growth, organizations protect themselves from rising and volatile
commodity prices, become more resilient to supply disruptions
and reduce their environmental footprint. They also gain access
to a range of tools to sharpen the core customer value proposi-
tion as their value chain now extends beyond design, production,
and sales into product use and take-back – where most actual
customer value and convenience are created.

The End of Business as Usual

Our work, both Peter’s and Jakob’s, and research by many others before us
have confirmed the same strong relationship between resource consumption
and GDP. Historically, for every 1 percent increase in GDP, resource usage
has risen on average 0.4 percent.3 Over the 35-year period between 1975
and 2010, a 225 percent increase in real GDP and 64 percent growth in
population were accompanied by a 120 percent growth in material usage.4
Population and economic growth are clearly drivers of resource consump-
tion. But, more importantly, these figures demonstrate that even if efficiency
is increasing in the global economy, net resource use is also still rising –
rapidly.

Commodity costs declined by an average of 0.5 percent for every 1 percent

growth in GDP between 1975 and 2000.5 But around 2000, strained resource
 Waste to Wealth

6
supplies reversed this relationship, and between 2000 and 2013, each 1 percent
growth in GDP was instead followed by an average increase in commodity
prices of 1.9 percent.6 As a growing population and expanding global middle-
class drive up demand for resources faster than innovation and resource
substitution is lowering it, this trend will continue and make business as usual
increasingly untenable.

The global population is growing at a rate of 750 million people per decade,
and, using current growth as a guide, between 2014 and 2030 as many as
2.5 billion new middle-class consumers are estimated to join the competition
for natural resources.7, 8 Without breakthrough innovation in how business is
done, companies that rely on primary and scarce resources will see their bot-
tom lines eroded or be forced to raise prices while an ever-increasing share of
household income will be lost to commodity price inflation.

How did we get to this point? To understand what’s happening and plan for
change, consider three crises that make the linear growth model incompatible
with our economic development aspirations.

First Is the Finite Nature and Increasing Scarcity

of Nonrenewable Resources
Between 1980 and 2000, demand for nonrenewable resources like fossil fuel,
metals, and minerals grew by 50 percent. The strongest growth, 75 percent,
was for construction minerals, as emerging economies spurred investments in
infrastructure and buildings. For the next 14 years, from 2000 to 2014, non-
renewable resource demand grew another 80 percent. The market for fossil
energy and ores grew rapidly in concert with the swelling of the global middle
class and its yearning for more transportation and manufactured goods. This
story is part of a longer growth journey from 1960 to 2014 that led to a 450
percent increase in consumption of nonrenewable resources – and that shows
no signs of leveling off anytime soon.9

This demand growth, coupled with diminishing reserves of nonrenewable

resources, makes it difficult to meet further demand increases. Estimates for
when resources will be depleted are notoriously uncertain. But many experts
now believe that key commodities vital for modern economic growth – oil,
copper, cobalt, lithium, silver, lead, and tin – risk running out within 50 to
100 years.10 Even if new discoveries add to reserves, declining ore grades and
increasing extraction costs will seriously complicate resource use, slowing or
stopping economic growth and devastating the environment.11
 On Borrowed Time

7
Second Is the Increasing Stress on Renewables
Consider this: Global water demand is projected to increase by 55 percent
between 2000 and 2050, by which time more than 40 percent of the world’s
population – nearly 4 billion people – will live in areas under severe water stress
(defined as water demand exceeding 40 percent of available water supply).12 In
many areas of the world, groundwater is increasingly polluted and depleting
rapidly. The rate of groundwater depletion has more than doubled between
1960 and 2000 to more than 250 km3 of depleted water per year. The largest
river in Europe, the Volga, discharges this much water annually. The yearly loss
of groundwater is so large, it’s visible from space.13

The excessive and unsound use of natural resources in the current growth
model, so clearly illustrated by crises one and two, is causing major environ-
mental problems that are getting out of control.

Third Is the Transgression of Key Planetary Boundaries

In 2009, a group of 28 internationally renowned scientists identified and quan-
tified a set of nine planetary boundaries, the crossing of which could generate
abrupt or irreversible environmental changes. The world has already passed
three of these – extinction rate (loss of biodiversity), atmospheric carbon
dioxide concentration and atmospheric nitrogen fixation.14

Global warming from the increase in greenhouse gases is a major concern.

As mentioned above, the Living Planet Report has shown an overall fall in
biodiversity of about 50 percent between 1970 and 2014.15 Atmospheric con-
centrations of the main greenhouse gases now far exceed the natural range
over the past 650,000 years. CO2 atmospheric concentration has grown from
280 ppm (its pre-industrial level) to 401 ppm as of June 2014, and its accumu-
lation is accelerating.16 Human processes wreak havoc on delicate ecosystems.
Crop fertilization, for instance, introduces an overabundance of nitrogen into
water supplies. That, in turn, produces algae blooms that effectively kill off
fish and other organisms.17

These and a host of other environmental impacts are threatening the “plan-
etary sinks” – ecological shorthand that refers to forests, the atmosphere,
and oceans, which absorb waste, pollution, and toxins. When excessive use
of fossil energy resources emits too much carbon into the atmosphere, the
acid levels of the oceans increase – which threatens sea life, especially coral
and fish. “I used to think it was kind of hard to make things in the ocean go
 Waste to Wealth

8
extinct,” said James Barry of the Monterey Bay Aquarium Research Institute
in California in an interview with the Seattle Times. “But this change we’re
seeing is happening so fast it’s almost instantaneous. I think it might be so
important that we see large levels, high rates, of extinction.”18
The fallout from the scarcity of planetary sinks is already evident. The 2005
“Millennium Ecosystem Assessment,” an international effort by more than
1,000 of the world’s leading experts on ecosystems, concluded that 60 percent
of ecosystem services were being degraded or used unsustainably. Humans
have increased the species extinction rate by as much as 1,000 times the nor-
mal extinction rates typical over the planet’s history. The changes that have
been made to ecosystems have contributed to substantial net gains in human
well-being and economic development, but these gains have been achieved at
growing costs. These problems, unless addressed, will substantially diminish
the benefits that future generations obtain from ecosystems, which is all the
scarier considering that agriculture employs around half of the world’s labor
force.19, 20

Awash in Rubbish

Exacerbating these three crises is the massive volume of waste the linear
model generates – a total of more than 11 billion tons globally. Only 25 per-
cent is recovered and returned to the production system again.21 The rest is a
lost opportunity, filling trash bins and clogging landfills.

Unless significant changes are made to the current growth model, municipal
waste is expected to increase by more than 75 percent and industrial waste
by 35 percent between 2013 and 2025.22 Waste generation varies wildly
not only by geographic region but also by income level. Organisation for
Economic Cooperation and Development (OECD) countries generate
4.6 billion tons of waste every year, versus 2.2 billion for Asia Pacific.23 Even
in developed countries, the difference is substantial, with the United States
generating 40 percent more municipal waste per capita than the United
Kingdom.24

But the waste problem isn’t just an environmental concern. With global
recycling rates disappointingly low, waste translates into up to $1 trillion
in annual lost value ($300 billion for municipal waste and $700 billion for
industrial).25 Again, there are startling differences by geography. The
estimated annual loss for China is $150 billion, 50 percent more than that
 On Borrowed Time

9
of the United States ($100 billion) and more than seven times Germany’s
($20 billion).26

Will more recycling help relieve pressure on the linear growth model? To
some extent, it will. Higher recycling rates will mean less waste going into
landfills, and that’s a good thing. But recycling doesn’t prevent waste from
being generated in the first place, nor does it allow a company to preserve
the value embedded in products. It also consumes resources in breaking down
product waste and building it up again into new goods. Preventing waste in
the first place by refurbishing and reusing products and components instead
of recycling makes much more economic sense. “Take a vehicle engine, for
example,” said Xie Zhenhua, vice chairman of the National Development and
Reform Commission (NDRC), China’s top economic planning body. “It weighs
500 kilos. If it is recycled as waste steel, its value is only worth about 1,000
yuan (about $160). But if the engine is remanufactured, it will be worth no
less than 30,000 yuan ($4,900).”27

Recycling strips complex products down to their base materials to recover

them, but destroys most of the invested labor in product design and develop-
ment in the process. It ameliorates the buildup of waste, but is still a rather
basic process that will not alone solve the resource problem.

A Dangerous Imbalance

A business-as-usual approach to economic growth is destined to create a

growing – and dangerous – imbalance between resource supply and demand,
as well as runaway environmental devastation. Many natural resource prices
have spiked in the past 15 years, putting stress on companies and undermin-
ing growth prospects. The effects of those rising prices are spreading beyond
industry, driving trade-balance shifts, consuming a larger share of household
expenditures, and even causing social unrest.28

For energy commodities, the supply of oil is already peaking; the real price
index for energy commodities was almost twice as high on average between
2000 and 2014 as it was between 1985 and 2000.29 Dwindling supply can
only hope to be offset by the discovery and development of substitutes. In the
United States, the advent of shale gas has motivated consumers and industry
to switch away from coal and oil. But prospects for shale gas to replace major
energy sources are uncertain, with hopes resting on many unknowns. A 2012
report to the European Commission stated that “current resource estimates
 Waste to Wealth

10
should be treated with considerable caution”,30 and the US Energy Information
Agency’s scenarios for US production in 2040 range from 28 trillion to 45 tril-
lion cubic feet of shale. Production in 2014 stood at 24 trillion cubic feet.31
While shale gas brings temporary relief to the threat of peak oil, one should
not place bets on the global economy running on gas alone for very long.
Rather than divest from risky resources that will eventually dry up, many coun-
tries are only increasing their exposure. In Europe, natural gas consumption is
projected to increase from 24 percent in 2011 to 30 percent by 2030.32
Adding to the uncertainty is widespread concern about both the local and
global environmental impact of continued exploitation of fossil fuel reserves,
as well as the geopolitical risks to supply, such as unrest in the Middle East
and Northern Africa and conflicts of interest between the European Union
and Russia concerning Ukraine.
Fed in part by emerging economies, construction and manufacturing are
booming, pushing up metal prices. Between 2000 and 2014, copper, iron,
lead, and tin prices rose by 150 to 250 percent, even with the global economy
struggling in the latter half of the period. Precious metals also rose by more
than 200 percent in the same period.33 As India, Pakistan, Indonesia, Nigeria,
and others strive to imitate China’s economic success, demand for energy,
metals and minerals will only continue to rise.
Renewable commodities have seen erratic volatility. Cotton prices rose almost
90 percent between 2000 and 2011, leading suppliers to raise prices by up to
30 percent and forcing retailers to choose between eroding margins or raising
prices for customers.34, 35 Volatility in agricultural commodities is created by a
one-two punch: rising demand on one hand, and a strain on critical nutrient
resources like nitrogen and phosphorous on the other.
Real prices of agriculture commodities rose almost 60 percent between 2000
and 2014,36 with real food prices growing over 70 percent,37 undermining the
ability of households around the world to make ends meet and spurring social
unrest. Real prices for agricultural fertilizers, critical to boosting productivity,
ballooned over 300 percent between 2000 and 2008, and 110 percent in the
2000 to 2014 period as a whole.38
For businesses that continue to depend heavily on scarce natural resources for
growth, these trends spell disaster.
Supply uncertainties and changing consumer preferences could prevent com-
panies from generating revenues and maintaining market share. A very real
scenario: Companies that depend heavily on scarce resources might have to
shut down production, becoming unable to deliver demanded volumes, when
 Price Development and Growth Rate of Industrial Inputs
(Metals and Agricultural Raw Materials), 1984–2014

Industrial Inputs

REAL PRICE INDEX (2010=100)

190
180
170
160
150
140
130
120
110
100
90
AVERAGE ANNUAL PRICE CHANGE,
80 2000–2014: +4.8%
70
60
50 AVERAGE ANNUAL PRICE CHANGE,
1984–2000: +1.7%
40
30
20
10
0
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

Sources: Accenture analysis based on indexmundi, ‘Commodity Industrial Inputs Price Index Monthly Price –
Index Number’, accessed January 8, 2014, http://www.indexmundi.com/commodities/?commodity=industr
ial-inputs-price-index&months=360.

Commodity Price Development (Energy & Non-Energy)

and GDP, 1960–2014

Energy Non-energy GDP

REAL PRICE INDEX (2010=100)

130
120
110
100
90
80
70
60
50
40
30
20
10
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Sources: Accenture analysis based on data from: The Conference Board, ‘Total Economy Database – Key
Findings’, January 2014, http://www.conference-board.org/data/economydatabase/; The World Bank,
‘World Bank Commodities Price Data (The Pink Sheet)’, December 2014, http://siteresources.worldbank.
org/INTPROSPECTS/Resources/334934-1111002388669/829392-1389028647906/Pnk_1214.pdf;
IndexMundi, ‘Commodity Prices’, accessed January 6, 2015, http://www.indexmundi.com/commodities/.
 Waste to Wealth

12
supply dries up. Even if supply doesn’t completely stop, undersupply can push
up resource prices to prohibitive levels. When China, which dominates world pro-
duction of rare earth metals, imposed export restrictions on Neodymium, widely
used in electronics manufacturing, prices skyrocketed from $50 to $500 per
kilogram.39 The cost of critical components shot up a jaw-dropping 700 percent.
Companies like Hitachi were forced to ramp up investments in recycling and look
at other technologies to secure future supply and bring down costs.40, 41

Companies whose growth is tightly tied to scarce resources could also find
themselves at a competitive disadvantage due to rising and volatile prices
that strain their ability to forecast and compete with less resource-intensive
competitors. In 2011, fashion retailer Hennes & Mauritz (H&M) saw first-
quarter net profits drop 30 percent largely because of soaring cotton prices.42
Between 2004 and 2008, rising prices of steel, plastics, copper, and aluminum
added approximately $1.35 billion to the costs of Electrolux, forcing increased
cost-cutting. For comparison, the company’s total operating income was
approximately $660 million in 2007 and $180 million in 2008.43, 44

Intangible assets risk taking a hit as well. A company’s environmental foot-

print and resource dependence could erode brand value as consumers shun
companies with irresponsible business practices. People hold companies as
accountable as governments for improving the quality of their lives. According
to a UN Global Compact-Accenture study that surveyed 30,000 people across
five continents, fully 72 percent believe that business is failing to live up to
expectations to deliver social good.

And consumers are taking action. Global divestment campaign gofossilfree.

org is a student and grassroots initiative calling for investors to pull out of
fossil-intensive ventures. By September 2014, the group had convinced 181
institutions and local governments representing more than $50 billion to join
their cause. The movement even managed to persuade Pope Francis to speak
out for divestment.45, 46 And as planetary limitations and resource scarcity
become more critical, policymakers will likely continue to favor companies
that can prove they have positive societal impact and can operate without
depleting their countries’ natural resources.

Strains on and volatility in commodity markets, as well as food security and

water stress, would also ensue, leading to geopolitical strains and instability
as countries battle for increasingly scarce resources. As history shows, acute
resource shortages have consistently been a factor in inciting, sustaining, and
prolonging social unrest. As recently as 2010, the worst drought in a century
impacted food producers and exporters such as China, Russia, Australia, and
 On Borrowed Time

13
Canada; subsequent price increases played a role in triggering and spreading
the Arab Spring. In the past 20 years, at least 18 civil wars have been fought
over natural resources such as diamonds, timber, and cocoa.47 Resource con-
flicts, like the fight for diamond mines in Sierra Leone, have been responsible
for derailing peace agreements in regions with fragile governance.
 Waste to Wealth

14

No less importantly, the current growth model will have an irreversible impact on
the climate and ecosystem. Humanity has entered a new epoch in geological his-
tory, one that scientists have informally dubbed the “Anthropocene”, defined by
the arrival of the human species as a geological force.48 The label (whose Greek
roots can be translated as “new man”) suggests that shifts in the ecosystem,
wrought by man-made climate change, will have a lasting impact on the planet.
 On Borrowed Time

15
Quantifying the Gap

Data strongly suggest that economic development as we know it is on a colli-

sion course with resource availability. A widely cited message from the Global
Footprint Network – a global nonprofit of leading scientists, nations, and organ-
izations – is that the world is already using the equivalent of 1.5 planets’ worth
of resources every year. Obviously, we inhabit but one planet, which means we
currently use 50 percent more resources every year than Earth can regenerate
and absorb pollution from. This measure of resource overshoot is called our “eco-
logical footprint.”49 The ecological footprint is defined by the total area humans
occupy to produce the resources they consume, the space to accommodate their
buildings and roads, and the ecosystems that absorb their waste emissions. The
data is compared with how much biologically productive area is available, which
is referred to as “biocapacity.” Based on the current pace of development, we’ll
demand three planets’ worth of resources every year by 2050.50 This overshoot
isn’t possible over time. Like someone spending more than he earns, it can only
work for a short time. Ultimately, debts need to be reconciled.

Global Supply and Demand for Constrained Material and

Energy Resources, 1960–2050

Demand (business as usual) Supply

BILLION TONNES
75
70
65
60
55 EXCESS DEMAND

50
45
40
35
30
25
20
15
10
5
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

Sources: Accenture analysis. For additional background, see Appendix: Data Tables From Modelling.

To illustrate the challenge of the coming decades, Accenture developed a

model to quantify the resource supply and demand imbalance, and merged
the resulting data with research on resource availability inspired by the ecolog-
ical footprint measure. The model uses population and economic growth data
from 1961 to 2014 and forecasts to 2050, together with resource intensity
 Waste to Wealth

16
variables for biomass, fossil energy, ores, industrial minerals, and construction
minerals, to predict future resource demand, adjusted for technological devel-
opment scenarios.

A note about the model: We created it to err on a conservative rate of change

toward constrained resources exceeding a long-term viable supply. In practice,
we accepted a continued growth of excess resource use until 2030, followed
by moving toward a balanced demand in 2050. That adjusts for the world as
a whole needing time to change its growth model, even if some countries,
regions, cities, and companies will move faster. An example to substantiate
this assumption: China has committed to 2030 as the year when its greenhouse
gas emissions will peak.51

We found that demand for constrained resources, such as metals, minerals,

fossil fuels, and forests, already consumed at rates above their long-term car-
rying capacity, will increase from 48 billion tons in 2014 to 130 billion tons in
2050 – by which time total resource overuse will be almost 400 percent above
the level where we’re consuming one planet worth of resources.52 When we
adjusted for a business-as-usual technological development scenario, both in
terms of resource efficiency and greener production technology, total resource
demand fell to 85 billion tons in 2050 – a smaller figure for sure, but still
nearly double 2014’s.

By weighting in an optimistic scenario, we concluded that even with rapid

technological development, overuse of scarce resources will be 15 percent
in 2030 and 75 percent in 2050. In other words, incremental improvements
in line with the current rate of change will not come close to solving our
problems.

This excess demand for natural resources will translate into lower growth
as companies struggle to access resources in desired volumes at reasonable
prices. The impact for businesses is obvious, said Mathis Wackernagel, presi-
dent of the Global Footprint Network. “It’s quite simple,” he explained to us
in an interview. “Business models that require high units of input or resources
that exceed availability will not succeed in the future.”53

In terms of the supply of natural resources, our analysis indicates a likely

shortage of 29 billion tons of material in 2050 (8 billion in 2030) that must
be dealt with. How? “We could have 6.5 billion people stay in poverty and
stop pursuing growth,” said Ernst Ulrich von Weizsäcker, co-president of the
prestigious think tank The Club of Rome. “Or we could go back to only 1.5
billion people on Earth. Of course, those are neither realistic nor desirable.
 On Borrowed Time

17
But there is a third option that makes possible both prosperity and environ-
mental sustainability,” he said, “and that’s increasing resource productivity
five-fold.”54

Achieving this step-change in resource productivity requires finding new ways

to grow companies and economies capable of decoupling growth from rapidly
depleting resources, protecting renewable resource production capacity, and
securing vital planetary sinks for current and future generations.

We believe the answer is, in large part, a circular economy.

The End of the Linear Growth Model

Growing at an average rate of 3 percent per year, the global linear economy
doubles every 25 years. Nothing currently points to a break in the contingent
relationship between growth and resource consumption. As Professor Walter
R. Stahel, founder-director of The Product-Life Institute, Geneva and senior
advisor for extreme events and climate risk to the Geneva Association, put it,
“The ‘bigger, better, faster, safer’ syndrome for new goods that is the hallmark
of the current industrial model won’t work in an era of greater scarcity and
waste accumulation.”55

Is it possible to adapt the linear growth model to reverse these trends, to

make it more viable in the coming years? Our research, as well as that of
many others, points to a resounding “no.” Even taking into account techno-
logical improvements in the current growth model, overuse of scarce resources
will grow exponentially, by billions of tons of materials. The core flaw of the
linear growth model is its inability to extend a product’s lifecycle and make its
embedded components, material and energy as valuable after its useful life
ends as they originally were when going into production. Considerable value
is lost, squandering material, energy, and labor.

Dr. Janez Potočnik, the European commissioner for environment since 2010,
told us a massive change is urgently needed. “Incremental improvements of
material efficiency are possible and necessary, and they make a lot of busi-
ness sense,” he explained. “However, they will not be enough to create more
wealth while reducing the pressure on natural resources. That is why we need
to get away from today’s linear model – where we mine, manufacture, use
and throw away. We need to focus not only on getting more value out of
every ton of materials, but on using those materials again and again to get
more value.”56
 Waste to Wealth

18
To meet growing global demand, the world needs a new growth model that
delivers far greater resource productivity than the linear model – even with
substantial improvements – can generate. That model is the circular economy.
Companies using circular business models no longer focus on driving more
volume and squeezing out cost through greater efficiency in supply chains,
factories and operations. Rather, they concentrate on rethinking products
and services from the bottom up to “future-proof” their operations, preparing
for inevitable resource constraints but without requiring customers to make
trade-offs. While other companies will be divested, those using circular busi-
ness models will prosper, run in sync with the natural world and benefit their
owners, employees, customers, and communities.
 2 te
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The Roots of the

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Circular Economy

Responsibility and long-term thinking is all the rage. Individuals, companies,

governments – everyone is focused on leaving a lighter footprint on the
planet and treating nature’s resources with more respect to make sure we
can use them to live a good life long into the future. But it wasn’t always
like this. From a historical perspective – say, a few hundred years – resource
stewardship has only been in vogue for a short time. Four or five decades
ago, manufacturers in developed economies were dumping waste into rivers
and lakes, and in many cases this is still happening in emerging and devel-
oping economies. And the concept of household recycling was as foreign to
consumers as the thought of putting a man on the moon.

Fortunately, we’re now in an era where businesses and consumers are

expected to share concern for the environment. That might mean consum-
ing precious resources more wisely, minimizing the use of toxic or harmful
substances, or reducing waste. Ultimately, we recognize that our planet can’t
continue to support the current population, let alone one that’s expected
to expand dramatically in the next few decades (latest estimates predict a
global population of 9.5 billion by 2050 and 11 billion by 2100),1 if economies
continue to operate as if natural resource supplies are limitless.

This evolution in environmental awareness has borne what we’ve come

to know as the circular economy. In the circular economy, companies are
focused on growing without relying on extracting and consuming Earth’s
resources, without squandering energy, without generating a steady stream
of products that end up in landfills or otherwise damage the environ-
ment. The circular economy represents the best alternative we have to
19
 Waste to Wealth

20
the “take-make-waste” industrial model that has dominated the industrial
economy since its inception.

While the circular economy is still in its infancy from a global perspective, it’s
growing in prominence with each passing year. Industries, governments, and
even consumers are increasingly recognizing the inherent and intuitive value
in circular principles, and they’re embracing practices that can help them
achieve the “circular advantage.”

Before exploring how companies are adopting circular principles today, it’s
worth briefly explaining what the circular economy actually is and how it
developed to this point.

The circular economy’s roots go back further than many people realize – to
the late eighteenth century. In 1798, Thomas Malthus, concerned about the
world’s mushrooming population, published his famous work, “An Essay on
the Principle of Population.” The main tenets of his argument were radically
opposed to then-current thinking. He argued that continued population
increases would eventually diminish the world’s ability to feed itself. Malthus
based this conclusion on the thesis that populations expand to overtake the
development of sufficient land for crops.2 Other influential figures in these
early years included John Stuart Mill and Hans Carl von Carlowitz, who
advanced theories around responsible management of natural resources.

For environmental historians, the rise of the environmental movement as

we know it today concludes a story that began before 1900. As Adam Rome
wrote in The Journal of American History, “The first protests against pollu-
tion, the first efforts to conserve natural resources, and the first campaigns
to save wilderness all occurred in the late nineteenth century.”3 Soon, the
implications of nonrenewable resource depletion aroused the interest of
economists. One of them, Harold Hoteling, had this to say in 1931:

Contemplation of the world’s disappearing supplies of minerals, forests,

and other exhaustible assets had led to demands for regulation of their
exploitation. The feeling that these products are now too cheap for the
good of future generations, that they are being selfishly exploited at too
rapid a rate, and that in consequence of their excessive cheapness they are
being produced and consumed wastefully has given rise to the conservation
movement.4

Many other influential thinkers followed Hoteling with their own takes on the
issue, and their conclusions all echoed a similar message: that the exploitation
of abundant and cheap natural resources, while profitable in the short term, is
not viable indefinitely.
 The Roots of the Circular Economy

21
More recently, the debate on resource depletion and economic development
was energized in 1972 with the book The Limits to Growth, which focused
on natural resources’ finite nature and their risk of depletion. The book’s con-
clusion: Delays in global decision-making would cause the human economy
to overshoot planetary limits before the human ecological footprint slowed.
Once in unsustainable territory, human society would be forced to reduce its
rate of resource use and its rate of emissions.5 The book argued that without
“checks” in place, the human ecological footprint would breach the planet’s
physical carrying capacity, or its so-called “sustainable limits.” Importantly, the
book warned that policymakers would fail to arrive at a consensus in time,
leaving the human footprint to slide out of control. Society would be forced
to scale down, either through “managed decline” or a “collapse” to the same
levels caused by the unmitigated work of “nature” or “the market.”6

After years of debating the problems, some leaders naturally moved the focus
to solutions. Ernst Ulrich von Weizsäcker published Factor Four: Doubling
Wealth, Halving Resource Use in 1998, arguing that growth and sustainabil-
ity can coexist and human society can prosper without demolishing natural
resources. He proposed that for economic growth and human welfare to both
be realized, we would need to extract at least four times as much wealth from
current resources. The book offered a range of case studies illustrating how it
can be done.7

The 21st Century

Early threats of resource scarcity and overpopulation have rarely needed to be

acknowledged, as price signals have driven innovation and other solutions,
outpacing resource depletion. But at the dawn of the new millennium, grow-
ing interest in how resources are extracted and used sparked a movement for
change. Signs of scarcity intensified and rippled through commodity markets.
People also began to question whether the economy’s intense use of chemi-
cals, toxins, fertilizers, and fossil energy was environmentally and socially
acceptable.

The publication of Cradle to Cradle: Remaking the Way We Make Things in

2002 triggered a new wave of interest in systemic change. This manifesto by
Michael Braungart and William McDonough advanced the notion that “eco-
effectiveness” rather than “eco-efficiency” – that is, “doing more good” instead
of “doing less harm” – should drive economic development and thinking. The
authors argued that “reduce, reuse, recycle” was not viable because minimizing
a flawed system’s negative impact does nothing to change its inherent flaws.
 Waste to Wealth

22
The book proposes that bad design, not consumption and economic activity,
is the problem. It recommends a bio-inspired design philosophy where “waste
equals food” and resources either safely re-enter the environment or circulate in
closed loops – i.e., a cradle-to-cradle approach to growth where a large, posi-
tive footprint, as opposed to a small one, is the goal.

Today, cradle-to-cradle design is a certified program – administered by the

Cradle to Cradle® Products Innovation Institute8 – that uses a standard frame-
work for quality assessment and innovation. McDonough and Braungart’s
most recent book, The Upcycle: Beyond Sustainability – Designing for
Abundance, envisions the next step in addressing Earth’s ecological crisis: not
just effectively reusing and recycling resources, but actually improving the
world as we live, create, and build.9

The early twenty-first century greeted a surge of ideologies that emphasized

economic growth while minimizing resource consumption. A leading example
is The Performance Economy by Walter Stahel.10 First published in 2006 and
updated in 2010, the book proposed a decoupling of economic growth from
resource consumption, arguing that business model innovations can be a key
inroad to securing a viable growth model.

In 2009, a follow-up book to Factor Four was published: Factor Five:

Transforming the Global Economy through 80% Improvements in Resource
Productivity.11 The book revealed how companies across a range of industries
achieved factor-four resource-efficiency gains, and challenged businesses to a
factor-five increase. A year later came Gunter Pauli’s The Blue Economy: 10
Years, 100 Innovations, 100 Million Jobs.12 The book draws inspiration from
the flow of energy and resources across nature’s ecosystem.13 In a business
setting that means the output of one process is fed into the other as an input,
with the ultimate goal being a world without waste or emission.

That same year, the Ellen MacArthur Foundation was established to advance
the adoption of circular economy principles. The foundation is a charity pri-
marily funded by a group of leading global companies. It initially focused on
incorporating multiple schools of thought into an integrated framework that
it called the “circular economy.”

It went on to create the first economic reports to size the scale of the circular
economy opportunity, and also built the CE100 program, a circular economy
innovation and pre-competitive collaboration platform.14

Ellen MacArthur introduced the circular economy concept to the Young

Global Leaders (YGL) community of the World Economic Forum (WEF) when
 The Roots of the Circular Economy

23
she was asked to present her work on it in 2011. The circular economy and
the Ellen MacArthur Foundation have since gained significant traction within
both the YGL and broader WEF community.

Today the foundation’s work cuts across four areas: business and government;
education; insight and analysis; and communications and publications, with
the goal of accelerating the transition to a circular economy.
The United Nations has also been a major advocate for the advancement of a
circular economy. Their work on a post-2015 global development agenda will
be closely linked to the output of the UN Conference Rio+20 (June 2012),
which established clear measures for implementing sustainable development
across UN member states.15 These measures include a process to develop a
set of Sustainable Development Goals (SDGs) and groundbreaking guidelines
on green economy policies.16 Resource efficiency and productivity are now
being debated as part of the UN’s post-2015 agenda.17 Other influential non-
governmental organizations have added their voices to the discussion. Oxfam
International, for instance, believes decoupling growth from resource use
and incentivizing resource efficiency are important components of the core
principles that should underpin the post-2015 framework.18

All of these efforts have influenced the circular economy. Works of eminent
thinkers and economists have been instrumental in furthering the debate
on strategic resource use. Though the term was first used in the 1990 book
Economics of Natural Resources and the Environment by David Pearce and
R. Kerry Turner,19, 20 its development has been collaborative and iterative over
the course of many years.

Getting to the Circular Advantage

This book rests on “the shoulders of giants,” building on research and

insights gathered over generations. Our express purpose for writing it is to
help companies turn theory into action and gain real advantage through the
circular economy at scale. In the coming chapters we examine how resource
productivity innovation will play out. We describe which business models will
prosper and how executives can evaluate the strategic options, capabilities,
and technologies needed to capture the circular advantage. We also explore
how policymakers can encourage systemic change that will accelerate adop-
tion. We’ve spent 50 years building supply chains that work in one direction.
It’s now time to make them work in two directions.
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Gaining the Circular

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Advantage

Shifting to a circular model means changing our linear economy’s sup-

ply logic. We will need more renewable energy, more biomaterials and
biochemicals that degrade safely, and more technical materials like metals
that are designed to be easily recovered and recycled. Products need to be
designed to use recovered secondary material and for low-cost end-of-life
recycling, effectively closing the manufacturing loop. We need components
designed for reuse and products that can be upgraded and refurbished
rather than discarded and replaced. This is the critical supply-side of the
circular economy.
But efficient resource use is not the main business driver in a circular
model – a common misconception. The true power lies on the demand
side: how a company engages customers, their role during and after
a product’s use, and how they develop products and evolve resource
requirements. In other words, the circular economy starts with a deeper
understanding of demand, and ends with resource requirements and supply
specifications.
Customers have access to a world of information in their pockets. Cloud
computing, big data, and constant information innovations open doors to
greater insight into a product or service’s price, availability, and performance.
Consumers are also plugged into the practices of companies they’re doing
business with. As a result, they’ve come to “want it all” – price, availability,
quality, performance, sustainability – and will choose companies that can
deliver.
24
 Gaining the Circular Advantage

25
In a 2013 survey of US consumers, respondents said the best ways companies
can demonstrate responsibility are by designing products to minimize energy
use and waste generation, and lowering waste-related carbon emissions – all
of which are core to the circular economy.1 In a second survey, one looking at
54 of the world’s leading brands, four out of five respondents said customer
behaviors most important to the brands were recycling, community engage-
ment, buying sustainable products, and reducing waste.2 These, again, are
directly connected to circular business principles.

Yet to date, many sustainable business efforts force customers to make a

trade-off. They often face questions like: Will a product made from old
products be of the same quality as one made from virgin materials? Will it
perform just as well? Do I have to pay more for something that’s responsibly
produced? Do truly sustainable alternatives to what I usually buy even exist?
Will my purchase channels and selections be limited when buying pre-owned
goods instead of new?

Thanks to digital technologies, circular principles are beginning to mitigate

trade-offs. For example, pooling products for co-use and co-ownership used
to require numerous manual processes, and the state of the product was
difficult or impossible to confirm ahead of time – leading to frequently disap-
pointing outcomes. Now mobile devices and services like sat nav automate
processes while keeping users fully informed. “Audi Unite” is a pilot program
by the carmaker, offering a co-ownership solution for up to four drivers, fully
supported by maps, route tracking, an app for booking, direct monitoring of
fuel status in the cars, and more.3

Customers who expect companies to operate responsibly will gravitate

toward those that adopt circular principles. They will find that goods
produced and delivered with business models decoupled from constrained
resource use are equivalent to, or better than, those made via the linear
model in quality, performance, and price. They will see how trading owner-
ship of products for access to them can translate into greater convenience,
little concern over maintenance and repair, less clutter in their homes, and
more money in their pockets. Perhaps most important, customers will feel
a greater sense of loyalty to circular businesses and a willingness to enter
into a deeper, longer-term relationship with them. This won’t happen
everywhere at the same time. Companies need to carefully select products,
brands, markets, and customer segments to start with and then scale
accordingly.
 Waste to Wealth

26
Granted, this is a major shift in how many companies operate today.
Circularity upends traditional business models so that companies focus on
managing resources in the markets rather than in production. Companies
are pushed to understand and focus on what customers really value – it’s no
longer just about shrinking production costs. Customers will expect to pay for
the service a product can deliver, not primarily for the resources and energy
used to produce it. In a circular economy, companies routinely recover embed-
ded resources, which help them drive down costs and compete to deliver the
best experience and performance through the entire product lifecycle. They
sometimes even retain ownership of their products and help customers share
and remarket products when they are no longer needed.

By design, circular models require companies to become highly involved in the

use and disposal of products, finding ways to shift revenue generation from
selling the physical stuff to providing access to it or optimizing its perfor-
mance along the value chain. Take a conventional power drill as a telling case.
A power drill is typically used for less than 30 minutes during its lifecycle,4 yet
the market supplies millions of tools that mostly sit around collecting dust. If,
instead, users had convenient access to a high-quality tool only when needed,
they could save money and time while the product could be optimized for
longevity, component reuse, recycling, sat nav tracking for finding the nearest
tool, user communities for advice, and mobile payments to simplify pick-up
and drop-off.

This concept can be applied to anything from tools to trucks, buildings,

chemicals, and printers. Once a business goes circular, it must account for
a product’s use and return in addition to production and selling. This think-
ing incites a massive realignment of customer and business incentives – no
more intentionally designing products to break down, for obsolescence, or
without regard for their impact on the environment. While many of the
companies we have worked with are piloting solutions, most get caught in
“pilot paralysis” and have yet to crack the code on scaling their efforts. Yet
intriguingly, some of those who have managed to scale, like Airbnb, Lyft,
Zipcar, Rent the Runway, Gazelle, and SolarCity, have achieved astonishing
levels of valuation (not seldom in the billions) within just a few years. In
the case of Rent the Runway, for example, five million members are using
the fashion leasing service, which has a revenue growth that’s expected
to double from $50 million to $100 million from 2014 to 2015, and was
valued in October 2014 at $400 million to $600 million.5 Similar companies
that rolled out early car-sharing offerings have also been enjoying stellar
market growth.
 Gaining the Circular Advantage

27
North American Car-Sharing Memberships 2002–2013, in Thousands

1,030

910

AVERAGE ANNUAL
CHANGE: +46%
640

520

380
320

210
120
60 70
20 30

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: Susan Shaheen and Adam Cohen, ‘Innovative Mobility Carsharing Outlooks: Carsharing Market
Overview, Analysis and Trends’, July 8, 2013, http://tsrc.berkeley.edu/node/629.

Leading the Charge

Companies worldwide have already adopted circular principles through efforts

such as renewable energy investments and recycling. What’s making this space
truly exciting now? Pioneering innovators know that the circular economy is
not just about resource supply and use efficiency. It’s also about evolving their
approach to resource demand from the customer’s point of view, as in the cases
mentioned above. We have identified more than 120 innovative companies
applying circular economy thinking and new technology in ways that seriously
threaten incumbents. We call the competitive edge these companies gain the
“circular advantage.” Companies enjoy the circular advantage when they inno-
vate for both resource productivity and customer value along the entire lifecycle
of a product. They rethink products and services “back to basics” when it comes
to the value they deliver to customers and then reconstruct their business models
to align with the circular economy. That’s the essence of the circular advantage.
Nike has spent years working on ways to balance the tension between
resource productivity and customer value. Their efforts have fostered innova-
tions that have boosted product performance while reducing the products’
environmental impact. One example is Nike’s FlyknitTM technology, which
effectively creates a shoe upper out of a few single threads. The result is a
less-wasteful (by up to 80 percent) production process that renders a better-
fitting and lighter shoe that can help boost an athlete’s performance.
Reducing waste, however, is just a first step. Nike is also investing in R&D and
engaging in partnerships to improve product recyclability and develop 100 percent
plant-based material to move away from scarce petroleum-based resources.6 Flyknit
 Waste to Wealth

28
and similar efforts reflect circular thinking’s central role in Nike’s business. “We
build our business by decoupling our growth from resources that are becoming
increasingly scarce,” explains Hannah Jones, Nike’s Chief Sustainability Officer and
VP, Innovation Accelerator. “Through technology, science and innovation, we need
to get to a place where you should be able to walk into a NikeTown in New York
and return your old Nike T-shirt that can be ‘re-birthed’ into a new product.”7, 8
The circular economy stands apart from the traditional linear model in several
ways. In the linear model, resources are seen as abundant and cheap, perform-
ing a cradle-to-grave service at the lowest possible economic cost. In a circular
economy, resources are recognized as scarce and valuable, and companies aim
to keep them in productive use for as long as possible without losing quality or
value. Similarly, while resources in the linear model are optimized as consumables
in production and as volume-based sources of revenue in the market, resources
in a circular economy are seen as investments in production and as performance-
based assets when in the market. Finally, in the linear model, environmental
impact is largely unaccounted for and incentives to minimize waste during use
and product end-of-life are weak. In a circular economy, waste and inefficient
resource use anywhere along the value chain translate to direct costs for business.

Sizing the Economic Opportunity

These differences translate to powerful business benefits for the circular model.
Several studies have estimated the size and value potential of the circular economy
in different industries worldwide. Major and prominent studies include those by:
China Association of Circular Economy: $293 billion output in 2015 in
China.9
EU Commission: €600 billion in net savings for EU companies and up to
two million jobs by 2030.10
Ellen MacArthur Foundation: €630 billion by 2025 in the EU (a focus
on a subset of manufacturing industries)11 and €700 billion in material cost
savings (a focus on global fast-moving consumer goods sectors).12
Waste & Resources Action Programme (UK): €400 billion cost savings
and 160,000 jobs for the EU27 economies by 2020 (focus on food and bev-
erage, built environment, and manufactured goods).13
UK Department for Environment, Food, and Rural Affairs: €63
billion per year in the UK (energy, waste, and water efficiency focus).14
The Netherlands Organization for Applied Scientific Research:
€7.3 billion and 54,000 jobs for the Dutch economy (a focus on metal and
electrical sectors and bio-based waste).15
 Gaining the Circular Advantage

29
For this book we wanted to size the overall economic opportunity of the circu-
lar economy, cutting across nations and industries and including all four types
of linear economy waste (see the “methodology” section). The million-dollar
question for estimating this value potential was: How resilient and innovative
is the global economy in substituting for constrained resources as commodity
prices rise? As studies have shown, its resilience has historically been remark-
able;16,17 however, the rate at which demand is growing has also never been
faster, nor environmental problems more critical. To account for this tension
when simulating the economic value at risk, our model includes a business-as-
usual scenario as well as an optimistic one, in which commodity price increases
drive technological development and resource substitution at very rapid rates.
We simulated the global economy up to 2050 (where data accuracy is
naturally indicative at best) and discovered there is significant value at risk
if current production and consumption patterns continue to drive resource
depletion and excess demand. By 2030, supply disruptions, price increases
and volatility could cost the global economy between $3 trillion and $6 tril-
lion of growth with the expected impact at $4.5 trillion. This cost rises to
somewhere between $10 trillion and $40 trillion by 2050, with the upper end
of the range being a worst-case scenario that includes a major shortage of
critical energy and material inputs and a lack of low-cost substitutes.

Circular Economy Value Opportunity

EXPECTED VALUE OPPORTUNITY RANGE OF OPPORTUNITY

$4.5 TRILLION
TRILLION OPPORTUNITY BY 2030
DOLLARS

45

40

35

30 25

25

20 16

15 11.5

10 8
4.5
5
3
1.5
0 0

2015 2020 2025 2030 2035 2040 2045 2050

Source: Accenture analysis. For additional background, see Appendix: Data Tables from Modelling.
 Waste to Wealth

30
The flipside of this is a value opportunity of $4.5 trillion by 2030 from busi-
ness solutions that target and eliminate linear economy waste, decoupling
growth from constrained resource use. We leveraged a bottom-up approach
to divide the total value potential between the different types of waste to
roughly understand where value will be created when moving to the circular
economy in the coming years. The results show economic growth potential
between 2014 and 2030 in these areas:

Elimination of wasted resources by introducing renewable energy and

bio-based fuel, chemicals and materials: $1.7 trillion in growth (with
$1.1 trillion from energy and $0.5 trillion from materials).

Growth Potential to 2030 across Four Types of Linear Economy Waste

ELIMINATION OF WASTED ELIMINATION OF WASTED

RESOURCES: Introduce CAPACITY: Increase sharing,
renewable energy and bio-based co-owning, co-usning and other
fuel, chemicals and materials. forms of resource pooling.
Manufacturing Logistics

$1.7 $0.6
TRILLION
TRILLION Sourcing Marketing
& sales

Product
use

$ $1.3 $0.9
TRILLION
Reverse End-of-life TRILLION
logistics disposal
ELIMINATION OF WASTED ELIMINATION OF WASTED LIFECYCLES:
EMBEDDED VALUES: Increase Boost remarketing, remanufacturing
recycling, upcycling, component and refurbishing, while building
harvesting and energy recovery. products and assets to last.

Source: Accenture analysis. For additional background, see Appendix: Data Tables From Modelling.

Elimination of wasted lifecycles by boosting remarketing, remanufacturing,

refurbishing, repair, make-to-last, asset optimization services, etc.: $0.9
trillion.
Elimination of wasted capacity by increased sharing, co-owning, co-using,
resource pooling, etc.: $0.6 trillion (these are the markets with the strong-
est growth potential, starting from a relatively modest size today).
Elimination of wasted embedded values by increased recycling, upcycling,
component harvesting and energy recovery: $1.3 trillion.

But estimates are one thing. Could the circular economy actually realize this
value? To find out, we analyzed how seven major industries can operate in a
circular economy and estimated the resource productivity improvements that
 Gaining the Circular Advantage

31
would follow. Through this analysis, we concluded that by applying various
combinations of circular principles, resource productivity for each industry
can increase by many multiples and can surpass what’s required to relieve the
global economy of threatened resource supplies. To be sure, scaling up the
needed business models and technology, engaging customers and develop-
ing better circular value propositions require innovation on many fronts. But
as examples and quotes throughout this book illustrate, there are already
enough circular solutions to get started.

Here are a few examples of where these seven industries could focus their
efforts to capitalize on eliminating the four types of waste:

Agriculture & Food

Reducing and reusing food waste across the value chain; anaerobic digestion
to produce circular energy; water and soil management; aeroponic farming
with output reuse (e.g., roots) and co-location (e.g., excess heat and CO2
transfer from a nearby industrial process); reusable or fully recyclable packaging;
direct-to-consumer retail (dematerialized stores).

Apparel
Resell and reuse marketplaces and online communities; fiber recycling;
material innovation such as wood-based fibers; circular production practices
to eliminate toxic chemicals and dyeing processes; biodegradable products;
upcycling (e.g., old tires into footwear).

Automotive & Transportation

Remanufacturing key components, such as transmissions, pumps, and cylinders;
preventive maintenance and repair services; recycling manufacturing by-
products and tires; implementing car-sharing schemes; switching to bio-based
and renewable electric fuel; crowdshipping last-mile and intercity deliveries;
load and use optimization to reduce idle capacity in freight fleets.

Construction Industry
Recycling building materials such as asphalt, concrete, and plasterboard; reus-
ing waste from construction and demolition, as well as from other industries,
to create new building materials; modular building designs; renting out
unused space; integrating harvesting of energy and water; enabling co-use of
equipment, for example, for facility management and transportation.
 Waste to Wealth

32
Consumer Electronics & IT
Upgrading and reselling pre-owned products; modular designs and compo-
nent marketplaces; 3D printing spare parts; end-of-life component harvest-
ing; content-based revenue models (e.g., zero upfront cost with take-back
and refurbishing); hardware centralization/sharing (e.g., cloud computing).

Energy
Renewable energy; biofuel; product service systems for energy production
(e.g., solar lease); recycling and refurbishing of grid infrastructure.

Industrial Equipment
Remanufacturing end-of-life machinery; sharing schemes for excess capacity;
product service systems/asset lifecycle management; connected equipment
for monitoring efficiency and predictive maintenance.
Moving toward a circular economy can be daunting. But the payoffs – to
growth, customer satisfaction, not to mention the planet – are worth it.
By adopting circular economy principles, more companies are gaining real
competitive advantage. New business models are being scaled that make it
possible for companies to make the transition and become major drivers of
the circular economy.
 IIio
n
ct

Five New Business

Se

Models for Circular

Growth
 4te
r
ap

Circular Supply-Chain:
ch

“Right from the Start”

Until recently, manufacturers had few options for the raw materials and
energy needed to make their products other than those derived from virgin
resources, which were often toxic, polluting or nonrecyclable. That’s because
the companies providing those inputs were tied to the linear model, supply-
ing energy generated from fossil fuels, materials based on highly toxic chemi-
cals, or fibers made via resource-intensive processes.

The situation today is changing for the better. Manufacturers now have far
better options, as more providers are embracing the Circular Supply-Chain
business model.

At its core, the Circular Supply-Chain business model offers access to fully
renewable, recyclable or biodegradable inputs as substitutes for linear ones.
One example: Renewable energy is an essential resource input for almost
any product’s circular value chain, replacing nonrenewable energy. Bio-based
material such as biochemicals or bioplastics – referred to as “biological nutri-
ents” – can replace nonrenewable and toxic inputs and will safely degrade in a
natural environment after use. Recyclable inputs such as metals or minerals –
or “technical nutrients” – can be infinitely recycled and reused as long as
35
 Waste to Wealth

36
a return chain is functional, there is no resource leakage along the value chain
and the resource is not contaminated.1

“This is not about minimizing ‘bad’ materials, but about creating something
that is valuable and economically reasonable to produce,” explained Michael
Braungart.2 For Braungart, powering a circular economy is not about becom-
ing more efficient and doing less bad; it’s about “doing right” from the start.
The issue for consumers runs much deeper than resource scarcity. “If we
continue the way we are acting now, we will lose what makes us human,” he
explained.

In the beginning it is only about losing the economic system, but in the
end it is about losing dignity because we are not able to deal with the
consequences of resource scarcity and climate change leaving other species
and entire ecosystems in ruin. It’s not about reducing our footprint; it’s
about having a big footprint but one other species are happy with. Circular
supply chains are ideally not only regenerative but also inherently good
and nontoxic. Customers might enjoy lower prices and volatility, but, more
importantly, resources designed with intention would never emit toxic
pollutants that turn up in breast milk – as some current linear resource sup-
plies do, Braungart noted. “We find up to 2,500 chemicals accumulated in
breast milk. It’s chemical harassment because the baby didn’t ask for it.”

About the Circular Supply-Chain Business Model

The Circular Supply-Chain model is critical in our world of finite resources.

As a provider weans itself from increasingly scarce and sometimes toxic com-
modities, it develops a more predictable, long-term, cost-effective source
for the energy or materials it sells to manufacturers. This model also offers
providers a competitive edge on demand: Customers looking to reduce risk,
secure stable pricing, comply with regulations, ensure long-term supply and
make more good than harm are likely to become long-term partners. In fact,
a large majority of consumers would choose a sustainable alternative over a
conventional if comparable one on price and quality. This is the market-share
power of circular supply chains.

Materials must be nontoxic to realize the circular economy’s goals. If toxic

resources are used to design a more reliable, longer-lasting product, it still isn’t
fully circular. Michael Braungart points to tires as an example. “Tires today last
far longer than they used to, which means consumers have to replace them
 Circular Supply-Chain: “Right from the Start”

37
Circular Supply-Chain

PRODUCT 2
VALUE CHAIN START

SUPPLY RESOURCES
DESIGNED FOR
REGENERATION

RENEWABLE
RESOURCES
TRADE TO
OPEN
$ MARKET
NON-RENEWABLE
RESOURCES

PRODUCT
1 VALUE
CHAIN

RECOVERY
REPROCESSING
CHANNEL

BIODEGRADATION

less frequently – which, in turn, means fewer end up being discarded,” said
Braungart. “However, the substances that have made such durability pos-
sible can be toxic and create health problems for people who are coming into
contact with them.”3

Variations of the Business Model

Companies can use the Circular Supply-Chain model in two ways: to produce
for others or to produce for their own operations.
 Waste to Wealth

38
Typically, companies develop and market circular supplies like renewable
energy and material for others to use to produce goods and services. This is
what CRAiLAR Technologies does. Founded in 1998, this now-publicly traded
company produces renewable and environmentally responsible biomass
resources using flax, hemp, and other bast fibers. By applying an all-natural
enzymatic process to flax fiber, CRAiLAR produces a garment that is as soft
and durable as cotton while minimizing the environmental risks associated
with cotton’s cultivation. It also saves money: Studies show that it takes any-
where from 2,000 to 29,000 litres of water to produce a single kilogram of fin-
ished cotton.4 CRAiLAR uses just 17 liters of water to produce one kilogram
of its material – a savings of as much as 99 percent.5 When one considers the
true cost of water – when it’s not subsidized or provided for free – it becomes
clear that circular supplies are dramatically more effective than conventional
sources, both economically and environmentally.

CRAiLAR Flax counts some of the world’s biggest apparel brands among its
customers, but its potential extends far beyond fiber applications to indus-
trial, energy, medical, and composite material industries as well.6 In December
2013, CRAiLAR announced it had received an infusion of $5 million in financing
from IKEA and Adidas.7

Natureworks is another company providing circular supplies. Created as

a joint venture between Cargill and PTT Global Chemical, Natureworks
offers commercially available biopolymers derived from 100 percent
renewable resources. The cost and performance of Natureworks’ biopoly-
mers compete with petroleum-based packaging materials and fibers. The
product is used in a number of end products, from packaging material to
plastic bottles.8

When producing circular inputs for others’ use, a company may find value in
working closely with customers on joint development and lifecycle manage-
ment projects – something AkzoNobel, a leading global paints and coatings
company and a major producer of specialty chemicals, is doing. AkzoNobel’s
products are sold into many market segments, from housing and construction
to consumer goods, transportation, and industrial power generation. The
company researched megatrends and translated those into a business strategy
of “more value from fewer resources.” This strategy drives their work as both
a customer and supplier of circular supplies. Use of more bio-based material
is in focus and the company is also providing customers with more recyclable
and reusable materials.
 Circular Supply-Chain: “Right from the Start”

39
But AkzoNobel’s own operations only represent six percent of the total
energy used in the company’s value chain. Ninety-four percent of the energy
is used upstream by suppliers or downstream by customers. That’s why the
company is working closely with customers to identify more opportunities
in which it can deliver the solutions customers need with less energy waste.
Their research covers end-market segments such as buildings, shipping, and
consumer goods.9
A great example of AkzoNobel’s work in this area is its development of a new
coating made from plant-based oils and recycled PET bottles. This coating
is the key component of the world’s first fully recyclable and compostable
paper cup. It’s a significant development: The roughly 200 billion conven-
tional paper cups used annually around the world – which are coated in a
petroleum-based film – can’t be recycled without high costs or greatly eroding
the paper fiber’s quality. AkzoNobel’s coating preserves the fiber’s quality
when the cups are recycled, making the paper usable for other products. This
also means significant financial savings for paper mills, since they can capture
all of the paper waste from the production process that typically goes to
landfills. And since paper costs are the highest single expense for cup mak-
ers, recycling industrial scrap delivers both cost and environmental benefits to
AkzoNobel’s customers.10
“When we were changing our own business, we also asked ourselves the
question: How can we help our key customers in the market to enable them
to save energy and resources?” explained Andre Veneman, director of sustain-
ability at AkzoNobel. “We thought it was really important to be able to work
with our suppliers to make our entire value chain much more resource- and
energy-efficient.”11
One example of circular innovation through supplier collaboration: Akzo-
Nobel teamed with cleantech player Photanol to develop a “green” chemical
building block that would replace conventional raw materials typically
supplied through fossil-based production methods. It makes sense for the
environment, and for AkzoNobel’s bottom line. The company anticipates
generating 30 percent of its 2015 revenue from “eco-premium” products like
this one.12
Providers can also produce circular supplies and use them for their own opera-
tions. IKEA, for example, produces and consumes renewable energy. In April
2014, IKEA purchased a wind farm in Illinois as part of its effort to produce
more renewable energy than it consumes by 2020. The project, which will
 Waste to Wealth

40
be fully operational in 2015, is expected to produce the equivalent of
130 percent of the energy used by all US IKEA stores, or 10 percent of its
global operations. Ninety percent of US-based IKEA stores use solar energy
produced from solar panels on store roofs, which helped IKEA meet 37 percent
of its global energy needs with renewables in 2013.13
“[IKEA is] committed to renewable energy and to running our business in a
way that minimizes our carbon emissions, not only because of the environ-
mental impact but also because it makes good financial sense,” explains IKEA’s
US CFO, Rob Olsen. “We invest in our own renewable energy sources so that
we can control our exposure to fluctuating electricity costs and continue pro-
viding great value to our customers.”14
Renewable energy can be regenerated in continuous cycles, so the invest-
ments also add to IKEA’s circular advantage.
Ecover, a maker of green cleaning products, reduced demand for toxic, non-
biodegradable materials by introducing the first phosphate-free laundry deter-
gent in the 1980s after finding evidence that phosphates pollute our water. It
now makes 35 products distributed in 40 countries, primarily through grocery
and health and beauty-care retailers.15

Adoption of the Model Is Accelerating

Energy and chemicals sectors are early adopters of the circular model, with
many notable pioneers in Europe and North America. Bioenergy is the most
mature industry sector, where significant interest has existed for more than a
decade. Many chemical companies are switching from fossil to bio-based sup-
plies to make performance chemicals, platform chemicals, plastics, detergents,
coatings, adhesives, and more.
Take biotech company Novozymes. The nearly $2 billion company applies
innovation in biorefining to help our economy shift its focus from nonrenew-
able oil to renewable plant- and waste-derived food, feed, fuel, and materials.
Novozymes sees biorefining as the cornerstone of a bigger renewable economy
that can “replace oil, strengthen security of food and energy supplies, create
‘green’ jobs, increase incomes and ensure green growth – all at the same time.”
This growth strategy will reduce Novozymes’ CO2 emissions by 75 million
tons in 2015 as customers apply the company’s products.16
Novozymes’ leadership believes that by using industrial biotechnology, the
company can reengineer thousands of everyday products to be more circular,
while cutting energy  and raw material costs for its customers. This includes
 Circular Supply-Chain: “Right from the Start”

41
using cutting-edge technology to turn corn, soya, sugarcane, wheat, and
waste into products as diverse as food oil, fish feed, electricity, plastics, and
detergents.17

Novozymes ramped up its commitment to biofuels in 2012 when it bought

a stake in Beta Renewables, a global leader in cellulosic biofuels. A year later
Beta Renewables and Novozymes opened the largest cellulosic biofuels facil-
ity in the world. The plant is the first of its kind designed to produce ethanol
from agricultural residue like straw and rice. The facility is powered by its own
biofuel, and excess energy is sold to the local grid. Beta Renewables antici-
pates opening 15 to 25 new facilities in the next five years and projects total
sales potential from these new facilities could reach $175 million.18

Novozymes sees such big potential in replacing fossil-based input material

with bio-based sources that it has entered into an industry joint undertaking
with the European Union; the “Bio-Based Industries” (BBI) is committed to
putting €3.7 billion into developing Europe’s bioeconomy sector between
2014 and 2024. At the launch, Novozymes CEO Peder Holk Nielsen said that
“the BBI is an unprecedented public-private commitment because of its focus
on bringing bio-based solutions to the market. It is an opportunity to deliver
sustainable growth in European regions.”19

While not as advanced as the energy and chemical sectors, industries like
mining and metals also expect significant uptake in the Circular Supply-Chain
model. Products are being optimized for return, reprocessing and deployment
back into the economy, as customers increasingly source from return chains.
Accenture predicts that in a circular economy, the high-performing mining
business will be more focused on managing resources in the market than on
digging to extract additional resources.20

Mining and metals companies that wait too long to act risk being crippled
by innovators who have already reinvented the way they mine for valuable
resources. A thought-provoking example: One ton of electronic waste – cir-
cuit boards, specifically – has as much as 30 to 40 times more copper than a
ton of copper ore. For gold, it’s 40 to 800 times.21

To accelerate change, companies need to improve how they trace material

flows. Once they can effectively track how materials are used in products,
they can start to develop new financial and production models that use mate-
rials more efficiently.

Consider industries heavily dependent on steel. With steel comprising

approximately 98 percent of the volume of a container ship, Maersk Line now
 Waste to Wealth

42
implements cradle-to-cradle product “passports” for the ships it manufactures.
The passports contain a detailed inventory of the materials used and give
Maersk a better understanding of each vessel’s composition as it enters the
recycling yard at the end of its life. This close monitoring allows Maersk to
recycle each ship’s components to a higher quality than ever before.22

Getting Started

As the circular economy grows, the Circular Supply-Chain business model

will allow companies to improve the value they offer customers, operate
in future-proof mode and be more competitive overall. Companies that
provide circular supplies will be in greater demand as manufacturers strive
to access material and energy that are more circular and less exposed to
price increases and volatility. One example is IKEA. During a speech at the
UN Climate Summit in 2014, IKEA CEO Peter Agnefjäll announced that
the company will use 100 percent renewable or recycled plastics in home-
furnishing products by 2020. This will secure a long-term, viable supply of
plastic material that the company estimates will prevent 700,000 tons of
CO2 emissions per year.23
But most providers can’t reap these benefits until they scale to a level they
have yet to reach. Scale economies and production and recovery technologies
are still relatively immature. That said, few customers prefer linear supplies
over circular ones if the price and performance are the same. So, providers of
circular supplies that compete with their conventional counterparts on quality
and cost can increase their market share very quickly.
Supply and demand will control the speed at which circular supplies can
scale. Strong demand for virgin resources and diminishing opportunities for
cheap extraction are expected to drive up costs for many virgin resources. Oil
is a prime example. While global demand for oil surged in the past decade,
the most attractive oil fields are being depleted. This is leading the industry
to explore smaller, deeper fields and more marginal regions such as deep
water and the Arctic, often at greater cost.24 The result, of course, is higher
production costs, higher oil prices – and, ultimately, greater interest in circu-
lar supplies. The issue is not limited to oil. Any linear supplier will be forced
to drill deeper and search in more difficult locations as resources dwindle,
making production costs rise.
Regulatory factors like policy change could also spur demand for circular
supplies. For instance, today the use of virgin resources is often subsidized, so
 Circular Supply-Chain: “Right from the Start”

43
their full cost isn’t necessarily reflected in their price. Eliminating this subsidy
would force companies to raise prices, thus stimulating more circular resource
use. Companies in some industries also have to acquire CO2 emission rights.
While the cost of those rights is reflected in product pricing, the permit price
is low relative to the environmental damage these emissions cause. If the cost
of emission rights were changed to reflect pollution’s true impact, interest in
circular supplies would swell.

On the supply side, several factors will make scaling circular supplies more
economically viable for businesses in the near future. Recycling and reuse
technologies such as urban mining and 3D printing are developing rapidly
and will increase circular supplies’ competitiveness. As production tech-
nology for circular supplies matures, prices are expected to decline. The
large drop in solar power costs in the past 25 years illustrates how quickly
improved efficiency can make prices more competitive. The price of solar
photovoltaic cells has dropped 99 percent since 1977 and more than 60 percent
from 2011 to 2013.25

Many companies looking to produce full cradle-to-cradle products are strug-

gling for access to a stable supply of circular inputs at predictable prices.
Greater supply will ultimately invoke increased demand, as it will be easier
for companies to switch to circular supplies when volumes, prices, and quality
stabilize.

Key Challenges to Scaling

Scale is just one of a host of issues that companies adopting the Circular
Supply-Chain business model must face.

To start, the significant costs and lead time require determination. Shifting to
the Circular Supply-Chain model typically involves long research and develop-
ment cycles and major capital to get to production at scale. Natureworks took
14 years of intensive R&D to develop the biopolymers it now sells.26 Strong
R&D knowhow and financial backing are crucial.
Collaborating with R&D institutions, universities, and other sources of innova-
tion is also essential. The Circular Supply-Chain model involves being an active
partner in a supportive circular network in which members help each other
maximize their resources’ profitability. As AkzoNobel demonstrates, many
companies enter the circular model as part of a joint venture with suppli-
ers or customers, sharing the costs and benefits of innovation and allowing
 Waste to Wealth

44
for accelerated growth. Effective joint ventures require a unique mind-set,
as information is often shared at levels that many companies initially find
uncomfortable. They also demand companies to see beyond their core busi-
ness and respond to trends in customer demand without being bound by
existing design and production models.
Companies implementing the Circular Supply-Chain model will likely need to
make significant investments to change their linear production systems and
supply chains. Italian energy company Eni is investing approximately €100
million to convert its conventional refinery in Venice to one that will use
renewable inputs to produce innovative, high-quality bio-fuels.27 Given the
potentially high cost of switching, it is a major advantage if circular supplies
can be used in a company’s existing infrastructure as much as possible. IKEA’s
installation of rooftop solar panels on its stores, mentioned earlier, is a good
example of where little additional grid is needed. In cases where renewable
material is being introduced as a replacement for nonrenewable material (e.g.,
shifting to bioplastics or plant-based packing material), material suppliers
should consider existing production and distribution infrastructure and, as
much as possible, avoid asking customers to invest in expensive new equipment
or processes to use the new material.
It’s sometimes efficient to generate circular supplies via decentralized, or
“distributed,” production rather than through the centralized, super-scale pro-
duction typically used to process linear resources. This is because the input for
and output from circular supplies can be more regionally dispersed; consider,
for example, biomass resources (forests, land) versus mines, or solar or wind
power (solar panels of roofs, windmills) versus oil wells. Another example: In
2014, it’s estimated that 70 million tons of electronic waste were generated
globally, containing large quantities of valuable metals and minerals.28 Using
this material as input in a circular supply-chain requires sourcing back material
in a distributed mode from literally millions of customers, instead of a small
number of mines in a linear model.
The route to market for circular supplies often involves commodity trades
and sizeable business-to-business contracts, so competency in commodity
trading is also critical. If the circular supply involves a liquid commodity, such
as renewable energy and common biofuels, it will be openly traded on the
international commodity markets. Alternatively, customers secure individual
pricing on circular supplies through contracts. Even if a company integrates
the model and produces its own inputs across several locations, at some point
it may be producing so much of its circular input that it needs an outlet for
excess supply.
 Circular Supply-Chain: “Right from the Start”

45
Providers of bio-based circular supplies will need to overcome the limited
supply of responsibly sourced biomass to scale their business models. It’s
currently not cost-effective or technologically possible to use all biomass
for production, and some sources of inputs are constrained by ecological or
social factors (e.g., sensitive ecosystems, food-grade biomass, or recreational
areas). However, many companies are finding solutions. Material sciences
company Ecovative produces its circular supply by growing bio-based
material within a production facility, effectively not competing with food
production for land. Similarly, as demand for paper declines, some paper
mills are converting their production lines to make pulp that can be blended
with other materials to create thread used in textile manufacturing. This
“chemical cellulose” product can help reduce the use of cotton (which is
environmentally intensive and competes with other uses in many emerg-
ing economies) as well as potentially replace synthetic fibers (or “linear
textiles”).29

A final consideration when adopting the Circular Supply-Chain model: being

aware of the design principles behind cradle-to-cradle concepts. Make sure
technical nutrients earmarked for indefinite use can indeed be recycled and
that biological nutrients can be safely returned to the biosphere.30 For exam-
ple, specific environmental conditions may be required for a biodegradable
product to actually biodegrade. A biodegradable plastic bag is no more envi-
ronmentally friendly than a petroleum-based plastic bag if, when disposed,
the conditions are not conducive to biodegrading.

Bringing the Circular Supply-Chain Model to Life

Despite its challenges, the Circular Supply-Chain business model has moved
beyond theory. Many organizations have overcome the obstacles to imple-
menting it, and we profile two of them here. Ecovative grew as a circular
business built from scratch: it is the brainchild of two entrepreneurs who saw
massive potential in the lowly mushroom. The other enterprise, DSM, faced
an entirely different sort of challenge, akin to changing a car’s tires while it
rolls down the highway: DSM had to redesign its nearly €10 billion business
around circular supplies while preserving its virgin resources-based revenue
streams.

In both cases, these companies’ experiences illustrate not only the challenges
one may encounter but also the potential rewards that come with adopting
the Circular Supply-Chain model.
 Waste to Wealth

46
Ecovative: Making Magic from Mushrooms
In 2007, two engineering students at Rensselaer Polytechnic Institute dis-
covered how to use fungi to create rigid, molded materials. Some of their
mechanical engineering peers thought the project was crazy, but Eben Bayer
and Gavin McIntyre saw it as a disruptive innovation that could help the
planet.31 They endeavored to use renewable resources to produce biodegrad-
able plastics that would deliver the same quality as their nonbiodegradable
counterparts.

After a few years of research and development, Ecovative – the company

spawned by Bayer and McIntyre’s university experiments – now produces
mushroom-based materials by combining agricultural by-products like corn
stalks with mushroom mycelium. Mycelium is a natural, self-assembling glue
that digests crop waste: The more the product is used, the more it benefits
the environment.

Ecovative’s products offer environmentally responsible, biodegradable,

and home-compostable alternatives to traditional plastic foam packaging,
insulation, and other synthetic materials. While the firm started out with
a focus on the packaging industry, CEO Bayer now describes Ecovative
as “a platform company that provides products in different areas and is
developing new raw materials.”32 It has expanded its focus to two indus-
tries beyond packaging: construction and furniture. According to Bayer,
“We have 20 research scientists and eight engineers. You would never
have them in your business if you just concentrated on packaging.” The
goal is to sell material more broadly so customers can find their own
applications.

The mushroom material is cost- and quality-competitive with petrochemical-

based plastics. And Bayer believes “a 100 to 500 times scale-up will allow us
to price 10 to 30 percent below prices for traditional alternatives.”33 From
an industrial point of view, the pricing for these inputs is less volatile than
pricing on petro-based inputs. Overall energy used for making Ecovative’s
products is also significantly lower than petro-based production. The fungi
can grow in a factory and doesn’t require land, so it doesn’t compete with
food producers for land availability.

Of course, Ecovative confronted the same challenges every start-up faces,

including determining how to scale the business. Ecovative chose to focus
on entering award competitions and pursuing certifications that would help
fund its growth while the company gained media attention and credibility in
 Circular Supply-Chain: “Right from the Start”

47
the market. Early in its growth it won the PICNIC Green Challenge in 2008,
the world’s largest prize for solutions addressing climate change. The award
provided the recognition and financial resources to scale Ecovative’s technol-
ogy at a time when venture capital investors were skeptical of its industrial
application. In addition to the €500,000 prize, winning the Green Challenge
validated Ecovative’s efforts to have an environmental impact. The award
was instrumental in moving the company forward, enabling it to expand
its first prototype manufacturing facility in Green Island, New York. More
recently, the company raised $14 million through private equity to fund its
expansion plans.34

Today, Mushroom® Packaging is being produced in North America through a

partnership with the Sealed Air Corporation, a $7 billion company.35 Sealed
Air, with support from Ecovative, is growing packaging products for various
Fortune 500 companies and industry leaders including Dell, Steelcase, and
Crate & Barrel. In 2014, Mushroom Packaging launched globally. Mushroom
Packaging produced in the United States is based on corn stalks, while inter-
national facilities utilize other local plant waste feed stocks, such as rice and
wheat straw.

DSM: Shifting from Fossils to Renewables

Unlike an entrepreneurial start-up such as Ecovative, global science-based
company DSM was already a successful business when it decided its future
was in circular supplies. In 2010, the €9.6 billion enterprise embarked on a
new strategy it coined “DSM in Motion,” the heart of which is to make “the
core value of sustainability a fundamental business driver that defines DSM’s
position in the market and determines its ability to shape a stable and pros-
perous future for the benefit of People, Planet and Profit.”36 In other words,
they were entering the circular economy. This long-term commitment to value
creation and market positioning meant finding renewable supplies that could
be reintroduced into the circular model in consecutive “loops.”

“There are almost no molecules leaving this planet,” explained Royal DSM
CEO Feike Sijbesma.

Almost all remain here, only in different places and in different mixes
where we call our resources waste and pollution; the carbon that was
underground in fossil resources is now largely in the air. If we can rede-
sign the economy to reuse all those molecules, then we don’t have scarce
resources and we can all benefit. This is the transition we need to make:
from a linear to the circular economy.
 Waste to Wealth

48
Sijbesma says DSM believes

we are getting the keys in our hands to switch step by step from our
dependency on fossil resources in this fossil-age we live in, towards a
more sustainable, bio-based economy: the bio-renewable-age. There are
significant opportunities for DSM in renewable energies such as second-
generation, cellulosic-, plant-residue-based bio-ethanol, as well as in renew-
able building blocks replacing oil-based chemicals, like bio-based succinic
acid that would enable building the materials of the future designed to
live in close loops.37

According to Sijbesma, insights that DSM collectively developed over two

decades were instrumental in the company’s decision to embrace the circular
economy. Sijbesma was adamant that the move simply made solid business
sense. “It is a logical thing to do – to switch from a linear to circular economy,”
he explained.

Looking at all the issues in the world around climate change, the world
food problem and the uneven distribution and consumption of raw materi-
als, a circular approach can be part of the answer, using, for instance, crop
waste as valuable raw material. In addition, we have seen that the circular
economy can also bring new business models, like DSM does with its solar
cells output boosting films. So it is not only about doing good for the world,
but doing good for the company as well through additional business and
profits.38

For DSM, the circular economy not only provides new sources of revenue, but
it also strengthens the company’s intangible value and reduces its dependence
on fossil fuels – improving its environmental footprint and protecting it from
risks related to scarce linear resources. For customers, circular economy offer-
ings help build circular value chains with higher yields, reduced waste, lower
energy use, and fewer greenhouse-gas emissions.

DSM’s past works in its favor as it is making the move to circular principles.
The company is experienced in reinventing itself, having shifted its business
model from an extraction company to a chemical company and then to
a material and life science company. Now, its focus on moving to a circular
economy is fundamental to its future. DSM’s pursuit of renewable energies is
led through the DSM Innovation Center, which serves as an enabler and accel-
erator of innovation within DSM. It is within this Innovation Center that DSM
Bio-based Products & Services is rapidly growing as an emerging business
area for the company. DSM Bio-based Products & Services is now a leading
 Circular Supply-Chain: “Right from the Start”

49
producer of biofuels and bio-based materials made from cellulosic biomass.
DSM is also focused on developing technological solutions for bio-based
manufacturing processes that will help scale and optimize the biorefinery’s
output.

Befitting the Circular Supply-Chain business model, DSM Bio-based

Products & Services concentrates on demonstrating technology (bioconversion
“software”) via strategic investments and partnerships along the value chain.
It sells conversion technology and consumables, as well as products from
demonstration plants (such as biofuels, biogas, and bio-based chemicals)
through partnerships – all with a focus on green materials with better per-
formance and lower environmental footprint. The company recognizes that
these alternatives are competing against highly efficient value chains, such as
the petroleum value chains, and that its challenge is to be able to scale its
solutions quickly and efficiently.

DSM licenses its technology and expertise to others, enabling them to convert
biomass in a commercially viable way. Its collaboration with the French starch
and starch-derivatives company Roquette Frères began in 2008; in 2010,
the companies announced their intention to establish a joint venture under
the name Reverdia. In 2011, DSM and Roquette Frères built a commercial
scale plant for the production of bio-based succinic acid, the first nonfossil
feedstock-derived chemical building block that allows customers in the chemi-
cal industry to choose a bio-based alternative with a lower eco-footprint for a
broad range of applications, from packaging to footwear.39

In January 2012, DSM announced a joint venture with US-based POET LLC,
one of the world’s largest bio-ethanol producers, to commercially dem-
onstrate and license cellulosic bio-ethanol, a by-product of co-fermenting
sugars derived from crops and competitive with grain ethanol. Such bio-based
chemicals have great potential for waste reduction and reduced net CO2 emis-
sions. Because it is made from agricultural waste, this circular input does not
compete with food production. The cellulosic bio-ethanol has created a new
revenue stream for DSM, and the company anticipates it could eventually cre-
ate 35,000 to 70,000 related jobs.40, 41

The joint venture’s first project, Project LIBERTY, is a commercial-scale, cellu-

losic ethanol plant expected to produce 20 million gallons of ethanol, growing
to approximately 25 million gallons per year. Opened in 2014, Project LIBERTY
will make use of corncobs, leaves, husk, and some stalk that passes through
the combine during harvest. The process uses about 25 percent of the avail-
able material, leaving 75 percent on the ground for erosion control, nutrient
 Waste to Wealth

50
replacement, and other important farm management practices.42 The plant’s
production capacity is estimated to produce $100 million in sales value.

At the plant’s opening, POET Chairman Jeff Broin said, “When we turned
to this venture, there were naysayers who said, ‘you’ll never get enough bio-
mass,’ or ‘you’ll never be cost-competitive.’ Some called it fantasy fuel. Today,
it’s real.”43

DSM’s experience illustrates how important technology and long-term R&D

capabilities are to the Circular Supply-Chain business model’s success. For
DSM, technology is an especially critical, and complicated, success factor.
When the company began R&D to convert cellulosic into bio-ethanol, many
scientists believed it wasn’t possible. Now, after several years of research and
testing, DSM can complete the conversion with a 95 percent yield.44

DSM also strongly emphasizes collaborating with the right stakeholders in its
endeavors. An important partner in Project LIBERTY is the US Department of
Energy, which has awarded up to $100 million in grants to support the costs
of engineering and construction, as well as biomass collection and infrastruc-
ture. The State of Iowa has also contributed $20 million in financial assistance.

Biomass acquisition will play an important role in the success of Project

LIBERTY. POET-DSM has studied biomass collection, storage, and transporta-
tion since 2006, partnering with universities and government programs to
better understand the relationship between biomass removal and soil health.
POET-DSM has also worked extensively with biomass producers to develop
a number of “best practice” guidelines for biomass collection. POET-DSM
estimates that farmers participating in biomass collection can increase their
average profit per acre by $46.00, a 13 percent to 20 percent increase that
creates a strong incentive for farmers to participate.45, 46

Bringing Supplies Full Circle

The linear model is responsible for a host of externalities that the planet will
no longer be able to absorb. A big part of the problem, according to Michael
Braungart, is that companies are optimizing the wrong things. They are focus-
ing on doing “less bad” by reducing their emissions and increasing their resource
efficiency instead of designing products so they deliver a positive contribution.
This results in toxic, polluting or nonrecyclable waste – stuff that can’t be reused
and that has a significant, negative impact on the environment. He believes this
shows a lack of understanding about what’s really at stake.
 Circular Supply-Chain: “Right from the Start”

51
“The problem is still that people think it is an ethical or social thing to con-
centrate on the circular economy,” Braungart noted. “But it’s not about ethical
responsibilities. It’s about business responsibility.”47

Ecovative and DSM are two companies that “get it.” They use biomass to
produce innovative circular supplies. Many other companies also supply
renewable and recyclable resource inputs, thus enabling the circular economy.
Not only are these companies’ practices environmentally sound, but they give
them a competitive edge over other companies still stuck in the linear model.
 5te
r
ap

Recovery and Recycling:

ch

Making History of Waste

With global competition intensifying and resources becoming more costly,

businesses are looking for ways to protect, recapture, and reuse the sources
hiding in their production outputs and discarded products.

That pursuit drives the Recovery & Recycling business model. With this
model, a company looks for value not just when considering its end prod-
ucts, but all material streams that run through its business. In other words,
every by-product and waste stream is optimized to maximize its revenue
potential.

Under the Recovery & Recycling model, everything previously considered

waste is revived for other uses, effectively eliminating not only waste but the
concept of waste altogether. Resource return chains transform waste into
value through recycling and upcycling. (Upcycling means converting an old
product or material into something more valuable.) By using new technolo-
gies and operating a two-way supply chain (i.e., moving products to custom-
ers and bringing end-of-life goods back), companies can recover almost any
resource output to a level that’s at least equivalent to their initial investment.
Solutions range from industrial symbiosis – sharing by-product resources
among industries – to integrated closed-loop recycling and cradle-to-cradle1
52
 Recovery and Recycling: Making History of Waste

53
designs, where disposed products can be reprocessed into something else
without any resource loss.

This model eliminates material leakage and maximizes the economic value
of product return flows, making it attractive to companies producing large
volumes of by-product that can be reclaimed and reprocessed at a reasonable
cost. It is often possible to keep costs low when material flows are relatively
pure and not locked into complex product designs. For customers, the benefit
is clear: new and convenient ways to get rid of unwanted products, includ-
ing pick-up services, drop-off points, buy-back, and send-back schemes.
Companies actually compete for dead products, offering in-kind and cash
compensation. Our experiences with global consumer goods companies show
that the residual material value in disposed products can be substantial, but
the cost of reclaiming it has historically been high and operationally difficult
due to the lack of technologies for tracking, tracing, sorting, and screening.
With new, innovative solutions for take-back and recovery, a big company
and its customers can now capture hundreds of millions of dollars in material
value that would otherwise have been lost.

The Recovery & Recycling model has a long history and, in a sense, is the
latest effort to manage modern society’s excess waste.2 Early waste-manage-
ment initiatives concentrated on basic needs for removing waste from city
streets to reduce health risks and improve quality of life. Focus eventually
moved to creating landfills and, as landfills became crowded, to recycling
waste. The Recovery & Recycling model takes the next logical step: working
to make waste itself obsolete. In that regard, Recovery & Recycling is very
different from recycling: It views waste not as an external problem to be dealt
with only by legislation or waste-management entities, but as a resource that
is fully integrated into the business model. Companies using this model think
it’s as natural to maximize profits on waste as it is on the products they make
and sell.

About the Recovery & Recycling Business Model

The benefits of resource recovery aren’t difficult to foresee:

Reduced costs of compliance and waste management.

Increased revenue from selling unwanted outputs.
Diminished environmental impact with lower demand for virgin resources
and energy.
 Waste to Wealth

54
Convenient options for customers to dispose of unwanted products.
New interaction points between companies and customers where disposal
and new purchases can be combined.
Deeper insights into how products are disposed of, which can be used in
product development and design for recyclability efforts.
A lower material bill when switching from primary to secondary resources
(not the case for all material types, depending on quality and performance
levels of primary vs. secondary).

Businesses today are not only generating large amounts of waste, but they
are also paying a lot for the privilege of disposing of it. They may be tossing
aside a profitable revenue stream in the form of materials that could, after
reprocessing, be valuable to another company. Consider the fact that the
value of plastic recyclates rose from approximately $170 to $550 per tonne
between 2003 and 20133 and that 60 percent of global waste, or some 17
million tonnes of material per day, is still not recycled or reused.4 It has been
estimated that in the UK, the value lost in plastics, food, and electronics
waste alone is $3 billion, and as discussed in Chapter 1, our analysis indicates

Recovery & Recycling

Closed Loop
COMPANY
PRODUCT
IN USE

RECOVERY
START CHANNEL

VALUE
RECOVERY

RECYCLED MATERIAL

OWN
PRODUCTION REPROCESSING

RECYCLED PARTS

RECOVERED ENERGY
 55
Recovery & Recycling
Open Loop

START
OTHER
PRODUCTS
COMPANY
IN USE
PRODUCT
IN USE

OTHER
PRODUCTION
RECOVERY
CHANNEL

VALUE
RECOVERY

TRADING RECYCLED MATERIAL

REPROCESSING

RECYCLED PARTS

RECOVERED ENERGY

Recovery & Recycling

Zero Waste Operations

REUSE IN
OWN PRODUCTION

TRADE TO
OPEN MARKET

RECOVERY PRODUCT USE

CHANNEL

VALUE
RECOVERY

RECYCLED MATERIAL

START

REPROCESSING
OWN RECYCLED PARTS
PRODUCTION

RECOVERED ENERGY
 Waste to Wealth

56
that the material value lost in global waste can be as high as $1 trillion.
There’s abundant room for improvement.
Companies that have already wrung out operational inefficiencies to imple-
ment lean practices, or have instituted recycling programs for materials such
as paper, now need to embrace a more ambitious aspiration: zero waste.
Moving toward that goal will require redesigning products and processes
so that any residual material can serve as a potential resource. Historically,
manufacturers have focused on producing the cheapest products, which
are frequently disposable. For companies that use the Recovery & Recycling
model, it pays to keep resources in use, preserving the value that’s been
added through energy, labor, and materials.
Two companies making considerable progress toward zero waste are
Procter & Gamble and General Motors. As of this writing, 45 P&G facilities
now operate on a zero-waste basis – meaning all manufacturing waste at
those sites is recycled, repurposed, or converted into energy. Writing in a
P&G corporate newsletter, Dr. Forbes McDougall, global waste reduction
leader at the company, noted, “Over the past five years, P&G’s efforts
to find worth in waste have also created over $1 billion in value for the
company. Zero waste is not just good for the environment, it’s good for
business too.”5
GM launched a zero-waste program in 2011. The company now recycles
90 percent of its worldwide manufacturing waste and has 102 landfill-free
facilities, and has hopes of reaching 125 facilities globally by 2020. GM
reports that it generates $1 billion in revenue annually from by-product recy-
cling and reuse.6 At the program’s onset GM engaged employees to become
part of the process and made real investments in the project. For each ton
of waste the car manufacturer reduced, the cost was $10. Now that’s down
92 percent thanks to the company’s efficient network of plants and partners
that all help to recycle and reuse in the most efficient way. And metal isn’t
the only raw material in focus. GM is doing everything from converting
wastewater into fertilizer to composting cafeteria waste for one plant’s
landscaping.7,8
When analyzing the case studies, we identified two variations of the
Recovery & Recycling model:
1. Recovering end-of-life products to recapture value in closed loops
(a company’s own products) or open loops (any company’s products).
2. Recovering waste and by-products from a company’s own production
process and operations to recapture value.
 Recovery and Recycling: Making History of Waste

57
Recovering End-of-Life Products
While many products can be refurbished, restored, and resold, others must be
dismantled to unlock their residual material and energy value. Several compa-
nies we studied have made major strides in recovering components through
reuse, material through recycling and energy through waste-to-energy pro-
cesses. The more value these companies extract from end-of-life products, the
more value they can return to customers in the form of better service or even
outright compensation to encourage participation in such efforts.

Ricoh, the document management technology manufacturer, endeavors to

reuse components in printers, scanners, and other equipment when they’re
retired. The company has a centralized return program across Europe that
lets customers send back used toner cartridges for free, and has collection
and treatment centers in Europe to handle used service parts after they’re
replaced. Ricoh disassembles returned cartridges and service parts and sorts
all components – including shipping and packing materials – for reuse, material
recovery, and energy recovery.9

Interface, a nearly $1 billion company and a leading manufacturer of carpet

tile (modular carpet), participates in the Healthy Seas initiative to reuse nylon
fishing nets in carpet manufacturing. For years nylon fishing nets have been
discarded in the ocean, where they were harming coral reefs and reducing
fishing stocks, among other environmental misdeeds. Now Interface uses the
nylon found in nets recovered from the ocean to make new carpet tiles, clos-
ing the material loop and making a positive contribution to the environment.
The company, which is based in Atlanta, even has a department that is always
on the lookout for the latest innovations related to resource productivity and
climate change.10

Of course, the notion that used fishing nets could have value to carpet or
textile manufacturers may have seemed far-fetched at first. But a zero-waste
goal is likely to lead a company to tap unfamiliar sources. It’s important
for businesses to get creative, looking beyond their core industry for less-
than-obvious opportunities in other value chains.

A large and established industry already capitalizing on this model is the

waste management and recycling services industry. There, the challenge is
to drive innovation toward more efficient processes and more valuable end
use for waste material. One example is SITA’s (Suez Environnement S.A) sub-
sidiary SOPAVE (a SITA recycle subsidiary), located in Viviez, France, which
transforms tarps, covers, and films from the agricultural and industrial sectors
 Waste to Wealth

58
as well as soiled and recyclable collection bags into 100 percent recycled and
recyclable bags. These new bags are then used by the local authorities or by
industry. A sum of €3.5 million was initially invested to recycle 16,000 tonnes
of agricultural and industrial films per year. SOPAVE now produces 5,000
tonnes per year of 100 percent recycled and recyclable bags and 7,500 tonnes
of plastic pellets used in the production of irrigation pipes or spare parts in
the automobile industry.11

Recovering Waste and By-products

Such advice also applies to the second variation of the Recovery & Recycling
model, in which companies recover waste and by-products from a produc-
tion process – either their own or another company’s – and use them as new
manufacturing material.

The Blue Economy author Gunter Pauli suggested that some players in the
paper industry (backed by mining companies) are starting to use mining
waste for paper production, rather than using fiber from trees. He says
doing so yields multiple benefits. First, it reduces costs, as mining waste is
easily available. Second, it protects the environment by preserving land and
water used in fiber production and by avoiding the toxins that are part of
the pulping process. Third, it results in a product, mineral paper, which has a
400-year lifespan. Traditional paper can only be recycled a maximum of four
times.12

Creative thinking about waste has helped US grocery giant Kroger Company
convert its own food waste into renewable energy. The 150 tons of daily food
waste produced at the company’s Ralphs and Food 4 Less distribution center
in Compton, California, was a major cost in terms of lost revenue, disposal
fees, and emissions. Now, Kroger’s food waste provides inexpensive and
clean energy that powers a 49-acre campus housing offices and their distri-
bution center. The company relies on an “anaerobic digestion” system that
converts food waste into biogas that runs the campus’ micro turbines and
boilers. It replaces virtually all of the natural gas the company previously used
to power the distribution center. The initiative will yield an 18 percent return
on Kroger’s investment and will be paid off within five years.13
Walmart has enjoyed similar benefits. The massive retailer, which operates
more than 4,000 stores in the US alone,14 reported that in 2012 more than
80 percent of its waste was diverted from landfills. That effort returned
more than $230 million in value to the business, and may have reduced CO2
emissions by as much as 11.8 million tons. Working with its suppliers, the
 Recovery and Recycling: Making History of Waste

59
company in one year also turned more than 500,000 tons of recovered cook-
ing oil into biodiesel, soap, and a cattle-feed supplement.15,16
Converting waste into wealth – or trash into cash – isn’t limited to particular
industries. Newlight Technologies, a start-up based in Irvine, California,
has devised a proprietary method for taking greenhouse gases such as
methane and carbon dioxide from the atmosphere – a pervasive by-
product of all kinds of manufacturing processes and fossil energy use – and
turning it into plastic pellets. The process culminates in the creation of
“AirCarbon,” a material with the strength of oil-based plastics, but without
the expense.
Telecommunications giant Sprint has announced it will sell iPhone cases that
use the material.17 And Dell plans to use Newlight’s material in the packaging
sleeves for a new line of notebooks.18 Not only can AirCarbon significantly
undercut oil-based plastics on price while matching performance, but it also
helps strengthen customers’ emotional ties to the product (your attractive
new iPhone case is a planet saver too!).
Newlight is being rewarded by the investment community. In 2014 the com-
pany announced it had raised an additional $9.2 million in Series C rounds.
In total, the company has scored $19 million in funding, money that will be
used to further accelerate the company’s growth plans.19

Getting Started

One of the basic tenets of the Recovery & Recycling model is in salvaging
the embedded value from a discarded product and reprocessing it – whether
that product comes from one’s own company or even another industry.
Companies then remake the same product or build wholly new ones from
those salvaged materials. This process would benefit from having products
designed so they can be easily disassembled. That may mean using clips or
screws to connect components rather than fusing them with glue, mak-
ing sorting easy through identification carriers, using only pure material or
cutting down on the number of parts.

However it’s done, the goal should be to protect the embedded components’
value and material through a product’s lifecycle and to reduce costs of col-
lecting, sorting, and reprocessing. The better a company can do this, the
more access they’ll have to secondary material, reducing costs, and environ-
mental impact.
 Waste to Wealth

60
Riding the Maturity Curve
The more companies use the Recovery & Recycling business model, the better
they get at recovering outputs with greater levels of value. When companies
first explore the model, they focus on the easy targets – outsourced recycling
and energy recovery either in-house or through their Business-to-Business
(B2B) relationships, where quality control, quantity, and location are reliable.
As they become more sophisticated in using the model, companies recover
value from all resources (including components) either by developing
enhanced internal capabilities or by allying themselves with the right part-
ners, such as waste-management companies. They also become proficient
in direct-selling unwanted outputs to other industries. Eventually, a firm
progresses to expand its reach to the end consumer to recover products from
their own or even other industries.
Organizations that are most proficient in this model have closed-loop sup-
ply chains that are integrated across industries. In other words, they embed
fully circular practices into their products’ lifecycles and also reuse waste from
other value chains. Companies that formerly outsourced waste management
now generate income from their own waste.
We’ve worked with a global retailer that has matured in this way. The com-
pany began its resource recovery efforts by focusing on internal cardboard
waste from stores. From there, it moved to collecting and recycling plastics
and metal from its products. The company then realized that certain com-
ponents could be standardized, recovered, and reused, rather than being
destroyed, melted, and remade into new parts. In pursuing the new oppor-
tunities here, we found an even stronger source of value creation: increased
customer interaction and traffic to stores and other outlets, resulting in more
than half of the total forecasted new value.
A critical factor in mastering the Recovery & Recycling model is the ability
to harness supporting technologies. These advances help track and trace
materials and components that, at a granular level, identify the specific prop-
erties within products. Waste Management’s online Diversion & Recycling
Tracking Tool (DART®) is one such solution.20 It allows companies dealing
with complex products to embed them with a “product passport” chip that
stores information about their contents, including any hazardous or toxic
substances. The European Resource Efficiency Platform (EREP) recom-
mends using product passports. The group said in an interim report that
the passports could solve the concern of “inadequate business-to-business
information on what resources a product contains.” It would help recyclers
 Recovery and Recycling: Making History of Waste

61
and reusers be better informed about the resources contained in a product,
and any risks that might be posed by those resources (such as by hazardous
chemicals in electronics equipment). This, in turn, would make recycling and
reuse more economically viable.21

Technologies are especially important in industries where the product’s life

is continually shrinking or becoming more complex, like in consumer tech-
nology. In these situations, companies need more advanced technology to
recover the resources in their products.

Key Challenges to Scaling

The Recovery & Recycling business model can drive a company’s competitive
edge. Being able to replace an expensive production material with one con-
sidered to have little value offers major advantages. A company also avoids
costs and generates new revenue by selling previously unwanted waste as
valuable material to another organization. But it’s not as easy as it sounds.
A recovered resource’s price is typically linked to what its virgin counterpart
would fetch. A metal with recycled content isn’t discounted; its material
qualities are the same as if it were composed of virgin resources. Recycled
paper, by contrast, can be cheaper because its fiber quality deteriorates with
every recycling process.

This means companies have to address two challenges: maintaining the

quality of resources and keeping ownership rights to high-quality resources.
Companies need to find ways to control the return flow (e.g., launching
product take-back schemes) and to maximize the quality of recovered
resources (e.g., investing in in-house sorting, reprocessing, and refining tech-
nology). Simply buying recovered material of the same quality specifications
as new or selling untreated waste won’t yield much circular advantage.

Taking back products to recover resources is much easier in B2B markets,

where companies can reference their contracts and deal information to track
how much in product volume went to each customer and where. That makes
it feasible to organize the take-back and closely monitor reverse logistics.

In Business-to-Consumer (B2C) markets, customers are much more difficult

to corral. Still, retailers typically have a network of logistics and physical
stores that they can use as collection and distribution centers to take returns
and aggregate them in volumes. UK-based retailing giant Marks & Spencer
has chosen to collaborate with the nonprofit organization Oxfam.22 Used
 Waste to Wealth

62
Marks & Spencer clothes, shoes, and bags can be brought into Oxfam stores.
Customers receive a Marks & Spencer voucher in exchange. Depending on
the item’s quality, it’s either resold or recycled with the money raised used by
Oxfam to tackle poverty. Collaboration makes the model more attractive to
consumers, since there are more drop-off locations. The voucher also serves
as an incentive for consumers to frequent Marks & Spencer stores, boosting
the foot traffic critical for any retailer. And the partnership makes product
recovery more cost-competitive for Marks & Spencer to operate.
Mike Barry, the company’s head of sustainability, said clothing and accessories
are just the beginning. “You could imagine all physical things participating in
the circular economy,” said Barry. “Furniture is the next candidate.”23
It’s critical for companies to handle returning and reprocessing efficiently to
preserve the cost advantage. If these processes cost more than what a com-
pany would spend to extract virgin resources, then the model becomes – like
spent resources – unusable.
The model should prove durable for companies that create by-products or
waste material in large volumes, or where it’s possible to source large volumes
of reasonably pure post-consumer resources, like in the paper industry. Textile
makers and others are increasingly interested in the Recovery & Recycling
model, even in cases where the product lifecycle is brutally short – less than
a month, as in the case of paper and packaging.
In China, the share of recovered paper used to produce new paper jumped
from around 20 percent in 1992 to more than 70 percent in 2011.24 During
that time, demand for recovered paper among customers in China alone
grew by 260 percent.25 The reason for this soaring popularity: recycling paper
saves 65 percent of the energy needed to make new paper, reduces water
pollution by 35 percent and air pollution by 74 percent.26 Reused materials
typically appeal to businesses and consumers in a broad range of geographies
and sectors, although there are some regional differences. Mario Abreu from
Tetra Pak International, a multinational food packaging and processing com-
pany based in Sweden and Switzerland, highlighted a difference between the
US and China.

“Tetra Pak cartons are always made from virgin fibres,” Abreu explained.
They are recycled into cardboards and other paperboards in China, mostly
due to the fact that Chinese cardboard production seems to rely heavily on
recycled fibres reused over and over again. The fibres in beverage cartons,
therefore, have great value. Conversely, in the US paperboard makers rely
 Recovery and Recycling: Making History of Waste

63
less on recycled fibres, and beverage cartons recycled in the US are mostly
used for other paper categories.27

But it’s not just the producers that need to overcome obstacles posed by the
Recovery & Recycling model. Waste-management firms face their own set
of challenges. One of the biggest is in changing its role from a third-party
waste-removal provider to efficient resource manager and trusted strategic
adviser on lifecycle resource productivity.

David P. Steiner, CEO of Waste Management (a $14 billion market leader in

North America), states:

We are charting new territory at Waste Management. We’re no longer

merely in the business of picking up the trash and putting it somewhere
safe. …Our customers, and the communities in which we operate, want
more sustainable ways to deal with what they discard. When they gener-
ate waste, we see opportunities to produce low-carbon power and turn
what can be recycled into feedstocks.28

To fully recover materials from products, waste handlers must become part-
ners in their customers’ businesses. Rather than measuring their effectiveness
in tons hauled, they need to share the goal of creating a production system
that generates as little loss – and as much profit – as possible. They can
do this by helping to design products for ease of disassembly and material
extraction, or by identifying new methods for turning hard-to-recycle waste
into high-quality raw material. They may even serve as brokers, buying energy
and raw materials from companies with excess and reselling it to others.

Bringing the Recovery & Recycling Model to Life

While the Recovery & Recycling model comes with its challenges, those very
obstacles can stir innovation in companies. That’s certainly been the case with
companies like Timberland, Desso, and I:CO, whose experiences with the
model demonstrate what can happen when organizations think creatively
about waste.

Timberland: Stepping Up Design Innovation

Timberland, a leading manufacturer and retailer of outdoors wear, wanted
to reduce its products’ environmental impact throughout their lifecycle, even
beyond the point of purchase. To spur innovation at the product design and
 Waste to Wealth

64
development stage, the $1.6 billion29 Stratham, New Hampshire, company
instituted a program that included a scoring system.30 The company’s “Green
Index®” ranks the level of innovation shoe designers and developers apply to
each new product.

Its Earthkeeper® boots are made – actually, remade – not just for walking but
also for disassembly, with features such as refurbished leather components,
recycled polyester lining, and soles made of recycled tire rubber. Those
touches distinguish this line of Timberland boots from those of its competi-
tors. To close the product lifecycle, the company encourages consumers to
return their boots to any Timberland store, raising their level of customer
engagement and loyalty.

Timberland has also reaped more quantifiable benefits from the model, includ-
ing a 500-ton reduction in carbon per 40,000 boots produced. In addition, it
will reuse up to 80 percent of the materials it recovers through the program in
new footwear, a 200 percent increase since it started the initiative.31

Desso: Nailing Down a System for Recovering Residual Value

Netherlands-based Desso Group faced a challenge similar to Timberland’s,
only with a different product: carpets. The company needed to figure out
how to extract value from each product’s end-of-life cycle. It developed a
separation technique called Refinity®, which splits yarn and other fibers from
carpet backing. After a purification stage, the yarn is returned for the pro-
duction of new yarn in a Cradle-to-Cradle® system. Backing is then grinded
and used as material for the construction industry. The entire program helps
cascade end-of-life materials into their most productive use.

In early 2008, Desso launched its TakeBack™ program to ensure that products
would be recycled according to Cradle-to-Cradle® principles. Desso takes back
customers’ products after their useful life, and then either safely recycles
them into new carpet products or uses them in other recycling initiatives.
To fully achieve its Cradle-to-Cradle goal, the company needed cooperation
and commitment from key partners. Over 60 percent of the commercial car-
pet tile that Desso sells contains Econyl®, which is produced by yarn supplier
Aquafil. Econyl® is a yarn made from 100 percent recycled content including
postconsumer yarn waste from Desso’s Refinity® plant.32

Desso changed its product designs to make it inexpensive to recover materi-

als at the end of their useful life. It uses materials that are safely recyclable
and nontoxic, and adapts product designs for easy identification, separation,
 Recovery and Recycling: Making History of Waste

65
and recycling. The company’s desire for high-quality material spurred it to
learn more about how its carpets were used. That eventually inspired Desso
to find innovative ways to enhance its products’ performance.

Four years after it adopted circular approaches, Desso increased its market
share in Europe. While most other players in the carpet business suffered
during the global recession (the industry is down by 30 percent), Desso’s
incremental earnings in the carpet tile business jumped from 1 percent in
2006 to 9.2 percent in 2010.33,34

Worldwide I:CO: Finding Its Own Style of Erasing Waste

Worldwide I:CO doesn’t develop any products of its own, but as a firm that
provides tertiary services, it plays a major role in the success of the Recovery
& Recycling business model.
The company, whose name stands for “I collect,” is a market aggregator for
the fashion industry, creating an efficient return chain at scale. The company
provides the infrastructure to ensure that old textiles can be used in new
ways – reselling them, burning them to capture energy, or recycling their raw
materials. By 2020, I:CO – which is part of SOEX Group, a Swiss company
focused on recycling shoes and textiles – wants to achieve a straightforward
goal: reducing waste to zero.
I:CO encourages consumers to bring discarded clothing, shoes, or accessories
back to the places where they were purchased. In exchange, customers often
receive a voucher for discounts on any new purchases.
Recycled textiles are used as insulation material for the construction industry,
for cushioning and filling, for stuffed toys, insoles, or bags. Shoes are turned
into floorings, key rings, protective packaging, pellets, or hard casing. I:CO is
now represented in 54 countries, offering eight million customers a month the
opportunity to return used textiles and footwear for continued circulation.
I:CO’s partners include popular fashion brands like Esprit, C & A, Adler,
Footlocker, The North Face, Forever 21, and Reno. For fashion retailers,
recycling through stores helps deepen their customer relationships, increases
foot traffic in stores and, as such, offers the chance to sell new goods. In the
medium/long term, retailers can use recycled materials in their own production
processes.35

PUMA, the sports and lifestyle brand, joined with I:CO to improve the
resource flow of its products. By putting “Bring Me Back” bins in its stores,
the company hopes to entice consumers to drop off their used goods, no
 Waste to Wealth

66
matter which brand. PUMA is now using the materials to manufacture its
own product line. The PUMA InCycle collection launched in 2013 and is the
first collection from PUMA that qualifies as a closed-loop set of products.36
These moves earned PUMA the “Cradle to Cradle® Certified Basic” endorse-
ment. InCycle uses materials such as biodegradable polymers, recycled
polyester, and organic cotton. The PUMA Backpack, for example, is made of
polypropylene. It will be collected and returned to the original manufacturer,
which will use the recycled polypropylene to produce new backpacks.
PUMA is a leader in “walking the talk” when it comes to measuring environ-
mental impact. The company is well regarded for its product Environmental
Profit and Loss (EP&L) conceived by PUMA chairman Jochen Zeitz. Through it,
the company can gauge the environmental impact of product production and
use of conventional versus circular materials in InCycle brand products. In its
annual report, the company noted that the InCycle line had 31 percent lower
environmental costs than conventional products. The report also noted that
the shoes trade at 12 percent higher retail prices.37 That’s a win-win for the
business and the environment.
Swedish apparel retailer H&M is another player upping the ante on its circu-
lar practices. The multinational is also an I:CO partner, and in early 2014 it
launched five classic denim pieces made from recycled cotton.38 The retailer
has stated that it will strive to recycle all its textiles in the future and is invest-
ing in collection infrastructure as well as recycling technologies and product
development.39

On the Road to Zero Waste

The economic argument for zero waste is easy. But for companies to even
begin to achieve that goal, they must work closely both internally and with
external partners. “Companies, states, cities find it important to enhance
sustainability values,” observed Javier Flaim, CEO of Recyclebank (a sub-
sidiary of Recycle Rewards Inc.). “We would like it to move faster, but are
very understanding of the constraints. A lot of change comes from business
innovation, and that will happen from collaboration between firms, cities and
government.”40

Reconfiguring products for maximum effectiveness requires understanding

all the materials involved and analyzing each step of the production cycle.
Designing waste out of the system is a collective effort that calls for close
 Recovery and Recycling: Making History of Waste

67
communication between every function of a product’s lifecycle: from the
designers who summon it to life to the waste-handlers who manage the
resources at its end-of-use stage.

Many companies already have considerable experience with the Recovery &
Recycling model. That experience is creating momentum for broader adoption.
But in some cases disposed products actually haven’t reached their end-
of-life quite yet. Instead, with some tweaks and refinements, they can go on
for additional lifecycles. For these products, residual value is unlocked not by
deconstructing them, but by extending their useful and productive life.
 6 te
r
ap

The Product
ch

Life-Extension Business
Model: Products That
Are Built to Last

For decades, manufacturers have focused on volume: moving more units to

keep the top line rising. It’s a logical strategy in an economy based on cheap,
abundant natural resources, and one in which environmental issues are seen as
a problem to be dealt with “another day.” When resource prices are dropping
and environmental concerns are largely disregarded, one of the most efficient
ways to grow is by increasing throughput.

The downside of this approach, of course, is that it encourages consum-

ers to continually replace their products. In some cases, those items are
perfectly fine but are seen as inferior to the “latest and greatest model.”
This is especially true in industries such as consumer goods and electronics,
where consumers are offered a steady stream of new features and functions
that, individually, may not mean a lot, but collectively add up to an irresist-
ible package. In other cases, products really do need to be replaced because
they’re simply worn out. Companies actually even sometimes design products
to intentionally stop working or become obsolete, a concept that is artfully
exposed in the popular 2010 documentary The Light Bulb Conspiracy.1

But what if, instead of planning to replace products and obsessing over mov-
ing volume, manufacturers tried to squeeze as much value as possible out of
68
 The Product Life-Extension Business Model

69
every ton of resources consumed? What if they made a product’s useful life
as long as possible and maximized profitability over the lifecycle rather than
at the point of sale? Instead of planning frequent release cycles and design-
ing products to last only a couple of years, what if they developed them to
endure for a decade or more, and accommodated easy upgrades and services?
What if, rather than enticing consumers to discard a perfectly functional
product in favor of a new one, or forcing them to toss an entire product just
because one component needed replacement, they designed products that
could be repaired by swapping out only the desired components or changing
only the product’s “skin”? If they did this, manufacturers would be capitalizing
on the Product Life-Extension business model.
Product Life-Extension
Resell
PRODUCT
OWNER

NEW PRODUCT
BUYER

RECOVERY
(BACK TO
COMPANY)
REDISTRIBUTION
(TRADING
PLATFORM)

MONEY
EXCHANGE

Product Life-Extension
Repair/Upgrade/Refill

PRODUCT DESIGNED
TO LAST

BROKEN/
OUTDATED
BACK TO
PRODUCT
OWNER

UPGRADES/
PARTS
DELIVERED
REPAIR/
UPGRADE
SERVICES

MONEY
EXCHANGE
 Waste to Wealth

70
Product Life-Extension
Refurbish & Remanufacture
OWNER DISPOSES
A PRODUCT

RESELL
‘GOOD AS NEW’ RECOVERY
PRODUCT CHANNEL

RENEWED DISASSEMBLED
PRODUCT PRODUCT

About the Product Life-Extension Business Model

The Product Life-Extension business model lengthens products’ useful lifecy-

cle by generating revenue through longevity instead of volume. In this model,
product characteristics like durability, quality, and functionality are more
highly valued: the longer and more intensively a product is used, the better
for the company that supplies it.

Products sold through this model often command a higher up-front cost,
and that high price can be a barrier for marketing to a broad customer
base. The solution: Change the revenue model. Although a product
sold through the Product Life-Extension model must command higher
revenues than a conventional one over the product’s lifecycle (as it is
replaced less frequently), that doesn’t have to mean a higher price. Take
the digital “freemium” model2 into the physical world and give the prod-
uct away for free, then generate all revenue from upgrades, content, and
add-on sales the way Amazon does with the Kindle. Implemented cor-
rectly, the Product Life-Extension model can help a company increase its
revenue (sometimes by many multiples) while reducing its dependency
on hardware sales and lessening its environmental footprint. Users of the
zero-margin Kindle spend on average 56 percent more than non-Kindle
owners at Amazon every year, easily making up for the forgone revenues
 The Product Life-Extension Business Model

71
on hardware.3 With this revenue model, Amazon has no incentive to make
products that break down; to the contrary, they want people to hold on
to their products, using them as much as possible to enjoy paid digital
content. Effectively, the business model gets partially decoupled from the
physical resource use.
There are many ways to extend a product’s useful life to also generate addi-
tional revenue streams. In our research on companies using the Product Life-
Extension model, we identified six primary activities that enable a company
to increase the value and utility of products that would historically have been
discarded along with any residual value embedded in them:
1. Build to last: creating high-quality, extremely durable products; targeting
customers who are willing to pay a premium for quality, or those who
access the more durable product via alternative revenue models such as pay
per service.
2. Refurbish: restoring used products to their original, “like new” state; tar-
geting customers who are price-sensitive and don’t mind buying “good as
new” products that are often sold with similar warranty and service offers
as new ones; or remanufacturing, which involves remaking the product in
an “industry-like” setting.
3. Take-back/trade-in/buy-back to remarket: collecting pre-owned goods
to trade or resell, also called “ReCommerce”; targeting customers looking
for a “good deal.” This is typically handled by specialized companies rather
than primary manufacturers and retailers, although primary suppliers are
increasingly interested in tapping second-, third-, and fourth-life markets
and integrating reselling into the product range.
4. Upgrade: adding new features, functionality or fashion instead of replac-
ing the core product; targeting customers more interested in consuming
content, functions, and style rather than the products themselves.
5. Refill: replacing a function that’s depleted more quickly than the product
itself, such as refillable packaging; targeting customer segments where the
real demand is for a disposable part of the product, not the physical “carrier.”
6. Repair: fixing a product that’s broken; targeting customers who are satis-
fied with product performance and who have limited interest in replacing
an item.
Optus was practically burying itself in obsolete equipment such as modems,
routers, base stations, switches, and peripherals. The wholly owned subsidi-
ary of Singapore Telecommunications Ltd (SingTel), one of Australia’s largest
telecommunications companies, was upgrading its network every year, replac-
ing existing components. The storage expenses for warehousing those assets
 Waste to Wealth

72
were significant, as was the amount of capital tied up in them. By selling or
discarding those items – some of which had been languishing in storage for a
decade – the company estimated it could cut its storage costs by 25 percent,
money it could use more productively elsewhere.
Working closely with Accenture Strategy, Optus now has the industry’s first-
ever asset disposal program in place. This program will help Optus generate
additional revenues, save warehousing costs and better manage risk for years
to come. The Optus and Accenture team generated in-year cash benefits of just
under AUD$3 million through the resale of reusable assets and the recycling
of obsolete equipment. Importantly, because the program relied on targeted
and highly competitive negotiations with a select group of buyers, the sales
outcomes were 300 percent higher than the original offer pricing. Additionally,
by liquidating so much of its old inventory, Optus has been able to shut down
one of its warehouses and expects to achieve storage cost savings of more than
AUD$3 million over a three-year period.4
It’s easy to see how lengthening the lifespan of a product by finding it a
new owner creates direct revenue. But lengthened life with a single cus-
tomer won’t in itself reduce the use of natural resources and generate new
revenues – unless the customer has an incentive to engage with the supplier
at many points throughout the lifecycle. That could require redesigning the
product from scratch so that the supplier can easily upgrade it, or so a service
or partner network can perform cost-effective repairs. In the case of a house-
hold appliance, that may mean making the modules responsible for energy
efficiency replaceable so the product can be upgraded to keep its energy effi-
ciency and cost performance on par with newer models. It could also entail a
visible “front” of a product to be exchangeable, allowing it to follow design
trends, or connecting products to the Internet directly, enabling customers to
buy new features and software upgrades instantly and remotely. With prod-
uct margins often very slim in competitive segments like white goods, the
additional revenue potential from Product Life-Extension activities can be very
attractive both financially and in terms of customer relationships and loyalty.
Electrolux – a global leader in home and commercial appliances, selling more
than 50 million products in 150 countries annually – had this logic in mind
when it conducted a study measuring an appliance’s environmental impact
throughout its lifecycle.5 The company concluded that over 70 percent of an
appliance’s impact occurs during its use – as opposed to its manufacture or
end-of-life treatment – through energy and water consumption.6
As a result, sustainable innovation is now one of Electrolux’s top four
R&D priorities. In an interview with several of the company’s executives,
 The Product Life-Extension Business Model

73
we learned that in 2012, at least one-third of the company’s product-
development investments were sustainability-related, with most going to
boosting energy and water efficiency and reaching design-for-recycling goals.
“We are always looking for opportunities to become green and more profit-
able,” explained Henrik Sundström, the company’s senior vice president of
sustainability.7
Electrolux uses modularity to simplify products, making their materials and
components more serviceable and reusable. “It would be interesting if we
could divide the regular lifecycle – where a customer owns the product
from purchase to end-of-life – into several user cycles where the product
is regularly upgraded to improve efficiency and increase lifespan,” said
Sundström.8
Eventually a consumer will want to part with a product, even if it’s delivered
with upgrade potential. The product’s life doesn’t have to end there, how-
ever, as manufacturers and suppliers can take back, refurbish, and resell that
product to a new consumer. The environmental case for remanufacturing
can be substantial. China has recognized this, and it has stressed the ben-
efits of remanufacturing in the country’s national action plan for the circular
economy. “Compared with making new products, remanufacturing is esti-
mated to save energy by 60 percent and raw materials by 70 percent,” noted
Xie Zhenhua, vice chairman of China’s National Development and Reform
Commission (NDRC). “It also substantially reduces air pollutants.” Xie added
that remanufacturing would be critical to helping China achieve its goals to
save energy and reduce carbon emissions.9
Some of the Product Life-Extension business model’s benefits are not eas-
ily quantifiable. For instance, when a company extends product lifecycles
and drives up the number of interaction points it has with customers, the
customer relationship deepens. In contrast to a linear business, in which com-
panies avoid interacting with customers beyond the point of sale, companies
leveraging the Product Life-Extension model actually want to interact as
much as possible. Over time, customers appreciate that the supplier is hon-
estly interested in adding real value to their relationships and in improving the
product’s performance, functionality, and quality. Customers will interact with
suppliers, physically and digitally, at many points and possibly even at the
product’s end-of-life take-back. Such continual interactions are much easier to
realize today than just a few years ago with help of digital technologies like
mobile and social media. They can create valuable opportunities for the com-
pany to market upgrades, add-ons, and more, and help strengthen customer
loyalty and satisfaction.
 Waste to Wealth

74 Getting Started

Like other circular business models, the Product Life-Extension model is not
limited to certain types of companies. In fact, there are three potential roles
this model can take on for various companies.
The first role is for the industrial manufacturing company that creates the
actual products. Such companies have the biggest potential to decouple
from dependency on constrained resources by finding ways to extend their
products’ lives. They also face the most significant changes to their existing
businesses to adopt the model. A manufacturer might need to invest in
remanufacturing processes to revive used goods to meet or exceed their origi-
nal performance specifications. At the same time, it might need to update
product designs, components, and material selection to make remanufactur-
ing cost-effective and enable digital connectivity. The manufacturer might
also need to engage local partners for field services and develop a new
revenue model to generate sales beyond a product’s initial point of purchase.
Companies that are taking back their products from the marketplace need to
act quickly. The product is a prime candidate for reincarnation when it has
nearly expired in the eyes of its owner, who will be grateful to part with it
for some, however small, compensation. Trade-in or buy-back programs
are often effective, especially because users typically receive credit that can
be put toward purchasing something else from the original supplier. Apple
launched a trade-in program in 2013 that gives customers store credit for
their old iPhones that can be used toward the purchase of a new phone.10
Often companies offering take-back services start by recycling and dispos-
ing the products they receive. But as their business strategy matures and
volumes increase, the natural next step is to explore product life extension
through remarketing (to other markets/segments) and even through offering
customers repair and refurbish of the item.
The second role is for a company to become a “channel player.” Here, com-
panies establish and operate a community or platform that helps find a new
home for underused or unused products, extending the useful life of each
item. Channel players act as middlemen, using technology to provide a place
where owners can display their wares and others can buy them.
Many high-profile companies have made great strides in providing cost-
efficient, customer-friendly ways to move products between owners. Taobao,
eBay, and Craigslist are among the best-known marketplaces for the resale
of a wide range of merchandise (both new and used). Other sites such as
 The Product Life-Extension Business Model

75
Gazelle (electronics), thredUP (women’s and children’s clothes), and Poshmark
(women’s clothing) concentrate on specialized products. Although they don’t
disclose financials publicly, there’s speculation that Poshmark could have gener-
ated as much as $60 million on 1.5 million orders in 2013 alone.11

One of the leading channel players in the fashion industry is Asos, an online
clothes retailer. The company’s online marketplace features 750 boutiques
through which individuals can sell pre-owned and vintage clothes to a global
audience. According to company reports, the site carried more than 145,000
products in 2013.12 Asos says 80 percent of sellers on the site are reselling
their own clothes, recovering a portion of money they have invested in their
wardrobe.13 But the site has also been a source of new design talent: Asos
said it discovered a new menswear brand, Volklore, selling merchandise on the
marketplace and signed the company to create a new spring collection sold
exclusively on Asos.14

Similar channel players exist in the bricks-and-mortar world – retail outlets

specializing in selling used sports equipment (Play It Again Sports), children’s
clothes (Once Upon a Child), and musical instruments (Music Go Round), to
name just a few. Ideally, resold products generate value on both ends of the
transaction, and also in between.

The third role is for the “field service” company that, through its local pres-
ence, provides repair, upgrade, refurbishment, and maintenance services. Such
companies may be tapped by manufacturers to fill gaps in capabilities needed
to fully adopt the Product Life-Extension model.

High labor costs have typically made it unappealing to extend a product’s

life through field service. It’s been more cost-effective to import new goods
instead of fixing the existing ones using expensive local labor. But several
new factors are reversing that trend, making repairing existing products
more financially attractive. These include steadily rising labor costs in emerg-
ing markets such as China15 and increasing material and energy costs to
manufacture new goods. High unemployment and a focus on job creation in
developed economies are also reversing the trend, creating an environment
conducive to “close to home,” cost-effective upgrade and repair services.

Local value chains for product life extension are re-emerging, offering
global players a great opportunity to collaborate with local companies for
value-adding services tailored to local tastes and needs. While typically
highly fragmented, when combined, “field service” segments add up to
big business. For example, the US electronics and computer repair services
 Waste to Wealth

76
industry generated $20 billion in 2014,16 the US remanufactured goods
markets totaled at least $43 billion in 2011 (supporting 180,000 jobs),17 and
the global automotive repair and maintenance service market is expected to
exceed $305 billion in 2015.18

Field service segments are not limited to local markets. Thanks to technol-
ogy, the opportunity for multinational companies to collaborate with local
business ecosystems is bigger than ever. Not only are communication barri-
ers razed, but the options to monitor and understand the flow of products
and material have never been cheaper, largely thanks to low-cost information
carriers, connectivity, and data traffic.

Digitalization is also making it possible for online communities to provide

their expertise and services to a global audience, as ifixit.com does.19 Based in
the U.S., ifixit.com generated close to $10 million in 2012 (with a 223 percent
three-year growth rate) from selling a wide range of parts, kits, and tools,
as well as providing free online repair guides, for consumer electronics.20
Microsoft was so intrigued by ifixit.com’s value proposition that the technol-
ogy giant decided to team up with the company on a new program called the
Pro Tech Network. The free program provides entrepreneurs with resources to
help them start or grow a small business focused on repairing smartphones,
tablets, and computers. By working together on the Pro Tech Network,
Microsoft and ifixit.com not only hope to create a new community but also to
help pave the way for a new “repair economy.”21

Regardless of the type of company involved, the goal is ultimately the same:
helping users find value in a product for as long as possible.

Key Challenges to Scaling

Companies playing any of the three roles need to excel in a number of critical
areas.

Manufacturers will need to design a product for a long lifecycle that includes
upgrades, add-ons and, ultimately, take-back. Given the focus on continual
customer interaction, they will also need to focus as much on customers and
users as on products and engineering. That means maintaining and growing
customer relationships over time through multiple interaction points, possibly
even expanding into retail or services. And they will have to be proficient in
conducting predictive maintenance and identifying efficient sales approaches,
offering a replacement part to a customer just before something breaks
 The Product Life-Extension Business Model

77
down. Finally, manufacturers will have to knit together an effective network
of local field service partners as well as potentially outsourced activities in the
return chain.
Channel players need to manage decentralized buyer–seller relationships
connecting a community of buyers and sellers across geographies. They’ll exe-
cute large numbers of transactions, and accurately estimate the value of pre-
owned goods for optimal resale. They also need to keep operating expenses
low to minimize commission costs.
Field service providers tend to build strong relationships with manufacturers
and become their go-to source for repairs and upgrades. Technology leader-
ship is often essential for minimizing operating costs and adding the most
value to the customer. A provider has to be able to upgrade, refurbish, and
remanufacture items with a consistently high level of quality. They also need
to provide a top-notch customer experience to build loyalty.
One of the biggest challenges in implementing this model is figuring out
which situations and products are best suited for it. Our research found that
the products with the most potential for product life extension typically have
lifecycles exceeding five years. And the model is most likely to pay off in B2B
industries, where high-value equipment is required – a trait shared by sectors
from construction to high-tech.
Consider Caterpillar: The US-based, $55 billion manufacturer of construction
equipment remakes about 6,000 different parts. In 2012, the company took
back more than 2.2 million end-of-life components, remanufacturing more
than 73,000 tonnes of material. To carry out that task efficiently, it runs a
global network of 17 locations that combine, build, and resell products with
reused and new parts.22 In the high-tech industry, Cisco Systems, the $46
billion maker of computer networking equipment, refurbished, resold, or
reused more than 3,328 tonnes of returned products in 2012, a 25 percent
reuse rate. That figure represented a 45 percent increase over 2011.23
High-quality goods are relatively easier to integrate into this business model
than low-end ones. As part of its sustainability program, BMW, the German
maker of premium cars, sought to sell remanufactured genuine parts – with-
out denting its reputation as a prestigious brand. To reinforce its status as a
leading carmaker, BMW ensures its original remanufactured components – gen-
erators, water pumps, starters, and automatic transmissions – endure a rigorous
quality-control process, meeting the specifications of a newly manufactured
product. Customers receive a 24-month warranty similar to what buyers of
new products receive. Standard practice among remanufacturers is to offer a
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warranty that is identical to that of a new product, which reassures custom-
ers. By communicating its demanding standards to customers, the company
reinforced its status as a brand and established itself as a leader in making
wealth from previously wasted components.24
Some mid-priced goods have also thrived under the business model, per-
haps because the upgrade cycles are fast yet predictable or maybe because
a large number of users are especially responsive to pricing and convenience.
These include video games, traded and resold by companies like GameStop
and Walmart, and second-hand smartphones and electronic devices sold by
Gazelle, uSell.com and others.
Not every product is a good fit for the Product Life-Extension business
model. Some can’t be designed to accommodate easy disassembly. Others
have extensive material requirements. Product life extension is not especially
relevant to companies that want to cater to “take-make-waste” markets,
where high volumes of cheap, low-quality products are sold. Customers in
those markets aren’t generally concerned about the total cost of ownership of
what they buy as much as they are about having access to a ready quantity
of replacement products.
Companies whose products are susceptible to rapidly shifting consumer
tastes – that cannot be addressed through a simple add-on or upgrade – aren’t
good candidates for this business model, either. That means trendy clothing
is probably not a good fit (puns aside), but more standard apparel with
relatively timeless appeal, like t-shirts or classic suits, could be.
In the end, the decision to adopt the Product Life-Extension model may have
as much to do with the products’ qualities as it does with the culture of the
producer. It could be that remanufacturing doesn’t align with a company’s core
business or with its infrastructure or acumen. It may conflict with its strategy
for new product sales (although it doesn’t have to). To avoid cannibalization,
companies could sell remanufactured items through a distinct distribution
channel, as Dell has done with its online Dell Outlet shops. The key is to deter-
mine whether or not the company has the opportunity – and the knowhow –
to make up for the revenue it may lose by selling a lower volume.

Bringing the Product Life-Extension Business

Model to Life

Whether it’s building higher-quality and more durable products; refurbishing

and reselling used items; or repairing, remanufacturing, or creating items that
 The Product Life-Extension Business Model

79
can be upgraded on a modular basis, more companies are discovering the
value of extending a product’s useful life. It reduces demand for new prod-
ucts from virgin resources, helps keep waste out of landfills and preserves the
considerable embedded value that remains in products even after years of use.
Perhaps most important, companies that do it right can exploit entirely new
revenue streams that don’t rely on selling higher volumes of the core product.

As the following companies illustrate, that’s a winning proposition for sellers

and buyers.

Caterpillar: Harvesting Profits from Remanufacturing

The global manufacturer of construction equipment has been remanufac-
turing components since 1973. Its “Cat® Reman” business now employs
approximately 4,000 people in 17 locations worldwide.25 The decision to
remanufacture emerged from management’s growing awareness that by
keeping products in-house and remanufacturing them, the company could
retain ownership, recapture residual value and add value to customers.26
Upon closer examination, the company’s product line seemed especially suit-
able for the business model. Complex durable components like drivetrains
readily lend themselves to being repaired and upgraded. And only 10 percent
of a typical Caterpillar product has to be remanufactured. The rest can be left
unchanged.27 And the company already had in place long-established support
and services around its products.
But Caterpillar did have to rethink its design priorities. It started by chang-
ing its top goal from attaining maximum efficiency to ensuring that products
were easy to dismantle and remanufacture. One of the company’s best-known
designs is an engine block with a removable sleeve in the cylinder bore. In the
past, remanufacturing engine blocks required re-boring the engine cylinder
and using a larger piston. But after three times, the re-boring process affects
the product’s quality. Now once the component is recovered, Caterpillar
can remove the sleeve and replace it to restore the engine to like-new
performance.28
Material comprises 65 percent of Caterpillar’s operating expenses,29 which
encourages the company to find growth areas with less resource use.
Remanufacturing can reduce material use by up to 100 percent, creating com-
petitive advantage over rivals that do not remanufacture, and so are limited
to incremental material efficiency and labor cost reductions. Remanufacturing
also helps Caterpillar fend off low-end competitors looking to grab mar-
ket share, and it helps forestall third parties that want to remanufacture
Caterpillar’s parts, which would expose its reputation and brand to risks.
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Caterpillar offers customers an incentive to return used parts. Customers
receive a “core credit” when they return products, which they can exchange
for a discount on a remanufactured core.30 For the company, the incentive
drives down material costs and allows Caterpillar to regain control of prod-
ucts near the end of their traditional useful lives. Caterpillar markets its
remanufactured products at about 50 percent less than new ones, but with
the identical warranty. It touts the fact that a remanufactured product con-
sumes 85 percent less energy during production than a new one, appealing
to environmentally conscious customers.31

Many businesses assume this strategy would cannibalize sales. It’s true
that remanufactured and refurbished equipment needs to be marketed
intelligently, targeting brands, customer segments, and markets where canni-
balization is low or nonexistent. But even a cannibalized sale can be attractive.
Compared with selling a product made from only virgin resources, a remanu-
factured version sold at a 20 percent discount can have as much as 50 percent
higher gross profit – and if remanufactured and leased, up to 2.75 times the
original gross profit.32

Caterpillar incorporates new technologies into the Product Life-Extension

business model as they become available. It uses digital technology, in the
form of its “Product Link” interface, to track components and machinery that
are in the hands of dealers or customers. The wireless system notifies users
of system events, and keeps them informed of where machines are, helping
reduce inefficient usage and cut operating costs. It also helps manage preven-
tive maintenance to preserve the equipment’s value.33 The key is to pull a
product out of the initial use cycle just before it falls apart and starts to cost
the customer too much money through downtime.

It’s harder than it sounds, and more rewarding too: Caterpillar remanufactures
millions of components each year and in 2013 treated more than 78,000 tons
of material, up from approximately 55,000 tons in 2009.34 The benefits are
equally powerful. The process to remanufacture a cylinder head uses 93 percent
less water, 86 percent less energy, and emits 61 percent less greenhouse gases
compared with a new one.35

Walmart: Hitting “Play” on a Discarded Trade-in Business

With same-store sales declining, the planet’s largest retailer decided to attract
new customers by remarketing a service it had formerly abandoned: accepting
and selling used video games.
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Back in 2009, Walmart tried offering video game trade-ins using kiosks in
its stores. The program, a joint effort with e-Play, ultimately failed because it
lacked efficiency.36 This time, Walmart is partnering with CExchange, a key
player in the industry that brands itself as “the experts in electronics buyback.”
The two companies had already joined forces on a smartphone buyback
program.37 CExchange will be responsible for refurbishing the electronics.

In launching the trade-in program at 3,100 stores, the Bentonville, Arkansas,

giant has opened a new front in its retailing version of World of Warcraft,
challenging GameStop, a $9 billion retailer and the incumbent in the
videogame trade-in industry. In its 2013 holiday season, GameStop sales of
pre-owned games comprised 18 percent of its $567 million in revenues.38
Newcomers like Gazelle have also entered the market, attempting to gain a
foothold by offering a great customer experience, competing with Best Buy,
which also buys used games.

Under Walmart’s program, customers can exchange games they’ve played on

Xbox, PlayStation, or Nintendo and receive immediate credit that they can
use to purchase anything in the store.39 The company hopes to draw more
gamers into its aisles, where they can spend their credits (and possibly more)
on other products.40 In a win for the environment (no need to produce a new
game with associated material use and logistics) and for customers, collected
games are sent for refurbishing and made available for purchase in like-new
condition at a lower price point.

No matter what happens this time, the company isn’t likely to declare “Game
Over” soon. As Walmart’s chief marketing officer told the press: “Gaming con-
tinues to be an important business for us, and we’re actively taking aim at the
$2 billion pre-owned video game opportunity. When we disrupt markets and
compete, our customer wins. They’ll save money on video games and have
the flexibility to spend it however they want.”41 That same day, GameStop’s
stock dropped about 7 percent.42 Game on.

EcoATMTM : New Technology for Used Electronics

Serial entrepreneur Mark Bowles glimpsed opportunity where others saw only
trash – and too much of it. Electronic devices – especially mobile phones –
were being routinely abandoned, adding to a toxic tower of e-waste that
comprised the fastest-growing segment of the waste stream. In 2008, a friend
mentioned to Bowles that only 3 percent of the world’s cell phones were
being recycled. Even in the U.S., less than 12 percent of mobile devices are
 Waste to Wealth

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now recycled, according to the US Environmental Protection Agency (EPA).43
Mobile phones contain toxic material – including arsenic, lithium, cadmium,
mercury, and zinc – that can spread from landfills into soil and groundwater.
Most US e-waste is shipped to India, Africa, or China, where it is not prop-
erly recycled. When a company creates a new mobile device, it generates an
average of three tons of toxic mining waste.44

Bowles decided to do something about it. In 2008, he launched ecoATM,

which buys back used mobile devices through a self-service system using
kiosks.45 The company offers users instant gratification. Consumers imme-
diately receive cash (generally between $1 and $300 per device), in-store
credit, or gift cards for trading in their used mobile device. Some or all pro-
ceeds may be donated to charity. The device is then resold for refurbishing or
recycling.

To use ecoATM kiosks, customers slide their devices into a slot, where it is
scanned for model, type, and condition. Artificial intelligence and machine
vision incorporated into the kiosks can identify and assess more than
4,000 different electronic devices. While the machine scans the device, it
also shares facts, chatting onscreen about how electronic waste is harming
the environment. Customers must present their ID and appear on camera.
EcoATM doesn’t allow anonymous transactions. Customers punch in a code
so the kiosk can read the serial number to ensure the item is not lost or
stolen and must provide a thumbprint signature agreeing that the phone
is their property. The kiosk then issues a quote, which customers can
accept or decline. If it’s accepted, live attendees at ecoATM’s headquarters
match the seller to his or her ID via a camera installed on the kiosk before
dispensing cash.46

As of July 31, 2014, ecoATM had approximately 1,100 kiosks in the U.S.,
through which the company has collected more than three million devices,47
enabling the recovery or reuse of:
More than 250 tons of devices (“‘three space shuttles’ worth of plastics,
metals, and other potentially toxic materials”).
More than 30 tons of copper (“enough to create a second Statue of Liberty,
made of 28 tons of copper, and still have extra”).
700 kilograms of silver (“enough to create 22,540 American Eagle silver
dollar coins, made of .031 kilograms of silver”).48

EcoATM is primed for even greater growth after being acquired in July 2013
by CoinstarTM (renamed Outerwall Inc.) for $350 million in cash.49 That
 The Product Life-Extension Business Model

83
company, which offers self-service coin-counting machines, also owns Redbox
Automated Retail, a kiosk network that dispenses DVDs and video games.

Still, ecoATM faces fierce competition from a slew of competitors, ranging

from retailers to manufacturers. And while the experience of using one of the
kiosks may sound inhuman – it is, after all – the company has managed to
incorporate a touch of personality into the kiosks, many of which are situated
in malls. If a customer isn’t sure about accepting the price, the kiosk may offer
a nudge, goading the customer with a reminder as to how much less the
device will be worth in three months.

Helping Products to Keep on Living

There’s no doubt that most consumers embrace innovation. They enjoy

buying new things that improve their lives and get excited for new product
announcements from their favorite brands. What car fanatic doesn’t eagerly
anticipate the auto shows around the world each year, where carmakers show
off their shiny new models?

Yet innovation as it’s currently practiced has a downside: what to do with

all of those cars, mobile phones, television sets, and other goods when they
become obsolete, unwanted, or nonfunctional? Continuing to banish them to
the landfill is not a viable option just as telling consumers to forgo new cars
or appliances is not, particularly those in emerging or developing economies
who may be enjoying these goods for the very first time.

By finding ways to extend the useful life of products, companies like

Caterpillar, Walmart, and ecoATM are not only helping to keep discarded
products out of the landfill, but they’re also finding new ways to generate
revenue from those products – all without depriving their customers of the
products and utility they value. Through the Product Life-Extension business
model, these innovators are weaning themselves off virgin resources by tying
revenue generation to longevity instead of volume, and in the process are
seeing to it that a product’s first owner is not also its last.
 7 te
r
ap

The Sharing Platform

ch

Business Model:
Sweating Idle Assets

The sharing economy is making waves around the world, and it’s gotten the
media’s attention. Magazines, newspapers, and television programs are filled
with stories about how companies such as Airbnb, LiquidSpace, Lyft, and
other sharing-based businesses are upsetting the established order in their
industries. In some cases, they’re even making enemies among incumbents
whose businesses are being threatened.

The fourth business model of the circular economy, Sharing Platform, is

closely linked to the sharing economy. This business model provides a plat-
form to connect product owners with individuals or organizations that would
like to use them. Rather than accepting that products sit idle, the platform
boosts their productivity by allowing co-access or co-ownership.

The Sharing Platform model lets multiple customers use the same resources,
reducing demand for new manufacturing. It also allows for consumption
growth without the need to produce anything new from scratch. The benefits
to users include increased flexibility and availability: Customers can access
thousands of products at various price points and locations, instead of being
limited to a more narrow range of products served from a central site (such
as the traditional store). And there’s an added social component as users
84
 The Sharing Platform Business Model

85
contribute to communities that surround those platforms. For businesses, put-
ting users together with owners creates entirely new revenue streams.

Although there’s overlap between the sharing economy and the circular
economy, many nuances separate them. When a sharing economy activity
moves a product between users in a way that extends that product’s life, it
has effectively served multiple customers with one item. It’s consumption
without increased resource use – definitely circular. Many activities in the
sharing economy boost resource utilization and provide an incentive to design
products made for a long lifecycle – both objectives of the circular economy.

However, sharing economy expert April Rinne, who was previously chief strat-
egy officer of Collaborative Lab, points out:

The social component, the community building that is a crucial part of the
sharing economy, does not necessarily play a role in the circular economy.
An important distinction between the two is that the sharing economy is
focused on human relations and any type of underutilization, including
of skills and financial assets, while the circular economy is focused on
production and consumption relations and underutilization that has an
impact on natural resource use or environmental impact. This can lead to
distinguishing features among circular and sharing-based business models.
For instance, a car that is put into shared use – via a peer-to-peer such
as RelayRides or a B2C platform such as Zipcar – is part of the sharing
economy, but depending on the materials that it’s made of, it may not be
part of the circular economy.1

About the Sharing Platform Business Model

The Sharing Platform business model facilitates the renting, sharing, swap-
ping, lending, gifting, or bartering of resources. The platform owner does not
offer any products itself, but creates a revenue stream from matching supply
with demand for idle resource capacity. Companies make money by charging
a percentage fee over all transactions that happen on the platform. Uber, for
instance, takes 20 percent of all fares paid by customers.2 Other innovative
revenue models include selling the user data that is collected, using analytics
to market complementary products, or supplying insurance.

Sizing the sharing economy is difficult as it’s a matter of how one draws the
boundaries. And because it’s a new concept, there is little if any solid research.
However, depending on what one measures, the size has been estimated at
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86
Sharing Platform

EXCHANGE CO-USE SHARING PLATFORM CONSUMER

$3 billion to $30 billion in 2014, with a relatively near-term potential of more

than $100 billion (growing at up to 25 percent per year).3,4,5,6 Driving much
of that growth are some of the sharing economy’s leading players: Airbnb
(estimated 2013 revenue of $250 million, a growth of 100 percent7); Lyft
(with $333 million in secured funding8); and Uber (estimated 2013 revenue
of $200 million and 600 percent growth in 20149,10).

The concept of sharing is, of course, not new. What’s different now – and
why it’s becoming pervasive – is that advances in digital technology are
opening new opportunities to share efficiently at scale. In fact, our research
showed that technology is the one critical factor allowing sharing platforms
to disrupt how we buy and use resources. All successful sharing platforms use
the Internet as their foundation. But they also take advantage of mobile soft-
ware, social communities, and positioning services. These improve the speed,
 The Sharing Platform Business Model

87
security, and convenience with which resources can be shared, as well as the
ability to see supply and locations in real time. Other digital technologies like
remote diagnostics, remote unlocking, analytics, and identification are all also
critical enablers of sharing platforms.

Users of Sharing Platforms

If consumers’ perceptions mean anything, sharing platforms have plenty of
growth potential. A 2014 study by market research firm Nielsen Company
found that just under seven in 10 (68 percent) global online consumers are
willing to offer their personal items to sharing communities for payment.
Two-thirds (66 percent) are likely to use resources from a share community.11

Early sharing platform models focused on sharing expensive resources like

boats or airplanes, where buying is a major barrier. But that could change
dramatically in the future. Practically all products and industries could be
affected as broad product inventories move to sharing platforms with better
flexibility, access, and price points than traditional retail stores. According to
Nielsen’s survey, more than one-quarter (28 percent) of global respondents
are willing to share or rent their electronic devices for a fee. Other items they
are willing to rent include power tools (23 percent), bicycles (22 percent),
clothing (22 percent), household items (22 percent), sports equipment
(22 percent), cars (21 percent), outdoor camping gear (18 percent), furni-
ture (17 percent), homes (15 percent), motorcycles (13 percent), and pets
(7 percent).12

The desire/action gap should not be underestimated. A change in consumer

behavior takes time and requires action from business too. It’s about smart
and efficient choice editing, making sharing easy and compelling, and mak-
ing it work without hassle or disrupted service. While it’s not the dominant
behavior today, consumers surely are ready for change. In a 2014 United
Kingdom study 64 percent of the population was estimated to have taken
part in some form of collaborative/sharing activities in the past year and
almost half of those people used the Internet to do so.13

Perhaps not surprisingly, younger people are the most avid adopters of the
model. They appear to be more open to sharing and renting goods instead of
owning them, and are more comfortable with the Internet and mobile apps
where sharing platforms live. Geographically speaking, consumers in Asia-
Pacific are more receptive to participating in sharing communities, followed
by those in Latin America and the Middle East/Africa.14
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88
Sharing platforms benefit from densely populated metropolitan areas since
there’s greater supply and demand, less distance to travel for pick-up and
drop-off, and less space available to store privately owned goods.

The use of sharing platforms is not limited to individual consumers.

Companies can use them as a way to get products into the market without
the expense of brick-and-mortar stores, leveraging users to move goods
instead of taking on transportation themselves. This creates a decentralized
blend of the Sharing Platform and Product as a Service models. If a company
with a Product as a Service model makes the product inventory available on a
third-party sharing platform, it produces a powerful mix of two forces: maxi-
mum access and availability through sharing, and a strong incentive to maintain
product quality through Product as a Service. This combination could lead to
a significant drop in ownership rates for some product groups, as users end
up with more high-quality products at acceptable prices, always available in
different shapes, styles, and places.

From C2C to B2B

Unlike many other circular economy business models, the Sharing Platform
model started as a Consumer-to-Consumer (C2C) – or Peer-to-Peer (P2P) –
model, rather than a Business-to-Business (B2B) one. Today, the most mature
markets are all C2C, including the sharing of cars, rides, rooms, and vacation
homes.

As C2C sharing platforms mature, the model is becoming more visible in

B2B – particularly for expensive assets with low utilization rates. Storefront is
a sharing platform company founded in 2012 that provides short-term retail
space rentals used specifically for pop-up retail locations.15 Deliv is a platform
that lets retailers use “crowdshipping” as an alternative to traditional delivery
services. Deliv partners with mall operators and retailers to provide a low-
cost, high-quality, same-day delivery service via its quality-controlled fleet of
crowdsourced drivers.16 Deliv is essentially the Uber for retail delivery. Start-up
Getable exclusively targets general contractors and those who rent out their
construction equipment.

FLOOW2, another B2B sharing platform but for idle earth diggers, tractors,
excavators, and the like, enables companies and institutions to share equip-
ment, services, and the knowledge and skills of personnel. FLOOW2, which
bills itself as the “World’s Reset Button,” matches supply with demand for
25,000 types of assets and services from construction to healthcare, agricul-
ture, technology, real estate, and professional services. Its mission is to “reduce
 The Sharing Platform Business Model

89
the overcapacity worldwide, through a balance between profit, planet and
people.”17
Kim Tjoa, founder of FLOOW2, believes that slow uptake in B2B sharing is,
in part, because businesses are not as comfortable sharing excess production
capacity or assets with other companies. “The main barrier [for FLOOW2]
is the required mind-set shift to scale our business. Right now, companies
see renting out assets to other companies as unfamiliar, as a risk instead of a
chance. The opportunities for revenue and utilization of assets are not recog-
nized enough.”18
Businesses using a sharing platform have myriad opportunities to create rev-
enue and use assets more efficiently, with fewer resources. At the same time,
they can engage employees in ways that result in social and cultural improve-
ments. A company could use a sharing platform to increase the use of its fleet
of company cars while constructing a revenue model that benefits both the
company and the employee who is the car’s primary driver. In this scenario,
the technology is used to organize teams of people around resources and to
ensure they’re used optimally.
Caronetas Caronas Inteligentes, an online car-sharing company based in Brazil,
works closely with companies to promote carpooling and collaborative car use
to their employees. Its Sharing Platform model not only increases resource
utilization while reducing overall fuel use, but it also lets people earn or
save money by offering rides – which, according to Marcio Nigros, owner of
Caronetas, is the primary motivation for 85 percent of participating users.19
Users can offer or find a ride on the online platform and they are authenti-
cated through the user’s corporate email address. At the heart of Caronetas
is a mileage program, similar to mileage collection programs at airlines, where
drivers can collect miles by offering rides, their entire car, seats, and also
bicycles. Users can purchase miles with actual currency; however, collected
mileage cannot be exchanged for currency because of government regula-
tions. In exchange for mileage, Caronetas offers vouchers that can be used to
shop at selected stores. It then receives a small fee when those vouchers are
redeemed.20 More than 950 institutions with over 250,000 employees have
already joined the service.21
The business has evolved through three major phases. It began as a single
company offering ride sharing within its enterprise. This company then teamed
with a second company, enabling employees from the two organizations to
share rides with each other. Now, multiple companies are participating, with
employees offering and accepting rides across numerous firms.
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90
Our research confirms what many others have noted: Large companies are
beginning to recognize the sharing trend as a legitimate business opportunity.
“There is a culture shift under way,” explained global sharing economy expert
Benita Matofska, chief sharer of Compare and Share. “This is how business will
be done in the future. Companies that will not adapt will be driven out of the
market.”22

Getting Started

According to recent research,23 there are three major reasons people opt for
sharing: greater convenience, lower price, and better product or service qual-
ity. (The same things customers have always wanted!) We discuss these factors,
plus another one, trust, as keys to effectively implementing the Sharing
Platform model.

Convenience
Customers like sharing platforms because they expand the range of resources
available to them. Think of moving from a traditional bike-rental scheme to
a bike-sharing scheme. In a city, this might mean going from having dozens
of rental shops to having thousands of locations where a user can pick up a
shared bike. Having access to a bike from someone a few doors down or on
the next block is much more attractive than having to go to the nearest bike
rental shop a mile or two away.

Customers also like that sharing platforms use a simple and secure payment
system, make it easy to view the full range of available resources, and enable
them to buy access anytime and from anywhere.

Companies looking to implement a Sharing Platform model must be able to

track how people actually use the platform, analyze behavior and develop
or adapt functionality accordingly. Communication has to be fast and
efficient – which could mean integrating email, SMS and other channels,
as well as possibly screening, rating, and even closing down suppliers with
poor performance. And those companies must be able to secure a critical
mass of suppliers and users so it’s convenient for users to participate –
either by starting with a niche segment and gradually expanding, teaming
with brick-and-mortar retailers to get access to their loyalty card members,
or leveraging existing “physical” communities like neighborhood clubs or
associations.
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91
Airbnb, an international community marketplace for people to list and book
accommodations, experienced significant growth once it reached a critical
mass of supply and demand. It took the company several years to reach five
million bookings. Then, within a five-month period, Airbnb doubled its book-
ings to 10 million.24 As of September 2014, Airbnb had more than 800,000
listings and had served more than 20 million guests.25 Because Airbnb under-
stands it needs scale to work effectively, it focuses aggressively on promotion
as a core competency of the business.
Strong partnerships – between businesses with large customer bases,
advanced technology capabilities, and sharing platforms – can also help com-
panies amass more users. General Motors’ OnStar and RelayRides, a US-based
peer-to-peer car-sharing marketplace, have such a partnership. General
Motors’ 15 million OnStar subscribers can rent their idle vehicles through
the RelayRides marketplace using the OnStar connectivity already in their
cars.26 RelayRides’ renters can unlock reserved OnStar-enabled cars simply
by using their smartphones. This technology integration makes it easier for
OnStar’s subscribers to rent their cars and for renters to access them, boosting
RelayRides’ subscription rate. It’s also great exposure for both companies. The
data collected by sharing platforms can also be very valuable to businesses,
offering potential for a supplemental revenue stream through data sharing.
Identifying these partnerships requires innovative thinking, and managing
them requires skills in collaboration and joint venture management that many
companies don’t necessarily possess.

Price
One of the biggest motivations for using sharing platforms is cheaper access
to products that customers would otherwise have to own or rent. Therefore,
the competitive strategy most associated with this business model is to keep
users’ costs lower than what it would cost to rent or purchase a product. This
is usually doable, because the users offering resources on the platform are
typically generating “extra” income as they make money on assets that were
already paid for and would otherwise be idle.
Sharing platforms also makes it easy for customers to access a variety of
offerings at different price points to suit their needs. For example, the main
lodging option within a city center (hostels and dormitories notwithstand-
ing) has typically been large, expensive hotels. Now, it’s possible to stay in an
apartment in any city neighborhood at a range of price levels and with dif-
ferent features to meet travelers’ needs. Customers can get a more authentic
experience in a given destination at a fraction of the cost of traditional hotels.
 Waste to Wealth

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Quality
Consumers today want “tailored” personal experiences and often turn to
sharing platforms to get them. Whether that experience stems from a unique
offering (e.g., a special house or rare car model) or from engaging with
people as part of the transaction, personalized service is critical and can be a
differentiator for Sharing Platform business models.
Close attention to the customer experience is paramount. Since this model is
so dependent on online interaction, a good user interface is the key to deliver-
ing a clear, compelling, and unique customer experience. It has to be intuitive,
easy to use, and visually appealing, so customers can easily find what they’re
looking for.
It’s also important to set formal quality standards for the products and services
the company will carry. They should cover things like the types of offerings
allowed (and not allowed), condition requirements and guidelines for owners
to describe their offerings.
If relevant – for example, in a B2B sharing environment – a company can
ensure quality through predictive monitoring and maintenance. The Sharing
Platform company doesn’t even have to be the one to handle the mainte-
nance. It could offer a third-party managed-service solution to companies
that are sharing assets on its platform. So a company that offers construc-
tion equipment, trucks, or medical devices on a sharing platform could buy,
through the platform owner, a compatible third-party machine-to-machine
communication solution for tracking, tracing, and maintaining its assets.
It could make sense for a manufacturer or retailer to partner with a sharing
platform – or to set up their own – to improve the quality of their products
and customer service. One of the world’s largest truck original equipment
manufacturers (OEMs) is exploring the possibility of hosting a sharing
platform for their trucks through which customers can buy and sell overca-
pacity in a brand-exclusive community. The platform would help customers
maximize the use of their products. But it would also help the manufacturer
gain insights into how customers are using their trucks. It could then use
those insights to develop and sell maintenance and other services that could
improve its products’ quality and performance.

There’s always the potential for a product to be damaged or misused in a

sharing environment, whether it’s users mistreating products or owners failing
to take proper care of goods they share (akin to landlords who don’t main-
tain their rental properties). Incentives are necessary for both renters and
 The Sharing Platform Business Model

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owners – such as deposits that are refunded when a product is returned in
good condition, points accumulated for good performance, or ratings of both
parties that help establish their reputations in the community.

Trust
Although most sharing platforms work hard to create a sense of security,
fraud and trust issues are a key challenge to building critical mass within this
model. It’s difficult to completely monitor or control how the shared resources
are treated. Users need to sufficiently trust each other for the model to work,
and they turn to outlets like social media and customer reviews to build that
trust. Many companies connect with Facebook, LinkedIn, and other social
platforms to allow users to interact and “meet” the people with whom they
will be sharing their goods. Several platforms let users post reviews so that
others can consider those first-hand experiences as they browse offerings.

Many platforms now even offer their services with insurance to further put
users’ minds at ease. Airbnb’s insurance offering stemmed from a highly
publicized incident in 2011, when a San Francisco apartment rented through
Airbnb was vandalized by guests, who also stole the host’s jewellery, hard
drive, passport, and credit cards. Airbnb responded by instituting many new
security provisions, including setting up a 24/7 customer-service hotline,
establishing a $50,000 (later increased to $1 million) host guarantee, and
building a new trust and safety division.27

Sometimes companies host live events to strengthen their community and

build greater trust among users. Again, Airbnb is a leader in experimenting
with such events. Airbnb’s “Meetups” help travelers get together during trips
for authentic local activities. They can be organized by Airbnb community
members or by Airbnb staff. Events can include volunteering at a local garden,
taking a neighborhood architectural tour, exchanging hosting tips, or just
throwing a party to celebrate the Airbnb community in the local area.28

Key Challenges to Scaling

Pioneering companies are achieving significant scale in their sharing platform

offerings. But in doing so, they’ve also faced a number of challenges. Critics
of the sharing economy (not specifically the circular economy) have expressed
major concerns about its impact on the larger economy and its long-term
viability. Some of these are valid critiques to which policymakers and leading
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sharing platforms are responding. Others are simply objections that companies
should be aware of as they venture into the Sharing Platform business.
One criticism is that sharing economy companies operate like typical profit-
seeking companies when they should be motivated by community-building
capitalism and sharing among citizens. The Sharing Platform business model
is about finding new ways to access underutilized resources. It offers innova-
tive ways to co-own and co-access products and assets – that’s its revolutionary
function, regardless of how this new trade is financed. There is no inherent
requirement that it should be more or less altruistic than other economic
activities. It could be driven by a pure profit motive at the company facilitat-
ing the transactions (and the people “sharing”) or not. The word “share” does
necessarily connote community-based and free exchanges. It can also mean
simply providing excess capacity in exchange for some kind of remuneration.
Consider Yerdle, an online marketplace in which people can give away things
they no longer want. Its founders see Yerdle as a platform offering significant
potential to make more efficient use of goods that would otherwise be
thrown away. This platform certainly supports the circular economy by more
efficiently distributing goods that have already been manufactured and sold,
reducing society’s overall environmental footprint. Yerdle, which estimates
there is $5 trillion worth of usable goods in closets and garages in the US
alone, ultimately would like to displace 25 percent of what people are buying
new with sharing solutions.29,30 Some see Yerdle as a source of free sharing.
There is no money exchanged for goods. Instead, Yerdle uses a credit point
system through which users earn points by giving away goods and spend
points to receive goods. Others see Yerdle as anything but “free,” equating
the point system with a form of currency and acknowledging that in the
future, Yerdle intends to sell points to users to create a new revenue stream.31
The point is, while Yerdle’s business does have a social benefit, that’s not its
primary motivation, nor does it have to be to create positive outcomes.
A second criticism is that the sharing economy is creating a new category of
working poor with insecure income and few benefits. This is a valid critique
that needs attention. Policymakers and businesses must ensure regulations
and business ethics steer clear of exploitation and poor working conditions.
Sharing platforms do not create jobs in the traditional employer-sponsored
sense. In fact, one could argue that by facilitating greater product utiliza-
tion, sharing platforms may reduce the need for manufacturing jobs.32
Furthermore, while sharing platforms help micro-entrepreneurs generate
income, they don’t provide a guaranteed revenue stream or access to ben-
efits that traditional employers provide. But sharing platforms do open up
 The Sharing Platform Business Model

95
opportunities for people to generate income from underutilized resources. If
someone chooses to work through a sharing platform, he or she must feel the
payment is worth the effort.

Uber, which connects riders with drivers in more than 250 cities and 50 coun-
tries as of December 2014,33 is a good example. There are many reports from
satisfied to angry drivers about wages for Uber drivers ranging from better
than ordinary taxis to below minimum wage. The job requires minimal train-
ing and offers flexible hours. Both taxi and Uber drivers have various expenses
related to their roles, but being an Uber driver appeals to many individuals,
including immigrant drivers who embrace an independent contractor identity
and cabbies who are moonlighting for Uber, or quitting their old jobs alto-
gether.34 However, some Uber drivers feel that while Uber exerts control, it
does not take responsibility for the workers from which it profits, and this is
leading them to work toward collectively unionizing in a new grassroots way
in step with the new business model in which they work.35

Finally, some argue that the sharing economy is not competing fairly and is
threatening companies and jobs in the formal economy by avoiding taxes and
regulation. This is another valid critique. A hotel tax applies when a guest
rents a room, but the same tax is not always paid by hosts offering room
sharing. Taxes paid by taxi companies are not always paid by those using car
sharing. Hotels also must comply with safety standards from which private
homes are exempt. As sharing platforms like Uber grow, trade groups, unions,
and industry associations are protesting en masse to protect their position.
These objections often look more like defensive moves against competition
than calls for good regulation. But in some cases, the sharing platforms should
compete on a level playing field and ensure compliance with regulation and
tax codes. Several leading sharing platforms are taking action on this.36

Neelie Kroes, vice president of the European Commission, summed the situa-
tion up nicely:

Digital technology is changing many aspects of our lives. We cannot

address these challenges by ignoring them, by going on strike, or by trying
to ban these innovations out of existence. People in the sharing economy
like drivers, accommodation hosts, equipment owners, and artisans all
need to pay their taxes and play by the rules. And it’s the job of national
and local authorities to make sure that happens. But the rest of us can-
not hide in a cave.… It’s time for people at local and national levels to
sit around a table and come up with reasonable accommodations of inno-
vation. We cannot criminalize a whole class of citizens, or drive tourists
 Waste to Wealth

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away from places that need money, in order to protect a few industries
that think they can be exempt from the digital revolution. It’s not fair on
everyone else, and it’s not realistic.37

Bringing the Sharing Platform Model to Life

Given the visibility the sharing economy has received, several brands such
as Airbnb, Lyft, and Uber have become household names. Here we look at
three more Sharing Platform businesses that aren’t currently as well-known,
but could be soon: Rent Tycoons and Peerby are variations of neighborhood-
oriented sharing platforms; and 3D Hubs focuses on sharing 3D printing
capacity.

Peerby and Rent Tycoons: Digitally Enabled Sharing

Among Neighbors
Peerby operates a peer-to-peer borrowing service for a variety of products.
As a start-up in 2012, the company wanted to build a platform that let
individuals easily and safely share goods. It also wanted to create an online
element that would incentivize people to participate in real life without being
motivated by money. Peerby is active across all major cities in the Netherlands
(where it has developed a critical mass of users) and Belgium, and is piloting
its service in several US cities in preparation for a launch there. Peerby’s goal is
to expand to other countries as well and introduce an insurance product and
other related services.

Many households have durable goods in their homes that are not fully uti-
lized. Peerby helps individuals borrow those goods from within their own
neighborhoods. Members can send in an item request online, via their mobile
or via social media channels. The platform then pushes this request to 100 of
the requester’s closest Peerby neighbors who might have the desired item. If
someone nearby has the item, the requester is notified and a connection is
made.38 Peerby’s short-term goal is to accumulate a critical mass of members.
To help build trust among users, Peerby is developing a feedback feature that
allows members to rate each other after a transaction and enhance their repu-
tation in the community.

Because Peerby is free – it doesn’t charge any fees for its role in matching sup-
ply and demand – it gets funding from other institutions, including the DOEN
Foundation, the Clinton Foundation, and Sanoma Media. The company is
 The Sharing Platform Business Model

97
testing several user-based revenue models, such as insurance for lenders and
voluntary contributions from satisfied members.39

In the more distant future, Peerby founder Daan Weddepohl sees the com-
pany as the “Spotify for things,” offering itself as the platform for all kinds
of products as a service in cooperation with manufacturers and becoming
the place where people go if they need something.40 “We’re launched
basically in the whole of Holland,” Peerby co-founder and CTO Eelke
Boezeman said. “And we’ve got about 15,000 members there. We also have
an active community in other places including London, Berlin, Spain and
New York.”41

Rent Tycoons occupies a similar place in Singapore’s economy. It is the country’s

first online peer-to-peer rental marketplace, offering more than 10 product cat-
egories. Value is harnessed out of idling capacity, with Rent Tycoons facilitating
the entire process. Similar to Peerby, it is a marketplace where products can be
shared. One difference between Peerby and Rent Tycoons is its approach. On
Rent Tycoons, users must post the items they have available to borrow or rent
(versus posting a request to borrow as is done on Peerby). Owners determine
their own rental fees and the security deposit amount for their items. Owners
and renters are bound by a contractual agreement and rental fees and deposits
are paid through Rent Tycoons. Rent Tycoons is mainly used by individuals
(C2C), but some companies are participating as well.

Swito Yuber, a founder of Rent Tycoons, said:

The main motivation for consumers to use this platform is to save costs
and to make money. With a special focus on Singapore, the lack of avail-
able space is essential. With this peer-to-peer model, people can share their
assets instead of being constrained by the limits of space and house. The
platform gives individuals the possibility to offer and rent items online,
pool resources together in households, and create a platform to save costs,
make money and to be green.42

Like Peerby, Rent Tycoons is focused on building a strong and responsible

renting community through a peer-review-and-rating system. The company
received a Spring Singapore grant from the Singaporean government, whose
support helped Rent Tycoons build more credibility and trust with users.43
Moreover, the founders make themselves personally available to renters by
email and phone to provide assurance and answer individual questions.

In the future, Yuber believes that Rent Tycoons will make greater use of the
detailed transactional data it is collecting. He foresees tracking things such
 Waste to Wealth

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as which items are popular in specific regions and then generating a new
revenue stream by offering this valuable data to businesses.

3D Hubs: Connecting Owners and Users of 3D Printing

As 3D printing becomes more popular, it’s only a matter of time until cus-
tomers start looking for ways to use this powerful new technology without
having to actually buy a 3D printer. As far as 3D Hubs is concerned, that time
is now.

3D Hubs offers a collaborative production platform for makers and 3D printer

owners.

Using 3D Hubs’ platform, anyone with a 3D printer can bring customized,

locally produced goods to those around them. By creating a platform that
connects printing capacity with users who want to print, 3D Hubs makes
the market of 3D printers more liquid and allows one printer to serve more
people.

To join 3D Hubs, users can register with the online community and 3D printer
owners can list their offerings and pricing. Using 3D Hubs’ map, users can
choose a nearby 3D printer and see its offerings in terms of materials, delivery
time, pick-up process, and pricing. They can also check user reviews to learn
about their peers’ experience with the service. If the user decides to move
forward, 3D Hubs facilitates payment and charges a percentage fee for the
transaction. 3D Hubs holds the payment until the product is delivered, ensur-
ing the printed products’ quality by providing users with a means of getting
their payment back if something goes wrong. Projects are typically delivered
within two days.44

As of June 2014, 3D Hubs has communities in more than 80 countries. Its

network grew from 500 to more than 5,000 locations in less than a year since
its launch. As of this writing, the 3D Hubs network provides 3D printer access
to more than 750 million people globally within ten miles of their homes.45
 8te
r
ap

The Product as a
ch

Service Business Model:

Performance over
Ownership

Do people really want to own cars, or would they rather have access to trans-
portation when and where they want it? Does an office manager really care
what light bulbs are lighting the office space, or is he or she mainly concerned
with providing cost-efficient lighting for workers? Is a consumer really inter-
ested in filling his or her cupboard with a cache of clothing, or does he or she
simply want to be able to wear fashionable clothes? Increasingly, customers
are choosing the latter option: buying a desired function or performance
rather than a specific product.

All around the world, across industries and products, customers are forsaking
ownership of a range of items they used to purchase: cars, bikes, strollers,
smartphones, clothes, printers, solar panels, art, and tires, just to name a few.
They’re opting instead to buy access to – and the performance of – these
items on either a short- or long-term basis. Helping companies capitalize on
this new mind-set is the Product as a Service (PaaS) business model.

Unlike the Sharing Platform business model, companies leveraging the PaaS
model retain ownership of a product and offer it to one or many customers in a
“Product Service System.” Under this model, companies offer the physical prod-
uct and services to maintain a product’s use through design, use, maintenance,
99
 0
Waste to Wealth

10
reuse, remanufacture, and recycling.1 All that is done in close collaboration with
the customer, who becomes more of a “user” of the service as opposed to a
“consumer” of a product. Research has shown that variations of this business
model can, if managed correctly, yield environmental footprint reductions of
20 percent to 50 percent and, in some cases, upward of 90 percent.2
The PaaS business model can take several forms:
Pay for use: Customers buy output rather than a product and pay based on
use metrics such as miles driven, hours used, pages printed, or data transferred.
Leasing: Customers buy contractual rights to use a product over a longer
period of time, typically with rights to exclusive and individual access.
Rental: Customers buy the rights to use a product for a short period of time,
typically less than 30 days. A rental setup is generally more flexible than a
lease agreement and customers might not have guaranteed unlimited access.
Performance agreement: Customers buy a pre-defined service and qual-
ity level and companies commit to guaranteeing a specific result. For exam-
ple, it could be a “clean and snow-free street,” a “healthy indoor climate,” or
a “well-lit city street.”

Product as a Service
(PaaS)

START

RECLAIM & COMPANY

RECYCLE SERVICE
DESIGN FOR
PRODUCT
SERVICING

CONSUMER MARKET
RETURNS PRODUCT AS
PRODUCT RENTAL

CONSUMER CONSUMER
USES RENTS
PRODUCT PRODUCT
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The Product as a Service Business Model

10
For suppliers, the focus of the PaaS business model is on generating new
revenue streams based on delivering cost, performance, and risk improvements
for customers.

The model can deliver significant cost savings for customers if they only need
a product for a limited time or at regular intervals, but not often enough that
it makes sense to buy it (like a special-purpose tool or special-occasion cloth-
ing). Consumers who like to frequently change products or upgrade them
always have the “latest and greatest,” whether it’s a car or smartphone. For
them, PaaS is cost-effective.

The PaaS model can generate performance improvements if a supplier guaran-

tees uptime, maintenance, functionality, and availability when users lack the
capacity to do so. This often also translates into a cost improvement on com-
plex offerings, as the skills and technology needed to guarantee performance
are difficult and costly to acquire (such as skills to maintain heavy machinery
for a factory). Other benefits can accrue if a customer needs access to a large
selection of a certain product type but lacks the financial resources and space
to house and maintain all variations.
Risk improvements can be unlocked in cases when PaaS relieves customers
of the financial risk associated with owning, maintaining, and eventually
discarding products when they’ve reached the end of their useful lives.
A good example is an expensive product that demands maximum uptime,
such as a data center housing dozens of high-powered, mission-critical, and
expensive servers. Buying the desired performance as a service (cloud com-
puting) instead of purchasing the physical products can reduce financial and
operational risks.

The number of users of a product in this model can be one or many, depend-
ing on the nature of the service agreement. In the case of a dematerialized
product that many can access simultaneously (think Netflix and Spotify,
companies that replaced DVDs and CDs), there are virtually no limits to the
number of users who share the service.

About the PaaS Business Model

Companies have been using the PaaS model for years, but widespread
adoption has only occurred in the past decade. Rolls-Royce introduced
Power-by-the-HourTM in 1962, offering a complete jet engine and acces-
sory replacement service on a fixed-cost-per-flying-hour basis.3 Today, many
large car companies are taking Rolls-Royce’s lead by offering their products
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Waste to Wealth

10
as a service either through leasing or car-pooling programs. DriveNowTM
(a joint venture between BMW and Sixt), car2go (Daimler), Mu (Peugeot),
Quicar (Volkswagen), TwizzyTM (Renault), and KahShare (Honda) are some
examples.

Michelin solutions (www.michelin-solutions.com), a new business launched

by Michelin, one of the world’s leading tire manufacturers, has made sig-
nificant strides towards adopting the model through an innovative program
that allows fleet customers to lease instead of purchase tires. Michelin solu-
tions effectively sells “tires as a service”, as customers pay per miles driven.
Customers don’t own the tires and they don’t have to deal with the hassles of
punctures or maintenance of any kind.4 By adopting a PaaS model, Michelin
solutions is incentivized to develop longer lasting tires. And, by getting worn-
out tires back, the company is motivated to make sure, through design and
material selection, that returned tires can be reprocessed into a valuable input
for new tires or something completely different.

Leading industrial equipment, construction equipment, and heavy machinery

manufacturers also have fairly mature PaaS offerings. Atlas Copco Group, a
Sweden-based manufacturer of air and gas compressors and other industrial
equipment is providing an intangible product – air – as a service. Via its
Contract Air offering, the company lets industrial companies buy only the
compressed air they consume. Atlas Copco provides all the necessary equip-
ment and handles all the installation, maintenance, and spare parts through
the life of the contract. Customers are contractually guaranteed uptime of
equipment, compressed air quality, and energy efficiency, and have no need
for upfront capital investment in equipment.5 SolarCity Corporation in the
US provides solar power to residential, business, and government custom-
ers by installing, owning, and maintaining solar panels on customers’ roofs.
It’s achieved impressive growth. In the company’s second-quarter earnings
call in 2014, Lyndon Rive, CEO, told investors that SolarCity has more than
“$3.3 billion of customer payments coming to us in the next 20 years. We’ve
added $800 million in one quarter. This growth, and the demand for the prod-
uct, has really exceeded any of our previous forecasts.” The business model
obviously appeals to customers too; during the quarter in question, the
company added 30,000 new customers, an increase of 27 percent from the
previous quarter, and bringing the total customer base to 140,000.6 SolarCity,
which urges customers to “pay for power, not panels,” had a market capitaliza-
tion of more than $5 billion in November 2014.7 Sunrun8 and Vivint Solar,9
also in the U.S., provide similar services.
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The Product as a Service Business Model

10
In the luxury segment, a slew of new companies are using the PaaS model to
provide access to a range of exclusive and expensive items. TurningArt allows
individuals to rent art rather than own it, and also enables unused art inventory
to be put into market. Girl Meets DressTM in the UK and Rent the Runway in
the US make high-priced designer fashions accessible to anyone.10 Customers
apparently appreciate this nonownership model, with Rent the Runway boast-
ing five million members, and Girl Meets Dress growing over 100 percent in
2014 (the company doesn’t publicize its membership totals).11,12
As these examples suggest, PaaS is most relevant for products with high
operating costs or where expensive price tags and long payoff times make
it unappealing for customers to own. The model is ideal for customers who
only need to use something a few times or infrequently; have little space; lack
the funds for a major purchase; have limited capabilities for maintenance and
repair; or want to focus on a narrow core business and not on owning, man-
aging, and maintaining. Among consumers, the model is especially appealing
to younger consumers who, as a generation, are increasingly developing a
preference for access and performance over ownership.13,14,15,16
Customers are also attracted to the PaaS model because it lets them craft a
relationship with a provider that meets their individual needs – a provider of
solutions rather than products. They have convenient access to a functional
asset whenever and wherever they need it. And they have either no obliga-
tion or a limited contract, after which they can switch to another product if
the solution didn’t live up to expectations. In other words, the PaaS model
provides a service that is tailored to what each customer wants – and in that
sense, it’s all about innovating to improve the customer value proposition, not
simply offering a different pricing model.
In some markets, inroads by PaaS companies are motivating other companies
to move to a circular economy too. That’s the case with Marks & Spencer,
the leading UK retailer. While the company began exploring circular prin-
ciples to hedge against material price increases and build customer loyalty,
it also recognized that new competitors threatened to disrupt the market.
Mike Barry, the company’s head of sustainability, sees PaaS start-ups like
Girl Meets Dress as disruptive threats and realizes that companies such as
eBay or Amazon could significantly disrupt the market if they pick up and
scale those new business models. Now he sees far broader opportunities.
“While we started to explore the circular economy in clothing from a risk-
management perspective, the more we do, the more we realize that there
are direct business opportunities for us, too.”17
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PaaS companies must consider the entire product lifecycle when setting strat-
egy. Because the provider owns the products and is responsible for lifecycle
management costs, strong product performance is critical. Products must be
designed for optimal use, maintenance, reuse, remanufacture, and recycling
to avoid issues such as fast quality degradation, short lifespan, low utilization
rate, and low recycling/return, which can directly impact the company’s bot-
tom line. Quality degradation reduces the “next-user” value as well as embed-
ded value in material and components. A short lifecycle suggests that the
product is breaking down or going out of fashion quickly, which prematurely
ends the revenue stream. A low utilization rate prevents the provider from
charging for the full potential time the product can be used. And low recy-
cling/return means the provider loses any residual value the product might
still hold at the end of its life.
An important characteristic of the PaaS model is that it effectively aligns the
provider’s and the customer’s goals for the product. In a linear model where
customers are owners, long and productive product lives (at a reasonable
price) are highly desirable for the buyer. But for providers, wasteful use, short
lifecycles, and low utilization rates are all good for the income statement (of
course, only to a point at which reputation and brand value are not dam-
aged), as they help boost sales of new products. In a circular PaaS model,
the provider and the customer want the same things: high-quality products
that last long, are used frequently, maintained impeccably, perform well, and
are returned properly – all of which help reduce the cost of ownership for
customers and increase the provider’s revenue.
One of the most attractive provider benefits of the PaaS model is its impact on
customer engagement. The continuous customer interactions typically associ-
ated with this model – compared with the one-time transaction of purchasing
to own – often result in greater customer loyalty and retention. That means
more opportunities to generate revenue from add-on sales and services. Those
interactions can also be a boon to product development. They create a strong
feedback loop through which manufacturers can collect detailed usage, perfor-
mance, and other key data that can be analyzed to inform new offerings so
they are even more in tune with what customers want.

Getting Started

The PaaS model represents a very different way of doing business for com-
panies used to selling large volumes of new products. The impact will ripple
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The Product as a Service Business Model

10
across many areas of the organization. As one of our colleagues at Accenture
puts it, “every product is a service waiting to happen.”

One area is the sales channel. Whereas selling a product in a linear model can
be done effectively either in stores or online, the PaaS model requires a blend
of physical and digital channels. At the outset, customers typically want to
meet with providers to discuss how their solutions can meet their needs.
Once the arrangement is struck, customers can use digital channels to track
their use, cost, and performance levels, or to purchase additional services and
upgrades.

Similarly, in the service channel, a provider generally needs access to the physi-
cal equipment to perform maintenance on products in use. But using digital
technologies can make maintenance more efficient and reduce operating
costs. In fact, machine-to-machine communication, mobile technology and
data analytics have enabled businesses to efficiently manage assets to make
the model highly competitive. Businesses can remotely monitor products
to ensure they’re used properly and analyze user behavior to predict future
maintenance needs. By doing so, they can direct their attention only where
it’s required and perform predictive maintenance to fix potential issues in
advance – optimizing the cost of repair. For the customer, this means mini-
mized downtime – and in many industries a reduction of only 5 percent to
10 percent of downtime can mean a lot for the bottom line. Such technology
also helps reduce the number of resources PaaS companies need in order to
manage and repair their assets in the field. They can also provide users with
access to self-help capabilities when needed.

At the very extreme end of using technology to deliver a product as a

service, a company might make a physical product entirely obsolete. The
music industry is far down this path. By providing music as a service, Spotify
eliminates the need for CDs and infrastructure. Customers access music via a
phone or computer, so a dedicated “music player” is no longer needed. We
expect ongoing innovation will whittle down the need for physical products,
which will expand the scope of what providers can offer via fully dematerialized
PaaS models.

PaaS also requires a different way of making money compared to a traditional

“make and sell” approach. Revenue for PaaS shifts from a lump-sum pay-
ment to fees collected over the life of a contract or as the service is used.
But PaaS still requires production costs to be paid for with upfront capital,
which companies’ balance sheets must be able to absorb. Companies consider-
ing adopting the PaaS model may need to think creatively about financing,
 6
Waste to Wealth

10
potentially collaborating with financial institutions such as banks and insurers
to make it practically viable. That’s what Desso did when it teamed with De
Lage Landen International (DLL), a global provider of asset-based financing
solutions, to give customers a full-service carpet leasing option that includes
installation, cleaning, maintenance, and eventually removal. Teaming with
DLL enabled Desso to scale its circular economy solution beyond what it
might have been able to do on its own.18
When implementing the PaaS model, companies should carefully think
through the economics from both the company’s and customers’ points of
view. It can be difficult to get the economics right for lower-value products
because of the costs of managing the program and the relatively low-priced
options available for customers to buy and own. On the other hand, it’s
more difficult for customers to fund purchases for higher-quality, higher-
value products. Plus, such products will have greater residual value after use,
which the provider can capture through a new service offering or by reselling
them. Both factors make higher-value products more appropriate for a PaaS
model. Several big telecom companies have experimented with PaaS models
only to find them too costly for customers who didn’t see the value in paying
more to lease a phone instead of buying one. If these firms had pursued an
approach like bundling the phone with content sales or offering rapid replace-
ment cycles (like the Norwegian multinational telecommunications company
Telenor Group has done with its “Change” offering), they could have boosted
the perceived value.19
In cases where a product is used over a long period of time (such as with
appliances), the capital costs of depreciating the product over time (which are
typically higher for providers than customers, who might not even think in
terms of capital costs) and passing those costs on to customers can make the
overall offering too expensive. One solution can be to partner with a financial
institution and to mix the provision of the product with add-on services that
create value for both parties. This approach is often more appealing in the
business-to-business and public (e.g., infrastructure) area than in business-
to-consumer markets, but this may change as financial institutions become
more comfortable with this kind of calculation and risk. A solution suitable
for B2C markets is to enable a large number of users to share the product,
reducing capital – and program-management costs per user. One prominent
example of this is cloud computing; another one is a launderette.
There is a final unique characteristic of the PaaS model that deserves men-
tioning: It is a natural fit with most of the other circular business models.
According to our research and analysis, more than 80 percent of the businesses
 7
The Product as a Service Business Model

10
we studied that employ this model are blending it with one or more circular
business models. It’s often paired with the Product Lifecycle Extension model
to repair or upgrade products. There is also a natural synergy between the
PaaS and Sharing Platform models. A PaaS company can leverage a sharing
platform to maximize product access and availability. Car-sharing companies
such as DriveNow and car2go are good examples of this blended model:
They own the inventory, offer that inventory to provide a transportation
service and make it available through a sharing platform. These services are
sometimes called “floating car pools,” as the cars are not brought back to a
central location after every use. A floating car pool is more accessible than one
offered from a fixed location; and more convenient and available access to
products for customers means increased usage and revenues for suppliers. We
expect a future where not only cars but a wide range of products will “float
around” on models like this, which will drive down ownership rates and force
traditional suppliers to innovate.

Key Challenges to Scaling

A company will face many challenges when expanding its activities to include
producing, selling, owning, and servicing assets, and ensuring that they are
returned to either a fixed or a floating location when customers are done
using them.

As long as it’s not fully digitalized, a company will need to be able to physi-
cally work with customers and products when and where customers need
help. To handle geographically dispersed services, a company will need to
either team up with local partners, or create and deploy mobile service teams
that can respond to customer requests.

The bigger the PaaS operations, the more important it is for a company to
keep up-to-date information on the position and status of all assets. Imagine
how difficult it would be for car- and bike-sharing programs to operate effec-
tively if they didn’t know where their cars and bikes were at any given time
and whether they were available, in good condition and, where necessary,
filled up with fuel.

When it comes to getting products back, a company might be able to lev-

erage existing return channels. But it also needs to be able to ensure that
products are in good working condition and repair them if they’re not. For
take-back and repair, it’s not economically viable to have services in every
 8
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10
location. Some amount of centralization has to happen. Companies need to
strike a balance between establishing adequate local footprints and supple-
menting them with regional or global capabilities.

One example is PaaS companies that recycle material and remanufacture

components when products are no longer usable. Instead of processing small
volumes in many different locations, a company might want to pull products
from local markets and aggregate them into a centralized processing site to
capitalize on economies of scale. However, this adds logistics costs, so a deli-
cate balance must be struck. Again, technology is a solution. Our experience
indicates that a mix of local and central models might be applied by PaaS
companies. For example, remanufacturing loops could be performed (possibly
by a partner) in a centralized model, alongside recycling locally where small-
scale technology can be used for both reprocessing (e.g., turning waste plas-
tics into granulates) and reproduction (e.g., using the granulates to produce
spare parts with 3D printing technology).

A PaaS model also requires companies to deeply understand and connect

with their customers. There are many “hidden” costs related to maintenance
and end-of-life return when owning a product, and customers might
underestimate those when comparing ownership with a PaaS arrangement.
Companies must be able to clearly articulate the total cost of ownership in a
PaaS versus an ownership model, helping to make sure the customer is actu-
ally comparing “apples to apples.” They also need to be able to help custom-
ers optimize the performance of their products instead of convincing them
to buy new products.

Because a PaaS model generates value by enhancing products’ performance

in the market on an ongoing basis as opposed to selling them at a point in
time, providers must be able to effectively manage complex and sometimes
long-term contracts. They must also be able to define and measure the value
of those contracts to ensure the arrangements are profitable. That’s especially
true when offering a PaaS model requiring no upfront payment and one in
which the customer will pay for the product over time and possibly from
actual value generated. Philips’ agreement with the city of Washington,
DC, is a good example. As part of its “lighting as a service” offering, Philips
is replacing all the light fixtures – more than 13,000 of them – in the city’s
parking garages at no cost to the city. Under a ten-year maintenance contract,
Philips plans to make its money on a portion of the $2 million in annual sav-
ings the new light-emitting diode (LED) lights are expected to generate.20

As is the case with the Sharing Platform model, PaaS companies will find that
people often aren’t as careful with a product they don’t own, causing it to
 9
The Product as a Service Business Model

10
wear out more quickly. Landlords who rent out their properties know this all
too well. Companies should establish mechanisms that hold a user liable, such
as deposits, fines, mandatory insurance, bonuses, and points/reputation. In
the long term, educating users on how to properly use the products will help
minimize product abuse and promote a longer product life.

Finally, it will take some time to build out the regulatory infrastructure to
accommodate paying for products as a service. In the Netherlands, value
added tax (VAT) on leased products needs to be paid directly in full when
the product is initially “sold,” creating a large capital burden on PaaS busi-
nesses that need to pre-finance this expense. Thomas Rau, creator of
Turntoo, believes the tax system simply has to change. “It is completely
strange that people should pay taxes when adding value instead of paying
the tax when destroying value,” said Rau, whose company facilitates resource
management between manufacturer, supplier, and end-user through con-
sulting and other services. “Instead of paying VAT, people should pay value
destruction taxes (VDT). That would significantly change the behaviour of
firms.”21

Bringing the PaaS Model to Life

In some markets, such as Silicon Valley, there are enough PaaS options avail-
able to satisfy most life needs. Jeremiah Owyang, founder of the Crowd
Companies Council, is trying to live life as a service within his personal and
professional life, renting or borrowing goods whenever possible. Based in
Silicon Valley, he recognizes his access to products as a service is greater than
in other geographies, but he made fewer than 54 discrete purchases between
June 2013 and April 2014. He used services that range from clothing, food,
and transportation to office space and toys for the kids.22

It’s likely only a matter of time until the rest of the world catches up. As more
companies – such as Daimler, Philips, and Mud Jeans – aggressively adopt the
PaaS model, consumers and business customers will have many more options
to address their needs through a service rather than purchase.

Many companies are adopting the PaaS model today, from multinationals
creating new business units to start-ups funded through venture capital.
When PaaS models mature, we expect innovative start-ups and big play-
ers to interact to quickly scale them. That’s already happened with Avis’s
$500 million cash purchase of car-as-a-service pioneer Zipcar, which
has the potential to further disrupt the rental car industry. According
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Waste to Wealth

11
to Avis’s CEO and chairman, Ronald Nelson, the deal “will significantly
increase our growth potential, both in the United States and internationally,
and will position our company to better serve a greater variety of consumer
and commercial transportation needs.”23

Daimler: Providing Mobility as a Service through car2go

People will always need transportation. But not everyone finds private cars or
taxis practical, cost-efficient, or enjoyable. These individuals are prime targets
for car2go.

Car2go – launched in 2008 as a separate business unit of Daimler, the German

automotive manufacturer – gives customers instant access to transportation
without having to own a car or find a taxi. Users register for the service
online. Once car2go verifies the applicant’s driver’s license and driving history,
it sends the user a member card in the mail. Once registered, customers can
locate, reserve, and access vehicles through the mobile app, website, or by
phone.24 Rather than paying by the distance traveled, users pay by the time
used, with no additional charges for deposits, parking, or fuel costs, and no
recurring annual fees.

Rainer Becker, head of Business Development Asia-Pacific at moovel GmbH,

recalls that car2go was not launched purely with the intention of making the
world more green. It was a customer-focused, market-driven approach. The
objective was to see how Daimler could use its resources in an innovative and
efficient way as a reaction to global trends of future urban mobility and to
make commuting in cities easier and more attractive.25

Customers enjoy the convenience of being able to use the car for one-way
trips, picking it up from one location and parking it at the end of their trip
in any approved parking space. Customers are encouraged to help make the
model run smoothly through offers such as free minutes for using a prepaid
gas card located in the car to fill the tank if it is less than one-quarter full.
This optimizes the operating model’s efficiency by keeping the company from
having to dispatch resources to fill the tank.26

The company leverages its driving and customer data to enhance the service’s
quality and reliability. It knows where its cars are at any time and improves its
distribution system by adapting the allocation of cars to usage rates in specific
parts of the city. It uses vehicle breakdown information to see patterns and
conduct preventive maintenance.
 The Product as a Service Business Model

1
11
Social media is also very important to car2go, helping the company stay in
touch with customers and build a community of users who share experiences.
“Sharing has the kind of notion that I am part of something. I am part of
some kind of community, and I have a responsibility to the community,” said
Becker. He noted, for example, car2go would sometimes receive calls from
members who just happened to see a damaged car2go car, e.g. with a broken
window. “These cars are not just car2go’s cars. Members feel they are the
group’s responsibility too.”27

Critical to car2go’s success has been creating a service that is affordable,

flexible, and convenient. It makes cars quick to find, convenient to access,
and easy to drop off. This requires a delicate balance of supply with
demand, as profitability is driven by the number of customers per location
and the bookings per car per day. Car2go has found that acquiring active
customers takes time – sometimes one to two years for customers to fully
embrace the notion of car sharing. In some markets, the roadblocks are too
significant to manage. In May 2014, car2go announced it was leaving the
UK market after being in London since late 2012, because coordinating 32
separate authorities across different boroughs proved to be more difficult
than anticipated. Car2go failed to reach 10,000 customers, the scale it
requires to achieve the five to eight daily bookings necessary to make the
business viable. By contrast, at the time it left the UK market, car2go had
attracted about 110,000 users in Rome and Milan and about 70,000 clients
in Germany.28

Daimler has created a new revenue stream through car2go while contributing
to a less resource-constrained economy. With cities becoming more densely
populated and congested with automobiles, the car-sharing service reduces
the number of vehicles and parking spots needed in a city and uses energy-
efficient vehicles – which, of course, is good for the environment.

Car2go is innovating to meet customer needs and demands. As of December

2014, it had a registered user base of more than one million customers in
more than 25 cities across Europe and North America.29 In a measure of its
success, Daimler formed a subsidiary, Daimler Mobility Services, that covers
car2go and other related offerings, including taxi and carpooling services.
When announcing the move, Daimler noted some eyebrow-raising statistics,
including an estimate that car-sharing customers in Europe could increase
from 700,000 in 2013 to 15 million by 2020. Based on the “enormous market
potential,” the company set a goal to break €100 million in revenue within
24 months.30
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Philips: Revolutionizing How People Light their Buildings
While people generally don’t think much about getting electricity as a service,
many probably have not made the next logical leap: lighting as a service.
Philips is looking to change that.
Based in Amsterdam with operations worldwide, Philips is a €23 billion31 con-
sumer electronics giant selling light bulbs, healthcare equipment, and other
products. Its lighting business accounts for approximately 37 percent of the
company’s total revenue.32 The company has been one of the pioneers of
the LED, a bulb that produces light with far less electricity than conventional
light bulbs.
According to Philips, 19 percent of global electricity is used for lighting,
which equates to 1,900 megatons of CO2 released yearly. In the United
States, public and commercial buildings account for 60 percent of lighting
electricity usage, and 80 percent of buildings use out-of-date lighting equip-
ment.33 The company reports that energy-efficient lighting technologies
can cut costs by 50 percent to 70 percent, and intelligent controls can boost
those savings to as much as 80 percent.34 The company claims that the sav-
ings potential on a global level amounts to €128 billion and 670 megatons of
CO2, equal to the total emissions from 260 million cars.35 These are some of
the drivers behind launching Philips Lighting Services, which uses the PaaS
model to charge customers based on their usage while enabling Philips to
retain ownership of its lighting equipment.
The genesis of the Philips Lighting Service was in 2009, when Thomas Rau,
head of Amsterdam architecture firm Rau Architects and founder of Turntoo,
told Philips he wanted to change the lighting at his office – but he didn’t
want to buy lamps, cables, controls, luminaires, or other items related to
lighting. He told Philips:

I need so many hours of light in my premises every year. You figure out
how to do it. If you think you need a lamp, or electricity or whatever –
that’s fine. But I want nothing to do with it. I’m not interested in the
product, just the performance. I want to buy light and nothing else.36,37

The companies agreed on the level of service and types of lighting to use
in different places (e.g., cool light and warm light, etc.). Philips would be
responsible for paying the lighting portion of the electricity bill. That provided
Philips with the incentive to reduce energy consumption to a minimum. Every
reduction in energy consumption would increase Philips’ profit margin on this
business.
 3
The Product as a Service Business Model

11
Philips worked through an installation firm to establish the lighting at Rau
Architects. The company used LED lighting in the ceiling, and used a sensor
and controller system to dim or brighten the light based on motion or the pres-
ence of daylight. Early in the contract, the lighting system saved 35 percent on
Rau’s energy costs. Later, Philips installed smart energy meters that provided
details on energy consumption per room. That helped the company to cut
another 20 percent in energy costs to a total energy savings of 55 percent.38

Philips has the incentive to make the lighting in the buildings it services as
efficient as possible. Machine-to-machine technology is critical, as sensors
send data to smart meters which, in turn, send data to Philips for monitoring
and analytics. Advanced analytics help Philips improve its operations, letting
it do maintenance at the right time just prior to when the bulb is likely to
go out. Intelligent product data also allow Philips to improve its services and
adapt them to individual needs with limited investment.

“In addition to impending resource scarcity, we see a lot of competition in the

current model that’s based on large volumes and low pricing,” Philips’ CEO,
Frans van Houten, said.

We didn’t want to end up in a price war that, in the end, only has losers.
We think that by switching our business model from one focused on price
to one focused on total cost of ownership for customers, we’ll be better
positioned to maintain our market leadership in the lighting industry.
Selling light as a service is the most effective form of delivering value to
our customers and for us.39

But these are just the early days for Philips in offering its lighting products
as a service. The real payoff will come when it (or any other manufacturer)
rethinks its product. Lighting as a service hasn’t spurred Philips to reengineer its
lighting products yet. But it now has the incentive to create a highly efficient,
long-lasting product that is easily repaired and in which components are eas-
ily replaced – which, in turn, requires modular design. Philips is encouraged to
create products that deliver exceptional long-term performance versus creating
products that sell quickly and must be replaced often. Their “Green Products”
now comprise 51 percent of sales, putting the company well ahead of targets.40

Service at Scale

The PaaS model has been around for a long time in niche industries like car
rental, construction tool rental, and airplane leasing and servicing. Technology
 4
Waste to Wealth

11
and a new generation of financially strapped and environmentally conscious
consumers provide opportunities to take the model to a much grander scale
for many more products. As they do so, PaaS providers will have a big impact
on the environment, lengthening the life of products and making them less
environmentally harmful to make, use, and retire.

While the PaaS model is more prolific in the industrial segments of the econ-
omy – in fact, many industrial equipment manufacturers operate very mature
PaaS models – the model’s utility is increasingly evident in the consumer
market. We expect that as a generation of young people who increasingly
prefer access to ownership get older, the PaaS model will become a core part
of many companies’ businesses.
 III
io
n

Creating Circular
ct
Se

Advantage
 9te
r
ap

Circular Business
ch

Models: Evaluation,
Enablers, and
Ecosystems

The five circular business models not only prepare companies for a resource-
constrained future, but they also help companies understand customer behav-
ior and preferences in entirely new ways and provide competitive advantage
in the short term. Many companies are noticing competitors and start-ups
adopting these models, and some are painfully realizing that early adopters
of circular principles are beginning to dominate markets and win approval in
large customer segments.

Airbnb, founded in 2008, offered rentals of underutilized property across

190 countries in 2014 and had lodged 20 million guests in more than
800,000 listings since its start, showing jaw-dropping growth.1 Daimler’s
car-sharing business, car2go, which also launched in 2008, had 900,000
customers in November 2014.2 And electronics reseller Gazelle, founded in
2006, hit its $100 million revenue goal in 2013 in the $7 billion market for
consumer electronics “reCommerce” by leveraging the Product Life-Extension
model.3 Largely driven by Apple and Android smartphone trade-ins, Gazelle
announced in 2014 that it had accepted more than two million devices, pay-
ing out $170 million to one million customers.4

While start-ups have led the charge in market disruption through circular
business models, large multinationals are also making serious moves. Those
by Daimler, BMW, and Cisco (extending products’ useful life through
refurbishment and resale), Philips (offering “light as a service”), Amazon
(providing textbooks as a service) and Walmart (offering an in-store vide-
ogame trade-in program5) typify some of the initiatives large companies are
implementing.
7
11
 8
Waste to Wealth

11

Many factors are fueling these companies’ success, but it all starts with
mastering the basics: choosing the circular business model (or models) and
deployment strategy most appropriate for their business.

Picking the Right Model

Choosing the right business model and implementation strategy is vital to
making a successful transition to the circular economy. Several key steps are
typically involved.
 9
Circular Business Models

11
The first is for a company to truly understand how it uses resources. It needs
to know exactly where and what type of energy and materials end up in each
product and how customers use and discard those resources. In other words,
a company has to know where it’s vulnerable to resource constraints, and the
risks associated with those constraints. It also needs to know where in the
value chain (and in the company’s product range) resources aren’t used pro-
ductively due to wasteful production, use, or disposal. A scenario analysis that
models how various changes might impact the company’s income statement
can be extremely helpful. The study should be supported by tools for product
lifecycle and value chain analysis. This can help a company understand which
materials could negatively affect the business if supply dries up and weigh
that against availability of substitutes. Companies can then focus efforts
on improving resource productivity and finding ways to capitalize on the
improvement. In mapping out the context for a circular economy like this, it’s
useful to start with the four types of waste in a linear economy:

1. Wasted resources are materials and energy that cannot be continually

regenerated, but instead are consumed and forever gone when used.
2. Products with wasted lifecycles have artificially short working lives or are
disposed of even if there is still demand for them from other users.
3. Products with wasted capacity sit idle unnecessarily; for instance, cars
typically sit unused for 90 percent of their lives.
4. Wasted embedded values are components, materials, and energy that
are not recovered from disposed products and put back into use.

A company might focus its efforts in an area of the business where resource
costs are high, resources are at risk of becoming scarce, and the main value
chain inefficiency is in low product utilization and recycling. It could invest
R&D in exploring how products can be redesigned for cheap recovery, how to
take an active role in that recovery, and how the customer value proposition
can be changed to increase utilization rates. The “demand-side” dimension is
often overlooked, but it’s the best place to start when figuring out how to
change the value proposition. It’s typically not as effective to try delivering
the same offerings with slightly different material composition.

Companies can use the five business models as a guiding framework when
exploring how to transform resource use and value propositions to capitalize
on elimination of waste. The goal should be to “future-proof” the company
from impacts on revenue, cost, risk, and reputation. That’s accomplished in
two ways: by decoupling the company’s growth from constrained resources
at risk of becoming difficult and expensive to obtain; and by making sure
revenue streams are tied to the new circular way of doing things.
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12
The second factor to consider is which approach to take: the “pure” approach,
in which a single business model is chosen, or a blended one, in which two or
more models are used in concert.

Approximately 70 percent of the companies we studied that are successfully

employing circular business models are using a single model. Of the 30 percent
that blend models, about two-thirds involve two business models and the
remaining one-third engage three or more.

The pure approach, not surprisingly, is much simpler and easier to implement.
Start-ups often take this route: they lay the foundation for their business with
one model and, as the business scales, layer on other complementary models
as needed.

The blended approach, while more complex, unlocks greater value as a

company can control a wider scope of the value chain. This control lets the
company protect value upstream and downstream and ensures it can reap
the benefits of its investments. For instance, by designing products that
last longer, are modularized and are easy to reuse, a company can improve
resource productivity in a value chain. But the value of those investments will
mostly fall to the Product Life-Extension, Sharing Platform, and Recovery &
Recycling business models – so a company might want to have a play in all
three.

In a worst-case scenario, and one that’s all too common, a company takes a
supply-side-only perspective and develops great circular products using cut-
ting-edge material, but fails to launch a business model that can capture the
benefits from those performance improvements. Those benefits typically land
in the use and disposal stages of a value chain and, hence, are more demand-
side driven. Our experience is that customers are often surprisingly willing to
let companies take an active role in optimizing product use and return, but
that companies need to truly add value to this relationship to justify revenue
generation.

The blended approach is most likely to be used in two situations:

1. When businesses are active in multiple parts of a value chain (e.g., pro-
duction and sales), creating opportunities for synergies. For instance, if a
company both sells and produces clothing, it could use return channels for
reselling and recycling.
2. Where the Product as a Service model is employed. This model presents
a very strong incentive to engage other business models. For example,
if a company owns a product through its use phase until the end of its
 1
Circular Business Models

12
life, why not repair and remarket it or put it on a Sharing Platform? Or
if a manufacturer decides to open a direct channel to customers through
Product as a Service, why not also offer services for product life exten-
sion? Our research found that over 80 percent of businesses employing
the Product as a Service model are blending it with one or multiple other
business models.

Choosing the Right Approach

After choosing its model or models, a company has several roll-out options.
The right approach depends on many factors, including a company’s ambi-
tion, the severity of threat the company faces, capital available to invest, risk
tolerance, policy and regulatory context, and current capabilities.

In some cases, it makes sense for a company to start small and focused –
using a new model as a pilot in a specific area of the business and then
scaling it opportunistically. While this option reduces risk, it also limits
the extent to which the new model can positively impact a business. In the
worst case, pilots will suffer underinvestment and lack of ownership. In
the best case, a few high-potential pilots are identified and scaled with great
success.

In other situations – particularly those in which a company wants to quickly

become a leader in adopting circular principles or is facing an imminent threat
from resource scarcity or disruptive competitors – a company might want to
begin with a wide rollout. This does not necessarily mean revolutionizing the
original business model. Companies can simply give leadership in all parts of
the company a responsibility to explore circular business models and prepare
for change. This is a more risky proposition, but it can lead to far greater
benefits, more quickly, if done right.

A third option is to launch the new business model as a subsidiary or joint

venture with another company. This route, a “middle way between the other
two options, allows the new model to ‘go live’ without directly exposing the
core business to major risk or limiting the new business by existing norms and
interests.” On the other hand, a separate venture could escape the attention
of top management in the parent company, limiting opportunities for the
company to integrate circular economy principles into the wider organiza-
tion. It can also be more costly than working inside the current organization.
This option harbors a trade-off between freedom to innovate and willingness
to invest. And in the case of a joint venture, it signals a willingness to share
ownership with another company.
 2
Waste to Wealth

12 Creating the Right External Enabling Environment

Homework is the vital first step toward circular advantage. But to actually
bring the chosen model to life, a company needs to call in external partners to
fill gaps. Businesses typically won’t have all the capabilities and technologies
in-house to make this transition. Even once they’re many years into a circular
model, they still might not do everything themselves.

Many companies bring in external enablers – other enterprises that help com-
panies apply circular business models through related services. Enablers are
important to the rise of the circular economy because they contribute certain
services or capabilities more effectively. Enablers help companies reduce time,
cost, complexity, and risk as they implement a new business model.

Most enablers provide services in the take-back and logistics chain – sorting,
quality-controlling, and reprocessing products coming back to a company
from the markets. This reverse supply chain operation is where companies lack
capabilities and experience and where scale and scope are needed for the eco-
nomics to work. Most companies have focused for decades on trimming the
supply chain to market and not on getting things back (a high rate of returns
is hardly a sign of success), but the opposite is true in the circular economy:
a company actively seeks to get certain products back and runs a supply chain
in both directions.

Fashion retailer H&M offers a good example of how an enabler can fill the
gaps in logistics and handling capabilities. This outside help is key to the
company’s implementation of the Product Life-Extension and Recovery &
Recycling business models, which enable H&M to take back used clothing for
recycling or reselling. H&M already had a robust return-logistics capability,
moving excess inventory back to distribution centers to clear shelves for new
styles. Recognizing this capability could easily do double duty to transport
used clothing back for repurposing, the company decided to establish drop-
off points for unwanted apparel in stores.6

But that’s where H&M faced a challenge: how to sort the items coming
back? How to do quality control? How to decide what should go where
and make sure the materials are safe to reuse? The company had never faced
these questions before.

The answer came in the form of I:CO, which provides an end-to-end solution
for collecting, sorting, grading, and recycling textiles. It has collection points
in the United States and Europe and operates in more than 90 countries
 3
Circular Business Models

12
worldwide. The company processes about 700 tons of used items every day.7
H&M sells the used clothing returned to its stores to I:CO, which in turn either
resells them or recycles them into material to be used to produce other textile-
based products. By tapping into I:CO’s expertise, H&M became the first
fashion company to launch a global clothing recycling initiative.8 Company
representatives publicly state that the long-term goal is to reuse and recycle all
textile fiber for new use.9

Operating a flow of products back from markets can also benefit from
using the markets themselves as the enablers. The “crowdshipping” concept,
where a digital mobile platform is used to enable anyone with a vehicle to
take on shipping jobs, is currently most often applied to deliver products
to markets, but it can also be used to take products back from markets. Big
retailers often have a logistics network covering entire cities, where custom-
ers are constantly coming to and from stores. A “return chain” program could
leverage that crowd to collect and move disposed products back to stores or
even other drop-off points. Customers without their own cars could register
their need for a pick-up, and others could take the job on for cash or in-kind
compensation.
In addition to return chain management, enablers are emerging to assist
earlier in the value chain, providing services that help companies design prod-
ucts for more effective reuse and recyclability. Turntoo, for instance, works
with organizations to develop the design and business models for buildings,
parking lots, lighting and home electrical appliances that are sold on a perfor-
mance basis and are made of materials that can be reused after disassembly.

The advantage of Turntoo-designed products is that the manufacturer retains

ownership of the product and its raw materials. It takes full responsibility for
all service and maintenance during the product’s use, as well as the ultimate
reuse of the materials at the product’s end-of-life. Some examples of Turntoo
projects include working with a washing machine manufacturer to deliver
“washing as a service” to a housing corporation;10 partnering with several
companies to provide partial or entire office interiors as a service;11 teaming
with a leading lighting company to develop and market light as a service and
with another company to create modular buildings constructed from reused
and reusable materials.12

Other enablers are platforms that support circular activities. Recyclebank

partners with municipalities and waste-management companies to increase
recycling in their districts. The company rewards consumers with points for
recycling and other green actions, such as recycling household garbage,
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12
using energy more efficiently at home, reducing water usage, buying greener
products, and even walking to work instead of driving. The company also uses
its digital platform to educate consumers on green behavior. Consumers can
redeem their points for discounts and deals from more than 3,000 businesses.
Between 2004 and 2014, Recyclebank signed on 4.5 million members, helped
recycle approximately 1.7 billion kilograms of waste in the 300 communities
with which they partnered and provided members with $60 million worth of
rewards in 2013.13,14

TaskRabbit, an online and mobile marketplace, lets users outsource small jobs
and tasks to others in their neighborhoods. Users name the task they need
done and the price they are willing to pay, and a network of pre-approved
TaskRabbits (as of November 2014, more than 30,000 strong) bid to complete
the job. TaskRabbit’s main value is that it connects busy people who need a
little extra time with entrepreneurial people who want to make money.15 But
it also can be an enabler for the circular economy by making repairing and
maintaining possible for people who might not otherwise have the capacity
to do the work themselves. Big multinationals can lock in partnerships with
platforms like TaskRabbit to deliver cost-effective local services to support, for
example, a Product Life-Extension business model with services and upgrades.

A fourth type of enabler provides financial services that support the adoption
of circular models. That’s the role that De Lage Landen (DLL) plays. Part of
The Rabobank Group, DLL is a global provider of leasing, business, and con-
sumer finance solutions. Through its Life Cycle Asset Management (LCAM)
offering, DLL provides tailored financial services (such as operational lease,
second-life financing, extended usage, swapping of assets, and redeploy-
ment) to help effectively manage assets throughout their entire useful life.
According to Frits Engelaer, program manager for LCAM, DLL was inspired to
develop such solutions in the wake of the financial crisis, as customers began
to favor pre-owned equipment over new purchases to save money. “After the
crisis, we came to the conclusion that companies do not necessarily need
brand-new equipment for all of their applications,” Engelaer recalls, “espe-
cially when equipment is only used for a couple of hours a day, or in back-up
applications.”16

When considering enablers, it’s important to distinguish between those that

help companies actually apply circular principles and those that simply make
the current linear model more efficient.

Resource efficiency – doing more with less – can help make existing resources
last longer, which is important.
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But resource efficiency alone is never enough to move to a fully circular econ-
omy. Circular economy leaders Dr. Michael Braungart and William McDonough
stress the difference between eco-efficiency and eco-effectiveness17. While eco-
efficiency improves resource productivity, it remains stuck in today’s production
and consumption pattern and, in essence, makes the current linear model “less
bad.” Eco-effectiveness aims to create entirely new solutions that are designed
to restore the environment so human activity can have a beneficial impact on
the world. In other words, more efficient use of oil is good, but efficient use of
solar power is far better – and circular.

Expanding the Ecosystem

As new circular business models take root and companies’ ambitions expand,
some enterprises are moving beyond using a few enablers to handle a discrete
set of activities. They are beginning to look across their value chain to engage
a range of different customers, suppliers, and key partners in their efforts.
This is triggering the rise of powerful circular economy ecosystems that
are increasing the impact a particular business model or models have on a
company’s performance and, ultimately, on how the entire industry operates.

Interface offers a good example of an ecosystem formed around an existing

business.18 Long a pioneer of circular practices, and on a mission to achieve
its goal of zero negative impact, Interface created a network of circular busi-
ness partners. From return chain sourcing to installation practices, Interface
relies on its network of partners to help drive innovation and jointly develop
solutions to deliver on Interface’s zero-emission aspiration.

Interface is working with nongovernmental organizations (NGOs) in the

Philippines to collect used fishing nets that serve as a substitute for virgin
resources in the manufacture of carpets (and, as a bonus, reduce local waste
and have a positive social impact). The company also encourages suppliers to
look into recycled materials and request materials with a lower environmental
impact. Interface builds strong relationships with clients by offering a new
flooring model that is significantly cheaper for them due to higher durability
and the use of partly controlled recycling loops. Greater customer retention
and a growing customer base will offset fewer purchases per customer.

For their part, Interface’s distribution partners shifted their focus from selling
carpets to offering repair services as Interface rolled out its range of easy-
to-repair carpet tiles. These tiles reduced new carpet sales but increased the
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12
demand for repair and long-term maintenance contracts, benefiting these
partners that are paying back by recommending Interface.

Drinks manufacturer Carlsberg is another company that is building a circular

ecosystem – in this case, to amplify the effects of the Recovery & Recycling
model. In 2014, the company launched the Carlsberg Circular Community
with six global partners. The initiative is creating the next generation of
packaging optimized for recycling and reuse while, at the same time, retaining
or improving quality and value.19 “One of the projects is focused on making
our refillable glass bottles more visually appealing in hopes this will result in
the bottles being more attractive and thereby maintaining consumer appeal,”
says Simon Hoffmeyer Boas, the manager of the Circular Economy initia-
tive at Carlsberg. “Further, we want to change the attitude of the consumer.
This includes educating the consumer that used packaging is not waste but
valuable materials that can have continuous lives if treated in the right way.”20

While Carlsberg needs to develop new capabilities if it wants to eliminate

waste from all of its processes, the president and CEO of Carlsberg Group,
Jorgen Buhl Rasmussen, thinks the effort is certainly worth it. “As a business
case, it’s in the interest of consumers, as well as planners and society. It’s
important to set out some realistic targets. [Getting started] is always the
difficult part.”21

Carlsberg is already using solutions that reduce reliance on natural

resources. They include refillable glass bottles, which in some markets are
used more than 20 times, and beverage cans, which are infinitely recycla-
ble. In many markets, Carlsberg also sells its by-products from the produc-
tion process to nearby farmers or uses its wastewater to create biogas
and produce its own renewable energy. Along with its partners, Carlsberg
expects learning to be an ongoing component of the initiative, as it studies
the complexity in how packaging is returned and begins to understand the
importance of having an overview across all the streams. “In our project,
we are using output in a different way,” explained Simon. “Our vision is to
completely close the loop in our value chain, thereby creating a waste-free
society by optimizing our production processes and packaging to have the
same or higher value in the initial end-of-life – and enabling continuous, high-
quality upcycling.”22

Six founding members of the initiative already are on board. They include
Carlsberg’s suppliers of cans (Rexam), glass bottle coatings (Arkema Group),
glass packaging (Owens-Illinois), shrink wrap (RKW Group), paperboard
multipacks (MeadWestvaco Corporation), and PET kegs for draught beer
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12
(Petainer Manufacturing USA). The companies are using the Cradle to Cradle®
Design Framework – created by Braungart and McDonough with their
companies EPEA Internationale Umweltforschung GmbH and McDonough
Braungart Design Chemistry (MBDC) – to develop a Cradle to Cradle® road-
map and assessment of their products. This assessment is designed to reveal
whether products contain any chemicals or additives that would reduce the
value and quality of the materials. The targets are to include 15 partners and
to have a minimum of three products Cradle to Cradle® certified by 2016.23

President and CEO Rasmussen said the Carlsberg Circular Community dem-
onstrates the company’s ambition to be a frontrunner for circular economy
materials, as well as the importance of engaging key partners in achieving
that goal. “We want to build our resilience and prepare for future growth in
an environment of increased resource scarcity,” he explained.

And we want to develop solutions that benefit not only our business but
also the environment and the societies in which we operate. The packaging
initiative and the cooperation with suppliers represent a big leap forward.
By partnering with our suppliers, we can achieve far more than each of us
can do alone.24

Like Interface and Carlsberg, UK retailer Kingfisher is striving toward a world

with no waste. The company’s stated goal is to have at least 1,000 products
on its shelves with closed-loop credentials by 2020. A key component in
that goal is Kingfisher’s partnership with a range of related organizations
on circular initiatives – including creating new tools to measure closed-loop
innovation’s value to business. Kingfisher is also a founding member of the
European Resource Efficiency Platform, helping to shape EU policy to create
the right regulatory and business environment to support a circular economy.
And it has helped launch the Ellen MacArthur Foundation’s Circular Economy
100, a network of companies, innovators and regions designed to accelerate
the transition to a circular economy.25

One example of Kingfisher’s activism is Infinite: the first-ever worktop for

kitchens and bathrooms made from 100 percent waste sourced from both
Kingfisher’s stores and end-of-life DIY products. Infinite was the result of
collaboration between Kingfisher, Castorama France (the manufacturer of
Infinite), the independent chemistry research center Certech in Belgium,
waste recycler Veolia Environmental Services and composite wood manu-
facturers Océwood® (OCEPLAST). Infinite is 30 percent lighter than similar
products (making it easier to install and less prone to breakage) and more
water-resistant. And because it’s not made from virgin materials or harmful
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12
chemicals, Infinite has a much lower carbon footprint and preserves natural
resources.26
According to former Kingfisher CEO Sir Ian Cheshire, such efforts driven by
ecosystem collaboration and ecosystem strategy are critical to the circular
economy’s overall success. “[Our work] needs to be demonstrable to stimulate
innovation and practical [to accelerate] the shift from theory to real imple-
mentation,” explained Cheshire. “The more we can talk about the circular
economy aligning with real-life examples bringing quality to innovation, the
better.”27
The scope of circular economy ecosystems can range from local optimization
to global cooperation: It depends heavily on the offering that it is centered
around.
Local ecosystems typically form around services that require physical interac-
tion and products that need to be used immediately, are expensive to trans-
port relative to their value and do not require specialized equipment. Often
referred to as industrial symbiosis, local ecosystems may feature a group of
nearby organizations that work together to optimize the waste reuse process.
By-products that are shared to form an input for other organizations in the
ecosystem can include water, heat, gas, sulfur, and other chemical elements.
One example of such an ecosystem is Kalundborg Symbiosis in Denmark,
which features eight public and private enterprises in the Kalundborg area.
The group includes the world’s largest producer of insulin, Novo Nordisk; the
world’s largest enzyme producer, Novozymes; the largest sewage treatment
plant in Northern Europe; the largest power plant in Denmark; and the larg-
est oil refinery in the Baltic Region.28 Another is Tianjin Ziya Industrial Park in
China. It is the largest industrial park in North China among parks focused on
utilizing abandoned mechanical and electronic products, as well as the largest
collection and distribution center for recyclable materials and nonferrous metals
in North China.29
Four organizations in the Netherlands – The Port of Rotterdam Authority,
Rabobank Rotterdam, BIKKER & Company, and Van Gansewinkel – have
teamed up to establish a similar facility there: the Circularity Center.
According to these founding members, the new initiative is focused on
knowledge development and business development in the circular economy,
and is designed to help the organizations “reuse raw materials and mate-
rial components, as well as create new revenue models and accelerate the
transition towards a circular economy.” One of the first projects the center
will undertake is “Plastic to Oil.” A team of researchers will explore the
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12
establishment of a production location where plastic residual streams can first
be turned back into oil, and then back into plastics again.30

Global ecosystems generally form around opportunities that are not geog-
raphy-specific and that involve services requiring expensive and specialized
factories. For example, I:CO is at the center of an emerging global ecosystem
dedicated to transforming the textile value chain. In addition to its relation-
ship with H&M mentioned earlier, I:CO partners with a range of other com-
panies – including Adler, American Eagle Outfitters, Jack Jones, Puma, The
North Face, Max Shoes, and Volcom – to collect used shoes and apparel on a
global scale.31

Circular economy ecosystems do not only affect circular pioneers, their suppli-
ers, and partners. These ecosystems can also have a major impact on customers,
who will notice an increase in interaction points and a broader discussion
about circular economy principles around their favorite brands.

The only interaction between producer and consumer in a linear business

model is traditionally at the point of sale. In a circular ecosystem, consum-
ers’ interaction will occur with either the producer or its ecosystem partners
throughout the lifecycle of the product – in many cases, starting with product
design and ending with take-back offers. This means the relationship between
producers and consumers also changes. As in circular models, the incentives
for producers and consumers are aligned around resource productivity, there
is more space for interaction, and relationships can become closer and loyalty
can rise. As the ecosystem grows, whole communities of users might emerge
around it.

For community building, few companies can beat TerraCycle, a company

employing the Recovery & Recycling business model in a fascinating ecosystem.
TerraCycle engages more than 60 million volunteers in more than 20 countries
to collect and send in nonrecyclable waste.32 TerraCycle then turns the waste
into a variety of products and materials. Collection points include schools,
offices, community groups, and a range of other organizations as well as homes.
How does the company, which generated $25 million in revenue in 2013,
obtain its free labor force? Founder Tom Szaky said, “They just want to further
our purpose, our mission. Conventional business could never move people like
that. You wouldn’t want to get involved in helping Starbucks open up more
coffee shops for free.”33

TerraCycle’s ecosystem also includes more than 100 major brands in the US
and 22 other countries.34 Community building is also common for Sharing
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13
Platform business models leveraging online and mobile technology to support
activities.35

An ecosystem is also building around Google’s Project Ara, the effort focused
on developing and marketing a modular smartphone. Google is inviting
consumers to participate in the phone’s development by asking them to share
their insights and perspectives, which Google will use to shape the project’s
direction.36 This is a major departure from the traditional “secret” approach
to technology development that most companies adopt. Google has also
enlisted the help of an advocacy group to generate greater awareness of
modular phone development’s broader agenda.37

Assuming the initiative is successful, it’s not a stretch to envision how

Google’s relationship with customers and partners will evolve. A future model
might have Google supplying the modular phone, a host of third-party sup-
pliers offering innovative modular components compliant with Ara (akin to
a “hardware app store”), user communities in which customers can trade and
sell used modules, partners such as Techreturns,38 and retailers handling the
collection and return of end-of-life phones. By making sure it has a role to
play and money to make at each step, Google becomes a platform company
and increases its interactions with customers – all because it created and com-
mercialized a new customer value proposition for the smartphone, inspired by
circular principles.

Today’s ecosystems are company-specific and company-centric. However,

at some point, they might evolve to a broader industry-level solution. That’s
when the ecosystem will become most influential – providing a platform
upon which an entire industry can transform itself through the streamlined
adoption of circular business models.
 10
te
r

Driving the Technology

ap
ch

and Digital Edge in

Circular Advantage: Ten
Transformational Plays

New business models offer companies powerful options for embracing the
circular economy. But it would not be possible to scale many of these business
models without the support of innovative technologies. Digital innovations in
social, mobile, analytics, cloud, and machine-to-machine (M2M) communica-
tion are especially effective in connecting physical and digital channels, and
in connecting people with the internet of things. Just think of the Sharing
Platform business model (e.g., car sharing or asset sharing in industry) and
the Product Life-Extension model (e.g., maintenance, repair, and remarket-
ing). These are not new concepts, but where traditionally information costs,
manual labor requirements and collaboration hurdles created barriers to scale,
technology is now razing them. Sharing consumer goods or manufacturing
tools historically required customized solutions and lots of manual work to
exchange information, schedule handovers, track the position and status of
goods, and so on. Companies like Nexia and Innoverne are now automating
these logistics with remote-control software in the case of Nexia and, for
Innoverne, white-label software platforms that turn products into services and
run multistore, multichannel, end-to-end eCommerce, and reverse logistics.
Designing value chains to embed circular business models all the way through
to the customer’s use and return is a major new frontier for digital. It can rev-
olutionize service and flexibility, where the physical and digital worlds merge
and products start to flow between users, markets, and lifecycles at very low
transaction costs.

Circular economy leaders are powering their success with 10 disruptive

technologies that fall into three categories: digital (information technology),
1
13
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13
engineering (physical technology), and hybrid (a blend of the two). These
technologies are unlocking powerful new ways for companies to not only
build and run more resource-productive supply chains but also connect with
customers more broadly and deeply than ever before.

Digital Technologies

Digital technologies allow real-time information exchanges among users,

machines, and management systems. They’re intrinsically customer-focused
and provide the connections needed to maintain a relationship far beyond the
point of sale. They enhance remote visibility and control of assets, which are
especially critical for the Product as a Service, Sharing Platform, and Product
Life-Extension business models. By enabling dematerialization and altering
the way we interact with physical and digital assets, digital technologies can
transform value chains so they no longer need additional resources to grow.
The five most common digital technologies are mobile, social, cloud, M2M,
and analytics (see box).

D I G I T A L T E C H N O L O G I E S
D E F I N E D

Mobile technology is a combination of hardware, operating sys-

tems, networking, and software that gives users access to content
when and where needed. The most notable examples include
mobile phones and tablets. Mobile technology enables individuals
and businesses to access goods and services everywhere and
at any time, and is particularly important to the Product Life-
Extension, Product as a Service, and Sharing Platform business
models.
Machine-to-Machine (M2M) communication technology allows
different pieces of equipment or control centers to automatically
exchange information without human intervention. It helps to
monitor, maintain, and control assets remotely and offers users
enhanced performance and reduced cost through utilization of
real-time information.
Cloud computing hosts web-based content and applications
in a central location, making them available to many devices at
the same time without the need to install software or download
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Driving the Technology and Digital Edge in Circular Advantage

13
anything. Devices are connected over a network, typically
the Internet. The cloud is an important enabler of the Sharing
Platform and Product as a Service business models.
Social technology includes communication and interaction
tools that establish and maintain a connection among users.
Beyond well-known channels such as Facebook, Twitter, Weibo,
Whatsapp, Wechat, and LinkedIn, social technology includes
Internet forums, blogs, wikis, and collaborative software.
Big data analytics involve two components: big data is the term
for a collection of data sets so large and complex that it cannot
be managed or analyzed with traditional applications. Big data
analytics is the analysis of such data to extract insights that can
drive better business decisions.

Mobile

Mobile technology spurs adoption of circular business models by enabling uni-

versal and low-cost access to data and applications. As consumption behavior
goes mobile and online, it reduces the need for physical resources ranging from
paper and entertainment to stores. The digitalization of previously physical
consumption is clearly circular, but most importantly for the circular economy,
mobile devices enable smarter management of physical products in markets,
making mobile a core component of the Product Life-Extension and Sharing
Platform business models. This is mainly done in two ways:

Match supply and demand by letting users easily search for availabil-
ity, location, spare capacity and price of goods, and allowing them
to communicate with suppliers. According to Sharing Economy pioneer
Andy Ruben, there are $5 trillion of unused goods in closets and garages in
the US alone. “Our closets and garages, collectively, are the world’s biggest
warehouse,” says Ruben.1 Mobile technology not only enables people to
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13
unlock unused products for sale or lease, but allows others to know those
products are now available. Growing functionality in this space has enabled
users to search for nearby goods, locate them on a map, interact with suppli-
ers, arrange secure payments and more. Mercari is a Japanese resale shopping
app that raised $14 million in 2014. Since July 2013, less than a year after
launch, one million items were listed and 1.5 million people had downloaded
the app, which included functionality like item photography and instant
shipment tracking.2
As we wrote about in Chapter 8, another example is car-sharing platform
car2go, which allows customers using smartphones to locate nearby cars.
Similarly, Lyft allows users to share rides with nearby drivers via an app that
combines both users’ locations to match supply and demand. The platform
acts as a broker to unlock assets’ untapped value. Solutions like these are not
limited to B2C markets; they can also optimize the use of resources within a
company and address trade overcapacity in logistics between companies.
Simplify and improve the user experience through remote interaction
between customers, suppliers, and goods.
One key historical barrier preventing companies from engaging in how their
products are used and returned are the high costs of management and main-
tenance. If every time a product moves from user to user, someone from the
supplier needs to physically find the product, check its status, grant access,
and so on, the cost can make the service unattractive. Mobile apps combined
with other digital technologies like M2M communication and big data ana-
lytics solve this problem by enabling remote control, predictive maintenance,
mobile payments, and automated monitoring.

American broadband and telecommunications company Verizon released a

mobile share service in September 2014. The service enables a smartphone
to scan a QR code that remotely unlocks and accesses a product. The service
launched for cars, but it’s designed to eventually create mobile access to any-
thing from gardening tools to commercial storage, boats, and computers.3

As technology and software improve, one can easily envision markets where
mobile technology is used by anyone to access and use virtually anything at
any point in time. Companies can remotely monitor a large volume of goods
in the market and invest in repairs and maintenance only when needed, plan-
ning systems that minimize downtime and service interruption.

Continued advancements in mobile technology are driving a concentration

of functions into one device. A smartphone is already an all-in-one device,
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Driving the Technology and Digital Edge in Circular Advantage

13
serving as a calendar, camera, payment system, ticket, key, and a tool to check
one’s health status, to name but a few of its functions. And as more “stuff”
keeps moving into the digital realm, consumers will rely even more on their
mobile devices to access what they’re looking for, and companies to circulate
what people want.

Machine-to-Machine (M2M) Communication

Machines capable of communicating with one another are not new. M2M
technology has long been used in factory control systems and vehicle tele-
matics. But we’re about to reach a critical mass for mainstream M2M use as
wireless network coverage expands worldwide and emerging high speed and
capacity mobile networks provide the necessary bandwidth for everything
to be connected. Various studies have predicted that more than 300 million
devices will be connected in 2015 using mobile networks, and wireless con-
nectivity for M2M will grow at an annual rate of 25 percent to 30 percent.4
Technology innovation and new applications offer increasingly powerful
capabilities for M2M communications, while more cost-effective communi-
cation services and hardware make wireless M2M technology increasingly
affordable.

M2M technology is especially relevant to the Sharing Platform and Product

as a Service business models, as it allows companies to manage assets without
using costly field service, which has historically been a barrier to circular mod-
els. That’s what industrial equipment manufacturer SKF found when it began
offering customers various services to maintain, monitor, repair, and optimize
their assets throughout their operating life. “It’s critical that we’re able to
understand the condition of the system to anticipate when maintenance has
to be done, and to allow us to extend asset life,” said Magnus Rosen, portfolio
manager of Corporate Sustainability at SKF. “Sensors and software are espe-
cially important to help us detect the condition of assets.”5

M2M communication sends data from a product to the manufacturers’ man-

agement system. This allows manufacturers to remotely manage their products
and reduces the risks associated with offering performance-based assets
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13
(which is fundamental to the Product as a Service business model). When used
in this way, M2M communication generates considerable benefits for compa-
nies: It reduces overall service and maintenance costs6 by up to 30 percent,7
creates new business opportunities, and improves user experiences with existing
services (e.g., lighting that responds to the music being played in the environ-
ment). A 2014 study by Accenture and General Electric (GE) analyzed the
potential of the “Industrial Internet,” where M2M communication is used to
connect equipment, products, factories, and supply chains, combining with big
data analytics to drive efficiency and productivity. Eighty percent to 90 percent
of companies surveyed across eight industries indicated that this combination of
technologies was a top or top-three priority for the company.8 According to GE
Chairman and CEO Jeff Immelt, these improvements could increase global GDP
by as much as $10 trillion to $15 trillion over the next two decades.9

Cloud Computing

Dematerialization – the process of replacing something physical with a digital

alternative – has placed entire industries on the endangered species list (think
travel agents, music stores, and newspapers). Cloud computing is key to dem-
aterialization, along with mobile and social technologies. It lets companies
feed web-based content and applications to multiple Internet-ready devices
and moves customers to engage through social technology.

A company can let consumers shop or use services from anywhere at any time
by transferring data to them from the cloud. Consumers are attracted to the
time and cost savings that come with shopping from home – they don’t have
to go out to shop, saving time and eliminating stress, and the driving and
parking costs they otherwise would encounter.10 Hosting content and stores
from the cloud also makes it easy for a company to update content and func-
tionality with no effort from users.

Cloud services generally require less upfront investment and ongoing operating
costs than traditional IT.11 Online sales channels demand a lower initial capital
investment and lower maintenance or rental costs compared with physical
stores. Furthermore, dematerialized assets don’t involve physical stock and can
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Driving the Technology and Digital Edge in Circular Advantage

13
be continually shared as digital products. And digital products such as music
and movies are less resource intensive compared with their respective physical
counterparts, CDs and DVDs.12 The carbon emissions from digital music are
around 40 percent to 80 percent less than those involved in producing CDs.13

One of the biggest advantages of cloud computing is that it makes it easier

to offer tailor-made products whenever a customer wants them. So instead
of buying a CD, a consumer can buy specific songs or playlists. Spotify offers
dematerialized music in the form of a cloud-based streaming service. Spotify
users no longer have to buy physical CDs, and because they can access the
service from multiple devices, they don’t need any dedicated hardware. This
transformation has resulted in resource savings14 as the production and trans-
portation of physical products has declined.

Dematerialization’s impact on resource use can be significant. One European

publishing company found that a company publishing a 32-page newsletter
with a print run of 70,000 could switch to an online format and save 134 tons
of paper, 3.7 million liters of water, 269 barrels of oil, 551,040 kilowatt hours
of electricity, and nearly 14,000 kilograms of industrial waste.15

Social

While social media started as a way for people to find and connect with
friends and family, it has evolved into so much more. Social technology is
foundational to sharing. It reduces the cost of setting up sharing platforms
as it allows businesses to tap into existing networks such as Facebook. It
makes it cheaper and quicker for companies to receive consumer feedback
to help improve offerings.16 And it lets users facilitate transactions and
logistics on their own instead of through hired staff, which can be expen-
sive and cause delays. Most online marketplaces for used goods (notably,
eBay and Craigslist) would not work without this ability.

Social technology is also essential for securing trust among consumers. It links
people and builds communities where individuals meet, share experiences,
exchange product and service reviews, make recommendations, and link to
additional information. The social aspect is a prerequisite to facilitating trust
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across a sharing platform. One study shows that 73 percent of sharing start-
ups have social features and 53 percent are linked to Facebook.17 Spare to
Share is a start-up using technology and circular thinking at the core of its
business model. Through a mobile platform, the company establishes private
social networks within residential and commercial buildings. The networks
enable users to share skills and goods with neighbors and property managers
to increase resident engagement. According to the company, engaged ten-
ants are 35 percent more likely to stay, and 45 percent of tenants overall are
looking for more engagement in their buildings.18

Beyond these benefits, companies can rely on the user community to develop
the platform and offer ideas that help strengthen a product’s value proposi-
tion. Companies can easily reach potential customers and share information
through social media, creating opportunities to identify large and relevant
customer communities quickly. The technology helps companies effectively
target their marketing activities to specific groups based on their profile and
behavior. Perhaps most important, social technology lets users publicly review
a seller’s products or services, as well as other users, which reduces the risk of
a disappointed customer and an unpleasant customer experience.

RelayRides, which we introduced in Chapter 7, has extensively leveraged

social media to build its business. The company operates as an online
marketplace, connecting people who need a car for a short period of time
with car owners whose cars are available. The owner, car, and user are pro-
tected against physical damage up to the actual cash value of the vehicle to
a maximum of $1 million. RelayRides users can register using their Facebook
account, which enables RelayRides to make use of the users’ existing net-
works. To facilitate trust and safety, users can review one another, allowing
them to publicly “call out” someone who falls short of the community’s
expectations.

Big Data Analytics

In the circular economy, many companies will generate their revenues from
product use instead of sales, and growth will rely on how good they are at
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understanding and catering to product-use behavior. This means companies
need to monitor and analyze data in entirely new ways. Complex analytics
will be especially important for the Circular Supply-Chain, Sharing Platform,
and Product as a Service business models.
Big data analytics can give manufacturers insights into use patterns and user
requirements, helping them optimize asset management and customer propo-
sitions. Companies can better tailor offerings and revenue models to how prod-
ucts are being used, such as bundling a physical product with relevant add-on
services that make performance-based Product as a Service models more
financially attractive than a traditional make-and-sell approach. The ability to
predict user behavior based on historical data can make maintenance more effi-
cient, eliminating unnecessary use of financial, human, and natural resources.
And by analyzing user behavior, companies can better detect fraudulent activ-
ity and determine the best times to take certain risk-reduction measures – such
as avoiding making changes to assets during high-traffic periods.
Big data analytics is a critical component of Digital Lumens’ “intelligent
lighting systems” as a service offering. The Boston-based lighting solu-
tions company’s service combines LEDs, networking, and software into an
integrated system that reduces customers’ lighting-related energy use by
up to 90 percent.19 By analyzing user behavior and requirements, Digital
Lumens can provide optimal service while enhancing the product lifecycle
(i.e., the light bulbs are only used when required). While traditional analyt-
ics are sufficient for most buildings, large public buildings with different users
(e.g., airports) are more complex and generate vast amounts of data, making
big data analytics much more important.
In addition to opening up new dimensions to the producer–customer relation-
ship, big data analytics can, when combined with M2M communication, be
used to refine and optimize the running of equipment to support circular
business models and cut waste. Hi-tech farming company AeroFarms grows
food indoors and uses analytics to eliminate the need for soil and pesticides,
to cut water use by up to 90 percent, to increase yield up to 30 times that of
a normal greenhouse, and to fully circulate the use of nutrients. Plants grow
on a cloth in containers sprayed with a mist of nutrients and water, instead of
in soil. LED lighting powers the system and software monitors the status of
plants to ensure an optimal growing environment. Through analytics, the
plants are provided with their needs when they need them, and only in the
needed quantity. David Rosenberg, co-founder, circular economy pioneer,
and good friend of the authors, said in a discussion that “with our system
we can track the products through the entire supply chain. We can control
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14
the full input/output cycle and try to improve it at the finest level of detail
possible.”20,21,22

This form of hardware data collection, combined with software analytics and
automation, is being applied across many industries to eliminate wasteful use
of resources. As the costs of asset maintenance and optimization go down
with aid from big data analytics, the attraction of circular business models like
Product as a Service clearly goes up.
As a final point, open data collaboration can help drive innovation within
an industry or city. Accurate information on the status, use patterns, and
whereabouts of resources can be critical for optimizing the efficiency of an
entire system. One leading example of open data is “CopenhagenConnecting,”
an initiative of the city of Copenhagen to share a wide range of data on civic
elements as diverse as water, air, noise, weather, waste, energy, movement,
emissions, parking space usage, traffic, and asset location. All this data can,
the city hopes, be the basis of a wave of green innovation, including new
ways to optimize resource use.23

Engineering Technologies

While digital technologies are relatively recent phenomena, engineering

technologies driven by scientific breakthroughs have been around for decades.
Three types of engineering technologies are especially key to effectively
deploying circular business models: advanced recycling, modular design, and
life and material sciences (see box). These technologies allow new goods to
be manufactured from regenerated resources and offer cost-effective solutions
for collecting, returning, and processing goods and materials for recycling and
remanufacturing.

E N G I N E E R I N G T E C H N O L O G I E S
D E F I N E D

Modular design technology enables goods to be built up from

individual, often standardized components that can easily detach
and attach. This approach makes it easier and more economically
feasible to replace, repair, refurbish, remanufacture, and recycle
components. It also allows for easy and low-cost upgrades and
maintenance. Modular design technology plays a major role in
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the Product as a Service, Product Life-Extension, and Recovery &
Recycling business models.
Advanced recycling technology comprises technologies that
allow companies to recover and recycle materials from complex
sources, such as electronics. It also lets companies recycle mate-
rials that were previously difficult to recycle, including various
chemicals. Advanced recycling technologies are particularly
important to the Recovery & Recycling and Circular Supplies
business models.
Life and material sciences technology is concerned with the
chemistry of life, focusing on the structure and properties of
materials at the molecular or atomic level. Transforming struc-
tures at this microscopic level makes possible a whole new range
of opportunities to alter materials’ characteristics and create
desired properties. By enabling the creation of high-quality cir-
cular alternatives to traditional inputs, life and material sciences
technology is critical to the Circular Supplies and Recovery &
Recycling business models.

Modular Design Technology

Modular design technology is not only revolutionizing how products func-

tion but also the length and nature of customers’ relationships with those
products. When a modularly designed product breaks, only the defective
part is replaced or repaired, keeping the product relevant to its users longer
and extending its overall product lifecycle. Modular designs also enable com-
panies to keep pace with consumer expectations for continual upgrades in
capabilities and functionality (but not necessarily all-new physical devices).
They help companies move from planned obsolescence to constant iteration
as they add new dimensions and functionalities to goods through physical
add-ons.24
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Modular designs can also help companies open new markets: Remanufactured
and repaired products offer a relatively inexpensive route to lower-price seg-
ment market entry, reducing the need for costly initiatives to develop separate
product lines to serve that end of the market. Easy (dis)assembly also makes it
easier to control the product and reduce the risk of malfunction.

Xerox Corporation is a leader in incorporating design for remanufacture into

all its products. When a component breaks, modular design allows Xerox to
repair or replace only the broken part, effectively extending the product’s
lifecycle. Xerox also manufactures products from used components. A product
designed partly from old products may have 60 per cent of its parts by weight
reused.25 Customers get a lower price and Xerox realize several hundred mil-
lion dollars cost savings per year through reduced need for raw material to
make new parts, clearly a win-win situation.

Advanced Recycling Technology

While recycling is not at all new, it has benefited from a great deal of
innovation and some significant, rapid returns on circular economy invest-
ments. Gerrard Fisher, a special advisor at WRAP (an organization of circular
economy and resource efficiency experts), said, “The range of recycling tech-
nologies that have been developed to make recycling much more efficient is
increasingly serving as the basis for many companies’ move toward circular
business models.”26

Advanced recycling technology is often characterized by the use of sensors

that can identify and sort a product’s various components and materials.
This capability makes it financially feasible to effectively capture, separate,
and recycle more materials (such as urban mines, post-consumer plastics, and
textiles).

Chaparral Steel Company, located in Texas, owns and operates a techno-

logically advanced steel mill that recycles high levels of scrap steel. Chaparral’s
facilities and operating philosophy reflect the latest advances in electric arc
steelmaking, and the company has launched innovative projects to achieve
its environmental targets. One such project, Project STAR (Systems and
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Technology for Advanced Recycling), was designed to reduce resource con-
sumption and enhance the value of by-products.27 The project generates more
than $6 million in new revenues and $2.9 million in savings per year.28

As discussed in Chapter 8, at carpet manufacturer Desso, advanced recycling

technologies played an important role in the company’s development of
Refinity®, an innovative technique that enables Desso to separate the yarn
and other fibers in a carpet from the carpet’s backing – producing two main
material streams that can be recycled. After an additional purification stage,
the yarn is returned to yarn manufacturers to be used in the production of
new yarn.29

In the technology sector, advanced recycling technologies are the backbone

of one company’s business. UK-based company Dataserv Group relies on
such technologies to run a network of recycling facilities that handle end-
of-life products such as ATMs, printers, copiers, and computers, as well as
electronic waste from consumers and businesses. Equipment that is sale-
able is cleaned, serviced, and stored for resale; unsalvageable equipment is
sent to Dataserv’s Group processing plant for destruction and breakdown
to ecologically compliant materials for recycling. Dataserv’s technology
infrastructure includes an asset tracking system, which enables the company
to control and report on products by serial and part numbers; a web-based
controlling and reporting system that manages logistics and waste streams;
and an online solution that lets end users initiate the take back of their
products or waste.30

Life and Material Sciences Technology

Life and material sciences play a key role in driving input substitution at a
large scale. Ongoing innovation in this field will lead to new circular mate-
rial input options. It will also bring on new ways to alter outputs so they can
be used as inputs. One example: the conversion of carbon into Renewable
Methanol (RM). Advanced recycling technologies will drive new opportuni-
ties to collect, process, and reuse materials, leading to more interconnected
markets in which outputs are used across industries as inputs.
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We foresee businesses establishing more industrial symbioses so they can
capitalize on their circular efforts. Cross-industry businesses will work closely
together, sharing information and materials to establish linked loops – much
in the way Celtic Renewables does today. This Scotland-based start-up
produces a superior next-generation biofuel and other high-value products
from the by-products of biological industries. The company’s first target was
the £4 billion Scottish malt whisky industry, which Celtic Renewables sees
as a ripe resource for developing bio-butanol, a next-generation biofuel. The
company is redeveloping a defunct fermentation technology that will allow
it to combine the two main by-products of whisky production – “pot ale,” the
copper-containing liquid from the stills, and “draff,” the used barley grains – to
produce high-value renewable products.31

Some cement manufacturers are reducing their reliance on virgin resources

by using the waste from one industry – slag from steelmakers – to produce
cement. Molten slag, a by-product of iron production, is turned into dried,
fine granules, which then are used to replace a portion of Portland cement in
a concrete mixture. The result is stronger, more durable and more consistent
concrete. With slag cement, some cement manufacturers have completely
eliminated their use of virgin material (a 100 percent savings), reduced CO2
emissions by 98 percent, and cut their energy costs by 86 percent.32

Other advancements in life and material sciences technology could help cre-
ate materials with “self-healing” capacities, making it easier to keep products
in service for longer. It sounds like science fiction, but it’s not. Researchers are
already developing a new self-healing concrete that has a built-in “immune
system” to close cracks and prevent deterioration. The concrete contains
bacteria that if water enters will germinate and produce limestone to seal the
crack before any harm is done. Self-healing concrete can extend the lifecycle
and reduce the lifetime cost of a structure by up to 50 percent.33 Another
product where self-healing is being adopted is tires; punctures might soon be
a thing of the past.34

Hybrid Technologies

In many ways, hybrid technologies offer the best of both the digital and engi-
neering worlds, establishing a unique type of control over assets and material
flows. They allow a company to digitally identify the history, location, status,
and application of materials and goods while also supporting ways to physi-
cally manage, collect, treat, and reprocess them. The most promising hybrid
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technologies we identified in our research are trace and return systems and 3D
printing (see box).

H Y B R I D T E C H N O L O G I E S
D E F I N E D

Trace and return systems are digital and physical systems that
allow products to be traced and transferred from end users to the
manufacturer or a third party. These systems can often screen
and analyze products, interact with customers, and integrate with
payment schemes. As a result, they are critical to enabling cost-
effective collection of used goods at a large scale. In our research,
we found Recovery & Recycling, Product Life-Extension, and
Sharing Platform were the most common business models to
leverage trace and return systems.
3D printing is the process of slowly building a physical model
out of a polymer material, layer by layer. It relies on computer-
aided design (CAD) or other data file formats of a 3D image and
converts them into solid items, possibly with moving elements.
3D printing uses precise modeling technology, semi-automated
printing, and a variety of materials to create a final product.
While the technology is not yet fully mature, 3D printing has
been increasingly applied in Circular Supplies and Product Life-
Extension business models.

Trace and Return Systems

Trace and return systems support circular business models in a number of

ways. They make it more cost-effective to collect used products to service,
repair, recover, reuse, refurbish, or recycle them – for example, through effi-
cient and effective material sorting machines. They also make it easier to scale
reverse logistics by remotely evaluating goods. Systems with robust security
features enable companies to reuse outputs that contain sensitive information
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14
(such as computer hard drives). And they allow the owner to locate, keep
track of and control assets to ensure compliance with appropriate e-waste
regulations.

Modern trace and return systems make it possible to reclaim used products
and transfer them back to a facility for rebirth. That’s what g2 revolution, a
new breed of waste management company, does. The company has designed
five easy-to-use, cost-efficient logistical solutions called Recyclogistics to serve
organizations of any size in the US With its eco*trak® reporting system, g2 can
collect data to track all materials being recycled by location or customer, by
material type and by weight.35 It’s an approach that’s paying off: In 2014 the
company reported revenues of $5.6 million, a 238 percent growth over three
years.36 Similarly, innovation leader 3M has built a variety of solutions on trace
and return technology that enable companies to track, locate, and manage
assets – including RFID, GPS, radio frequency, electromagnetic, sensing, wire-
less communication, and mobile devices.37

3D Printing

Arguably one of the most-hyped technologies of the past few years, 3D

printing is steadily evolving to become a major player in the manufacturing
world. It has also become one of the major drivers of circular business models,
for several reasons. For one, it facilitates repairing by making it possible to
directly print suitable parts with the exact geometry. It also creates opportuni-
ties for circular inputs, inputs that are biodegradable or infinitely recyclable.
MakerBot, for example, is using PLA, a biodegradable plastic, in its 3D printers
that can be reused as an input.38

The technology spurs new production methods that can result in signifi-
cantly more durable products, which GE has discovered. GE is producing a
new 3D-printed jet engine fuel nozzle that is 25 percent lighter and five
times more durable than the current nozzle made from 20 different
parts.39 And significant resources can be saved during manufacturing since
3D printers only use the exact amount of material that is needed for the
product.
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One of 3D printing’s biggest contributions to the circular economy is that
it makes it easier to locally produce goods. 3D printing in local value chains
leads to quicker turnaround on product design, development, and time to
market. It also reduces costs for transportation, design, and development.
One producer of custom plastic injection molders, for example, reduced its
cost of manufacturing from $10,000 to $600 and production time from four
weeks to just 24 hours.40 3D printing lets companies mass-customize prod-
ucts on demand, reducing the need for large inventories and warehouses.41
They can also use more resource-efficient designs or even designs that they’d
previously been unable to produce. And because 3D printing can locally
reuse resources, it shields a company to some extent from volatile world
market prices.

With 3D Hubs, people with a 3D printer can even become producers for
other consumers. By sharing their 3D printer with those who don’t own one,
individuals not only improve their assets’ utilization rate but also foster the
development of an online community through which members can share 3D
printing experiences and potentially discover entirely new applications for
those assets.

Beyond New Technologies … to New Capabilities

New technologies have made it possible for companies to accelerate their pro-
gress toward the circular economy. Until recently, the tools simply didn’t exist
to support the kinds of business models we explored in the preceding chap-
ters – at least not to any scale significant enough to make an impact. Now,
the confluence of digital, engineering, and hybrid technologies is ushering in
a new wave of circular businesses that promises to only grow as technologies
evolve.

Yet still, with all their promise, technologies alone will not give companies
what they need to excel in their chosen circular business models. They must
be paired with a range of new capabilities across the organizations that are
vital to developing and institutionalizing new ways of working.
 11
te
r

Five Circular Capabilities

ap
ch

for Driving Value

As important as technologies are to implementing circular business models,

these models’ success hinges on capabilities that support the new ways of
working. Without them, companies attempting to adopt circular business
models face substantial risks of racking up additional or higher costs without
reaping new benefits.

Without the right capabilities, companies may face unnecessarily high

costs to recover and reprocess used goods or delayed time to market as
internal and external network governance fails to pull in one direction. In
our experience, one of the most common mistakes is designing products for
circularity but not adding capabilities or partnerships for managing prod-
uct end-of-life, resulting in failure to benefit from design improvements.
A second mistake is offering lifecycle services to the market without ensur-
ing capabilities and technology will add real value to continuous customer
engagement, resulting in slow customer uptake and low satisfaction and
willingness to pay.

Another risk is cannibalizing new sales as customers are given alterna-

tives that are not adeptly exploited. A company that offers more durable
products encourages customers to buy new products less often – which,
of course, translates into lower revenue unless the company (and its sales
staff) can provide related service-based offerings as a new revenue stream.
Similarly, offering access to goods means customers no longer need to
own the products – which, again, results in less revenue if an organization
doesn’t provide some other accompanying offering to counteract the drop in
purchases.
8
14
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Shifting to a circular business model will have substantial ripple effects across
an organization since it requires major changes in how companies operate.
We’ve found that five areas are especially affected, and they typically require
new capabilities for companies to successfully make the transition to circular
models and avoid major risks.

Strategy: Managing Complex and Collaborative

Circular Networks

In order to evolve, circular economy principles require penetration at an

organization’s highest strategic level. In the linear economy, which relies
on product and material throughput, profitability is greatest when com-
panies focus on a clearly and often narrowly defined core.1 But instead of
maximizing throughput, circular economy businesses aim for regenerative
product and material loops. Sourcing from return chains, growing presence
in used product markets, creating value from any waste materials along
the value chain and maintaining deep involvement with products in use
are just some of the strategic shifts companies make to evolve to a circular
model. Companies have to think beyond the traditional core and build
an ecosystem of partners that operate and monetize the entire product
lifecycle.

Gunter Pauli, the author of The Blue Economy,2 emphasized the need for
companies to look beyond their core businesses – in this case, to find new
ways to utilize waste. To illustrate his point, Pauli shared his encounter with a
senior executive at a global consumer products company that makes, among
other goods, coffee:

Pauli: How much coffee waste does your company produce each year?

Executive: 3.5 million tons

Pauli: What are you going to do with the coffee waste? What about growing
mushrooms?
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15
Executive: We are not in the mushroom business. But we have a solution: We
burn it.

“Cutting the cost of energy has nothing to do with reducing waste,” Pauli
commented.

Instead, looking for opportunities to create new value out of waste is

what we need. Farmers and entrepreneurs around the world demon-
strate that coffee waste can profitably be used to produce healthy food.
But today’s corporates focused on their core businesses will ignore these
opportunities.3

The Rationale for a New Strategy

There are a number of reasons a company needs to implement a new strategy
to fully benefit from circular principles. Reduced operating expense is one,
but often new revenue streams, a balanced revenue portfolio (less dependent
on constrained virgin resources and selling more physical goods) and closer
customer relationships are even more important. Consider that successful
companies often have a strong position and high market share in new sales,
but little to no presence beyond that initial transaction. Strengthening end-of-
life management to find new, cost-competitive recycled material is great, but
what about the link between initial sales and product disposal – where most
actual customer value is created?

Taking a circular business model to market generally requires changes along

the entire value chain – from product design to return chains and everything
in between. Undertaking every necessary activity in isolation would typically
push a single company beyond its capabilities and increase complexity and
costs. It’s better to collaborate with others to sync new product develop-
ment with innovative revenue models, customer engagement, and reverse
logistics – as long as the company doesn’t give away key activities and risk
undermining its market position.

A circular strategy typically brings on stronger (and more complex to manage)

innovation capabilities. Barriers, inefficiencies, and opportunities sometimes
hide in product development or research and development, while at other
times they’re found in retail, logistics, or aftersales and services. Companies
that are part of a network are less vulnerable to surprises, but they also need
to collaborate more, be more open and share successes. They tap into innova-
tion within their network to help retain control of every important step in the
value chain, ensuring access to expertise as well as critical data.
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Five Circular Capabilities for Driving Value

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Activities and Skills Important to Driving the Shift
Before shifting strategy, a company needs to perform a two-step assessment,
as follows:
STEP ONE: Determine how the circular economy will impact the
business ecosystem through these three driving forces:

1. Resource constraints: Assess current resource use in regard to possible

physical, environmental, and other constraints. How and where is the
revenue base exposed to rising and volatile commodity prices, regulatory
changes, customer preference changes, introduction of substitutes, and
supply shortages? What parts of the company, product mix, and value
chain are most vulnerable?
2. Customer value propositions: Map product, service, and business model
innovations in the industry to anticipate how circular approaches that
decouple consumption from constrained resource use could significantly
improve and transform value for customers. This is where a partner network
can mine for circular advantage. Examples of disruptive changes to cus-
tomer value propositions include dematerialization (e.g., streaming enter-
tainment instead of purchasing it), modularization (e.g., enabling hardware
upgrades piece by piece), decentralized circular energy (e.g., solar leasing
vs. fossil-based grid power), and service models (e.g., carpools instead of
ownership).
3. Technological innovation: Identify the most important technologies for
decoupling customer value from resource use. What technologies can be
leveraged and combined to introduce circular business models (e.g., mobile
and social to enable new sharing platforms)? How can a partner setup
secure control over those key technologies?

STEP TWO: Explore benefits from reducing these four types of linear
economy waste:

1. Wasted resources: What nonrenewable and hard-to-recycle energies and

materials are used today? Where are the greatest opportunities to substi-
tute other inputs? Should the company produce these substitutes in-house
or partner with others to secure supply? Can the company make money
supplying these regenerative resources to others?
2. Wasted lifecycles: What is the difference between potential and actual
product lifecycles? How can products be redesigned to create customer
value over a longer period of time without breaking down or going
obsolete? Can new service and revenue models make extended lifecycles
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15
commercially viable by monetizing the installed base for products over
demand for new products?
3. Wasted capacity: What is the utilization rate of the company’s products
today and how does it differ between markets and customer segments?
Where are the biggest opportunities to decrease idle capacity and mon-
etize increased use?
4. Wasted embedded values: How are products disposed of? Are they
recycled, incinerated or sent to a landfill? What material could be brought
back into production, and where can most value be recovered – back
into the company, the larger industry or a different industry altogether?
Should the company engage in an open loop with partners, or an internal,
closed loop?
This initial assessment will help a company understand how the underlying
drivers of the circular economy will likely affect the business. It will also help
the company see how applying certain circular principles could help it address
these drivers. And it can identify the business opportunities that circular prod-
ucts or services offer and prioritize implementation actions.
The assessment results can also help the company determine whether any
partners are necessary to help support the new strategy, such as a waste
specialist to establish and operate a return chain, a customer engagement
specialist to build momentum or product design experts to transform offer-
ings. A beautiful example of a circular network is the partnership between
outdoors-wear manufacturer and retailer Timberland and tire manufacturer
and distributor Omni United. The two companies have teamed up to jointly
assess circular economy opportunities and identify sources of waste they can
eliminate and monetize. The result? Omni United developed a line of tires
designed to be remade into footwear outsoles at the end of their lifecycle.
The tires use a rubber formulation that enables a higher value offset – into
shoes – than conventional landfilling or waste-to-energy disposal. Tire retailers
are a part of this circular network; they will establish a dedicated return flow
of Timberland tires as well as a network of recycling firms. Most important,
this is not a limited niche launch but a product range with more than 90 dif-
ferent tires, able to serve approximately 75 percent of North America’s pas-
senger vehicle market.4
The importance of internal collaboration and circular networks should not
be underestimated. While adoption of circular models typically requires a
broader involvement in the value chain externally, internally it often means
involving a set of organizations and people not used to working together.
For example, product development, supply chain, retail, and logistics would
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Five Circular Capabilities for Driving Value

15
have important roles in a program involving one or more product lines and
divisions. From our experience, strategically aligning and agreeing on the
focus as well as ownership, mandate, and budget within the company is not
a small challenge. The benefits, however, can be big. In addition to progress
on implementing circular models, other forms of innovation and competence
development typically come as a welcome side effect from these new internal
networks.

New skills will also be required for this strategic shift. Every circular economy
model calls on companies to develop their skills in determining which activi-
ties to keep in-house and which to outsource. They will also need to learn
how to manage an extensive set of partners. Our research and experience
show that new skills in partnership negotiation and project management,
standards, and data sharing, and aligning customer-facing activities are
especially important.

Focus on: Renault

French automaker Renault is a leading example of a company that made a
strategic shift to the circular economy and built the network necessary to sup-
port that new strategy. It featured three complementary companies working
to help Renault embrace circular principles: Renault; INDRA, a pioneer in
automotive recycling; and Suez Environnement/SITA, a specialist in global
waste management and recycling.5

Renault’s Jean-Philippe Hermine6 contended that cars are a perfect fit for
the circular economy for two reasons: Investment costs are high and material
input prices have risen and are highly volatile. Hermine, vice president of stra-
tegic environmental planning at Renault and CEO of Renault Environment,
said the company and its affiliates are now trading as much metals through
return chains as what Renault directly purchases for its manufacturing
activities. When recalling the shifts Renault made in its pursuit of the circular
economy, Hermine says a major step was building up new capabilities and
competitiveness levers, especially in processing metals and plastics. They also
offered new services, including reused or remanufactured parts for repair. This
is where the joint venture with INDRA and Suez Environnement/SITA plays a
key role. By pooling their skills and resources, the three companies can process
end-of-life vehicles and production wastes more effectively.

The companies are putting in place the resources necessary to meet an ambi-
tious objective by 2015: to recover 95 percent of each end-of-life vehicle by
weight. To achieve this, they are pursuing several joint initiatives as part of
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ICARRE 95® (Innovative Car Recycling 95%; a Life + EU-founded project),
including increasing the reuse of products and raw materials in existing
processes; developing new processes, particularly in recycling the materials
from end-of-life vehicles; and cooperating actively with all the players in the
automotive industry.

The efforts are already paying dividends. Its return chain-metal trading is
effectively hedging commodity risks and making the company highly “circu-
larly integrated” – perhaps the most circularly integrated car company in the
world. And remanufacturing, the largest of the company’s circular economy
initiatives, has grown into a €130 million business with attractive margins.7

In the longer term, Hermine expects Renault’s commitments will result in

similar partnerships worldwide, which in turn should spur the development of
other environment-linked activities.

Innovation and Product Development: Designing

for Many Lifecycles and Users

Traditional product design in a linear economy faces a dual challenge: how to

satisfy consumer appetite for new products while keeping upfront costs low
to maximize the target market? To meet this challenge, a company’s innova-
tion and product development approaches often focus on winning the market
with new releases in ever-increasing product cycles, with more emphasis on
production costs over operating costs. When adopting circular principles, this
focus has to change to incorporate a more complex and “longer” perspective.
In addition to attracting customers and making margins on new sales, prod-
ucts must retain their value and not create waste and liabilities over time, by
being designed with more than one user and lifecycle in mind.

The Rationale for New Innovation and Product Development

Capabilities
At its core, the circular approach is two-fold: keep products in productive use
for as long as possible and maximize their potential value at all times. It’s easy
to see how this makes sense in a world of increasing scarcity of the resources
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Five Circular Capabilities for Driving Value

15
needed for production. A company needs to keep products in use for longer
and offer ongoing upgrades, spare parts, services, and take-back to increase
their usefulness to customers – to “sweat” their install base. Alfa Laval,
a world-leading heavy industry company, discovered their market opportunity
in aftersales was up to seven times greater than that of new sales.8 For every
dollar they earn from selling equipment, seven can be gained from reducing
wasted capacity and wasted lifecycles. Add to that component and material
recycling at end of life, and you’ll have a disruptive new business model. For
resources companies, the challenge is to stop supplying energy and material
predestined to be used once, never intended for cost-efficient regeneration,
and instead market supplies that can be born again.

This all requires capabilities to define, measure, track, and capture value in
new ways. It’s easy to see how an extended collaboration between product
development, sourcing, sales, and aftermarket is needed. Organizations
might need to revisit their governance model to drive the right internal
behavior. It can be challenging, for example, to transform a sales organiza-
tion used to selling products into an organization that instead sells lifecycle
solutions and services – especially if, as is often the case, those services have
previously been seen as cost-centers only, or as a support system for new sales
rather than a standalone business on its own merits.

The cost of transforming products from one life to the next and transferring
between customers is a natural concern given this new view on value creation.
By intentionally designing products for many lifecycles and users, companies
will have an incentive to keep costs of transforming and transferring low. This
setup will also drive innovation and new business models. A simple example:
If it’s easy and cheap to replace components and parts, more component and
parts upgrades will be developed.

Furthermore, tracking, tracing, maintaining, upgrading, remanufacturing, and

recycling products will generate useful data on customer behavior and prefer-
ences. Companies have an opportunity to use the insights derived from that
data in product development and innovation to create new offerings based
on revealed (as opposed to stated) preferences.

Activities and Skills Important to Driving the Shift

The UK-based RSA (Royal Society for the encouragement of Arts, Manuf-
actures, and Commerce)9 has identified four models for circular design10:

1. Designing for longevity, in which products are designed to have a long

lifespan, extended through user upgrades and repairs.
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2. Designing for leasing or service, in which products are designed into a
service business model, requiring higher design specifications and materials
that increase product life and durability.
3. Designing for reuse in manufacture, in which products or their compo-
nents are developed so they can be taken back for reuse or to be rebuilt for
resale.
4. Designing for material recovery, which recaptures material through
new system designs that guarantee a quick flow of the product into their
material stream and back out as a recycled raw material.

Combined, the four models ensure that companies consider both the supply
and the demand side of the circular economy. In other words, they make sure
resource use and product designs are optimized for return and regeneration
and that products are optimized for high utilization and long lifecycles. Total
lifecycle revenues is a key aspect, as is an analysis of the environmental foot-
print and toxicity and the optimal renewability of material mix (for example,
weighing the differences among recycled plastic, biopolymers, conventional
plastic, and other suitable alternatives).

A lifecycle approach to innovation and product development typically follows

this flow:

1. New concept development, taking each of the four circular design models
above into consideration.
2. Selection of low-impact materials, increasing the use of renewable, recycled,
and recyclable materials.
3. Reduction of overall material use by reducing weight and volume (including
packaging) and reducing the energy required for transportation and storage.
4. Optimization of production techniques in regard to both energy and
waste, striving for zero waste and circular manufacturing. (In one famous
example, a textile mill adopting circular production techniques managed
to make water flowing out of the mill’s production line cleaner than the
water coming in.)11
5. Reduction of resource demand in the user stage to drive down operating
costs and enable reusability.
6. Integrated end-of-life management and logistics to ensure low costs for
transferring disposed products either to a new user or back into production.

Focus on: Mud Jeans

Dutch denim brand Mud Jeans demonstrates how a company can conceive
a product from a circular point of view, using innovative principles to drive
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product design. The situation is particularly unique in that Mud Jeans’ jeans
are leased to customers, rather than purchased outright, meaning the jeans
have to be built to last through multiple lifecycles.

One of the key design considerations is the use of recycled materials. The
company switched to recycled cotton to address the environmental problems
and costs associated with producing virgin cotton. It’s currently using about
30 percent recycled cotton, with a goal to increase that to 50 percent. As
a result, the product needed to be designed in a way that recycled cotton can
be used – a considerable challenge, as recycled cotton is less consistent than
virgin cotton.

Mud Jeans offers free repair service for jeans during the leasing period to
extend the products’ useful life. To minimize the need for repair – and keep
such costs low – the jeans have to be designed to be tear- and wear-resistant.
Reusability is also a big concern. Mud Jeans refunds customers their deposit
as soon as they return their product. The jeans must be as reusable as possible
for Mud Jeans to make the economics work (either by repairing/restoring
and reselling them or by reusing them as a substitute for virgin material via
recycling).12

Once converted to clothing, the typical garment’s life is less than three years.
Extending that life by only one-third through design and usage interventions
can reduce resources used by 20 percent – in clothing supply, laundry, and
disposal.13

When Mud Jeans was founded in 2008, the company began as a fashion
business offering only clothing made from environmentally friendly materi-
als and fair-trade sources. But they found that sourcing organic cotton was
very challenging, as there was relatively little available on the market. This
drove the company to introduce a lease-jeans concept in which Mud Jeans
could maintain a level of control and make sure that when a product is
at the end of its life, the company can get that organic cotton back for a
new pair of jeans. The company wanted to close material loops and create
cradle-to-cradle jeans while moving the fashion industry from sales to service
provider.

Mud Jeans has found that organic cotton and fair trade appeal to a certain
set of customers; others are attracted by the cost of leasing versus purchase.
The retail price for jeans of the quality used would have been somewhere
around €130. Leased jeans can now instead be ordered online, with custom-
ers signing a 12-month contract. They then pay a €20 deposit and a monthly
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15
subscription of €6 per pair of jeans. After the lease expires, customers can
return the jeans, swap them for another (€10) or renew the lease for another
four months, after which the customer will own the pair.14

Mud Jeans had more than 1,500 leasers using their jeans in July 2014. The
company hopes to eventually reach one million leasers. To get there, it has to
overcome a conceptual barrier in a product category that’s not used to being
leased. According to Bert van Son, CEO of Mud Jeans, the company’s goal is
for people to say, “I am wearing Mud Jeans and I don’t own them, and that
is cool.” He believes that when a customer is leasing jeans, he or she is also a
bit of an entrepreneur. “It is something new, and consumers have to change
their mind-set to break out of traditional schemes and do it.”15 As one of the
first movers in the consumer fashion industry, Mud Jeans has received signifi-
cant media attention, which has helped to get the concept of leased jeans and
the Mud Jeans brand up and running.

Sourcing and Manufacturing: Circular Supplies

All circular business models need a consistent supply of high-quality, pure, non-
toxic inputs that are fully renewable, biodegradable, or recyclable. A company
like IKEA, which has committed to using 100 percent renewable or recyclable
plastics by 2020,16 must be able to source “circular supplies” in large enough
volumes of predictable quality. This requires some key capability shifts within
sourcing and manufacturing.

Gunter Pauli stressed that procurement plays a pivotal role in the transition
toward the circular economy. Companies should aim to only purchase prod-
ucts that are optimized for circling indefinitely. Using waste from the mining
process as inputs to paper production, Gunter explained, not only reduces
costs and protects the environment, but it also results in a product that is
eminently more recyclable than tree-fiber-based paper.

On the production side, the manufacturing process must be able to accom-

modate a wide range of inputs while protecting resource value and quality
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throughout. The manufacturing organization must also be able to quickly
develop ideas for how it can use a by-product to produce a new high-value
product – such as what cement-industry players are doing by using slag waste
from the steelmaking process to produce cement.

A successful play in sourcing and manufacturing might, over time, mean that
the dominant share of resource use in a company comes from unconstrained
resource bases such as waste streams or sustainably sourced renewables. These
provide a hedge against commodity risks and also a more diverse, heteroge-
neous set of inputs, creating a need for capabilities to both identify and use
these new resource flows. Perhaps the most important aspect here is the
capability to upgrade or “upcycle” waste streams. This is where companies can
find an arbitrage opportunity by securing supply of a low-value waste stream
and putting it back into high-value production. We have seen examples of
companies increasing material value 10 times or more through opportunities
like these.

The Rationale for New Sourcing and Manufacturing Capabilities

Being able to identify and capitalize on circular resource flows is critical for
several reasons:

Reducing the demand for virgin resources lowers a company’s exposure

to resource scarcity and volatile world commodity prices. The flexibility to
use different types of resources, both virgin and return-chain-sourced, also
reduces supply risks.
A company can differentiate itself in the market by using circular (possible
to regenerate over time), nontoxic inputs that are fully renewable, biode-
gradable, or recyclable.
Substituting linear resources for circular supplies produced from waste
streams or renewable sources can reduce costs.
New revenue streams are created when previously considered waste and
by-products find a use in creating valuable products.

Activities and Skills Important to Driving the Shift

Companies looking to embrace circular business models must assess the envi-
ronmental footprint of current materials and potential alternatives. Upstream
in the supply chain means they need to consider their supplier landscape
and evaluate suppliers of alternative inputs (including recycling companies).
Downstream, they need to analyze their current waste flow to identify
opportunities to reduce waste or to reuse it in value-adding ways. Companies
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16
should also set up a monitoring system that lets them trace waste and by-
products on an ongoing basis.

Employees will have to augment their current skills in using lean principles to
reduce waste with a new mind-set: Outputs should not be seen as waste with
no value, but as something that could be used productively in other ways.
Consider the employees at European energy company Vattenfall. They found
a way to use fly ash residues in incineration plants in Denmark as valuable
inputs into construction material production. Such innovative thinking about
waste generated a huge return for the company, turning an annual waste-
treatment cost of approximately $33 million into an almost $4 million annual
revenue stream.17

Sourcing and manufacturing professionals also need to collaborate extensively

with their counterparts in other areas of the organization and with other
firms to find innovative ways to use a wider set of inputs, both virgin and
return-chain-sourced.

Focus on: Starbucks, SUPERVALU and Kimberly-Clark

Starbucks Corporation shows how an innovative approach to procurement can
pay big dividends. Working with the Japanese company Menicon, the coffee
giant developed a solution to the problem of what to do with Starbucks’ dis-
carded coffee grounds. Instead of simply composting the grounds, Starbucks
and Menicon turn them into “bean cakes” which, when fermented, turn into
feed for cows that enables the cows to produce higher-quality milk. The circle
is completed when Starbucks purchases the milk from farmers for use in some
of the company’s outlets in Japan.18

Creative thinking about new ways to capitalize on resource flows has also
benefited US grocery chain SUPERVALU. Through its Zero Waste Program,
SUPERVALU hopes to ultimately achieve zero waste throughout the enter-
prise. The retailer appears to be well on its way to accomplishing that goal. In
one year alone, the program enabled SUPERVALU to reduce its landfill waste
by more than 28,000 tons compared with the prior year, reduce garbage costs
by $3.4 million and generate more than $36 million in recycling income.19

In Latin America, consumer products manufacturer Kimberly-Clark Professional

(KCP) has launched a “waste to finished product exchange,” in which the
company trades recyclable secondary fiber generated by other companies for
finished KCP products. Part of a broader focus at Kimberly-Clark on preventing
waste and maximizing the value of secondary materials, the initiative helps
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Five Circular Capabilities for Driving Value

16
the company secure a more reliable supply of fiber for recycling and use in
the manufacturing of its products. The program has resulted in more than 360
annualized tons of secondary fiber being collected from 27 participating cus-
tomers, and is in the process of being rolled out to other countries in Central
America, the Caribbean, and Andean region.20

Sales and Product Use: Continuous Customer

Engagement

To this point, we’ve focused on internal capabilities needed to adopt circu-

lar business models. Of course, critical capabilities are also required on the
external side. The biggest change is that companies will need to embrace the
concept of continuous customer engagement. Instead of focusing on one-off
product sales, a company pursuing circular principles has to engage customers
on an ongoing basis, providing services and helping users maximize a prod-
uct’s utility across its lifecycle. Things like establishing trust and encouraging
responsible product use and return or disposal at the end of a product’s life
will become must-haves.

After-sales service will need to play a major role in managing the products’
lifecycle. Firms need capabilities that enable them to continually keep track of
assets, optimize products’ physical performance and return, and report on a
product’s impact while in use.

The Rationale for New Sales and Product Use Capabilities

Continuous customer engagement benefits a company in several important
ways. For starters, it gives a company a much deeper understanding of
customer needs and actual preferences – insights that it can use to gener-
ate new revenues from lifecycle extension products and services. It also
helps companies enhance their brand image and increase market share – for
example, by attracting new customer segments that value the convenience
of services-based delivery over asset ownership. And staying close to custom-
ers helps companies encourage them to return the product at the end of its
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16
life. This helps ensure companies have access to sufficient volumes of quality
end-of-life products from which they can recapture useful components or
critical material fractions. From there, companies can reduce manufacturing
costs by using recycled parts and shrink costs to serve by optimally managing
spare parts.

Activities and Skills Important to Driving the Shift

A company’s relationship with its customers is vital to its success and growth.
It’s critical that a company’s shift to a circular model will not negatively affect
that relationship but, rather, enhance it. That means a company has to excel in
five key customer-centered activities:

1. Understanding requirements: Companies must be able to use research,

customer feedback, social media, and market data to identify barriers and
opportunities in the product’s use phase as well as at its end-of-life return,
focusing on the customer’s “real” wants, needs, and use.
2. Innovating for the use phase: Particularly important to the Product Life-
Extension and Recovery & Recycling models are activities related to devel-
oping and taking new offerings to market. This includes conceptualizing
new products and services that add value to product use. Companies need
to define the right governance, KPIs, organizational ownership, and iden-
tify alliances and partners. Being sharp on the customer value proposition,
being able to communicate it in a meaningful way and finding relevant
ways to monetize use-phase offerings are all vital components.
3. Strengthening connection and data access: Customer communities and
collaborations are vital to a company’s ability to maintain close relationships
throughout a product’s lifecycle. They help a company gather data and user
behavior feedback used to drive future product and service development.
4. Optimizing spares management: Companies need to implement a spare
parts management strategy around their new offerings, determining which
new or refurbished spare parts to offer and how to reduce the costs of fault
detection and field service.
5. Managing channel partners effectively: A company needs to collabo-
rate with channel partners (retailers, dealers, and distributors) to provide
effective after-sales service and engage their partners in new business mod-
els and return chains. That includes finding ways to encourage customers
to perform selected tasks, such as return logistics to distribution centers or
transferring products between users in shared-use offerings – in the same
way that eBay puts responsibility for managing transactions and shipping
in customers’ hands.
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Sales, marketing, and service professionals’ skills must evolve in concert with
these new activities. For instance, sales and marketing professionals need to
be able to foster greater trust among customers to shift from one-off sales to
continuous engagement. They must also be able to collaborate with channel
partners to develop access to customers and products in the market. Similarly,
they must be able to understand the concept of asset lifecycle management,
which generally requires them to become much more involved and knowl-
edgeable about customer behavior and context. And they must be IT-capable
so they can analyze use-phase data to draw conclusions about optimal
engagement tactics and service development.

Focus on: SKF

Industrial equipment manufacturer SKF Group transformed its business from
product- to customer-centric as it adopted circular principles to focus on asset
efficiency and product life extension. With more than 100 years of experi-
ence, SKF has provided bearings, seals, lubrication, linear motion, actuation,
and mechatronics solutions to customers in every major industry. Drawing
on the knowledge of industrial assets it has gained during that time, SKF
developed advanced services and technologies for maintaining, monitoring,
repairing, and optimizing its customers’ assets throughout their operating life.

Doing so has enabled SKF to become more than just a parts supplier. It actu-
ally helps customers maximize productivity while minimizing total cost of
ownership for machinery. The company is able to close the asset management
loop by feeding the knowledge it gains from customers’ use of its services
to product development, where it is used to inform the design of the next
generation of its equipment.21 Today the company employs 46,000 people,
and 39 percent of its nearly $9 billion net sales is generated by the Industrial
Market, Regional Sales and Service business area responsible for its Asset
Efficiency Optimization offer.22

According to Vartan Vartanian, president of the business area, choosing to

steer clear of the “commodity trap” and become a solutions company fell
naturally for SKF. “In the past 20 to 30 years, economic pressures, global com-
petition and shifting mind-sets meant that simply selling great products at
good margins would, at some point, no longer be economically justifiable,”
said Vartanian. “The question was how to improve customers’ productivity
and sustainability in a way that also meant good business for SKF. By taking a
lifecycle approach, from the birth of the product to its death, we ensure that
at every stage we add value. And by focusing on the overall efficiency of the
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16
customer’s system instead of only selling products, we increased our relevance
and created a first-mover advantage against many competitors. Today we
use indicators such as total cost of ownership and among others, unplanned
downtime and critical component evaluations, to support the development
and execution of Asset Efficiency Optimization.”23

Return Chains: Opportunity-Driven Take-Back

The fifth area in which new capabilities are needed – and arguably the one
that holds the entire circular loop together – is reverse logistics and return
chains. This is also known as “disposal and collection.” This area’s goal is to
find the optimal volume and quality mix of end-of-life products, components,
and materials that should be targeted for return from the markets.

To be sure, an effective reverse-logistics function in a circular economy

must still ensure compliance with government regulations. But it also has
to be directly engaged with customers to ensure buy-back of the most valu-
able resources and local reuse of materials. What’s more, the reverse-logistics
function needs to accurately determine the quality of recovered resources to
gauge their usability.

The Rationale for New Return Chains Capabilities

Historically, return chains have been driven by the need to comply with regu-
lation, such as legislation requiring electronics manufacturers to collect and
dispose of e-waste. In a circular economy, the impetus shifts from compliance
to cost reduction and revenue generation. Whenever there is residual value in
end-of-life products, and there always is, the return chains function should
find and extract that value for a succeeding lifecycle. That’s the philosophy
that guided a decision by Johnson & Johnson, Procter & Gamble, Unilever,
Walmart, and others to launch the $100 million “Closed Loop Fund” in 2014.
It was initially conceived by Walmart to increase recycling in the United
States, with the by-product of ensuring industry access to high-quality
recycled material at low costs. The fund is now working with cities to unlock
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16
access to capital for investments in recycling and return-chain infrastructure.
According to the fund, a whopping $11 billion worth of packaging material is
sent to landfills every year in the United States due to poor return chain infra-
structure. The companies now provide zero-interest loans to municipalities,
and while $100 million is not a lot of money in the context of return chain
infrastructure, it’s a first step for the fund-owners in taking an opportunity-
driven approach to retrieving resources from markets.24,25

A strong return chain helps reduce costs by bringing back materials whose cost
to take back, collect, and reprocess is lower than that to source virgin alterna-
tives. Typically, the lower the processing costs, the more attractive the return
chain. This means designing a product for reuse, recycling, and component
harvesting, and engaging customers to bring back end-of-life products play
a critical role in making return-chain-sourced resources more economically
attractive than entirely new ones. The ultimate goal is to keep resources at their
highest possible value at all times. An example: reusing smartphones retains
48 percent of their original value, while the retained value in recycling is just
0.24 percent.26 But recycling can be powerful too. For one global consumer
goods company we have worked with, an elaborate scheme of product take-
back and recycling resulted in 10 percent to 15 percent lower cost of material.

A key consideration when recycling resources is ensuring a high value offset,

meaning confirming that recycled material can replace virgin material of equal
quality, or even that it can be “upcycled” for a higher-value use. Otherwise
materials have to be “downcycled.” This is often not just a recycling and take-
back challenge, but also a product development challenge.

Return chains also help boost revenue when combined with connected offer-
ings – such as leveraging the product return as an opportunity to market other
products and services, or refurbishing and remarketing disposed products to
other customer segments alongside new types of services (e.g., insurance) and
add-ons.

Activities and Skills Important to Driving the Shift

Developing and operating an effective circular return chain begins with
understanding the target value: mapping the residual end-of-life value for
each of the company’s products to identify where the greatest amount of
value is lost to waste in terms of market, customer segment, and product.
Once the value potential has been established, a company must design the
appropriate reverse-logistics network – including customer contact centers,
drop-off sites, return logistics, aggregation, and reprocessing centers – that
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16
can help it recapture that value. One of the most critical elements of this net-
work is the site in which a company reprocesses or remanufactures returned
products. Some companies may choose to build and operate such a facility
themselves, while others may opt to access a facility by partnering with a
third party. In some of the most innovative cases, companies operating
return chains work with their suppliers directly to source returning material
from markets without going through the waste and recycling industry at
all. From experience, we know some companies are even experimenting with
in-store recycling, where returned products can instantly be reprocessed into
new ones, sometimes using additive manufacturing – like 3D printing.

To keep the return chain running smoothly, a company also needs to create
new processes, supported by the appropriate analytics and IT systems that
let the organization track buy-back and take-back activities, monitor return
chain volumes and status, and manage quality control and testing. Good data
capabilities are also important for supply/demand planning. The volume of
returns often cannot be controlled, as customer behavior might change due to
new product releases, infrastructure development, seasonal buying habits, etc.
This makes the supply of returning material less stable than that from virgin
resources, forcing excess supply to be traded or stocked.

New skills will be required as well. Logistics staff must be equipped and
trained to move goods in two directions instead of just one – out to custom-
ers – as is the case with the linear supply chain. Manufacturing employees
must be able to collaborate with retailers and the market to identify high-
potential end-of-life products and components to target for returns, as well
as the highest-value use of those components. IT professionals need skills to
create customer engagement technology platforms that reduce transaction
costs and make it easier for customers to send products back. And sales and
marketing employees will need negotiation and offering development skills
to encourage customers to part with their end-of-life products at the lowest
possible cost to the organization.

Optimizing these skill sets ensures return chains run smoothly, but perhaps
most important, it ensures cost efficiency in the chain itself. High return chain
costs are one of the absolutely biggest barriers to the circular economy. When
operations lack scale and skills are immature, costs associated with take-back,
handling, logistics, and processing can be higher than the value of the resources
coming back. Luckily, there is often significant potential for cost efficiency.
One of the most impressive examples is General Motors, which between 2011
and 2014 managed to cut the cost per ton of resources in its return chain by
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Five Circular Capabilities for Driving Value

16
90 percent while also cutting total waste volume by 62 percent. Data has been
the backbone of this journey; the company uses a single resource data man-
agement system that constantly optimizes the waste stream with respect to
the value of commodities. Waste data is used to track all materials generated,
reused, and recycled while identifying opportunities to improve.27

Focus on: Cisco and Recyclebank

For years, Cisco has reaped the benefits of an extremely robust return chain.
The global technology manufacturing giant has established nine different
reverse-logistics programs that make it possible for customers to return equip-
ment they no longer need. If possible, returned products are remanufactured
to like-new condition and backed by the same Cisco warranty and support
options as new products.

The programs have succeeded in removing a significant amount of potential

landfill – 13,000 tonnes of it in 2012 – while creating an extensive inventory
of more than 3,500 different pre-owned and transformed products that
can cost as much as 80 percent less than new ones.28,29 That, in turn, helps
customers save money. In 2012 alone, 25 percent of returned products were
refurbished, resold, or reused (a 47 percent increase from the previous year);
and in 2014, more than $360 million of Cisco equipment was reused.30,31
Since 2001, more than 28,000 customers in 80 countries have been provided
with Cisco Certified Refurbished Equipment.32

Helping to encourage customers to participate in return chains are companies

such as Recyclebank, which partners with municipalities and waste-manage-
ment companies to increase recycling in their districts.

“In order to build consumer value, you need to find relevancy. But sustainabil-
ity is still not on top of consumers’ minds – the typical household has other
concerns and priorities, such as health and money,” explained Javier Flaim,
CEO of Recyclebank. “The question is: How can we tackle sustainability to
make it relevant to everyone’s life – as well as inspire and reward people to
make smarter choices for a more sustainable future?”33

The answer is rewarding consumers with points for recycling that they can
redeem for discounts and deals from businesses. Flaim says programs such
as the one used by Recyclebank play a vital role in raising the importance of
recycling in the minds of consumers. “Consumers are winning because of the
rewards they are getting by taking green actions,” he said. “[And] the change
of their behavior is benefitting the environment.”34
 12
te
r

The Power of Policy

ap
ch

Despite growing support for the circular economy, several barriers threaten to
slow the pace of change. These obstacles include inconsistent quality of recy-
cled materials, product designs that lack circular thinking, value chains that
rely on products to become obsolete, linear ways of measuring and encourag-
ing growth, limited tools to track and control products throughout the value
chain, and a lack of good infrastructure to efficiently recover resources from
markets. To scale at speed, the circular economy will clearly require a systems
approach spanning areas including policy, technology, investment, and
consumers.

Given these barriers, it’s not surprising that business leaders aren’t satisfied
with industry’s progress in addressing global challenges. According to a joint
2013 Accenture and United Nations Global Compact survey we led, only
32 percent of 1,000 global CEOs across more than 25 sectors and 100 countries
believe that the global economy is on track to meet the demands of a grow-
ing population, and just 33 percent think business is doing enough to address
global sustainability challenges. Part of the issue is that only 38 percent of
CEOs surveyed felt they could accurately quantify the business benefits of
improved sustainability. Our experience shows that businesses today are
willing to move ahead faster, but they’re not getting strong enough signals
from customers, investors, and policymakers to accelerate change. The circular
economy provides a direct link between long-term resource stewardship and
hard short-term business benefits, but it will not materialize fast enough with-
out policymakers ensuring that what is best for the planet and society is also
best for the bottom line.1
8
16
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A Call for Policy Intervention

Policy interventions can play a major role in removing barriers and spurring
the adoption of circular business models. That’s why CEOs are looking for
governments to get more involved and take action.

Eighty-three percent of CEOs we surveyed feel that for sustainability to

advance, governments and policymakers need to do more to enable the pri-
vate sector. Around 85 percent demand clearer policy and market signals to
support green growth. And 81 percent feel governments need to set a policy
framework for “economic development within the planetary boundaries of
environmental and resource constraints” for the global economy. Furthermore,
84 percent reported that clear global agreements and international regulation
on climate change will help them to accelerate their efforts. In short, business
leaders believe that they can’t make a collective and transformative impact
without greater government intervention at global, national, and local levels.2

Carlos Fadigas, CEO of Braskem, summed up the situation nicely. “Business

has always had to comply with rules, so if the rules change in the right direc-
tion, business will change,” he said. “But in society as a whole we haven’t
made this decision, so we are far away from doing as much as we could – or
as much as we should.”3

Policy plays a critical role in the growth of circular economy markets. In many
cases, it is an essential enabler. Policy can stimulate the necessary mind-set
and practices by creating a market framework that combines three elements:
financial incentives for companies to prioritize resource productivity; regulation
to discourage waste generation; and information and physical infrastructure
that facilitate circular resource flows. Producer responsibility, waste taxation,
and product labeling are well-known examples, but there are many others. We
discuss several of the most promising policy options in this chapter.

The sharing economy offers an example of how policy can facilitate, or hinder,
broader adoption of circular principles. While sharing goods and assets has
existed informally since human society began, mobile and social technology
has made sharing more efficient while helping consumers share a wider range
of goods on a much bigger scale.4 As connectivity has improved, so has the
opportunity to share not only expensive assets but also day-to-day goods. The
model is being embraced by owners looking to make money on under-utilized
assets and by renters eager to gain access to goods and services for a fraction
of the purchase price.5
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17
The sharing economy offers many advantages, including convenience, price,
and a reduced environmental footprint, where assets are used more efficiently
and effectively through sharing. Community benefits include improvements
in living conditions, reduced social isolation, and financial benefits. A study by
the United States-based National Building Museum shows that ride-sharing
keeps $127 million in the local economy for each reduction of 15,000 owned
cars, because people are able to fulfill their needs locally.6

But from a small idea – formalized sharing – global legal problems began to
develop. Questions about taxes: Who should pay them? Where and when?7
Sharers weren’t registered as businesses, and therefore generated untaxed
income.8 Governments were missing out on tax revenues. Insurance questions
also became complicated, because the assets did not comply with insurance
policies.9 Some companies, like Uber, started competing in regulated sectors
(where there were taxis) without having to meet the same conditions.10 Car
accidents put the ride-sharing model under increased scrutiny – by the public,
by governmental authorities, and insurance companies alike.

Questions arise when new sharing solutions clash with the existing policy
framework. Which elements of the sharing services need to be regulated to
protect consumer rights? How can this be done without adding excessive
costs or administrative burdens to the new businesses, thereby crushing inno-
vation? If the sharing services affect tax revenue, what’s the fairest way to
recover that revenue? As companies grow to dominate niches, how can policy
prevent them from behaving like monopolies?

A policy framework that works across all five of this book’s business models
needs to be developed to remove nonpolicy barriers, introduce new incen-
tives, and identify solutions for when policy itself is the barrier.

Emerging Responses from Government

Governments are not blind to the challenges. Many public agencies around
the world at regional, national, and local levels are taking steps to enable
the circular economy, albeit in many different ways and often with patchy
execution. But momentum on policy and regulation is building.

In Europe, for example, the EU has created the European Resource Efficiency
Roadmap11 and related Resource Efficiency Platform, a committee designed
to provide high-level guidance to the European Commission, Member
States, and private organizations on the transition to a more resource-
efficient economy. The committee focuses on initiatives such as phasing out
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17
environmentally harmful subsidies, accelerating the circular economy, and
improving resource efficiency in B2B relations through, among other efforts,
introducing a product passport (which we describe in a moment) and indus-
trial symbiosis initiatives.12
Dr. Janez Potočnik, the European Commissioner for Environment and cham-
pion of the Circular Economy, elaborated on the strategy in an interview:13

The European Commission has set resource efficiency firmly as a pillar

of structural economic policy in its EU 2020 Strategy to become a smart,
sustainable and inclusive economy. We focus on areas where policy action
can make a real difference, and we tackle specific bottlenecks like incon-
sistencies in policy and market failures. We push for cross-cutting themes,
such as addressing prices that do not reflect the real costs of resource use,
the need for more long-term innovative thinking and a lifecycle and value-
chain perspective for our policies.

In 2013, for example, we gave recommendations to 11 Member States

to further shift the tax burden away from income and toward resource
use or pollution. In 2014 we complemented the roadmap with a Circular
Economy Package. The aim is to raise the level of ambition for recycling,
discourage incineration of recyclable waste and eliminate landfilling. In
particular it proposes to update and revise targets in the Waste Framework
Directive, the Landfill Directive and in the Packaging Directive. Specific
waste challenges are also addressed – food waste, construction and demo-
lition waste, marine litter. But waste is only one part of the consumption
and production loop, and the package therefore puts the review of waste
legislation in this wider perspective of circular systems.

Through eco-design, we are setting minimum environmental standards

to be met by products sold on the European market, and by linking it
to the energy label, inform consumers about the energy efficiency of
equipment that they buy. We have started to go beyond just energy
efficiency, by integrating other important objectives such as durability,
recyclability and reusability, as well as water efficiency and emissions to
air. We are focusing on the real environmental impacts and the resource
efficiency gains.

This all make sense as numerous studies confirm. Every percentage point
reduction in resource use from the EU is worth around €23 billion to
business and could result in 100,000 to 200,000 new jobs.
(After this interview, in December 2014, the EU’s Circular Economy
package was withdrawn in favor of a revised version to follow in 2015.)
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The European Union waste policy framework is officially inspired by the
“waste hierarchy,” where the ambition is to first strive for waste prevention,
then for reuse, recycling, energy recovery, and, as a last resort, disposal. In
reality, however, our experience is that prevention and reuse are often under-
prioritized, while recycling and energy recovery are used more frequently. In
practice, recycling infrastructure, research and development, and target set-
ting are more widespread than policies encouraging remanufacturing, repair,
reuse, or sharing. But interest in the latter is growing as governments strive
to create jobs by lowering taxes on labor-intensive services such as repairing.
This is important because reuse and remanufacturing create eight to 20 jobs
per thousand tonnes of products processed, while recycling creates 5–10 and
landfill disposal a mere 0.1.14 Major waste companies see this too, with SITA
arguing in an inquiry with the Environmental Audit Committee in the United
Kingdom that “previous waste strategies have been overwhelmingly biased
towards the management of municipal waste and towards end-of-pipe.…
Policies that ‘push’ materials out of landfill should be balanced by policies
that ‘pull’ these diverted materials into the production economy.”15

In the United Kingdom a House of Commons report in 2014 suggested

that Circular Economy adoption should be stimulated by taxation reforms,
producer responsibility regulations rewarding reuse and more funding for
organizations promoting materials recovery. Access to data was recognized
as a barrier to analyzing and improving material flows. The report proposed
efforts to expand information about location and volumes of materials col-
lected and recycled. There are also suggestions for stopping businesses from
using materials that cannot be recycled when better alternatives exist and to
use government procurement standards to promote a circular economy.16 The
government later rejected some of the key proposals, but agreed to consider
recommendations for making products with high recycled content cheaper
and introducing producer responsibility schemes in new sectors to stimulate
recovery and recycling.17

In Denmark, the strategy is called “Denmark without waste” and focuses on

better exploiting the embedded value in resources, minimizing the environ-
mental impact of waste and improving recycling through new public–private
partnerships. The core emphasis is on promoting household waste recycling.
The initiatives are estimated to divert 820,000 tonnes of waste from incinera-
tion to recycling by 2022 – a doubling over the period. The strategy includes
funding for development and demonstration of waste separation and treat-
ment facilities, partnerships to develop smarter collection and data systems,
and simplifying the setup of direct collection schemes for disposed products.18
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17
The Scottish government’s Safeguarding Scotland’s Resources initiative is a
national program designed to reduce material use and the use of primary or
new resources by (a) replacing them with reused or recycled substitutes and
(b) ensuring that virgin resources are responsibly sourced and used efficiently
and productively. The program has outlined 20 actions to reduce waste by
7 percent between 2011 and 2017 and eventually move toward zero waste.
The policy hopes to realize £2.9 annual savings to Scottish businesses and
organizations from resource efficiency.19

Also in Europe, the NGO Circle Economy, CSR Netherlands, the Amsterdam
Economic Board, and the Dutch Government have signed a “Green Deal”
aimed at accelerating the Netherlands’ transition to a circular economy. The
organizations plan to launch 50 circular projects between 2013 and 2016, with
a focus on closing water, energy, agricultural, and nutrient loops. They also
hope to integrate circular principles into their procurement processes, policy,
and strategy by 2016.20

China is leading the way in Asia with the Circular Economy Promotion Law
of the People’s Republic of China. This effort is geared toward promoting the
circular economy, improving resource utilization, and protecting and improving
the environment to help the country develop. Several regions and munici-
palities will set up funds specifically for the development of circular activities.
Focus areas include supporting research and development for science and
technology related to the circular economy, and implementing important
circular economy projects and information services.21 Speaking out in support
of the ongoing work in September 2014, Chinese Premier Li Keqiang told an
international audience that “we have the resolve, the will and the capability to
pursue green, circular and low-carbon development.”22

Importantly, the policy approach in China is not limited to environmental

management and recycling. Instead, it targets a holistic new development
model of closed-loop material flows, spanning entire value chains from
extraction and production to retail and use. The law supports reuse and even
product-service systems in addition to material recycling. Pilots have been
launched to learn and drive change at the local level. This includes working
with strategic enterprises at the micro-level, establishing circular industrial
parks at the meso-level, and selecting pioneering cities and regions to drive
change at the macro-level.23

Since 2013 the China Association of Circular Economy (CACE), which is made
up not just of government officials but also of entrepreneurs and academ-
ics, has been working to promote the growth of the circular economy. CACE
 4
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17
expects that circular industrial output will expand to 1.8 trillion yuan ($293
billion) in 2015, up from one trillion yuan in 2010.24

“The circular economy has great potentials, and the development of it will
boost the recycling of resources and sustainable economic growth,” said
Xie Zhenhua, vice chairman of the National Development and Reform
Commission, the government’s major economic policymaking body.25

In Japan, a country poor in natural resources, the government has long

promoted resource productivity in order to maintain competitiveness and
address space shortages for storing waste. A package of laws for promoting
the efficient use of resources has been in place since 2001, the “Fundamental
Law for Establishing a Sound Material-Cycle Society.” The policy package aims
to reduce waste, promote reuse of parts and resources, and increase recycling.
Regulations address a wide range of economic sectors, including packaging,
home appliances, food, construction, and vehicles. To track and measure
progress, three broad indicators are used: material productivity (yen per ton),
the usage rate of recycled goods (by percentage) and disposal (by the ton).
Policies and targets are designed to raise the first two at the expense of the
last over time.26 Part of the package looks outward, to export and collabora-
tion with other countries. Room for improvement across the region is huge,
with Japan creating seven times more economic activity per ton of resources
consumed than China and double that of South Korea.27

There are also many cities and regions taking initiative to become hubs for
the circular economy movement, spurring innovation and job creation. Seoul
has implemented a strategy to become a “Sharing City” and has taken action
in three areas: changing outdated laws, supporting sharing enterprises, and
encouraging citizen participation. By implementing initiatives, the city is not
only supporting others to act but is also leveraging its own resources. For
example, almost 800 public buildings have been opened during idle hours for
other uses and more than 22,000 citizens have used this opportunity to date.
Other initiatives from a long list of achievements is a car-sharing infrastruc-
ture that has been used almost 300,000 times, an online platform for trading
used goods counting more than 20,000 transactions, and the opening of
1,300 data sets for innovators to develop new sharing solutions.28

In Singapore, the Packaging Agreement (SPA), a joint initiative by the gov-

ernment, private sector, and nongovernmental organizations, aims to reduce
packaging waste from consumer products and the supply chain, saving
44 million Singapore dollars (approximately $35 million, as of November
2014) over five years for the local economy.29
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17
California has a “Green Chemistry” package in place aiming to speed up the
replacement of toxic, harmful chemicals with safe bio-based alternatives.30 On
the national level President Obama has launched a “Bioeconomy” blueprint
to stimulate development of industries creating circular supply chains. The
blueprint’s focus is on fostering research and development, providing funding
for commercial ventures and facilitating the transition from lab to market.31

Policy Initiatives Driving Adoption

These initiatives show that there is an increasingly high ambition among some
policymakers to support circular principles. But the road to true systemic
change is long and it’s time for concrete policy to deliver on the promise.
Governments must do more to facilitate the transition to the circular economy
at scale.

Through our interviews with CEOs, policymakers, expert practitioners, NGOs,

and academics, we identified several critical policy measures governments need
to implement, falling into three broad categories: leveling the playing field,
moving toward zero waste, and encouraging increased productivity of assets.

Leveling the Playing Field to Put the Circular and Linear Models on
Equal Footing
This is likely to be the first thing mentioned in a discussion about policy and
circular economy, for good reason. Current regulations give the linear growth
model an unfair advantage by making it more financially attractive to grow by
expanding resource use. Changes to these regulations are needed to level the
playing field and allow circular and linear models to thrive on their own merits.

One such change is to shift taxation from labor to resources (see “Spotlight:
Shifting Taxation from Labor to Resources” on page 184). Today, the tax on
workers is far greater than that on virgin resources. This encourages companies to
continue extracting resources instead of investing in people and processes to get
greater productivity from resources already in use. In Europe, for example, labor
taxes provide 52 percent of all tax revenues while natural resources less than
0.3 percent.32 And use of some linear resources is still in fact being subsidized,
such as fossil fuels. By reducing labor taxes and increasing taxes on resource
use, manufacturers will be incentivized to use more unconstrained and recycled
materials. Lower taxes on labor would make it easier for companies to hire talent,
boosting employment. At the same time, companies that squander resources
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17
would be taxed, adhering to the “polluter pays principle.” To avoid a negative
impact on consumers, the shift in taxation could be made fiscally neutral.

Other tax instruments can be used to help level the playing field. These can
include landfill tax, tax on energy recovery to promote material recycling, and
differentiating the value-added tax (VAT). In a recent report, an interview
excerpt with Ramon Arratia of Interface carpets read:

We have products today with five kilograms of CO2, with 100 percent
recycled nylon, and there are products in the market with 20 kilograms
of CO2 with high-pile virgin nylon. Both pay the same VAT. Both pay the
same tax. What are the signals that we are giving to the market?33

An important thing to consider is that many charitable organizations and

NGOs are running the trade in some areas of the circular economy; for
example, second-hand retail. They often have special tax rules to support and
encourage activities. These organizations’ efforts sometimes overlap with
those of many for-profit companies that are also growing circular models but
don’t share the same tax breaks. Keeping a level playing field between these
groups will be complex, with each party arguing for their unique value contri-
bution. Taxation needs to promote circular economy commerce but also not
become too complex to manage with myriad tax exemptions.

Another change is to incorporate the cost of environmental impact into prod-

uct pricing. The price a customer pays for a product typically does not reflect
the impact that producing and delivering it has on the environment. By creat-
ing a market framework that incorporates environmental cost into a product’s
price, policymakers will encourage manufacturers to minimize that impact to
keep prices competitive. A good example today is the carbon tax, an excise tax
on use of fossil fuels that’s based on those fuels’ relative carbon content. More
sophisticated methods of quantifying environmental costs throughout a value
chain have been developed, both by businesses, such as Puma’s Environmental
Profit and Loss account, and in academia, like the Eco-Cost measure devel-
oped at Delft University.34,35 Developments like these expand policymakers’
toolbox to account for environmental profits and losses of different business
practices. And it means that we now have great reason to look beyond carbon
pricing for more holistic measures to correct pricing economy-wide.

Accelerating Toward Zero Waste

With waste volumes being a major problem around the world it’s easy to see
why governments zoom in on landfills. But preventing waste in the first place
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17
is the more long-term solution. Realizing a zero-waste economy at the most
fundamental level requires there to be a demand for disposed products and
material. Something can be called waste only when there is no demand for
the value it holds.

To increase demand for waste it’s important to start by understanding

what it is, what volumes and qualities are available, and where. The avail-
ability of information on waste-material flows is remarkably low. Making
things more difficult is that countries often have their own definitions of
waste. International standards and open public databases that inform com-
panies about the nature and content of waste streams will make it easier to
determine how different waste flows are generated. Once better data and
definitions are in place, government can focus on improving insight and
intelligence on the waste streams. The United Kingdom’s WRAP can provide
inspiration for this. WRAP works in England, Scotland, Wales, and Northern
Ireland to help businesses, local authorities, communities, and individuals
reap the benefits of reducing waste, developing innovative products, and
using resources efficiently. Established as a not-for-profit organization in
2000, WRAP is backed by government funding from Defra (Department for
the Environment, Food, and Rural Affairs), Scottish Government, the Welsh
Government, the Northern Ireland Executive, and the European Union.36 Data
and insights from WRAP are used around the world as the gold standard
for shaping waste strategies. An internationally funded equivalent to WRAP
could work miracles to improve our understanding of waste and how to
create real market demand for it.

Even with international standards, data, and insights, waste will continue to
be a problem in many countries because of outdated regulations. Legislation
is often designed to prevent dumping, not to stimulate demand for waste.
Many policies unintentionally prohibit international waste trade and use
of secondary material in products. Improved legislation that makes it
easier to trade waste internationally and use it to produce new goods where
it is most effective will help change the mind-set of many companies, which
is that recycling and reusing waste is simply too complex and risky. To be fair,
regulations are not always the problem. It can also be poor enforcement, lack
of institutional inspectorates, limited training, and general lack of applied
resources to consistently implement and enforce regulations.

An extended producer responsibility (EPR) policy can help maintain qual-

ity and performance in waste streams, and facilitate demand for waste to
more productive uses (see “Spotlight: Implementing an Extended Producer
 8
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17
Responsibility Policy” on page 185). An EPR policy makes a producer responsi-
ble for a product after the consumer has finished using it, including any poten-
tial harm the product causes. Such a policy not only helps remove waste from
value chains but also encourages manufacturers to use nontoxic and easily
reused materials in their goods. An EPR also incentivizes companies to consider
the whole product lifecycle, as its responsibility does not end when the prod-
uct leaves the factory door. A good example of an EPR policy is the European
Community’s Waste Electrical and Electronic Equipment (WEEE) Directive.37
Another is the EPR on furniture in France, which was initiated in 2012. Fully
implemented, the policy will support recovery and recycling of almost two
million tonnes of material annually, which is more than the total waste gener-
ated in the whole of Paris. As of May 2013 a recycling fee must be displayed on
each piece of furniture sold in the country, forcing consumers to visibly co-fund
development of circular economy infrastructure and recycling solutions.38,39

The EPR schemes can be extended to the entire economy with a market-
based instrument called “precycling premiums.” This is proposed by James
Greyson, founder and head of BlindSpot Think Tank, which works on
policy and practice for systems change, including circular economy initiatives.
“Precycling” is an action to stop future waste. It shifts attention from manag-
ing waste for disposal to managing resources so they don’t become waste. The
premiums are an obligatory fee paid by producers, based on the risk of their
products ending up as waste in the air, land, or water. Products with higher
risk of becoming waste would pay a higher premium, which creates an incen-
tive for producers to shift to circular product designs and business models. By
doing so, their products’ waste-risk is reduced, and they gain competitiveness
from lower costs and higher resource efficiency. Companies pay premiums
to insurance companies that, unlike conventional insurance premiums, are
spent immediately to cut waste-risk throughout society. This could finance
the fast, full systemic change needed to make the circular economy viable
and meaningful at scale. Premiums could also provide price signals to prevent
resource-related externalities and also cultural signals to inspire a decisive col-
lective effort toward circular models. In a discussion with James, he told us
that “the main factor holding this back is the obsolete assumption that big
systemic problems such as waste and climate change can be solved by small
gradual scattered efforts.” He added that “the big data challenge of tracking
the waste-risks of complex global supply chains can now be met by modern
technologies.”40

Another barrier to developing markets for waste is the lack of information on

what a product is made of. This is not only a challenge for customers seeking
 9
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17
circular products but also for manufacturers looking to recycle goods. A global
product passport can provide detailed information on a product’s material or
resource content – including origins, properties, and toxicity – as well as instruc-
tions for how to recover and recycle that content (see “Spotlight: Introducing
a Global Product Passport” on page 187). It can also help customers make
more informed purchase decisions. More importantly, product passports
encourage companies to design products with more easily reused material and
components. To complement a product passport, governments can incorporate
requirements for using recycled content into product standards – similar to how
certain countries have local content requirements. These policies would not
have to specify exactly how a passport should look, but passports would share
common standards. This would also encourage existing voluntary initiatives like
Environmental Product Declarations (EPDs). Providing detailed information on
a product’s ingredients and environmental impacts is not very different from
putting nutrition labels on food. Product labels would include metrics like raw
material and energy use, and air and water pollutants.41

While some of these actions are far-reaching or challenging to implement,

there is low-hanging fruit governments can pick in their own backyards:
encouraging more recycling. It’s well within governments’ purview to set
targets that require companies to recycle a percentage of the waste they
generate. Governments worldwide can boost recycling in their areas by set-
ting realistic goals and discouraging noncompliance. Recycling requirements
can also drive the development of new markets for recycled materials. One
word of caution, though: Recycling targets that lack proper details fall short
in inciting the desired behavior. One of the most common mistakes is failing
to define recycling targets for different types of the same material stream.
Pre-consumer material is generally easier to recycle due to higher quality and
purity in waste flow. Post-consumer material is where the big volumes are.
Recycling targets are often met through high rations of recycling for pre-con-
sumer material but low or none for post-consumer. Because of this, policies
risk missing the target to stimulate solutions that can scale.

It’s worth noting that most environmental achievements are not secured by
nudge politics alone, but by setting ambitious legal expectations and then
making sure people and organizations are equipped to meet them. The
Montreal Protocol is a famous example. It’s also important to keep an eye out
for unintended consequences and to enforce expectations very publicly. In
emotionally strong contexts where change is slow, campaigning NGOs might
create soft laws and enforce them through corporate humiliation, often via
online campaigns and social media.
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Making Sure We “Sweat” the Most Out of an Economy’s Assets
As we know, recycling is not the only solution. One of the best ways to pre-
vent material from entering waste streams in the first place is to keep them
in use longer. That’s the goal of the Sharing Platform, Product Life-Extension,
and Product as a Service business models. Unfortunately, regulations haven’t
always kept pace with what such models offer.
Many outdated policies were originally developed to support recycling. If
they are not updated they can make extended lifecycles less competitive
than recycling even if they are environmentally and economically more
efficient. One example is End of Life Vehicle regulations that give automo-
tive companies credits for ensuring that cars are recycled, but often lack
the same for remanufacturing. Another well-intended type of policy sets
standards to drive efficiency and use of innovative technology, such as
fuel- or energy-efficiency standards. These often don’t work for remanu-
facturing since some reused components might not meet the efficiency
standards, resulting in taxation or outright bans. These policies can make
sense at times, but the environmental benefits of extending a product’s
lifecycle are often greater than the benefits of improved performance in
new products. Governments need to develop standards and rules that take
products’ full lifecycles into consideration – not just their initial manufac-
turing. Other policies encourage transparency and insights into product
contents by mandating open information on use of certain chemicals and
substances. This could be impossible for activities like remanufacturing,
repairing, and refurbishing, where only the original manufacturer might
know a product’s contents. Again, dedicated standards and certifications
might be an answer.
Product design can be another barrier to sweating assets if complex designs
make repair and remanufacturing difficult. One suggestion tested in the
United States is to extend the scope of the Freedom of Information Act to
force designers to disclose a product’s components upon a remanufacturer’s
request.42 This way a remanufacturer does not need to invest in reverse engi-
neering, which can ruin the business case for business models like Product
Life-Extension.
Safety and trust are foundational elements of asset sharing, which lets people
become micro-entrepreneurs as they provide services to others. Yet custom-
ers using sharing models are often taking a leap of faith that they’re going
to get what they pay for. Creating common safety standards – like requiring
home sharers to adhere to the same safety standards as those required for
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18
hotels – can offer peace of mind and make customers feel more comfortable
about using shared assets.

Stop Waiting for the “Other Guy”

Great progress has been made over the past decade in the adoption of circular
business models. But there’s a lot more to do. The circular economy represents
a dramatic departure from the production and consumption model that has
prevailed for the past 250 years. The necessary transition is not only deep,
requiring a shift in industry behaviors, but also broad: Governments have to
reach across borders to establish policy frameworks that encourage invest-
ment in the next economic model. Both companies and governments have
a role in moving the circular economy forward.

Companies can start adopting the circular economy on their own: They can
minimize their products’ environmental impact, design out waste, optimize
resource use – and do it in ways that make good business sense for them and
their customers. Where change lacks momentum, companies need to work
with policymakers to create a regulatory framework that addresses the barriers
holding the circular economy back.

Governments need to take the initiative to fulfill their role. Local and
regional governments can accomplish a lot on their own to kick-start
markets. Cities, especially, have the power and responsibility to set their
own priorities and to forge their own circular strategies. This is especially
important given that cities use up 75 percent of all natural resources, while
creating 50 percent of the world’s waste and 60 percent to 80 percent of all
greenhouse gas emissions.43 They can devise innovative ways of building the
physical and digital infrastructure required for resource-efficient urban areas.
National governments can also set an example through their actions. They
can embrace circular principles in their public procurement, as the United
States Department of Agriculture (USDA) has done with its BioPreferred®
program. The program gives preference to bio-based products when
federal agencies are making purchasing decisions. The government and its
contractors are required by law to purchase products that are bio-based.
The program sets which types of products must receive this procurement
preference, and a minimum bio-based content is specified. In order to target
new applications and innovation, bio-based products that had a significant
market share in 1972 do not qualify for federal procurement preference or
for certification and labeling.44
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Scaling the circular economy requires a concerted effort from both business
and government. If either party is missing, progress likely will remain slow, ad
hoc, and limited to pockets dominated by innovative thinkers. It’s also impor-
tant to recognize that the circular economy is no panacea to all problems.
Rightly done, a circular policy package will reduce environmental footprint
and material use, increase recycling rates, raise overall asset productivity,
create jobs, stimulate local economies, and reduce dependency on resource
imports. It will not, however, solve all environmental problems, necessarily
improve social conditions, or benefit all industries when, for example, taxation
focus moves from labor to resource use.

Five Steps to Getting Started on Circular

Economy Policy

Form Political Vision

Regulation and laws force change, but it is ideas and visions that create the
required support, innovation, and license to move forward. The circular econ-
omy is about large-scale systems change; business will be done differently and
the role of the consumer will evolve. The vision that will inspire people on
this journey will look different for different cities, countries, and communi-
ties, depending on the local context, current industrial structure, and level of
development. Ida Auken, co-chair together with Peter of the World Economic
Forum’s YGL Taskforce on the circular economy and previous minister for the
environment in Denmark, told us that you need to “change society with ideas.
When I was minister, I changed the title of our ‘waste strategy’ to ‘resource
strategy’, and consequently I spoke about resources instead of waste. I spent
much of my airtime giving as many concrete examples as possible.”

The first step to going circular is a political vision that citizens and industry
can unite behind, and that makes sense locally.

Review Regulations for Circular Opportunities

Once the vision is in place, current regulations need to be reviewed and new
regulations developed. The three areas outlined in this chapter can serve as
good starting points: leveling the playing field, moving toward zero waste,
and encouraging increased productivity. When assessing the regulatory
context, a framework can be helpful. Here’s one developed by Nesta and
Collaborative LAB45:
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18
F R A M E W O R K F O R A S S E S S I N G
P O L I C Y A N D R E G U L A T O R Y
I S S U E S

Asset What asset is the activity/business focused on?

Business model What business model drives the activity?
Public benefits What economic, environmental, or social
benefits (macro, micro) do the activities/
companies in question bring?
Public risks What risks are related to the activities/com-
panies in question?
Current policy Is there a policy in place that directly regu-
lates the activities/companies in question?
– When was the current policy drafted?
– What risks was this policy intended to pro-
tect against?
– Who was it designed to protect?
– Why?
What’s outdated? Are the original risks in question still present?
What’s missing? Have new public risks developed in recent
years that are not covered by any policy or
regulation?

Ensure Supporting Taxation and Financial Incentives

Correcting price signals is a key challenge for environmental policy in
general – and for the circular economy. The labor versus resource taxa-
tion imbalance needs to be adjusted to incentivize businesses to focus on
resource productivity rather than cutting jobs to reduce costs. Taxation
also needs to be developed for an economy where resources and products
increasingly move from one lifecycle to the next, raising questions of where
to find stable tax bases. The government also has to provide incentives
through public procurement and funding of example projects.

A good starting point is to develop key indicators and goals based on the
political vision, and then assess what taxes and incentives can help improve
metrics. It’s important here not to simply focus on recycling, but instead to
address all five business models and support actions that increase resource
productivity metrics (e.g., GDP per tonne of resources used).
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18
Promote Research, Education and Information
Governments obviously have an important role in supporting skills and capa-
bility development at the national level. The circular economy transformation
is a long one, and it needs to be supported by university programs, collabora-
tion between design, business and science, education material for schools,
information campaigns, and similar initiatives.
Many disciplines need to be involved, but behavior and data sciences are
especially important. Behavior science can engage consumers and make cir-
cular economy behavior the accepted norm through simple changes in how
products and services are positioned and described to customers. Data science
can tackle the increased complexity of product and resource flows in a circular
economy and enable safe and secure movements in supply chains both to and
back from markets.

Shape New Partnerships

Last but not least, new partnerships are very much needed, especially initially
to enable pioneering industry leaders and innovative start-ups. Since the cir-
cular economy often requires many different stakeholders in a value chain to
work together, there is a great need for partnerships. Manufacturers need to
work with retailers; consumers need to work with collection companies and
companies who bring products, components, and material back to markets.
Eventually, when circular business principles are the norm, the capability will
increase for industries and consumers to shape those partnerships indepen-
dently. But initially government has a key role to play.

Spotlight: Shifting Taxation from Labor to Resources

While natural resources are increasingly scarce, that’s not the case when it
comes to labor. Global unemployment, which affected more than 200 million
people in 2013 and is expected to grow to more than 215 million by 2018,46
has created an abundance of available workers. Yet in most countries, exist-
ing tax schemes encourage companies to pursue what is scarce while actively
discouraging them from capitalizing on what is plentiful.

One solution is to enact a policy change in how natural resources and labor
are taxed. By increasing taxes on resource use and reducing them on labor,
governments can provide incentives for companies to minimize their natural
resource use while stimulating employment.
 5
The Power of Policy

18
Such a tax shift creates a “double dividend”: Labor becomes more attractive to
employ, which can boost a company’s creativity and innovation and improve
their manufacturing, repair, service, and maintenance capabilities. And
because virgin, nonrenewable resources become far less cost-effective, com-
panies will have a strong incentive to use them more productively. Research
by the International Labour Organization (ILO) argues, for example, that if
a global tax on CO2 emissions were imposed and the resulting revenues were
used to cut labor taxes, up to 14 million net new jobs could be created.47
Germany provides great evidence that such tax-shifting can have the desired
effects. The German Ecological Tax Reform, enacted in 1999, set forth an
incremental increase in taxes on fuel and energy. The additional income is
used to contribute to the public pension scheme, lowering the nonwage
labor costs. The higher energy prices create incentives for energy savings
and improved efficiency, while the reduction in nonwage labor costs helps
stimulate employment. It is estimated that this reform has created 250,000
jobs.48 More recently, from 2007 to 2013, the EU parliament made several
environmental tax-reform recommendations to shift the tax burden away
from taxes that are welfare-negative, like those on labor, to ones that are
welfare-positive, like those on resource use, pollution, and other sources of
environmental damage, due to the double dividend it would generate.49 The
European Commission believes such reform would simultaneously improve
both environmental and employment issues. However, despite several
recommendations, widespread support of any real reform has yet to emerge.
Ex’tax, an NGO that advocates such a taxation shift, expects it’s only a mat-
ter of time until reform becomes reality – likely in the next five to 20 years,
depending on whether developments fuel a sense of urgency among business
leaders and politicians.50 Regardless of the exact timeframe, it’s a fundamen-
tal change. Governments will need to give businesses plenty of time to adapt
to the new cost structure. And although such a shift can work at the national
level (as it has in Germany), a coordinated move at a higher level is necessary
to achieve maximum benefits and avoid creating a competitive disadvantage
for resource-intensive economies.

Spotlight: Implementing an Extended Producer

Responsibility Policy

When goods are sold, a manufacturer loses control over and responsibility
for the way they are used and discarded. Unfortunately, some consumers are
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18
unaware, unable, or simply unwilling to use and dispose of obsolete goods
responsibly. As a consequence, valuable resources are squandered and the
resulting waste causes environmental and social problems.

One solution to the problem is an EPR policy that makes a producer responsi-
ble for a product after a consumer is done using it. An EPR typically mandates
that manufacturers incur all or part of the costs involved in collecting, recy-
cling, or disposing of their products, as well as disclosing sufficient informa-
tion on the environmental properties of their products (e.g., using a product
passport). It also typically holds manufacturers liable for any environmental
damage that is proven to have been caused by their products. Liability can
apply to the entire product lifecycle or to different parts of it (including usage
and final disposal).

Depending on the type of EPR policy, manufacturers could be made

individually or collectively responsible. In the former case, a producer
is responsible for only the end-of-life management of its own products;
in the latter, manufacturers in the same product category (or industry)
as a group can be made responsible for the end-of-life management
of all products, regardless of brand. Research has found that individual
responsibility is more effective in driving desirable design changes because
it’s easier for a single company to see the direct benefit of changes,
such as eliminating toxic materials and using more easily recovered
content. Because the scope of an EPR policy is flexible, the policy can be
implemented relatively quickly, starting with a selection of products and
expanding it over time.

Regardless of whether an EPR applies individually or collectively, it can help

lift the burden of dealing with waste from municipalities, which often lack
the funds necessary to sufficiently handle it. The policy also motivates pro-
ducers to consider environmental factors when designing their products and
incorporates disposal costs in a product’s price.

EPR policies have been around for several decades. Early examples include
those passed by a number of countries in the 1970s that require consumers to
pay a small deposit on every can or bottle of beverages purchased to encour-
age them to return the containers after use. In 1990, Germany introduced the
Duales System Deutschland (currently known as the Green Dot® scheme) to
force companies to pay for the collection and recycling of their packaging.
Since its launch, the program has resulted in the collection of more than
80 million tons of used sales packaging and has saved €225 million annually in
packaging recycling.51
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The Power of Policy

18
More recently, the WEEE directive mentioned earlier became European law in
2003. It makes manufacturers or distributors responsible for the disposal of
waste from electrical and electronic equipment. The law requires companies
to establish an infrastructure for collecting such waste so that consumers have
the option to return it free of charge. In 2006, Dell became the first electron-
ics manufacturer to voluntarily take back Dell-branded products for recycling
free of charge.52

Innovative models for take-back and remarketing are emerging for many
consumer products, including technology and apparel (e.g., Gazelle, Mazuma
Mobile, Poshmark, and thredUP). This increasingly allows customers to get
paid for disposing of products. Following one of these models is often the
best strategic move for companies facing EPR policies. They can innovate to
make take-back commercially viable in and of itself, voluntarily becoming
responsible producers before policymakers require it of them. For policymak-
ers, it’s important to always make sure EPR policies support and encourage
companies to go beyond compliance. This will make the policies themselves
obsolete over time, as companies find ways to capitalize on take-back.

Spotlight: Introducing a Global Product Passport

One key to recycling or reusing products is to understand the value embed-

ded in those products, and any presence of hazardous materials that might
pose a danger if released. Often it’s difficult, if not impossible, to know
“what’s inside” because manufacturers don’t – and aren’t required to – reveal
what their products are made of.

Enter the “product passport.” A product passport contains complete, detailed

information on a product’s material contents, similar to a food nutrition
label. This information makes it easier for products to be collected, recovered,
processed, and recycled when they’ve reached the end of their useful lives.
And it encourages manufacturers to think differently earlier in the product
lifecycle: If they know all the contents of a product must be revealed on a
product passport, they will be more likely to focus on product designs that
don’t include hazardous materials. Product passports also give consumers the
information they need to make educated choices about the products they buy.

A group of the world’s leading auto manufacturers launched a version of a

product passport, the International Material Data System (IMDS), in 2000.
The IMDS collects and maintains information on all materials present in
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18
a finished automobile. Because of the system’s low cost and easy access – it
runs on a cloud-based, open software application – it was rapidly adopted
by almost all of the industry’s OEMs and quickly became a global industry
standard.53

In the EU, a similar program was launched in 2007 for the chemical industry:
the Regulation on Registration, Evaluation, Authorization, and Restriction
of Chemicals, or REACH. REACH makes chemical companies responsible for
assessing and managing the risks posed by their products. It also requires
them to provide appropriate safety information to their users.54

There are, of course, challenges to implementation. There is a risk that a

mandate to report all material contents could add an administrative burden
to businesses, and it could be seen as forcing companies to disclose what they
may consider confidential information. Furthermore, if a product passport is
implemented on a national level only, it could lead to competitive disadvantage
by increasing costs and restricting international trade flows.

The success of initiatives such as IMDS shows how a small group of organiza-
tions committed to a common goal can address the materials transparency
challenge for a specific industry in a relatively short time. But for the prod-
uct passport to become a global, cross-industry standard – which is what’s
needed to help scale the circular economy – strong collaboration among
businesses and governments is needed. When the private sector has come
together to establish meaningful product passports, governments can play
a key role in driving broad adoption of those passports through a mix of
incentives and regulation.
 IVio
n

Starting Now
ct
Se
 13
te
r

Capturing the
ap
ch

Advantage: Getting
Started

Companies like Caterpillar, Philips, Nike, Airbnb, and others are successfully
pioneering circular economy business models. Their actions and experiences
prove that the shift from the current linear growth model to a circular one
is already happening. It’s successful. And it’s inevitable. That’s why it is
important for organizations – regardless of market, geography, or industry –
to begin laying the foundation for decoupling growth from the use of con-
strained resources. By doing so, they can make the transition to a new way
of doing business that radically improves resource productivity; enhances dif-
ferentiation; reduces costs and risks; creates new, robust revenue streams; and
makes customers happier in the long run.
To begin the process, executives need to address five key sets of questions:
a. Risk and opportunity: What are the risks to our business if we continue
with a linear approach to growth? Where are the opportunities for adopt-
ing circular economy approaches in our value chain and what can be done
to shape our company’s journey?
b. Value engineering: What’s the real core value of what we deliver to
customers, and how can circular business models help us create more and
rethink how we deliver it?
c. Digital and other technologies: What are the technology trends – sci-
ence, engineering, and digital – that really matter to our business when it
comes to the circular economy, and what is their potential to disrupt the
value chain and support new ways to create it?
d. Capabilities: What improvements will we need to make to our operating
model, business ecosystem, and capabilities to support a circular economy
business model?
1
19
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Waste to Wealth

19
e. Timing: How do we time our initiation and adoption rates, as well as the
level of ambition of our circular economy approaches, to create a portfolio
that gives us options and agility?

By methodically working through these five areas, executives can determine

the main steps required to begin their organization’s transition, the size of the
prize, and the urgency with which they need to take action.

Risk and Opportunity

The linear growth model is living on borrowed time, and so are companies
that rely on it. To understand their linear economy risk and circular economy
opportunity, organizations must examine two dimensions: their exposure
to finite resources and the opportunities presented by inefficiencies in their
current value chain.

Linear Economy Risk

To gauge their exposure in the linear economy, companies need to conduct
a vulnerability assessment that evaluates their exposure to resource scarcity
and environmental regulation. What percentage of the company’s cost base
is resource-related? To which resources are they most exposed and in what
part of the organization (supply, manufacturing, retail, what products/
geographies/segments)? How much will a certain rise in commodity prices
affect the company’s profitability or force price increases to customers? What
is the organization’s high-level assessment of prices, volatilities, and timing
for key ingredients of the business and, accordingly, what is the exposure in
the company’s cost structure? These questions should be answered from both
a short- and long-term perspective. A company should also develop an under-
standing of its resource needs and its vulnerabilities given those needs over
a 10- to 15-year horizon as well as the standard three- to five-year horizon.

As organizations consider their long-term strategies, they should also consider

when resource substitutes may be available at sufficient scale to cause disrup-
tions in supply or demand. What resources are likely to be available in abun-
dance as opposed to scarcity? Also, what other competing resource uses could
disrupt the industry or geographic region? For example, the energy industry is
rapidly increasing demand for wood, as it uses wood to produce heat, and in
the future it will use wood for fuel, chemicals, and more. This demand from
the energy industry is impacting the paper and pulp industries, with which it
 3
Capturing the Advantage: Getting Started

19
competes for that resource. The textile industry is also starting to look at wood
as a future resource, threatening supply even more. So a key strategic challenge
for organizations is to assess what resources they will need in the long term
and which other industries will try to use those same resources.

Feike Sijbesma of DSM stressed the importance of taking such a long-term

view. “I call it making business future-proof, because when you look at the
figures about how we use and distribute our resources, it is unsustainable
and inevitable to redesign our economic system,” Sijbesma explained. “We
decided to make DSM’s business long-term future-proof and make sure our
company will flourish decades from now by making the switch from linear
to circular.”1 When determining long-term vulnerabilities, one can’t assume
today’s resource trajectory will continue. Switching from non-renewable
resources and addressing the planetary boundaries (all discussed earlier) are
important elements for companies – as well as governments – to address,
and it provides companies the ability to leverage their technological
expertise and innovative power to provide solutions to the world's biggest
challenges.

And while the future of government policy and environmental legislation may
be unknown today, it could have substantial impact over a longer-term hori-
zon. Many industries – including automotive, consumer electronics, packag-
ing, energy, and chemicals – are already affected in ways that require a strong
strategic response. There’s also a risk that new policies will have unpredictable
ramifications on companies that use a disproportionate volume of constrained
resources and create environmental problems in their wake. Organizations
would be wise to consider future scenarios where policy and environmental
regulation related to resource use is increasingly stringent.

Companies have increased their focus on enterprise risk management in the

past decade with, among other priorities, an emphasis on the risks associ-
ated with supply volatility. However, while hedging the business against risk
is important, it’s inherently limited by linear thinking. Often these initiatives
don’t consider changing the business model to deleverage risk. If a company
has a high exposure to a particular resource, and derives a considerable
amount of revenue from the use of that resource, the company doesn’t have
much resilience in that profit stream. Adopting circular economy business
models to disconnect revenue from that resource will make that business more
resilient.

A company’s objective is to diversify away from resources to which it is most

exposed, minimize the impact, and eliminate day-to-day exposure – protecting
 4
Waste to Wealth

19
the bottom line. This is what Renault has done effectively in recent years.
“Renault is now trading as much metals in our downstream end-of-life and
production waste businesses as we source in manufacturing,”2 observed Jean-
Philippe Hermine, vice president of Strategic Environmental Planning and
CEO of Renault Environment. The company effectively hedges its supply risk
and exposure to rising, and highly fluctuating, input prices.

Value Chain Inefficiency

Laying the foundation for the circular economy is not a “one size fits all”
approach. An important part of identifying opportunities involves under-
standing the inefficiencies in the company’s current value chain that can be
minimized or eliminated through a circular approach.

Some industries may generate considerable waste in the production process,

in logistics, or in retail. In others, low product utilization rates may be a
greater source of inefficiency. To be most effective, the opportunity should
be both significant and accessible. For example, a company may identify
inefficiencies in both its asset utilization and waste stream. But it could figure
out that increasing asset utilization is a better opportunity because 90 percent
of total waste occurs once the product is with the consumer, which is much
harder for the company to influence.

This is the case at Swedish home appliance giant Electrolux. The company’s
senior vice president of sustainability, Henrik Sundström, noted “that 80 percent
of the environmental impact of our product is in the use phase compared with
materials and transportation, which represents just 20 percent.”3

Depending on which sources of value are dominant for a company, the oppor-
tunities could be very different:

Will the industry experience widespread substitution for certain resources,

like moving away from cotton in the apparel industry or oil-based plastics
in packaging? There could be significant opportunity to create resources
that can be continuously regenerated to last longer or forever.
Will the industry move from primary (virgin) to secondary (return chain)
raw material sourcing as the dominant supply? There may be an oppor-
tunity in creating linked value chains where zero waste is generated from
production to disposal by boosting recycling and resource efficiency.
Will the owners/customers of the company’s products change their
behavior to increase utilization rates by collaborating, sharing, and trading
peer-to-peer? There may be an opportunity to create liquid markets in
 5
Capturing the Advantage: Getting Started

19
which products and assets are better utilized by becoming easily accessible
and convertible.
Will customers move toward a greater focus on total cost of ownership and
demand replacements and upgrades rather than replace the entire product
at regular intervals? There may be an opportunity to create long lifecycles
in which products are made to last, and to turn a profit from that product
longevity.

The European Union Circular Economy package mentioned in Chapter 12 was

a great step toward proactive policy. It is focused on recycling and reducing
landfills as a response to resource scarcity and the need for greater resource
efficiency.4 However, the resource supply and demand imbalance of the linear
economy cannot be resolved with recycling alone. In fact, for some resource
flows, recycling may not be the best course of action. We believe that by
not considering all four drivers of circular value potential (wasted resources,
wasted capacity, wasted lifecycles, and wasted embedded values), the EU
package will miss out on identifying the biggest circular economy opportuni-
ties. Piotr Barczak, the European Environmental Bureau’s Policy Officer for
Waste, agrees. “The Commission’s package is promising, but still falls short of
what is needed,” he noted. “You can’t build a circular economy just by recy-
cling more and more with our current production and consumption patterns.
You also need to cut down on the waste you generate.…” 5

The best options for the circular economy exist where there is large resource
exposure or a significant opportunity to eliminate one or several of the four
types of linear waste and share the resulting created and recovered value with
customers.

Value Engineering

Each of the five circular economy business models that are the heart of this
book offer unique ways to unlock the embedded value in a product, com-
ponent, material, or process. Finding the best path in the circular economy is
dependent on understanding how to use one or more of the business models
to capture and protect that value. It requires companies to assess the true core
value of what they deliver to customers – and how circular business models can
protect that value, capture greater value, or change the way value is delivered.

Finding new ways to unlock value may not come easily since it challenges con-
ventional operations and corporate culture. A clear example is the switch from
 6
Waste to Wealth

19
filament light bulbs to LED lighting. LED lights were so much more durable
that customers suddenly needed far fewer light bulbs – and, as a result, the
manufacturers of those products lost power (not to mention a lot of revenue).
A circular economy business model – in this case, the Product as a Service
model – could remedy this by moving the relationship from selling volume
(number of bulbs) to performance (good indoor lighting), like Philips did.

Companies have to reimagine how customers use their products or services.

Are people looking for a hole in the wall or a power tool? Are they interested
in owning a car or getting from point A to B in the most convenient way?
Do they want a desktop computer or instantly available software services? Do
they prefer a collection of physical music carriers and books or access to great
entertainment? Do they want a physical store or an inspiring selection and
efficient payment system? It can be a dramatic mind-set shift to move away
from seeing customers as consumers and instead see them as users of products.

In some cases companies can unlock value by leveraging circular methods

to reduce dependency on finite resources. But that often requires taking an
unconventional view of the commercial and revenue model. A company may
fundamentally change how its products deliver service to customers or it
may get rid of the physical product entirely. Value may not be created in the
company’s specific part of the value chain, or value may be hard to protect
because it occurs with the customer.

Simply adopting a circular economy practice without maximizing its full value
may result in disappointing return on investment. For example, consumer-
goods companies are designing products for recyclability. But because they
have no role in the return chain, they leave real money to be captured by
waste-management companies. Similarly, electronics companies are designing
great circular products and components that could be used again and again,
but they’re not changing the customer value proposition or commercial
model. Customers often don’t understand the point and think the product
is too expensive. These businesses could capture more profound value if they
change the revenue model or commercial model and the way they interact
with consumers. Whichever opportunities the company chooses to pursue,
the revenue and commercial model must secure the company’s position in
the value chain and protect its revenue stream. The key is to rethink how a
company is creating value (for itself and its customers) and then monetize
that value across the product’s complete lifecycle.

Tetra Pak, the B2B food processing and packaging solutions company, is doing
just that. The company invests in research to better understand customer
 7
Capturing the Advantage: Getting Started

19
behavior and uses better materials that facilitate high recycling rates at end-
of-life. Why? A more efficient value chain creates value upstream by increas-
ing demand for packaging made from circular inputs. Waste-management
companies, authorities, retailers, and customers favor packaging that can be
recycled – which leads to greater demand for Tetra Pak packaging. “We try to
develop polymers and aluminium recycling solutions to add more value for
recyclers so they can make better profits,” explained Mario Abreu, Tetra Pak’s
environmental performance director. “As a result, their competitors will start to
demand higher-quality materials, starting a race to the top. With the demand
for better materials, the price will increase, so all the links in the value chain
will receive better revenue and ultimately, it will result in improved business
and recycling.”6

By working through how their organization can create, capture, and protect
value, as well as how the commercial model must change to do so, organiza-
tions have the insights they need to select the right circular economy business
model, or combination of models, to capture their largest opportunities. This
is an innovative process, where it makes sense to involve a number of key
leaders from an organization, both from top management and operations.
Circular economy workshops can be helpful. They uncover dozens of ideas for
new business model applications and leave people energized and committed
to developing concepts further. Once companies reach this stage, they can
identify the operating model – particularly the capabilities and technologies –
they need to put the circular economy into practice.

Digital and Other Technologies

Rapid development in technology is the major thrust that’s enabling compa-

nies to profitably scale circular economy business models. When a value chain
moves toward circular practices, the dynamics of competitiveness and power
transform through such disruptive technologies as analytics, mobile, and
advanced recycling technology. Technology is enabling resource flow innova-
tions and radically different ways to engage consumers and offer products
and services. In some cases, value chains converge and traditional upstream
and downstream activities merge, all enabled by technology. According to
recent Accenture research, 64 percent of executives said their companies will
continue to focus on growth within their current industry – but 60 percent
plan to pursue growth in, or in collaboration with, other industries in the next
five years.7
 8
Waste to Wealth

19
This means new ecosystems and nontraditional competitors. Utilities offering
telecommunications services, IT companies offering home automation, car
companies offering mobility services, and the list goes on. Customers become
connected, more powerful and more demanding, forcing business to meet
customers on all sales channels and offer a social user experience with a high
degree of freedom. New technologies connect parts of the value chain that
haven’t been connected before. All of this leads to an intuitive fact that bears
emphasizing: Companies need to deeply understand the technology trends –
science, engineering, and digital – that matter to their business and, when it
comes to the circular economy, how those trends could disrupt their value chain.

Technologies are quite clearly linked to specific business models. For example,
the Product Life-Extension, Sharing Platform, and Product as a Service models
practically owe their growth to digital technology, whereas the Recovery &
Recycling and Circular Supply-Chain models would not be possible without
engineering and hybrid technologies. Companies moving toward a specific cir-
cular model or models should assess what technologies those models require,
whether those technologies currently exist in the company, and which they
need to build or acquire.

Just as with capabilities, a number of strategic options exist for creating the
appropriate technology infrastructure for circular models. Infrastructure can
be obtained through an acquisition or joint venture, by building through
organic investments, or through “borrowing” by collaborating with partner
companies. In many cases and for many technologies, companies will want
to build their own. However, that can be expensive, which makes software-
as-a-service and cloud-computing offerings very attractive. In any case put-
ting in place the right data-and-information-management system is critical.
Companies aiming to become managers of resources to, within, and back from
markets need to be able to get great data for strategizing and execution.

Finally, in driving change, it’s vital to forge a link between the technology
roadmap set out by the CTO and the requirements that come with the com-
pany’s circular business model. Ensuring collaboration between technology,
sustainability, and marketing departments is crucial to allow for the right type
of innovation.

Capabilities

Depending on the business model a company chooses – and whether it is one

or several – new capabilities will most likely be required. When a company
 9
Capturing the Advantage: Getting Started

19
adopts a circular economy business model, it’s often expanding its scope
upstream or downstream in the value chain from where it currently sits.
With some models, a company may need to work with suppliers to source
different types of materials or source from its own value chain in a closed-loop
ecosystem. In other models, it may need to become more active in the use
phase of its product or engage consumers at the product’s end-of-life. In all
cases, the company finds its core capability needs expanding beyond how it
has traditionally been structured.

In addition to developing new capabilities, a company will need to adapt

the activities it already performs to the circular business model. For example,
product development, marketing, logistics, and procurement are all affected
by circular product and service offers. Across functions, employees need to
understand the circular economy imperative and strategy. Steve Howard, chief
of sustainability at IKEA, summed it up well. “We spent 60 years building
an efficient supply chain that moves in one way,” he said. “It is going to take
more than six months to build one that goes two ways.”8

The choice of business model very much directs the priority capabilities a
company should pursue. So, a Circular Supply-Chain model requires strong
capabilities in managing collaborative circular networks and in sourcing
innovation around resource flow and cascading. Like the Circular Supply-Chain
model, the Recovery & Recycling model requires resource-flow innovation.
But it also calls for heterogeneous sourcing capabilities. The Product Life-
Extension model requires innovation in product development to create value
across lifecycles and design for many lifecycles and users. Companies using
the Sharing Platform model must excel in managing partnership networks
and customers through sales and product use, while those focused on
the Product as a Service model need strength in customer-centric sales and
marketing and asset lifecycle management.

Once a company identifies these new capabilities, a classic gap analysis fol-
lows and results in a prioritized list of what the company needs to build,
borrow, or acquire. A fundamental decision here involves determining which
parts of the circular value chain stay in-house and which portion should be
outsourced, if any. For example, if a company lacks a return chain as well as
the associated technology for trace and return systems, a joint venture with
a third party could contribute both the capability and technology needed to
return products to the producer.

After the gap analysis, most companies will generate a host of new business
ideas and a laundry list of new capabilities needed to make those ideas a real-
ity. They’ll need to plan smartly. Piloting and learning new approaches along
 0
Waste to Wealth

20
each link of the value chain will work best for some businesses – from design
to manufacturing, retail, and reverse logistics. For others, the best strategy
will be to focus on, and master, a limited set of capabilities. Regardless, build-
ing capabilities inevitably takes time and money: The more complex and
transformative the capabilities, the longer the time to pay back. Companies
that cannot manage the upfront investment all at once should focus on
uncovering short-term revenue streams to generate profit to fund longer-term
changes. IKEA does this particularly well, testing new concepts in pilot and
then scaling them up where they create the most value for customers and have
the biggest chance to generate volume. “Each country has freedom and flex-
ibility to start new projects,” IKEA’s Steve Howard said. “In France, they’ve
started a pilot in one store, which now has been rolled out nationwide. We
use these pilots and best practices to look for opportunities to scale up.”9

It can be tempting to experiment with too many projects, which results

in each one getting too little budget or attention to effectively deliver the
capability the business model needs. As projects begin to require real resources
(measurable time, people, and money), companies should allocate those
resources to projects that can scale quickly and generate their own funding in
the form of revenue, cost savings, or cost avoidance. Ultimately, myriad com-
pany- and industry-specific factors will determine how the capability should be
developed or acquired. What is critical is to ensure the capability can develop
and emerge in an environment where it is not constrained by the current busi-
ness and where workers are not constrained by other priorities and targets.

One emerging trend across many industries is the development of

Commodity Price Risk Management (CPRM) tools.10 In today’s market envi-
ronment, exposure to commodity prices will often put a company at risk. For
many businesses, from food companies to airlines, car manufacturers to con-
struction companies, commodity price movements are the single most volatile
drivers of profit. Historically, these price movements have been managed by
the procurement function. But companies with market-leading practices are
increasingly learning from industries such as energy, which have developed a
more sophisticated approach to commodity management. They are develop-
ing specialist CPRM capabilities to help manage price risk proactively. For
them, CPRM is not just a way to help control risk and determine capital
requirements. It’s a commercially driven approach that examines potential
rewards to determine the smartest trade-off between risk and return.

When entering a world of resource supply/demand imbalance, develop-

ing special CPRM capabilities makes perfect sense. But, at the same time,
 1
Capturing the Advantage: Getting Started

20
companies decouple financial results from problematic commodities altogether,
whenever possible.

Lastly, companies that wish to make a serious contribution to pushing circu-

lar principles in their industries will need to improve their public affairs and
policy outreach capabilities. It’s important to engage with the right partners
and associations that can become dynamic ecosystems and centers of gravity
for business development, investments, customer engagement, and policy
evolution.

Timing

Some of the most attractive circular opportunities will take time and resources
to pursue. The move to a circular economy is so profound that once the “plat-
form is burning,” it might already be too late. Consider the growth of Airbnb.
It took the company six years from 2008 to 2014 to reach the same number
of rooms as the Hilton hotel chain, a 95-year-old industry leader.11 To further
the point, Brian Chesky, founder and CEO of Airbnb, tweeted in January,
“Marriott wants to add 30,000 rooms this year. We will add that in the next
two weeks.”12 This growth was not achieved by adding capacity – building
more houses – but by smarter use of existing, wasted capacity in the built
environment through leveraging mobile and social technology. The pace of
disruption exemplified by Airbnb and others like it makes it critical for com-
panies to lay the groundwork for future possibilities before they’re realities.
But how do companies time their adoption of circular economy approaches to
create a portfolio that gives them options and agility?

It’s a difficult question, and one that doesn’t have an easy, sure-fire answer.
There are a lot of things a company could do to move toward the circular
economy that don’t make economic sense in the short term. But they’re
necessary for success in the longer term because of the time it takes to build
the technologies, capabilities, and market traction for a new business model
to succeed at scale. The rub is, because no one knows how resource supply
and prices will change over that time horizon and, more importantly, what
business model and technology innovations will come in to make the resource
perspective obsolete altogether, it’s impossible to pick with certainty the right
time to invest and enter the market.

Companies have a complex set of things whose orchestration they need to

time as they move to the circular economy: new business models, capabilities,
 2
Waste to Wealth

20
technologies, industry disruption, and new policies, to name a few. There are
uncertainties to consider and moving parts to coordinate in setting the pace
and direction of change. While it’s impossible to offer a uniform industry-
wide recommendation on timing, a conceptual matrix helps to frame how
quickly and aggressively a company needs to move. One axis maps the com-
pany’s exposure to wasted resources and embedded values (low/high) and
the other axis maps the level of wasted capacity and lifecycles in a company’s
market (low/high). Where the company falls on the matrix provides some
indication of the urgency with which it needs to respond.

Wasted resources
and embedded values

High

• Start work on
resource agenda • High urgency to
shape a full
• Watch out for circular economy
disruptive program
business models

• Start to explore new

• No immediate business models
urgency to act and technologies
• Watch out for • Watch out for new
exposure of constraints to
partners resource supply
Low
Wasted capacity
and lifecycles
Low High

For instance, a financial-services company may end up in the lower left corner,
so it has less urgency to move to the circular economy – although in some
parts of the portfolio, circular likely merits consideration as a disruptive force
for the companies and commodities in which financial assets are invested. In
contrast, the automotive and industrial sectors have high exposure to resource
waste and high levels of wasted capacity and lifecycles, placing them in the
upper right corner. In other industries – hospitality and some consumer goods
industries, for instance – resource constraints can be lower, but the level of
waste in the market high, putting them in the lower right corner. Finally, for
industries in the upper left corner such as logistics and aviation, they could
be dramatically disrupted if one company breaks through with a new circular
 3
Capturing the Advantage: Getting Started

20
solution. The nature of the challenge depends on the unique context, which
dictates the appropriate response and timing.
An important aspect of timing a company’s move is striking the delicate
balance between first-mover advantage (cultivating technology leadership,
securing scarce resource supply, creating switching barriers, and addressing
undiscovered customer needs) and disadvantage (free-rider effects, betting
on the wrong technology, failing to build capabilities, encountering unfavora-
ble policies). The bigger the potential first-mover advantage, the bigger the
risk of moving late. In the Sharing Platform model there is significant first-
mover advantage in supplying the infrastructure and technology to facilitate
the market – as eBay’s success amply demonstrates. Having the infrastructure
in place is a high barrier to entry for others, and there is significant advantage
in having the data collected on the use phase of products. In this “winner
takes all” market, companies want to get into the market early.
Compare this to a Circular Supply-Chain model that typically requires a lot of
R&D and high capital investment, and often results in a position in the mar-
ket that’s not easy to protect when mature. If a company is a leader in the
market and has the right types of alliances, it probably makes sense to move
forward. But if not, it may make sense to wait and let others assume the risk.
One example, in the automotive industry: Some companies went “all in” on
ethanol. When ethanol fell out of favor two or three years later, those compa-
nies found themselves behind in development of products the market really
was gravitating toward – electric cars and hybrids. These companies didn’t
time their moves well because they focused nearly exclusively on one area
early. With little agility to maneuver, they found it difficult to switch gears
toward other options. This challenge isn’t unique to the circular economy, but
it is an incredibly important facet of the timing decision.
At the end of the day, the solution that’s both circular and a win-win for the
customer is the one that will dominate.
When considering the timing of their moves, some companies start with a
separate circular economy business (such as Daimler and car2go), while
others make step changes to the core business (such as IKEA). Often, com-
panies need to work on parallel tracks, gradually improving the circularity of
their business while testing selectively where to go “all in” at speed and scale.
The right decision is a function of the company’s customers, partners, prod-
ucts, and organizational culture:
Customers: If there is a clearly identifiable set of customers or new mar-
kets looking for circular offerings, a company could capture that market
 4
Waste to Wealth

20
before convincing existing customers to change. On the other hand, if cur-
rent customers are more interested in circular offerings, it makes sense to
start with the core business.
Products: If the circular product adds value to existing products, it is
effectively changing the existing business. If it is a different product alto-
gether, it is addressing another type of demand and is better supported by
a new business.
Culture: The more resistance a company has to change in the existing
organization, the more it makes sense to start in a measured, isolated way.

Settling on the right time to move is so difficult because, frankly, the circular
economy itself is hard to adopt. It requires executives to think across func-
tions, value chains, and entire industries – something many, if not most, don’t
do very often or very deeply. It also challenges the conventional business
wisdom of profiting from the core and can fundamentally change the DNA of
the organization.

Feike Sijbesma, CEO of Royal DSM, embraces the principles and sums up the
mind-set companies need to adopt for the circular economy: “This is fully
aligned with DSM’s goal to create value along three dimensions simultaneously:
socially, environmentally and economically; in short: People, Planet, Profit.
It is clear that it will take time to build capabilities to change organiza-
tions and value chains and to develop competitive solutions for the circular
economy. So therefore the right time to start is now!”13

The Time to Start Is Now

To say the prospect of moving toward a circular economy can be daunting

for most organizations is an understatement. We’ve shown that throughout
this book. Yet we’ve also demonstrated – through the tangible experiences of
the many companies that have done it – that it’s more than worth the effort.
It is, in fact, necessary to the ongoing viability of the global economy – an
economy that delivers prosperity, jobs, and growth around the world but does
not do so at the expense of people and the planet.

More and more companies have already gained real competitive advantage by
adopting circular economy principles. They’re getting ahead of rivals by inno-
vating for both resource-efficiency and customer value – creating real change
at the intersection of strategy, technology, and operations. A silent revolution
is gathering momentum.
 5
Capturing the Advantage: Getting Started

20
The planet cannot continue to sustain the current growth model that has
served us over the past 250 years. Intensifying resource scarcity, runaway
waste, and climate change, coupled with the dramatic rise in demand from
a much larger global population and customer and policy expectations for
reduced negative footprint of business, all are collectively writing an obituary
for the linear growth model. But a circular economy offers the prospect of a
bright future.

When it comes to embracing the circular economy, there’s never been a better
time to start. By developing a proactive strategy – built on a clear understand-
ing of the motivation to leave behind the linear model and committed to the
business models, technologies, and capabilities critical to success – companies
can innovate to create superior value and capture the circular advantage in the
coming decade and beyond. We wish you luck on the journey!
Methodology

Development of the ideas presented in this book started back in 2010, when
Peter Lacy and David Rosenberg, both members of the Young Global Leaders
(YGL) network at the World Economic Forum (WEF), started a YGL Circular
Economy taskforce focused on innovation and new business models. Over
the years that followed, a range of experts and leaders engaged with and
presented at the taskforce speaker series, including Marc Bolland, Dame Ellen
MacArthur, Gunter Pauli, Len Sauers, John Warner, and many more. In 2012,
Jakob Rutqvist joined Peter as supporting taskforce manager, and the idea
of developing a practical handbook for the circular economy took shape. It
grew into a full-fledged business book on what defines success in a circular
economy and how best to achieve it.

The bulk of research and analysis happened in 2013 and 2014 when a
global team (including Accenture staff in the United States, Sweden, The
Netherlands, Germany, India, and China) combined desktop research with
interviews, case analysis, and the development of a model to calculate the
economic implications of a circular economy. The model leveraged the exist-
ing body of research on natural resource supply and demand, ecosystem
management, and population and economic growth. Combining current
research with historical data and forecasts, the model predicted supply and
demand for natural resources while adjusting for variables like technological
development. The model was used to assess the size of “business as usual”
excess demand for resources, the economic consequences of doing nothing,
and the economic opportunities of implementing circular economy solutions
to radically reduce demand. See appendix for data tables.

In case studies, we focused on scalability and proven commercial success. All

in all, 120 case studies were analyzed in-depth with representation from all
continents (but slightly higher concentration in Europe and North America).
Sixty-five of the cases were large companies, 35 were medium-sized, and
6
20
 7
Methodology

20
20 were innovative start-ups. Complementing the case analysis, we held
more than 50 rigorous interviews with senior executives and experts, which
are reflected throughout the book. Research results from both cases and
interviews went through a structured analytical process to identify the busi-
ness models, capabilities, and technologies that underpinned each. Out of
the companies analyzed, five circular business models were defined. We then
linked corresponding case studies to the models they exemplified.
Appendix

Data Tables from Modeling

The following tables contain some of the key data produced and used in this
book to estimate resource supply and demand, along with the opportunity of
the circular economy to bridge excess future demand for constrained mate-
rial and energy resources. Data is presented for transparency and for readers
interested in quantitative detail.

Central to the analysis is the DMC measure “Domestic Material Consumption,”

which measures in tonnes the volume use of material and energy resources in
a country or globally. We used both a full DMC measure and one limited to
“constrained resources,” which is a proxy for use of resources where scarcity
is an issue. For example, material like sand or gravel has been removed here.
For this reason, the demand and supply forecasts for “constrained resources”
should be interpreted not as total DMC supply and demand but only a subset
of constrained material and energy. Total DMC can be substantially higher
when new circular and unconstrained resources are developed and used.

Additional economic output enabled by circular economy business models

globally (GDP, $tn 1990 GK, Selected years)
Year Baseline Optimistic BAU Expected
2020 1.6 1.3 1.5
2025 3.6 1.9 2.7
2030 6.3 2.6 4.5
2035 12.1 3.5 7.8
2040 18.4 4.6 11.5
2045 26.0 6.5 16.2
2050 41.0 9.6 25.3
Source: Accenture analysis based on resource supply and demand forecast data and output elasticity.
8
20
 9
Appendix

20
Excess demand for constrained natural resources including energy (DMC,
bn tonnes, 2015–2050)
Year Baseline Optimistic BAU Expected
2015 0 0 0
2020 4 3 3
2025 8 4 6
2030 12 5 9
2035 20 6 13
2040 29 6 18
2045 38 8 23
2050 48 10 29
Source: Accenture analysis based on forecasted output growth, footprint intensity and biocapacity use.

Output elasticity with respect to resource supply shortages

Resource supply shortage thresholds 20% 50% 75% 90%
Output (GDP) elasticity 0.33 0.37 0.43 0.55
Sources: Accenture analysis.
The World Bank, “Where is the Wealth of Nations?”, published by the World Bank, 2006, http://site
resources.worldbank.org/INTEEI/214578-1110886258964/20748034/All.pdf.
Gaël Giraud and Zeyner Kahraman, ”How Dependent is Growth from Primary Energy? Output Energy
Elasticity in 50 Countries (1970–2011)”, Paris School of Economics, April 10, 2014, http://www.paris
schoolofeconomics.eu/IMG/pdf/article-pse-medde-juin2014-giraud-kahraman.pdf.
Population and output baseline estimates used in analysis (1961–2050)
21
Year 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 0
Global baseline population (bn) 3.1 3.1 3.2 3.3 3.4 3.4 3.5 3.6 3.6 3.7
Global baseline GDP (tn, $1990 GK) 9.0 9.5 9.9 10.6 11.1 11.7 12.1 12.8 13.5 14.2
Appendix

Year 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980
Global baseline population (bn) 3.8 3.9 3.9 4.0 4.1 4.2 4.2 4.3 4.4 4.5
Global baseline GDP (tn, $1990 GK) 14.8 15.5 18.0 16.8 17.0 17.9 18.6 19.4 20.1 22.3

Year 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
Global baseline population (bn) 4.5 4.6 4.7 4.8 4.9 4.9 5.0 5.1 5.2 5.3
Global baseline GDP (tn, $1990 GK) 22.7 23.0 23.6 24.6 25.5 26.3 27.2 28.4 29.3 29.8

Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Global baseline population (bn) 5.4 5.5 5.5 5.6 5.7 5.8 5.9 5.9 6.0 6.1
Global baseline GDP (tn, $1990 GK) 30.1 30.3 30.7 31.5 32.6 33.7 34.9 35.6 33.9 35.5

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Global baseline population (bn) 6.2 6.2 6.3 6.4 6.5 6.6 6.6 6.7 6.8 6.9
Global baseline GDP (tn, $1990 GK) 36.5 37.8 39.5 41.5 43.6 46.1 48.7 50.3 50.4 53.2
 Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Global baseline population (bn) 6.9 7.0 7.1 7.2 7.3 7.3 7.4 7.5 7.6 7.6
Global baseline GDP (tn, $1990 GK) 55.5 57.4 59.1 60.8 62.5 64.3 66.1 68.0 70.0 72.0

Year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Global baseline population (bn) 7.7 7.8 7.8 7.9 8.0 8.1 8.1 8.2 8.3 8.3
Global baseline GDP (tn, $1990 GK) 74.0 76.2 78.3 80.6 82.9 85.3 87.7 90.2 92.8 95.5

Year 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Global baseline population (bn) 8.4 8.4 8.5 8.6 8.6 8.7 8.7 8.8 8.8 8.9
Global baseline GDP (tn, $1990 GK) 98.2 101.0 103.9 106.9 109.9 113.1 116.3 119.6 123.1 126.6

Year 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050
Global baseline population (bn) 8.9 9.0 9.1 9.1 9.1 9.2 9.2 9.3 9.3 9.4
Global baseline GDP (tn, $1990 GK) 130.2 133.9 137.8 141.7 145.8 149.9 154.2 158.6 163.2 167.8
Sources: Accenture analysis.
Historical GDP (1961–2013): The Conference Board, “Total Economy Database - Key Findings”, January 2014, http://www.conference-board.org/elata/economydatabase/.
Appendix

Population: US Census Bureau, “International Data Base”, accessed December 23, 2014, https://www.census.gov/population/international/data/idb/informationGateway.php.

21
1
Footprint intensity and biocapacity use globally (2013–2050)
21
Year 2013 2014 2015 2
Footprint intensity (ecological footprint hectares per ton DMC) 0.42 0.42 0.42
Biocapacity use (bn ecological footprint hectares) 20 20 20
Appendix

Year 2016 2017 2018 2019 2020

Footprint intensity (ecological footprint hectares per ton DMC) 0.41 0.41 0.41 0.40 0.40
Biocapacity use (bn ecological footprint hectares) 20 20 20 20 20

Year 2021 2022 2023 2024 2025

Footprint intensity (ecological footprint hectares per ton DMC) 0.40 0.39 0.39 0.39 0.39
Biocapacity use (bn ecological footprint hectares) 20 20 20 19 19

Year 2026 2027 2028 2029 2030

Footprint intensity (ecological footprint hectares per ton DMC) 0.38 0.38 0.38 0.37 0.37
Biocapacity use (bn ecological footprint hectares) 19 19 19 19 19

Year 2031 2032 2033 2034 2035

Footprint intensity (ecological footprint hectares per ton DMC) 0.37 0.37 0.36 0.36 0.36
Biocapacity use (bn ecological footprint hectares) 18 18 18 17 17
 Year 2036 2037 2038 2039 2040
Footprint intensity (ecological footprint hectares per ton DMC) 0.35 0.35 0.35 0.35 0.34
Biocapacity use (bn ecological footprint hectares) 17 16 16 16 15

Year 2041 2042 2043 2044 2045

Footprint intensity (ecological footprint hectares per ton DMC) 0.34 0.34 0.34 0.33 0.33
Biocapacity use (bn ecological footprint hectares) 15 15 14 14 14

Year 2046 2047 2048 2049 2050

Footprint intensity (ecological footprint hectares per ton DMC) 0.33 0.33 0.32 0.32 0.32
Biocapacity use (bn ecological footprint hectares) 13 13 13 12 12
Sources: Forecast: Accenture analysis.
Historical data: Global Footprint Network, “Data and Results: National Footprint Accounts”, accessed on December 23, 2014, http://www.footprintnetwork.org/ar/index.php/
GFN/page/footprint_data_and_results/.
Appendix

21
3
 21
4
Baseline resource demand (bn tonnes DMC, 1961–2050)
Year 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970
Biomass 9 9 10 10 10 11 11 11 11 11
Appendix

Fossil energy carriers 4 5 5 5 5 6 6 6 6 6

Ores and industrial minerals 2 2 2 2 2 2 2 2 2 3
Construction mineral 4 5 5 5 6 6 6 6 7 7

Year 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980
Biomass 12 12 12 12 13 13 13 13 13 13
Fossil energy carriers 7 7 7 7 7 8 8 8 8 8
Ores and industrial minerals 3 3 3 3 3 3 3 3 3 3
Construction mineral 7 8 8 8 8 9 9 10 10 10

Year 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990
Biomass 14 14 14 15 15 16 16 16 16 17
Fossil energy carriers 8 8 8 9 9 9 9 9 10 10
Ores and industrial minerals 3 3 3 3 3 3 3 4 4 4
Construction mineral 10 10 10 11 11 11 12 12 12 12
Year 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Biomass 16 17 17 17 17 17 17 17 18 18
Fossil energy carriers 9 9 9 9 10 10 10 10 10 10
Ores and industrial minerals 4 4 4 4 4 4 4 4 4 4
Construction mineral 13 13 14 15 15 16 16 16 17 17

Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Biomass 18 18 18 19 19 19 20 20 20 21
Fossil energy carriers 10 10 11 11 12 12 12 13 13 14
Ores and industrial minerals 4 5 5 5 6 6 6 7 7 7
Construction mineral 18 19 20 22 23 25 26 27 28 30

Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Biomass 21 22 22 22 22 23 23 23 23 24
Fossil energy carriers 14 14 14 15 15 15 15 16 16 16
Ores and industrial minerals 7 7 8 8 8 8 8 9 9 9
Construction mineral 32 33 34 35 37 38 39 41 42 44
Appendix

(continued)

21
5
Continued
21
Year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 6

Biomass 24 24 24 25 25 25 25 25 26 26
Fossil energy carriers 16 17 17 17 18 18 18 18 19 19
Appendix

Ores and industrial minerals 9 10 10 10 10 11 11 11 12 12

Construction mineral 45 47 49 51 52 54 56 58 60 62

Year 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Biomass 26 26 27 27 27 28 28 28 28 29
Fossil energy carriers 19 20 20 20 21 21 21 22 22 22
Ores and industrial minerals 12 12 13 13 13 14 14 15 15 15
Construction mineral 63 65 66 68 69 71 73 74 76 77

Year 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050
Biomass 29 29 29 30 30 30 31 31 31 32
Fossil energy carriers 23 23 24 24 24 25 25 26 26 26
Ores and industrial minerals 16 16 17 17 18 18 18 19 19 20
Construction mineral 79 80 82 83 85 86 88 89 91 92
Sources: Forecast: Accenture analysis.
Historical data (1961–2010): Fridolin Krausmann, Simone Gingrich, Nina Eisenmenger, Karl-Heinz Erb, Helmut Haberl, Marina Fischer-Kowalski, “Growth in global materials use,
GDP and population during the 20th century”, Ecological Economics, 68 (10), August 15, 2009.
Anke Schaffartzik, Andreas Mayer, Simone Gingrich, Nina Eisenmenger, Christian Loy, Fridolin Krausmann, “The global metabolic transition: Regional patterns and trends of global
material flows, 1950–2010”, Global Environmental Change, Volume 26, May 2014, http://www.sciencedirect.com/science/article/pii/S095937801400065X.
Total resource supply, one-planet economy in 2050 scenario (DMC, constrained resources, billion tonnes, 2013–2050)
Year 2013 2014 2015 2016 2017 2018 2019 2020
Baseline 47 48 49 49 49 49 49 50
Optimistic BAU 47 48 49 49 49 49 49 50

Year 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Baseline 50 50 50 50 50 50 50 50 50 50
Optimistic BAU 50 50 50 51 51 51 51 51 52 52

Year 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040
Baseline 50 49 49 48 48 47 46 46 45 45
Optimistic BAU 52 52 51 51 51 51 50 50 50 50

Year 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050
Baseline 44 43 43 42 41 40 40 39 38 37
Optimistic BAU 49 49 48 48 48 47 47 46 46 45
Source: Accenture analysis based on estimated footprint intensity and biocapacity use.
Appendix

21
7
Baseline material intensity (kg/$1990 GK) used in analysis (2010–2050)
21
Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 8
Biomass 0.39 0.39 0.38 0.37 0.37 0.36 0.35 0.35 0.34 0.33
Fossil energy 0.25 0.25 0.25 0.24 0.24 0.24 0.24 0.23 0.23 0.23
Ores and industrial minerals 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13 0.13
Appendix

Construction minerals 0.57 0.57 0.57 0.58 0.58 0.59 0.59 0.59 0.60 0.60
Total average 1.34 1.34 1.33 1.32 1.32 1.31 1.31 1.30 1.30 1.29

Year 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Biomass 0.33 0.32 0.31 0.31 0.30 0.30 0.29 0.29 0.28 0.28
Fossil Energy 0.22 0.22 0.22 0.22 0.21 0.21 0.21 0.21 0.20 0.20
Ores and industrial minerals 0.13 0.13 0.13 0.13 0.12 0.12 0.12 0.12 0.12 0.12
Construction minerals 0.61 0.61 0.62 0.62 0.62 0.63 0.63 0.64 0.64 0.65
Total average 1.28 1.28 1.28 1.27 1.27 1.26 1.26 1.25 1.25 1.25

Year 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039
Biomass 0.27 0.27 0.26 0.26 0.25 0.25 0.24 0.24 0.23 0.23
Fossil energy 0.20 0.20 0.19 0.19 0.19 0.19 0.18 0.18 0.18 0.18
Ores and industrial minerals 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12
Construction minerals 0.64 0.64 0.64 0.63 0.63 0.63 0.62 0.62 0.62 0.61
Total average 1.24 1.22 1.21 1.20 1.19 1.18 1.17 1.16 1.15 1.14
 Year 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050
Biomass 0.22 0.22 0.22 0.21 0.21 0.20 0.20 0.20 0.19 0.19 0.19
Fossil energy 0.18 0.17 0.17 0.17 0.17 0.17 0.16 0.16 0.16 0.16 0.16
Ores and industrial minerals 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12
Construction minerals 0.61 0.60 0.59 0.59 0.58 0.57 0.57 0.56 0.55 0.55 0.54
Total average 1.13 1.11 1.10 1.09 1.07 1.06 1.05 1.04 1.02 1.01 1.00
Sources: Forecast: Accenture analysis.
Historical material use data (1961–2010): Fridolin Krausmann, Simone Gingrich, Nina Eisenmenger, Karl-Heinz Erb, Helmut Haberl, Marina Fischer-Kowalski, “Growth in global
materials use, GDP and population during the 20th century”, Ecological Economics, 68 (10), August 15, 2009.
Historical GDP (1961–2013): The Conference Board, “Total Economy Database - Key Findings”, January 2014, http://www.conference-board.org/data/economydatabase/.
Appendix

21
9
Acknowledgments

The authors would like to thank the following for outstanding contributions
and intellectual exchanges during the course of the project, as interviewees,
team members, reviewers, and/or sparring partners:

Mario Abreu, Rickard Ahlbom, David Aikman, Geanne van Arkel, Ida Auken,
Tatiana Babakina, Günter Bachmann, Gemma Baker, Mike Barry, Ton Bastein,
Eben Bayer, Rainer Becker, Anders Bering, Bruno Berthon, Cecilia Brännsten,
Michael Braungart, Joost Brinkman, Katherine Brown, Henk de Bruin, Jane
Bryett, Philipp Buddemeier, Vanessa Butani, Nathalie Chalmers, Ritu Chandra,
Sir Ian Michael Cheshire, Adam Cooper, Sytze Dijkstra, Quentin Drewell, Alex
Duff, John Dutton, Kevin P. Eckerle, Freek van Eijk, Frits Engelaer, Alexander
Collot d'Escury, Jamie Leon Evans, Noel Fernandes, Gerrard Fisher, Javier
Flaim, David Gardner, Jason Goode, James Greyson, Femke Groothuis, Janet
Gunter, Tomas Haglund, Klas Hallberg, Gary Hanifan, Jean Pierre Hannequart,
Mark Haverlach, Jean-Philipp Hermine, Simon Boas Hoffmeyer, Frans van
Houten, Steve Howard, Kristoffer Hvidsteen, Sony Kapoor, Justin Keeble, Alan
Keeso, Joost de Kluijver, Gautham Krishnan, Ellen Macarthur, Benita Matofska,
Mark P. McDonald, William McDonough, Robert P. McNamara, Paras Mehta,
Cui Mengmeng, Ana Paula Mundim, Kasper Meldgaard Nielsen, Peder
Holk Nielsen, Marcio Nigro, Cecilia Nord, Paul Nunes, Sabine Oberhuber,
Stephan Paetzelt, Mrinal Pareek, Gunter Pauli, Claus Stig Pedersen, Catherine
Pettersson, Janez Potočnik, Jørgen Buhl Rasmussen, Kristin Rechberger, April
Rinne, Eric Roland, Magnus Rosen, David Rosenberg, Rachit Rungta, Luisa
Santiago, Stefan Schaltegger, Juliet Schor, Jen Zhu Scott, Tina Senior, Aditya
Sharma, Feike Sijbesma, Samanthi Silva, Martens Sjors, Lorna Solis, Bert van
Son, Mark Spelman, Walter Stahel, Per Stoltz, Henrik Sundström, Kim Tjoa,
Klaus Töpfer, Marco Torregrossa, Vartan Vartanian, Andre Veneman, Mathis
Wackernagel, Dominic Waughray, Toby Webb, Daan Weddepohl, Ernst
Weiszäcker, Fokko Wientjes, Johnson Yeh, Swito Yuber, and Dajian Zhu.
0
22
About the Authors

Peter Lacy is Global Managing Director of Sustainability Services at Accenture

and a member of the Accenture Strategy leadership team. He is an adviser to
the United Nations, the World Economic Forum and governments, CEOs, and
boards around the world. He is a business fellow at Oxford University, a WEF
Young Global Leader, and cofounder of “The Circulars,” the first worldwide
circular economy award for business innovation. He is a regular contributor to
publications such as the Financial Times, The Wall Street Journal, Bloomberg,
Business Week, The Guardian, and China Daily.

Jakob Rutqvist is a manager in Accenture’s Strategy and Sustainability practice

and is part of its Nordic sustainability leadership team. Before Accenture he
worked as a lobbyist on innovation, climate, and energy and has engaged
big multinationals as well as governments and institutions like the United
Nations, World Bank, World Economic Forum, and EU Parliament. He is an
alumni of Clinton Global Initiative, One Young World, and Harvard University.
Jakob has written for Fast Company and Fortune.
1
22
Notes

Executive Summary

1. Accenture analysis based on World Bank data. (Pink sheets)

2. Macrotrends website, ‘Crude Oil Price History Chart’, accessed December 10,
2014, http://www.macrotrends.net/1369/crude-oil-price-history-chart.
3. ‘World Poverty Statistics’, Statistic Brain, accessed November 20, 2014, http://
www.statisticbrain.com/world-poverty-statistics/.
4. MyWays website, accessed December 1, 2014, https://www.myways.com/
5. http://www.forbes.com/sites/stevenbertoni/2014/08/20/how-mixing-data-
and-fashion-can-make-rent-the-runway-techs-next-billion-dollar-star/
6. SKF Group, ‘SKF launches SKF Insight™, groundbreaking intelligent bearing
technology’, April 8, 2013, http://www.skf.com/group/news-and-media/news-
search/2013-04-08-skf-launches-skf-insight-groundbreaking-intelligent-bearing-
technology.html.
7. Drawing on primary and secondary research, Accenture analyzed more than 120
case studies on companies representing a wide range of geographies and indus-
tries, with the most prevalent being companies in Europe or North America and
in the textile, high-tech and apparel industries.
8. ‘AkzoNobel and Photanol Developing Chemical Compounds of the Future’,
company press release, September 17, 2014, https://www.akzonobel.com/
news_center/news/news_and_press_releases/2014/akzonobel_and_photanol_
developing_chemical_compounds_of_the_future.aspx.
9. MarketsandMarkets, ‘Renewable Chemicals Market worth $83.4 Billion by
2018’, company press release, June 24, 2013, http://www.marketsandmarkets.
com/PressReleases/renewable-chemical.asp.
10. Dr. Forbes McDougall, ‘From waste to worth – zeroing in on waste’, Inside
P&G, accessed September 9, 2014, http://www.pg.com/en_UK/news-views/
Inside_PG-Quarterly_Newsletter/issue8/sustainability.html.
11. ‘GM Makes the Business Case for Zero Waste’, company news release, October
19, 2012, https://media.gm.com/media/us/en/gm/news.detail.html/content/
Pages/news/us/en/2012/Oct/1019_Landfill-FreeBlueprint.html.
2
22
 3
Notes

22
12. Dell, ‘Dell Outlet – Go Green and Save Some Green’, accessed February 3, 2015,
http://www.dell.com/learn/us/en/22/campaigns/outlet-green-usdfh.
13. Caterpillar, ‘Common Good: Sustainability That Benefits Our Customers,
Stockholders, People and Planet’, 2013 Sustainability Report, p. 57, http://
reports.caterpillar.com/sr/_pdf/CAT2013SR.pdf.
14. Yerdle website: https://yerdle.com/about. Accessed October 28, 2014.
15. Douglas MacMillan, Sam Schechner, and Lisa Fleisher, ‘Uber Snags $41 Billion
Valuation’, The Wall Street Journal, December 5, 2014, http://www.wsj.com/
articles/ubers-new-funding-values-it-at-over-41-billion-1417715938.
16. Allied Market Research, ‘Global LED Market Is Expected to Reach $42.7 Billion
by 2020’, company press release, September 11, 2014, http://www.prnewswire.
com/news-releases/global-led-market-is-expected-to-reach-427-billion-by-
2020---allied-market-research-274728291.html.
17. United Nations Global Compact and Accenture, ‘The UN Global Compact-
Accenture CEO Study on Sustainability 2013: Architects of a Better World’,
September 2013, http://www.accenture.com/Microsites/ungc-ceo-study/
Documents/pdf/13-1739_UNGC%20report_Final_FSC3.pdf.

1 On Borrowed Time

1. UNEP, “Responsible Resource Management for a Sustainable World: Findings

from the International Resource Panel,” 2012, http://www.unep.org/resource-
panel/Portals/24102/PDFs/SYNOPSIS%20Final%20compressed.pdf.
2. WWF, “Living Planet Report 2014: species and spaces, people and places,” 2014,
http://wwf.panda.org/about_our_earth/all_publications/living_planet_report/.
3. Accenture analysis based on data from: Stephan Lutter, Stefan Giljum, and
Mirko Lieber, “Global Material Flow Database,” March 2014, http://www.
materialflows.net/fileadmin/docs/materialflows.net/SERI_WU_MFA_techni-
cal_report_final_20140317.pdf; The World Bank GDP data, accessed September
9, 2014. http://data.worldbank.org/.
4. The Conference Board, Total Economy Database™, accessed January 2013, http://
www.conference-board.org/data/economydatabase/.
5. Accenture analysis based on data from: The World Bank, “World Bank Commodity
Price Data (The Pink Sheet),” December 2014, http://econ.worldbank.org/
WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/0,,contentMDK:21574907~
menuPK:7859231~pagePK:64165401~piPK:64165026~theSitePK:476883,00.html.
6. Accenture analysis based on data from: The World Bank, “World Bank
Commodity Price Data.”
7. OECD Development Center and Homi Kharas, “The Emerging Middle Class in
Developing Countries; Working Paper No. 285,” January 2010, http://www.
oecd.org/development/pgd/44457738.pdf.
8. Linda Yueh, “The rise of the global middle class,” BBC News, June 18, 2013,
http://www.bbc.com/news/business-22956470.
 4
Notes

22
9. Accenture analysis.
10. Much has been written on this topic. Some selected works that we’ve based
our research on include the following: Ugo Bardi, Extracted: How the Quest
for Mineral Wealth Is Plundering the Planet, Chelsea Green Publishing, April
22, 2014; Michael T. Klare, The Race for What’s Left: The Global Scramble for
the World’s Last Resources, Picador, December 24, 2012; Donella H. Meadows,
Dennis Meadows, and Jorgen Randers, Limits to Growth: The 30 Year Update,
Chelsea Green Publishing, February 27, 2012; Huib Wouters and Derk Bol,
Materials innovation Institute (M2i), “Material Scarcity,” November 2009,
http ://www.mvonederland.nl/sites/default/files/2013/m2i20material_s
carcity20report.pdf; BBC, “Global resources stock check,” June 18, 2012, http://
www.bbc.com/future/story/20120618-global-resources-stock-check; Michael
T. Klare, “Peak Oil Is Dead. Long Live Peak Oil!,” The Nation, January 9, 2014,
http://www.thenation.com/article/177859/peak-oil-dead-long-live-peak-oil;
EIA, International Energy Statistics database, accessed September 9, 2014,
http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=5&pid=57&aid=6.
11. Ernst Ulrich von Weizsäcker, Jacqueline Aloisi de Larderel, Karlson “Charlie”
Hargroves, Christian Hudson, Michael Harrison Smith, and Maria Amelia
Enriquez Rodrigues, United Nations Environment Programme, “Decoupling 2:
Technologies, Opportunities and Policy Options,” 2014, section 1.4.3, http://
www.unep.org/resourcepanel/Portals/24102/PDFs/IRP_DECOUPLING_2_
REPORT.pdf.
12. OECD, “Environmental Outlook to 2050: The Consequences of Inaction, Key
Findings on Water,” March 2012, http://www.oecd.org/env/indicators-model-
ling-outlooks/49844953.pdf.
13. Karen Villholth, Aditya Sood, and Evgeniya Anisimova, “Unsustainable Use of
Groundwater May Threaten Global Food Security,” International Food Policy
Research Institute, March 2014, http://www.pim.cgiar.org/2014/03/21/
unsustainable-use-of-groundwater-may-threaten-global-food-security/.
14. J. Rockström, W. Steffen, K. Noone, Å. Persson, F. S. Chapin, III, E. Lambin,
T. M. Lenton, M. Scheffer, C. Folke, H. Schellnhuber, B. Nykvist, C. A. De Wit,
T. Hughes, S. van der Leeuw, H. Rodhe, S. Sörlin, P. K. Snyder, R. Costanza,
U. Svedin, M. Falkenmark, L. Karlberg, R. W. Corell, V. J. Fabry, J. Hansen, B. Walker,
D. Liverman, K. Richardson, P. Crutzen, and J. Foley, “Planetary boundaries:
exploring the safe operating space for humanity,” Ecology and Society, 2009,
14(2): 32, http://www.ecologyandsociety.org/vol14/iss2/art32/; European
Commission, “Module 1: Understanding the Basics: Global Environmental
Challenges and Climate Change Science,” 2013, http://capacity4dev.ec.europa.
eu/system/files/file/19/06/2013_-_1143/module1_en_vfinal.pptx.
15. WWF, “Living Planet Report 2014.”
16. CO2Now.org, “Earth’s CO2 Home Page,” http://co2now.org/, accessed June 2014.
17. Rockström et al., “Planetary boundaries: exploring the safe operating space for
humanity.”
 5
Notes

22
18. Craig Welch, “The Pacific’s Perilous Turn,” The Seattle Times, September 12, 2013,
http://apps.seattletimes.com/reports/sea-change/2013/sep/11/pacific-ocean-
perilous-turn-overview/?prmid=4749.
19. Millennium Ecosystem Assessment, “Current State & Trends Assessment,” mil-
lenniumassessment.org/en/Condition.html.
20. Millennium Ecosystem Assessment, http://www.unep.org/maweb/en/Slide
Presentations.aspx.
21. Bank of America Merrill Lynch, “No Time to Waste – Global Waste Primer,”
April 5, 2013, http://www.longfinance.net/images/reports/pdf/baml_waste_
2013.pdf.
22. Accenture analysis based on data from The World Bank, Frost and Sullivan, and
national environment agencies in selected countries.
23. Accenture analysis based on data from The World Bank, Frost and Sullivan, and
national environment agencies in selected countries.
24. Accenture analysis based on data from The World Bank, Frost and Sullivan, and
national environment agencies in selected countries.
25. Accenture Analysis based on The Global Industrial Waste Recycling Markets –
TEKES Growth Workshop, Helsinki, October 2, 2012, https://tapahtumat.
tekes.fi/uploads/c8ffe124/Tekes_GG_Workshop_021012_global_industrial_
waste_presentation-9175.pdf; Bank of Amerikan Merrill Lynch, “No Time to
Waste-Global Waste Primer,” accessed April 5, 2013, http://www.longfinance.
net/images/reports/pdf/baml_wast_2013.pdf and Daniel Hoornweg and
Perinaz Bhada-Tata, The World Bank, “What a Waste: A Global Review of Solid
Waste Management,” accessed March 2012, http://siteresources.worldbank.org/
INTURBANDEVELOPMENT/Resources/336387-1334852610766/What_a_
Waste2012_Final.pdf and cross-checked with sample national waste accounts
(Sweden, China, Japan, UK, Germany).
26. Accenture Analysis based on The Global Industrial Waste Recycling Markets –
TEKES Growth Workshop, Helsinki, October 2, 2012, https://tapahtumat.
tekes.fi/uploads/c8ffe124/Tekes_GG_Workshop_021012_global_industrial_
waste_presentation-9175.pdf; Bank of Amerikan Merrill Lynch, “No Time to
Waste-Global Waste Primer,” accessed April 5, 2013, http://www.longfinance.
net/images/reports/pdf/baml_wast_2013.pdf and Daniel Hoornweg and
Perinaz Bhada-Tata, The World Bank, “What a Waste: A Global Review of Solid
Waste Management,” accessed March 2012, http://siteresources.worldbank.org/
INTURBANDEVELOPMENT/Resources/336387-1334852610766/What_a_
Waste2012_Final.pdf and cross-checked with sample national waste accounts
(Sweden, China, Japan, UK, Germany).
27. “Remanufacturing Stressed in Circular Economy Boost,” China Daily Europe, April 21,
2011, http://europe.chinadaily.com.cn/business/2011-04/21/content_12368590.
htm.
28. IEA, “World Energy Outlook 2013,” November 12, 2013, http://www.world
energyoutlook.org/publications/weo-2013/.
 6
Notes

22
29. Accenture analysis based on data from The World Bank, “World Bank Commodity
Price Data.”
30. European Commission, “Unconventional Gas: Potential Energy Market Impacts
in the European Union,” 2012, https://ec.europa.eu/jrc/en/publication/eur-
scientific-and-technical-research-reports/unconventional-gas-europe-potential-
energy-market-impacts.
31. EIA, “Annual Energy Outlook 2014,” May 7, 2014, eia.gov/forecasts/aeo/MT_
naturalgas.cfm.
32. Michael Ratner, Paul Belkin, Jim Nichol, and Steven Woehrel, Congressional
Research Service, “Europe’s Energy Security: Options and Challenges to Natural
Gas Supply Diversification,” August 20, 2013, http://www.fas.org/sgp/crs/
row/R42405.pdf.
33. Accenture analysis based on data from The World Bank, “World Bank
Commodity Price Data.”
34. World Economic Forum and Accenture, “More with Less: Scaling Sustainable
Consumption and Resource Efficiency,” January 2012, https://www.cdp.net/
en-US/News/Documents/more-with-less.pdf.
35. Bloomberg News, “Gap, Wal-Mart Clothing Costs Rise on ‘Terrifying’ Cotton
Prices,” November 15, 2010, http://www.bloomberg.com/news/2010-11-
16/gap-wal-mart-clothing-suppliers-raise-prices-on-terrifying-cotton-costs.
html.
36. Accenture analysis based on data from The World Bank, “World Bank
Commodity Price Data.”
37. Accenture analysis based on data from The World Bank, “World Bank
Commodity Price Data.”
38. Accenture analysis based on data from The World Bank, “World Bank
Commodity Price Data.”
39. Jim Witkin, “A Push to Make Motors with Fewer Rare Earths,” The New York Times,
April 20, 2012, http://www.nytimes.com/2012/04/22/automobiles/a-push-to-
make-motors-with-fewer-rare-earths.html?pagewanted=all&_r=0.
40. Jason Clenfield, Mariko Yasu, and Stuart Biggs, “Hitachi Leads Rare Earth
Recycling Efforts as China Cuts Access to Supply,” Bloomberg, December 8,
2010, http://www.bloomberg.com/news/2010-12-08/hitachi-recycles-rare-
earth-as-china-crimps-supply.html.
41. Ismini Scouras,“China, Rare Earth Minerals and Electric Motors,”Electronics360, June
12, 2013, http://electronics360.globalspec.com/article/180/china-rare-earth-
minerals-and-electric-motors.
42. Andrew Ward, “H&M Hit by Soaring Cotton Prices,” The Financial Times, March
31, 2011, http://www.ft.com/intl/cms/s/0/95c54d66-5b68-11e0-b965-00144
feab49a.html#axzz37GMtxJ5m.
43. Electrolux, “90 years of leading innovations and design,” February 3, 2009,
http ://group.electrolux.com/en/wp-content/uploads/sites/2/2009/03/
Electrolux-Annual-Report-2008-Part1-English.pdf.
 7
Notes

22
44. Electrolux website, “External factors affecting operations,” accessed December 10,
2014, http://annualreports.electrolux.com/2010/en/strategy/externalfactors/
external-factors-af.html.
45. Allyse Heartwell, “Fossil Free,” September 22, 2014, http://gofossilfree.org/
50-billion/.
46. “Pope Francis urged to rid the Vatican of investments in fossil fuels,”Fossil Free press
release, August 27, 2014, http://gofossilfree.org/press-release/pope-francis-
urged-to-rid-the-vatican-of-investments-in-fossil-fuels/.
47. UNEP, “From Conflict to Peacebuilding: The Role of Natural Resources and the
Environment,” 2009, http://www.unep.org/pdf/pcdmb_policy_01.pdf.
48. C. B. Field, V. Barros, T. F. Stocker, D. Qin, D. J. Dokken, K. L. Ebi, M. D.
Mastrandrea, K. J. Mach, G.-K. Plattner, S. K. Allen, M. Tignor, and P. M. Midgley
(eds), IPCC, “Summary for Policymakers: Managing the Risks of Extreme Events
and Disasters to Advance Climate Change Adaptation: A Special Report of
Working Groups I and II of the Intergovernmental Panel on Climate Change,”
2012, Cambridge University Press, pp. 1–19, https://www.ipcc.ch/pdf/special-
reports/srex/SREX_FD_SPM_final.pdf.
49. As cited on the Global Footprint Network’s home page, http://www.foot
printnetwork.org/en/index.php/GFN/page/world_footprint/.
50. Global Footprint Network (2012), “Data and Results,” http://www.footprint
network.org/ar/index.php/GFN/page/footprint_data_and_results/.
51. David Nakamura and Steven Mufson, “China, US agree to limit greenhouse gases,”
The Washington Post, November 12, 2014, http://www.washingtonpost.com/
business/economy/china-us-agree-to-limit-greenhouse-gases/2014/11/11/
9c768504-69e6-11e4-9fb4-a622dae742a2_story.html.
52. Global Footprint Network, “Earth Overshoot Day,” http://www.footprint
network.org/en/index.php/GFN/page/earth_overshoot_day/.
53. Accenture interview with Mathis Wackernagel, December 4, 2013.
54. Accenture interview with Ernst Ulrich von Weizsäcker, November 16, 2013.
55. Accenture interview with Dr. h.c. Walter R. Stahel, November 19, 2013.
56. Written 2014 Accenture interview with Dr. Janez Potočnik.

2 The Roots of the Circular Economy

1. Patrick Gerland, Adrian E. Raftery, Hana Ševčíková, Nan Li, Danan Gu, Thomas
Spoorenberg, Leontine Alkema, Bailey K. Fosdick, Jennifer Chunn, Nevena Lalic,
Guiomar Bay, Thomas Buettner, Gerhard K. Heilig, and John Wilmoth (2014),
“World Population Stabilization Unlikely this Century,” Science 346 (6206),
http://www.sciencemag.org/content/346/6206/234.abstract.
2. “History: Thomas Malthus (1766–1834),” BBC, http://www.bbc.co.uk/history/
historic_figures/malthus_thomas.shtml.
 8
Notes

22
3. Adam Rome (2003), “Give Earth a Chance: The Environmental Movement and
the Sixties,” Journal of American History, September, 525–554, http://www.
journalofamericanhistory.org/issues/902/902_rome.pdf.
4. Gérard Gaudet (2007), “Natural Resource Economics under the Rule of Hotelling,”
Canadian Journal of Economics 40 (4): 1033–1059, doi:10.1111/j.1365-
2966.2007.00441.x. Jeffrey A. Krautkraemer (1998), “Nonrenewable Resource
Scarcity,” Journal of Economic Literature 36 (4): 2065–2107, JSTOR 2565047.]
5. Jorgen Randers, “What was the Message of the Limits to Growth?” Club
of Rome, April 2010, http://connect.clubofrome.org/ecms/files/resources/
What_was_the_message_of_Limits_to_Growth.pdf.
6. Jorgen Randers, “What was the Message of the Limits to Growth?” Club of
Rome, April 2010, http://connect.clubofrome.org/ecms/files/resources/
What_was_the_message_of_Limits_to_Growth.pdf.
7. Ernst U. von Weizsäcker, Amory B. Lovins, and L. Hunter Lovins, Factor Four:
Doubling Wealth, Halving Resource Use—A Report to the Club of Rome,
Earthscan, 1998.
8. Cradle to Cradle Products Innovation Institute, http://www.c2ccertified.org/about.
9. William McDonough and Michael Braungart, The Upcycle: Beyond
Sustainability—Designing for Abundance, North Point Press, New York, 2013.
10. Walter R. Stahel, The Performance Economy, Palgrave Macmillan, Basingstoke,
2006 and 2010.
11. Ernst U. von Weizsäcker et al., Factor Five: Transforming the Global Economy
Through 80% Improvements in Resource Productivity: A Report to the Club of
Rome, Earthscan, O 2009.
12. Gunter Pauli, The Blue Economy, Paradigm Publications, Taos, NM, April 2010,
http://www.paradigm-pubs.com/catalog/detail/BluEco.
13. Gunter Pauli, The Blue Economy. Paradigm Publications, April 2010. http://
www.paradigm-pubs.com/catalog/detail/BluEco.
14. Ellen MacArthur Foundation, “Circular Economy Reports,” http://www.ellen
macarthurfoundation.org/business/reports.
15. United Nations Economic and Social Council, “Millennium Development Goals and
post-2015 Development Agenda,” http://www.un.org/en/ecosoc/about/mdg.
shtml.
16. United Nations, United Nations Conference on Sustainable Development,
“Rio+20,” http://sustainabledevelopment.un.org/rio20.html.
17. United Nations Environment Programme, “UNEA High-level Segment
Ministerial Plenary: Interactive Dialogue on SDGs and the Post-2015
Development Agenda, Including Sustainable Consumption and Production,”
http://www.unep.org/unea/docs/concept_note_sdgs.pdf.
18. Oxfam International, “Post-2015 Development Goals: Oxfam International
Position,” accessed January 28, 2013, http://www.beyond2015.org/sites/
default/files/oxfam-post-2015.pdf.
19. David W. Pearce and R. Kerry Turner, Economics of Natural Resources and the
Environment, Johns Hopkins University Press, Baltimore, December 1, 1989.
 9
Notes

22
20. Mikael Skou Andersen, “An Introductory note on the Environmental Economics
of the Circular Economy,” Sustainability Science, accessed December 21, 2006,
http://www.environmental-expert.com/Files%5C6063%5Carticles%5C15091
%5Cart12.pdf.

3 Gaining the Circular Advantage

1. Bridgestone, “Bridgestone Releases Earth Day 2013 Consumer Recycling and

Sustainability Survey Findings,” Company News Release, accessed April 22, 2013,
http://www.bridgestoneamericasmedia.com/2013-04-22-Bridgestone-Releases-
Earth-Day-2013-Consumer-Recycling-and-Sustainability-Survey-Findings.
2. Sustainable Lifestyles Frontier Group, “Value Gap: The Business Value of
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ellenmacarthurfoundation.org/business/reports/ce2013.
 0
Notes

23
13. WRAP, “EU Vision 2020,” accessed July 2014, http://www.wrap.org.uk/content/
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4 Circular Supply-Chain: “Right from the Start”

1. The concepts of biological and technical nutrients were introduced in the

seminal 2002 book Cradle to Cradle: Remaking the Way We Make Things by Bill
McDonough and Michael Braungart.
2. Accenture interview with Dr. Michael Braungart, November 26, 2013.
3. Accenture interview with Dr. Michael Braungart, November 26, 2013.
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gets-ikea-adidas-investments.html.
8. NatureWorks LLC, “About NatureWorks,” accessed January 6, 2015, http://
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9. Accenture interview with Andre Veneman, December 16, 2013.
10. “AkzoNobel Creates the World’s First Fully Compostable and Recyclable Paper
Cup,” Company Press Release, accessed August 7, 2014, https://www.akzono-
bel.com/news_center/news/news_and_press_releases/2014/akzonobel_cre-
ates_the_worlds_first_fully_compostable_and_recyclable_paper_cup.aspx.
11. Accenture interview with Andre Veneman, December 16, 2013.
 1
Notes

23
12. AkzoNobel, “Creating Value from Eco-Premium Solutions,” 2011, accessed
December 1, 2014, https://www.akzonobel.com/sustainability/managing_
sustainability/key_focus_areas/creating_value_eco_premium_solutions/.
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renewableenergyworld.com/rea/news/article/2014/04/ikea-sticks-with-
renewables-commitment-makes-largest-investment-to-date.
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16. Novozymes, “Today’s Facts: The World Leader in Bioinnovation,” 2013, http://
www.novozymes.com/en/about-us/brochures/Documents/TodaysFacts-2013.
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17. Novozymes, “The Role of Novozymes’ Solutions,” http://www.novozymes.
com/en/sustainability/benefits-for-the-world/biobased-economy/benefits-
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E2%80%99%20solutions.pdf.
18. Novozymes Press Release, “Beta Renewables and Novozymes to Form Strategic
Partnership in the Cellulosic Biofuel Market,” accessed October 29, 2012, http://
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Novozymes-to-form-strategic-partnership-in-the-cellulosic-biofuel-market.aspx.
19. Bio-Based Industries, “EU and Industry Partners Launch €3.7 Billion Investments
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investments-renewable-bio-based-economy.
20. World Economic Forum, “Scoping Paper: Mining and Metals in a Sustainable
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21. EPA, “Wastes–Resource Conservation–Common Wastes & Materials–eCycling:
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conserve/materials/ecycling/faq.htm.
22. Maersk, “Cradle-to-Cradle,” accessed October 31, 2014, http://www.worlds
largestship.com/facts/cradle-to-cradle/.
23. “IKEA Group to Expand Customer Solar Offer beyond UK to Eight New
Countries,” Company Press Release, accessed September 22, 2014, http://www.
ikea.com/us/en/about_ikea/newsitem/expand_solar_offer.
24. Kate Mackenzie, “Marginal Oil Production Costs are Heading Towards $100/
barrel,” FTAlphaville Blog, accessed May 2, 2012, http://ftalphaville.
ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-
towards-100barrel/. Graph concerns non-OPEC excluding FSU, data from
corporate reports, Bernstein analysis; Accenture analysis.
 2
Notes

23
25. Joe Romm, “Must-See Chart: Cost of PV Cells has Dropped an Amazing 99%
Since 1977, Bringing Solar Power to Grid Parity,” ClimateProgress, accessed
October 6, 2013, http://thinkprogress.org/climate/2013/10/06/2717791/cost-pv-
cells-solar-power-grid-parity/. Data for graph from Bloomberg New Energy Finance.
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27. Eni, “Eni: a New Future for the Refinery of Venice,” accessed September 21,
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eni-new-future-refinery-venice.shtml.
28. marketsandmarkets.com, “Global E-Waste Management Market (2011–2016),”
accessed August 2011, http://www.marketsandmarkets.com/Market-Reports/
electronic-waste-management-market-373.html.
29. Adam Belz, “Minnesota’s Largest Paper Mill Now Churning out Pulp for Textile
Mills,” StarTribune, October 30, 2013, http://www.startribune.com/blogs/
229878461.html.
30. Michael Braungart and William McDonough, Cradle to Cradle: Remaking the
Way We Make Things, North Point Press, April 22, 2002.
31. Ecovative, accessed July 2014, http://www.ecovativedesign.com/.
32. Accenture interview with Eben Bayer of Ecovative Design, November 22, 2013.
33. Accenture interview with Eben Bayer of Ecovative Design, November 22, 2013.
34. Pam Allen, “Ecovative Design Raises $14 Million in Private Equity Funds,” Albany
Business Review, accessed November 7, 2013, http://www.bizjournals.com/
albany/blog/2013/11/ecovative-design-raises-14-million-in.html?page=all.
35. Sealed Air, Stock Quote & Chart, accessed October 31, 2014, http://ir.sealedair.
com/phoenix.zhtml?c=104693&p=irol-stockquote.
36. Royal DSM, “Factbook 2014,” 2014, http://www.dsm.com/content/dam/dsm/
cworld/en_US/documents/factbook-2014.pdf?fileaction=openFile.
37. Accenture interview with Feike Sijbesma of Royal DSM, May 28, 2014.
38. Accenture interview with Feike Sijbesma of Royal DSM, May 28, 2014.
39. Royal DSM, “Factbook 2014,” 2014, http://www.dsm.com/content/dam/dsm/
cworld/en_US/documents/factbook-2014.pdf?fileaction=openFile.
40. Royal DSM, “Factbook 2014,” 2014, http://www.dsm.com/content/dam/dsm/
cworld/en_US/documents/factbook-2014.pdf?fileaction=openFile.
41. David Hodes, “Advancing Biofuels,” Global Corporate Xpansion, April 10, 2013,
http://gcxmag.com/2013/04/advancing-biofuels/.
42. As stated at http://poet-dsm.com/liberty.
43. Jim Lane, “POET-DSM’s Project LIBERTY Opens, as Fantasy Becomes Real,”
BiofuelsDigest, accessed September 3, 2014, http://www.biofuelsdigest.com/
bdigest/2014/09/03/poet-dsms-cellulosic-biofuels-plant-opens-as-fantasy-
becomes-real/.
44. Accenture interview with Feike Sijbesma of Royal DSM, May 28, 2014.
45. POET-DSM, “Biomass Resources,” accessed January 6, 2015, http://poet-dsm.
com/biomass.
 3
Notes

23
46. Gary Schnitkey, “Returns and Cash Rents given $4.80 Corn and $10.75 Soybean
Prices,” Farmdoc Daily, accessed July 16, 2013, http://farmdocdaily.illinois.edu/
2013/07/returns-and-cash-rents-given-prices.html.
47. Accenture interview with Dr. Michael Braungart, November 26, 2013.

5 Recovery and Recycling: Making History of Waste

1. “Cradle to Cradle” is a registered trademark of the consulting firm McDonough

Braungart Design Chemistry, http://en.wikipedia.org/wiki/Cradle-to-cradle_design.
The phrase was first used in the 1970s by Walter R. Stahel, a Swiss architect and a
pioneer in the field of sustainability, http://en.wikipedia.org/wiki/Walter_R._Stahel.
2. Trash Timeline, http://www.alliedwastedalycity.com/kids_trash_timeline-printer.
cfm.
3. Green Alliance, “Wasted Opportunities: Smarter Systems for Resource Recovery,”
accessed July 2014, http://www.green-alliance.org.uk/resources/Wasted_
opportunities.pdf.
4. Accenture analysis based on The Global Industrial Waste Recycling Markets–
TEKES Growth Workshop, Helsinki, October 2, 2012, https://tapahtumat.tekes.
fi/uploads/c8ffe124/Tekes_GG_Workshop_021012_global_industrial_waste_
presentation-9175.pdf; Bank of American Merrill Lynch, “No Time to Waste–
Global Waste Primer,” accessed April 5, 2013, http://www.longfinance.net/
images/reports/pdf/baml_waste_2013.pdf; and Daniel Hoornweg and Perinaz
Bhada-Tata, The World Bank, “What a Waste: A Global Review of Solid Waste
Management,” accessed March 2012, http://siteresources.worldbank.org/
INTURBANDEVELOPMENT/Resources/336387-1334852610766/What_a_
Waste2012_Final.pdf and cross-checked with sample national waste accounts
(Sweden, China, Japan, UK, Germany).
5. Dr. Forbes McDougall, “From Waste to Worth–Zeroing in on Waste,” Inside
P&G, accessed September 9, 2014, http://www.pg.com/en_UK/news-views/
Inside_PG-Quarterly_Newsletter/issue8/sustainability.html.
6. “GM Makes the Business Case for Zero Waste,” Company News Release, accessed
October 19, 2012, https://media.gm.com/media/us/en/gm/news.detail.html/
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7. Leon Kaye, “General Motors Expands Zero-Waste Agenda Worldwide,”
TriplePundit, accessed October 20, 2014, http://www.triplepundit.com/
2014/10/general-motors-expands-zero-waste-agenda-worldwide/.
8. General Motors, “GM Makes the Business Case for Zero Waste,” accessed October
19, 2012, https://media.gm.com/media/us/en/gm/news.detail.html/content/
Pages/news/us/en/2012/Oct/1019_Landfill-FreeBlueprint.html.
9. Ricoh website, “Total Green Office Solutions,” accessed December 1, 2014,
http://www.ricoh-europe.com/services-solutions/sustainability-management-
services/total-green-office-solutions/index.aspx
 4
Notes

23
10. Interface website, “Net-Works™,” accessed December 1, 2014, http://www.
interfaceglobal.com/Products/Net-Works.aspx.
11. Accenture interview with Suez Environnement S.A., January 20, 2015.
12. Accenture interview with Gunter Pauli, November 2, 2013.
13. Bill DiBenedetto, “Kroger Converts Food Waste into Renewable Energy,”
TriplePundit, accessed August 15, 2013, http://www.triplepundit.com/
2013/08/kroger-converts-food-waste-renewable-energy/.
14. Walmart store numbers according to the company, http://corporate.walmart.
com/our-story/our-business/locations/.
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Environmental Leader, accessed October 12, 2012, http://www.environmental
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in-fy13/.
16. Jenna Quentin, “Walmart Recycling Food Waste,” The Kansan, accessed March
13, 2014, http://www.thekansan.com/article/20140313/News/140319813.
17. “Turning Greenhouse Gases into Mobile Phone Cases,” Guardian Professional,
May 30, 2014.
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Parts,” Plastics News, May 21, 2014.
19. Gabrielle Karol, “Newlight Technologies Raises $9.2M to Make Plastic from
Greenhouse Gases,” Fox Business, accessed April 16, 2014, http://smallbusiness.
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raises-2m-to-make-plastic-from-greenhouse-gases/.
20. Waste Management website, accessed September 9, 2014, http://www.
wm.com/enterprise/construction/Diversion-and-Recycling-Tracking-Tool.jsp.
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22. Oxfam website, accessed October 27, 2104, http://www.oxfam.org.uk/donate/
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23. Accenture interview with Mike Barry, December 18, 2013.
24. RISI Store, “2012 Outlook for Global Recovered Paper Markets,” 6th edition,
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26. Bureau of International Recycling website, accessed September 8, 2014, http://
www.bir.org/industry/paper/.
27. Accenture interview with Mario Abreu, February 17, 2014.
28. Waste Management, “Embracing the Zero Waste Challenge,” 2012, http://
www.wm.com/sustainability/pdfs/2012_Sustainability_Report_Executive_
Summary.pdf.
 5
Notes

23
29. Timberland revenue as stated on its website, accessed September 9, 2014,
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com/earthkeeping/green-index.
31. Timberland, “Grading Our Products: Timberland’s Green Index Program, 2009
Report,” http://responsibility.timberland.com/wp-content/uploads/2011/05/
Timberlands_Green_Index_Program_2009_report.pdf.
32. From the Desso websites, http://www.desso-businesscarpets.com/corporate-
responsibility/recycled-yarn, http://www.desso-businesscarpets.com/corporate-
responsibility/cradle-to-cradler and http://www.desso-businesscarpets.com/
corporate-responsibility/circular-economy/.
33. Oliver Balch, “How Desso Aims to Spread the Cradle-to-Cradle Philosophy
Worldwide,” The Guardian, accessed May 16, 2012, http://www.theguardian.
com/sustainable-business/desso-circular-economy-business-model.
34. Lynn Beavis, “DESSO: Recycling to Infinity and Beyond,” The Guardian, accessed
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40. Accenture interview with Javier Flaim, December 6, 2013.

6 The Product Life-Extension Business Model:

Products That Are Built to Last

1. IMDb, “The Lightbulb Conspiracy,” accessed December 16, 2010, http://www.

imdb.com/title/tt1825163/.
 6
Notes

23
2. Wikipedia, “Freemium,” accessed April 23, 2014, http://en.wikipedia.org/wiki/
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3. Amy Dusto, “Kindle Owners Spend 56% More with Amazon than those Who
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6. Electrolux, “Managing the Environment,’ accessed July 2014, http://group.
electrolux.com/en/managing-the-environment-791/.
7. Accenture interview with Henrik Sundström, Bengt Banck, Cecilia Nord and
Vanessa Butani, February 10, 2014.
8. Accenture interview with Henrik Sundström, Bengt Banck, Cecilia Nord and
Vanessa Butani, February 10, 2014.
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10. Katherine Jacobsen, “Apple Offers New iPhone Trade-in Program,” The Christian
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12. ASOS, “Annual Report and Accounts 2013,” 2013, http://www.asosplc.com/~/
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13. Vikki Morgan, “ASOS Marketplace Sales Grow 690% Over the Past Year,”
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 7
Notes

23
18. PRWeb, “Global Automotive Repair & Maintenance Services Market to Exceed
$305.8 Billion by 2015, According to a New Report by Global Industry Analysts,
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22. Accenture Research.
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24. BMW Group, “Working Together: Sustainable Value Report 2013,” 2013, http://
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31. Accenture Research.
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nect.org.uk/apsrg/sites/site_apsrg/files/apsrg_-_remanufacturing_report.pdf
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34. Caterpillar, http://reports.caterpillar.com/sr/_pdf/CAT2013SR.pdf, p. 57
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The Dallas Morning News, accessed March 17, 2014, http://www.dallasnews.
 8
Notes

23 com/business/retail/20140317-wal-mart-to-challenge-gamestop-in-used-video-
game-business.ece.
37. Ian Sherr and Shelly Banjo, “Newest Player in Used Videogames: Wal-Mart,”
The Wall Street Journal, accessed March 18, 2014, http://online.wsj.com/news/
articles/SB10001424052702303287804579445751023122542.
38. Maggie McGrath, “GameStop Sinking as Wal-Mart Targets $2 Billion Video
Game Trade-in Business,” Forbes, accessed March 18, 2014, http://www.forbes.
com/sites/maggiemcgrath/2014/03/18/gamestop-sinking-as-wal-mart-
targets-2-billion-video-game-trade-in-business/.
39. Chris Morris,“Walmart Jumps into the Game Trade-in Business,”Gamesindustry.biz,
accessed March 18, 2014, http://www.gamesindustry.biz/articles/2014-03-18-
walmart-jumps-into-the-game-trade-in-business.
40. Justin Williamson, “Trade in Used Video Games for Walmart Credit,” Walmart
blog, accessed March 18, 2014, http://blog.walmart.com/trade-in-used-video-
games-for-walmart-credit.
41. Maria Halkias, “Wal-Mart to Challenge GameStop in Used Video Game
Business,” The Dallas Morning News, accessed March 17, 2014, http://www.
dallasnews.com/business/retail/20140317-wal-mart-to-challenge-gamestop-in-
used-video-game-business.ece.
42. Maggie McGrath, “GameStop Sinking as Wal-Mart Targets $2 Billion Video
Game Trade-in Business,” Forbes, accessed March 18, 2014, http://www.forbes.
com/sites/maggiemcgrath/2014/03/18/gamestop-sinking-as-wal-mart-
targets-2-billion-video-game-trade-in-business/.
43. US Environmental Protection Agency, “Statistics on the Management of Used
and End-of-Life Electronics,” accessed July 2014, http://www.epa.gov/osw/
conserve/materials/ecycling/manage.htm.
44. Accenture Research.
45. ecoATM®, “Consumer Electronic Recycling on the Rise; ecoATM® Collects
its Three Millionth Device,” accessed September 4, 2014, http://www.ecoatm.
com/press/2014/09/04/consumer-electronic-recycling-on-the-rise—ecoatm–
collects-its-three-millionth-device/.
46. ecoATM®, “ecoATM® Expands Dallas-Fort Worth Presence with Additional
Electronic Device Recycling Kiosks,”accessed March 27, 2014, http://www.ecoatm.
com/ecoatm-expands-dallas-fort-worth-presence-with-additional-electronic-
device-recycling-kiosks/.
47. ecoATM®, “Consumer Electronic Recycling on the Rise; ecoATM® Collects its
Three Millionth Device,” accessed September 4, 2014, http://www.ecoatm.
com/press/2014/09/04/consumer-electronic-recycling-on-the-rise—ecoatm–
collects-its-three-millionth-device/.
48. ecoATM®, “ecoATM® Expands Dallas-Fort Worth Presence with Additional
Electronic Device Recycling Kiosks,”accessed March 27, 2014, http://www.ecoatm.
com/ecoatm-expands-dallas-fort-worth-presence-with-additional-electronic-
device-recycling-kiosks/.
 9
Notes

23
49. Michael Pachter, “Analyst: Outerwall’s EcoATM Acquisition Will Help Grow
Margins,” Wall St. Cheat Sheet, July 4, 2013, http://wallstcheatsheet.
com/stocks/analyst-outerwalls-ecoatm-acquisition-will-help-grow-margins.
html/?a=viewall.

7 The Sharing Platform Business Model:

Sweating Idle Assets

1. Accenture interview with April Rinne, November 11, 2013.

2. Ingrid Pan, “Uber’s Breakneck Growth: How the Company Grows and Makes
Money,” YAHOO!Finance, accessed June 23, 2014, http://finance.yahoo.com/
news/uber-breakneck-growth-company-grows-210007173.html.
3. Tomio Geron, “Airbnb and The Unstoppable Rise of the Share Economy,”
Forbes, accessed January 23, 2013, http://www.forbes.com/sites/tomiogeron/
2013/01/23/airbnb-and-the-unstoppable-rise-of-the-share-economy/.
4. “Peer-to-Peer Rental: The Rise of the Sharing Economy,” The Economist,
accessed March 9, 2013, http://www.economist.com/news/leaders/21573104-
internet-everything-hire-rise-sharing-economy.
5. Danielle Sacks, “The Sharing Economy,” Fast Company, accessed April 18, 2011,
http://www.fastcompany.com/1747551/sharing-economy.
6. Jaime Contreras, “MIT Sloan Grad on the ‘Sharing Economy,’ the Next Big Trend
in Social Commerce,” MIT Sloan Management, accessed December 15, 2011,
http://mitsloanexperts.mit.edu/mit-sloan-grad-on-the-sharing-economy-the-
next-big-trend-in-social-commerce/.
7. Joseph Gacinga, “Forget the Pricey Shares: Here’s Why HomeAway Is a Good
Investment,” The Motley Fool, accessed May 19, 2014, http://www.fool.com/
investing/general/2014/05/19/forget-the-pricey-shares-heres-why-homeaway-
is-a-g.aspx.
8. Carolyn Said, “Lyft Snares $250 Million for U.S., International Growth,” SFGate,
accessed April 2, 2014, http://blog.sfgate.com/techchron/2014/04/02/
lyft-snares-250-million-for-u-s-international-growth/.
9. Ingrid Pan, “Uber’s Breakneck Growth: How the Company Grows and Makes
Money,” YAHOO!Finance, accessed June 23, 2014, http://finance.yahoo.com/
news/uber-breakneck-growth-company-grows-210007173.html.
10. Uber website, “The Ride Ahead,” accessed December 10, 2014, http://blog.uber.
com/ride-ahead.
11. Nielsen, “Global Consumers Embrace the Share Economy,” accessed May 28,
2014, http://www.nielsen.com/content/corporate/apac/en/press-room/2014/
global-consumers-embrace-the-share-economy.html.
12. Nielsen, “Global Consumers Embrace the Share Economy,” accessed May 28,
2014, http://www.nielsen.com/content/corporate/apac/en/press-room/2014/
global-consumers-embrace-the-share-economy.html.
 0
Notes

24
13. Kathleen Stokes, Emma Clarence, Lauren Anderson and April Rinne, “Making
Sense of the UK Collaborative Economy,” Nesta, accessed February 9, 2014, http://
www.nesta.org.uk/publications/making-sense-uk-collaborative-economy.
14. Nielsen, “Global Consumers Embrace the Share Economy,” accessed May 28,
2014, http://www.nielsen.com/content/corporate/apac/en/press-room/2014/
global-consumers-embrace-the-share-economy.html.
15. Lora Kolodny, “Storefront Raises $7.3M to Help Online Brands Set up Shop
Offline (Without Signing a Lease),” Wall Street Journal, accessed April 14,
2014, http://blogs.wsj.com/venturecapital/2014/04/14/storefront-raises-7-3m-
to-help-online-brands-set-up-shop-offline-without-signing-a-lease/.
16. United States Postal Service Office of Inspector General, “Using the ‘Crowd’ to
Deliver Packages,” accessed February 12, 2014, https://www.uspsoig.gov/sites/
default/files/document-library-files/2014/using_the_crowd_to_deliver_pack-
ages.pdf.
17. FLOOW2, “FAQ,” accessed July 2014, http://www.floow2.com/faq.html.
18. Accenture Interview with Kim Tjoa, November 8, 2013.
19. Accenture Interview with Marcio Nigro, November 4, 2013.
20. Marcio Nigro, “Caronetas Caronas, Inteligentes,” accessed April 30, 2014, http://
istart.org/startup-idea/business/caronetas-caronas-inteligentes/24289.
21. Instituto Saúde e Sustentabilidade, accessed October 31, 2014, http://www.
saudeesustentabilidade.org.br/index.php/caronetas-e-selecionado-como-
uma-das-15-solucoes-mundiais-inovadoras-de-mobilidade-sustentavel-pela-
universidade-de-michigan/?lang=en
22. Accenture Interview with Benita Matofska, November 21, 2013.
23. Vision Critical and Crowd Companies, “Sharing is the New Buying,” accessed 2014,
http://www.visioncritical.com/sites/default/files/pdf/sharing-new-buying-
collaborative-economy-report.pdf.
24. “Airbnb Celebrates Record Growth with 10 Million Guest Nights Booked,”
Company Press Release, accessed June 19, 2012, http://www.marketwired.
com/press-release/airbnb-celebrates-record-growth-with-10-million-guest-
nights-booked-1670787.htm.
25. Airbnb website, accessed September 24, 2014, https://www.airbnb.com/about/
about-us.
26. GM, “RelayRides and OnStar: Baby, You Can Rent My Car,” accessed July 17,
2012, http://media.gm.com/media/us/en/gm/news.detail.html/content/Pages/
news/us/en/2012/Jul/0717_onstar.html.
27. Jason Tanz, “How Airbnb and Lyft Finally Got Americans to Trust Each Other,”
Wired, accessed April 23, 2014, http://www.wired.com/2014/04/trust-in-the-
share-economy/.
28. Airbnb, “What Are Meetups?,” accessed July 2014, https://www.airbnb.com.
au/help/article/356.
29. Heather Matheson, “Yerdle: Exploring Decentralization at Cleantech Forum San
Francisco 2014,” Cleantech Group, accessed January 12, 2014, http://events.
cleantech.com/this-week-in-cleantech-oct-2–9/.
 1
Notes

24
30. Yerdle website, “Shop Freely,” accessed November 21, 2014, https://yerdle.com/
about.
31. Andrew Leonard, “How the Facebook Economy is Costing Us Big,” Salon, accessed
February 21, 2014, http://www.salon.com/2014/02/21/the_silicon_valley_lie_
thats_costing_us_big_everything_is_free/.
32. Moira Herbst, “Let’s Get Real: The ‘Sharing Economy’ Won’t Solve Our Jobs
Crisis,” The Guardian, accessed January 7, 2014, http://www.theguardian.
com/commentisfree/2014/jan/07/sharing-economy-not-solution-to-jobs-
crisis.
33. Uber website, “The Ride Ahead,” accessed December 10, 2014, http://blog.uber.
com/ride-ahead.
34. Susie Cagle, “To Get a Fair Share, Sharing-Economy Workers Must Unionize,”
Aljazeera America, accessed June 27, 2014, http://america.aljazeera.com/
opinions/2014/6/uber-sharing-economyunionstaxis.html.
35. Susie Cagle, “To Get a Fair Share, Sharing-Economy Workers Must Unionize,”
Aljazeera America, accessed June 27, 2014, http://america.aljazeera.com/
opinions/2014/6/uber-sharing-economyunionstaxis.html.
36. Annie Karni, “Airbnb Wants to Pay Taxes and Become a Legal Hotel, but Faces
Opposition From an Affordable Housing Group,” New York Daily News,
accessed April 21, 2014, http://www.nydailynews.com/new-york/airbnb-bids-
pay-taxes-faces-opposition-article-1.1763073.
37. Neelie Kroes, “My View on Today’s Taxi Protests and What it Means for the
Sharing Economy,” European Commission Blog, accessed June 11, 2014, http://
ec.europa.eu/commission_2010-2014/kroes/en/blog/my-view-todays-taxi-
protests-and-what-it-means-sharing-economy.
38. Peerby, accessed July 2014, https://peerby.com/.
39. Peerby,“If Peerby is Free,WhatThen is the Business Model?,”accessed March 28, 2014,
http://support.peerby.com/customer/en/portal/articles/1497066-if-peerby-is-
free-what-then-is-the-business-model-.
40. Accenture Interview with Dean Weddepohl, November 8, 2013.
41. Darrell Etherington, “Peerby’s Local Lending App is Ready to Help Neighbours
Participate in the Sharing Economy,” TechCrunch, accessed September 29, 2013,
http://techcrunch.com/2013/09/29/peerbys-local-lending-app-is-ready-to-
help-neighbours-participate-in-the-sharing-economy/.
42. Accenture Interview with Swito Yuber, November 6, 2013.
43. Joanna Yeo, “Why Buy When you can Rent with Rent Tycoons?” e27,
accessed January 16, 2012, http://e27.co/why-buy-when-you-can-rent-with-rent-
tycoons/.
44. 3D Hubs, “How to Hub,” accessed December 1, 2014, http://www.3dhubs.
com/how-to-hub.
45. 3D Hubs, “3D Hubs Reaches Critical Mass with Over 5,000 3D Printing
Locations Worldwide,” accessed June 5, 2014, http://press.3dhubs.com/78412-
3d-hubs-reaches-critical-mass-with-over-5-000-3d-printing-locations-
worldwide.
 2
Notes

24 8 The Product as a Service Business Model:

Performance over Ownership

1. Arnold Tukker (2004), “Eight Types of Product–Service System: Eight Ways

to Sustainability? Experiences from SusProNet,” Business Strategy and the
Environment 13: 246–260, doi: 10.1002/bse.414.
2. Arnold Tukker (2004), “Eight Types of Product–Service System: Eight Ways
to Sustainability? Experiences from SusProNet,” Business Strategy and the
Environment 13: 246–260, doi: 10.1002/bse.414.
3. Rolls-Royce, “Rolls-Royce Celebrates 50th Anniversary of Power-by-the-Hour,”
accessed October 30, 2012, http://www.rolls-royce.com/news/press_releases/
2012/121030_the_Hour.jsp.
4. Michelin, Michelin® Fleet Solutions™, accessed July 2014, http://www.
michelintruck.com/michelintruck/services/MichelinFleetSolutions.jsp.
5. Atlas Copco, “Contract Air: Air-Over-the-Fence Service for Compressed Air or
Gas,” accessed July 2014, http://www.atlascopco.us/usus/products/product.
aspx?id=1546129&productgroupid=1524845.
6. Eric Wesoff, “SolarCity CEO: Now’s the Time to Capture the Market and
Grow as Fast as We Can,” GreenTech Media, accessed August 7, 2014, http://
www.greentechmedia.com/articles/read/SolarCity-CEO-Nows-The-Time-
to-Capture-the-Market-and-Grow-as-Fast-as-We.
7. MarketWatch, accessed November 17, 2014, http://www.marketwatch.com/
investing/stock/scty.
8. Sunrun, accessed July 2014, http://www.sunrun.com/.
9. Vivint Solar, accessed July 2014, http://www.vivintsolar.com.
10. Jeremiah Owyang, “Collaborative Economy: Live Like Royalty Without Owning
a Throne,” Jeremiah Owyang Blog, accessed June 17, 2013, http://www.
web-strategist.com/blog/2013/06/17/collaborative-economy-live-like-royalty-
without-owning-a-throne/; GirlMeetsDress.com, accessed July 2014, http://
www.girlmeetsdress.com/.
11. Steven Bertoni, “Rent The Runway Nears End Of Series D Round, Valuation
Could Top $600 Million,” Forbes, accessed October 28, 2014, http://www.
forbes.com/sites/stevenbertoni/2014/10/28/rent-the-runway-nears-end-of-
series-d-round-valuation-could-top-600-million/.
12. Claire Heighway, “An Interview with … Anna Bance: Co-founder of Girl Meets
Dress,” Exquisitely British, accessed September 5, 2014, http://www.exquisitely
british.com/#!girl-meets-dress/ct5u.
13. Claire Suddath, “The Millennial Way of Shopping: More Careful, Durable, and
Frugal than You Think,” Bloomberg BusinessWeek, accessed April 25, 2014, http://
www.businessweek.com/articles/2014-04-25/millennials-are-careful-frugal-
shoppers-who-buy-for-the-long-term.
14. Zipcar, “Zipcar’s Second Annual Millennials Study Finds 18–34-Year-Olds
Increasingly Embrace Collaborative Consumption and Access Over Ownership,”
 3
Notes

24
PR Newswire, accessed December 12, 2011, http://www.prnewswire.com/
news-releases/zipcars-second-annual-millennials-study-finds-18-34-year-
olds-increasingly-embrace-collaborative-consumption-and-access-over-
ownership-135431053.html.
15. The Rockefeller Foundation, “Access to Public Transportation a Top Criterion
for Millennials When Deciding Where to Live, New Survey Shows,”
accessed April 22, 2014, http://www.rockefellerfoundation.org/newsroom/
access-public-transportation-top.
16. J.J. Colao, “Welcome to the New Millennial Economy: Goodbye Ownership,
Hello Access,” Forbes, accessed October 11, 2012, http://www.forbes.com/
sites/jjcolao/2012/10/11/welcome-to-the-new-millennial-economy-goodbye-
ownership-hello-access/.
17. Accenture interview with Mike Barry, December 18, 2013.
18. De Lage Landen, “De Lage Landen and Desso Join Forces to Offer Desso’s
Customers Circular Economy Leasing Model,” accessed September 18, 2013,
http://www.delagelanden.com/press/latest_news/224187421.html.
19. Telenor website, accessed November 18, 2014. http://telenor.se/change.
20. SustainableBusiness.com, “Philips Introduces ‘Lighting as a Service’ ”, accessed
January 23, 2014, http://www.sustainablebusiness.com/index.cfm/go/news.
display/id/25461.
21. Accenture interview with Thomas Rau, Sabine Oberhuber and Erik de Ruijter,
January 7, 2014.
22. Jeremiah Owyang, “How I’m Experimenting with Life-as-a-Service,” Jeremiah
Owyang Blog, accessed April 17, 2014, http://www.web-strategist.com/
blog/2014/04/17/how-im-experimenting-with-life-as-a-service/.
23. Paul A. Eisenstein, “Avis Buying Zipcar in $500 Million All-Cash Deal,” NBC
News, accessed January 2, 2013, http://www.nbcnews.com/business/autos/
avis-buying-zipcar-500-million-all-cash-deal-f1C7785094.
24. Car2Go, accessed July 2014, http://www.car2go.com; from the November 18,
2013 Accenture interview with Rainer Becker.
25. Accenture interview with Rainer Becker, November 18, 2013.
26. Car2Go, accessed July 2014, https://www.car2go.com/en/austin/what-does-
car2go-cost/.
27. Accenture interview with Rainer Becker, November 18, 2013.
28. Automotive News Europe, “Daimler to Close Car2Go Unit in UK,” accessed
May 29, 2014, http://europe.autonews.com/article/20140529/ANE/140529857/
daimler-to-close-car2go-unit-in-uk.
29. Matt McFarland, “Car2go has Signed Up One Million Members Worldwide,” The
Washington Post, accessed December 10, 2014, http://www.washingtonpost.
com/blogs/innovations/wp/2014/12/10/car2go-has-signed-up-1-million-
members-worldwide/.
30. Auto Rental News, “Daimler Consolidates Car2Go and Other Mobility Services,”
Auto Rental News, accessed January 23, 2013, http://www.autorentalnews.
 4
Notes

24 com/channel/rental-operations/news/story/2013/01/daimler-consolidates-
car2go-and-other-mobility-services.aspx.
31. Philips website, accessed September 24, 2014, http://www.philips.com/about/
investor/financialresults/index.page.
32. Philips, “Annual Report 2013,” http://www.annualreport2013.philips.com/
content/en/performance_highlights.html.
33. Philips,“Helping to Meet the Nation’s Energy Goals,”accessed November 18, 2014,
http ://www.healthcare.philips.com/main/about/company/arra_lighting_
ecovision.wpd.
34. Philips,“TheTime is Right for Connected Public Lighting,”accessed October 10, 2012,
http ://www.newscenter.philips.com/main/standard/news/publications/
20121009-connected-public-lighting-philips-cisco.wpd.
35. Philips, “The LED Lighting Revolution,” May 2012, http://www.lighting.philips.
com/pwc_li/main/connect/Assets/tools-literature/LED-lighting-revolution-
booklet.pdf.
36. Philips, “Case Study: RAU Architects,” 2012, http://www.lighting.philips.com/
pwc_li/main/shared/assets/downloads/casestudy-rau-int.pdf.
37. Thomas Rau, “Intelligent Lighting: Designing with Responsible Consumption
in Mind,” The Guardian, accessed September 25, 2013, http://www.theguardian.
com/sustainable-business/intelligent-lighting-designing-responsible-consumption.
38. Thomas Rau, “Intelligent Lighting: Designing with Responsible Consumption in
Mind,” The Guardian, accessed September 25, 2013, http://www.theguardian.
com/sustainable-business/intelligent-lighting-designing-responsible-consumption.
39. Accenture interview with Frans van Houten, April 28, 2014.
40. Philips, “Our Green Products,” accessed October 31, 2014, http://www.philips.
com/about/sustainability/ourenvironmentalapproach/greenproducts/index.page.

9 Circular Business Models: Evaluation, Enablers,

and Ecosystems

1. Larissa Ham, “What You Need to Know about Being an Airbnb Host,”
The New Daily, accessed November 5, 2014, http://thenewdaily.com.au/
life/2014/11/05/how-to-make-money-from-airbnb/.
2. PR Newswire, “Daimler Financial Services Expects 2014 to Become the Best
Year in the Company’s History,” accessed November 13, 2014, http://www.pr
newswire.com/news-releases/daimler-financial-services-expects-2014-to-become-
the-best-year-in-the-companys-history-282546731.html.
3. Gregory T. Huang, “Gazelle, Apple, and Amazon: The Future of ‘Recommerce’,”
Xconomy, accessed October 22, 2013, http://www.xconomy.com/boston/2013/
10/22/gazelle-apple-amazon-future-recommerce/.
4. David Harris, “Consumer Electronics Trade-in Site Gazelle says it’s Accepted 2
Million Devices, Served 1 Million Customers,” Boston Business Journal, accessed
 5
Notes

24
May 28, 2014, http://www.bizjournals.com/boston/blog/techflash/2014/05/
consumer-electronics-trade-in-site-gazelle-says.html.
5. Walmart, “Walmart Doubles Down on Video Gaming,” Company News Release,
accessed March 18, 2014, http://news.walmart.com/news-archive/2014/03/18/
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6. H&M website, http://www.hm.com/gb/longlivefashion.
7. I:CO website, accessed November 18, 2014, http://www.ico-spirit.com/en/
about-ico/.
8. Jasmin Malik Chua, “H&M Becomes First Fashion Company to Launch Global
Clothes-Recycling,” ecouterre.com, accessed December 6, 2012, http://www.
ecouterre.com/hm-is-first-fashion-company-to-launch-global-clothes-recycling-
program/.
9. The Guardian, “Recycling and Reusing Textile Waste in Fashion,” accessed
November 18, 2014, http://www.theguardian.com/sustainable-business/hm-
partner-zone/recycling-reusing-textile-waste-fashion.
10. Accenture interview with Thomas Rau, Sabine Oberhuber and Erik de Ruijter,
January 7, 2014.
11. Turntoo website, http://turntoo.com/en/diensten/household-appliances/.
12. Turntoo website, http://turntoo.com/en/diensten/parking-lots/.
13. Recyclebank, “Recyclebank Launches Online Shop One Twine,” Company News
Release, accessed April 22, 2014, https://www.recyclebank.com/corporate-info/
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14. Recyclebank, “Recyclebank Celebrates 10 Years and 1.5 Billion Pounds of Waste
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15. Elizabeth Dwoskin, “BossTalk: TaskRabbit Chief Aims to Recast Freelance Work,”
Wall Street Journal, accessed August 12, 2014, http://online.wsj.com/articles/
bosstalk-taskrabbit-chief-aims-to-recast-freelance-work-1407886284.
16. Accenture interview with Frits Engelaer, December 5, 2013.
17. William McDonough and Michael Braungart, Cradle to Cradle: Remaking the
Way We Make Things, 2002.
18. Accenture interview with Geanne van Arkel, October 28, 2013.
19. Carlsberg Group, “Carlsberg Joins Forces with Suppliers to Eliminate Waste
by Developing Next Generation of Packaging for High-Quality ‘Upcycling’,”
Company News Release, accessed January 21, 2014, www.carlsberggroup.com/
investor/news/Pages/Carlsbergjoinsforceswithsupplierstoeliminatewastebydeve
lopingnextgenerationofpackagingforhigh-quality‘upcycling’.aspx.
20. Accenture interview with Simon Hoffmeyer Boas, December 6, 2013.
21. “The Launch of the Circulars,” accessed January 24, 2014, http://www.youtube.
com/watch?v=L6gE4jycbbM
22. Accenture interview with Simon Hoffmeyer Boas, December 6, 2013.
23. For more on Carlsberg’s experience, http://www.carlsberggroup.com/investor/
news/Pages/Carlsbergjoinsforceswithsupplierstoeliminatewastebydevelopingne
 6
Notes

24 xtgenerationofpackagingforhigh-quality%E2%80%98upcycling%E2%80%99.
aspx.
24. Carlsberg Group, “Carlsberg Joins Forces with Suppliers to Eliminate Waste
by Developing Next Generation of Packaging for High-Quality ‘Upcycling’,”
Company News Release, accessed January 21, 2014, www.carlsberggroup.com/
investor/news/Pages/Carlsbergjoinsforceswithsupplierstoeliminatewastebydeve
lopingnextgenerationofpackagingforhigh-quality‘upcycling’.aspx.
25. Kingfisher, “The Business Opportunity of Closed Loop Innovation: Kingfisher’s
Progress Towards Products that Waste Nothing,” accessed November 18, 2014,
https://www.kingfisher.com/netpositive/files/downloads/kingfisher_closed_
loop_innovation.pdf.
26. Kingfisher, “The Business Opportunity of Closed Loop Innovation: Kingfisher’s
Progress Towards Products that Waste Nothing,” https://www.kingfisher.com/
netpositive/files/downloads/kingfisher_closed_loop_innovation.pdf.
27. Accenture interview with Sir Ian Cheshire and Alex Duff, May 1, 2013.
28. Kalunborg Symbiosis, “Some of the Largest Industrial Enterprises in Denmark
are Partners in Kalundborg Symbiosis,” http://www.symbiosis.dk/en/partnere.
29. HKTDC Research, “Tianjin Ziya Industrial Park: Facts & Figures (2010),” accessed
September 19, 2011, http://china-trade-research.hktdc.com/business-news/
article/Fast-Facts/Tianjin-Ziya-Industrial-Park/ff/en/1/1X000000/1X0723HA.
htm.
30. Port of Rotterdam, “Rotterdam Organisations Join Forces in Circularity Center,”
Company News Release, accessed April 4, 2014, http://www.portofrotterdam.
com/en/News/pressreleases-news/Pages/rotterdam-organisations-join-forces-
circularity-center.aspx.
31. I:CO website, http://www.ico-spirit.com/en/ico-partners/.
32. Inspiring Social Entrepreneurs, “Episode 13 Interview with Tom Szaky, founder
of Terracycle,” accessed November 18, 2014, http://inspiringsocialentrepreneurs.
com/episode-13-interview-tom-szaky-founder-terracycle/.
33. Fergal Byrne, “A 60 Million Strong Army is Growing and could Save the World
from a Sea of Waste,” Pioneers Post, accessed September 22, 2014, http://www.
pioneerspost.com/news-views/20140922/60-million-strong-army-growing-
and-could-save-the-world-sea-of-waste.
34. Project Ara website, accessed November 18, 2014, http://www.projectara.
com/.
35. Fergal Byrne, “A 60 Million Strong Army is Growing and Could Save the World
from a Sea of Waste,” Pioneers Post, accessed September 22, 2014, http://www.
pioneerspost.com/news-views/20140922/60-million-strong-army-growing-
and-could-save-the-world-sea-of-waste.
36. Project Ara website, accessed November 18, 2014, http://www.projectara.
com/.
37. Phonebloks website, https://phonebloks.com/en.
38. Techreturns website, http://www.techreturns.nl.
 7
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10 Driving the Technology and Digital Edge in
Circular Advantage: Ten Transformational Plays

1. Heather Matheson, “Yerdle: Exploring Decentralization at Cleantech Forum

San Francisco 2014,” Cleantech Group, accessed April 11, 2014, http://events.
cleantech.com/this-week-in-cleantech-oct-2–9/.
2. Takeshi Hirano, “Japanese Mobile Flea Market app Mercari Raises $14 Million,
will Expand to US Market,” The Bridge, accessed March 31, 2014, http://the
bridge.jp/en/2014/03/mercari-fundraises-14-million.
3. Barry Levine, “Verizon Plans to Create a Sharing Platform for Virtually
Anything – Not Just Cars”, Venture Beat, accessed September 8, 2014, http://
venturebeat.com/2014/09/08/verizon-plans-to-create-a-sharing-platform-for-
virtually-anything-not-just-cars/.
4. Praveen Shankar,“Wireless M2M in the Supply Chain: Achieving High Performance
through Dynamic, Real-Time Insight,” Accenture, 2013, http://www.accenture.
com/SiteCollectionDocuments/PDF/Accenture-Wireless-M2M-Supply-Chain.
pdf.
5. Accenture interview with Magnus Rosen, December 11, 2013.
6. Accenture, “Accenture Technology Vision 2013: Every Business is a Digital
Business,” http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-
Technology-Vision-2013.pdf.
7. Gopalakrishna Palem, “M2M Telematics & Predictive Analytics,” Symphony
Teleca, 2013, http://www.symphonyteleca.com/media/93766/analytics_wp_
2013_v1_m2m_telematics___predictive_analytics.pdf.
8. Accenture, “Industrial Internet Insights Report for 2015,” 2014, http://www.
accenture.com/SiteCollectionDocuments/PDF/Accenture-Industrial-Internet-
Changing-Competitive-Landscape-Industries.pdf.
9. GE Reports, “Analyze This: The Industrial Internet by the Numbers & Outcomes,”
accessed October 7, 2013, http://www.gereports.com/post/74545267912/
analyze-this-the-industrial-internet-by-the-numbers.
10. The Integer Group, The Checkout, Issue 5. 2013 “Mobile Edition,” http://
shopperculture.integer.com/the-checkout-2013-archive.html.
11. Accenture, “A New Era for Retail: Cloud Computing Changes the Game,” 2013,
http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-A-New-
Era-For-Retail.pdf.
12. Christopher L. Weber, Jonathan G. Koomey, and H. Scott Matthews, “The Energy
and Climate Change Impacts of Different Music Delivery Methods,” accessed
August 17, 2009, http://download.intel.com/pressroom/pdf/cdsvsdownloads
release.pdf.
13. Christopher L. Weber, Jonathan G. Koomey, and H. Scott Matthews “The Energy
and Climate Change Implications of Different Music Delivery Methods,” accessed
August 17, 2009, http://download.intel.com/pressroom/pdf/CDsvsdownloads
release.pdf.
 8
Notes

24
14. Weber et al., “The Energy and Climate Change Implications of Different Music
Delivery Methods,” accessed August 17, 2009, http://download.intel.com/
pressroom/pdf/CDsvsdownloadsrelease.pdf.
15. European Commission, “Digital Editions: Pathway to Greener Publications,”
accessed June 9, 2009, http://ec.europa.eu/environment/ecoap/about-
eco-innovation/good-practices/united-kingdom/395_en.htm.
16. Accenture, “Accenture Technology Vision 2013: Every Business is a Digital
Business”, http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-
Technology-Vision-2013.pdf.
17. Jeremiah Owyang, “The Collaborative Economy”, Altimeter Group, accessed
June 4, 2013, http://www.slideshare.net/Altimeter/the-collaborative-economy.
18. Spare to Share, corporate website, accessed February 3, 2015, https://www.
asparetoshare.com/.
19. Digital Lumens website, http://www.digitallumens.com/company/.
20. Accenture interview with David Rosenberg, November 15, 2013.
21. Oliver Balch, “Hi-tech Farming: Growing Plants in Urban Warehouses,” The
Guardian, accessed April 3, 2013, http://www.theguardian.com/sustainable-
business/tech-farming-plants-urban-warehouses.
22. AeroFarms website, accessed November 18, 2014, http://aerofarms.com/.
23. Copenhagen Connecting, “Copenhagen Connecting – An Unique and Innovative
Opportunity to Shape the Future of Copenhagen,” accessed February 3, 2015,
https://docs.google.com/a/melcher.com/spreadsheets/d/1M149zx2MQBYH8
QwEgI8J7GzlelQtSupbjUEYsAsj3Rg/edit?usp=sharing.
24. trendwatching.com, “UPGRADIA: The Digital Culture of Constant Upgrade and
Iteration Comes to the World of Physical Objects,” February 2014 trend briefing,
http://trendwatching.com/trends/pdf/2014-02%20UPGRADIA.pdf.
25. Xerox website, http://www.xerox.com/corporate-citizenship-2010/sustainability/
waste-prevention.html.
26. Accenture interview with Gerrard Fisher, December 9, 2013.
27. International Institute for Sustainable Development, “Chaparral Steel Company,”
accessed November 18, 2014, http://www.iisd.org/business/viewcasestudy.
aspx?id=51.
28. Indigo Development, “Industrial Ecology: Case Profiles,” accessed July 2014,
http://www.indigodev.com/Cases.html.
29. Desso website, http://www.desso-refinity.com/desso-refinityr/.
30. dataserv website, http://www.dataserv-group.com/about/about_EN.html.
31. Celtic Renewables website, http://www.celtic-renewables.com/about-us/.
32. Slag Cement Association, “Material, Energy and Greenhouse Gas Savings,”
accessed July 2014, http://www.slagcement.org/Sustainability/Materials.
html.
33. University of Bath, “Micro-Capsules and Bacteria to be Used in Self-Healing
Concrete,” accessed May 30, 2013, http://www.bath.ac.uk/news/2014/12/03/
micro-capsules-and-bacteria-to-be-used-in-self-healing-concrete/.
 9
Notes

24
34. Daniel Patrascu,“Michelin to Launch Flat FreeTire in 2014”, Auto Evolution, accessed
May 24, 2011, http://www.autoevolution.com/news/michelin-to-launch-
flat-free-tire-in-2014-35646.html
35. g2 revolution website, accessed September 24, 2014, https://www.g2rev.com/
g2rev/about-us.jsp.
36. Inc.com, accessed November 18, 2014 “Top Environmental Services Companies
on the 2014 Inc. 5000,” http://www.inc.com/inc5000/list/2014/industry/
environmental-services.
37. 3M News Release, “3M Introduces Asset and Inventory Tracking System,” March
11, 2010, 3m.com/tracking/docs/AITS_Press_Release.doc.
38. MakerBot website, accessed September 24, 2014, http://www.makerbot.com/
support/guides/pla.
39. “GE Uses Big Data to Monitor Laser-Printed Jet Engine Parts,”accessed June 5, 2013,
http://www.3ders.org/articles/20130605-ge-uses-big-data-to-monitor-laser-
printed-jet-engine-parts.html.
40. Stratasys, “Streamlining Manufacturing,” 2013 Case Study, http://www.
stratasys.com/~/media/Case%20Studies/Commerical%20Products/SSYS-CS-
Thogus-05-13.pdf.
41. Transport Intelligence, “The Implications of 3D Printing for the Global Logistics
Industry,” 2012, http://www.transportintelligence.com/articles-papers/the-
implications-of-3d-printing-for-the-global-logistics-industry/76.

11 Five Circular Capabilities for Driving Value

1. Chris Zook and James Allen, “Profit From the Core: Growth Strategy in an Era of
Turbulence,” Harvard Business Review Press, Boston, February 2001.
2. Blue Economy website, http://theblueeconomy.org/blue/Home.html.
3. Accenture interview with Gunter Pauli, February 11, 2013.
4. Mike Hower, “Timberland Retreads Old Tires as New Shoes,” GreenBiz, accessed
November 3, 2014, http://www.greenbiz.com/article/timberland-giving-old-
tires-new-treads-new-shoes.
5. Accenture interview with Jean-Philippe Hermine, October 12, 2013.
6. Accenture interview with Jean-Philippe Hermine, October 12, 2013.
7. Accenture interview with Jean-Philippe Hermine, October 12, 2013.
8. Alfa Lavel, “Annual Report 2013,” accessed March 3, 2014, http://www.
alfalaval.com/about-us/investors/Reports/annual-reports/Documents/Annual_
report_2013.pdf.
9. The Royal Society for the encouragement of Arts, Manufactures and Commerce
website, http://www.thersa.org/.
10. RSE Action and Research Centre, “Investigating the Role of Design in the
Circular Economy,” accessed June 2013, http://www.thersa.org/__data/assets/
pdf_file/0020/1524017/RSA-Great-Recovery-Executive-Summary-June-2013.pdf.
 0
Notes

25
11. Designtex, “Home > Environmental Design > ED Stories > Climatex,” accessed
February 3, 2015, http://www.designtex.com/climatex_Environments.aspx?f=
36310.
12. Ellen MacArthur Foundation, “Mud Jeans is Pioneering a Lease Model for its
Organic Cotton Jeans, in Order to Ensure Raw Materials Supply and Discover New
Business Opportunities,” http://www.ellenmacarthurfoundation.org/case_
studies/mud-jeans; Accenture interview with Bert van Son, CEO of Mud Jeans,
December 5, 2013; Accenture analysis.
13. Wrap, “Valuing Our Clothes: The True Cost of How We Design, Use and Dispose
of Clothing in the UK,” accessed July 11, 2012, http://www.wrap.org.uk/sites/
files/wrap/VoC%20FINAL%20online%202012%2007%2011.pdf.
14. Mud Jeans website, “How Lease a Jeans Works,” accessed November 24, 2014,
http://www.mudjeans.eu/Lease-How-it-works/How-Lease-A-Jeans-Works.
15. Accenture interview with Bert van Son, December 5, 2013.
16. Heather Caliendo, “IKEA’s New Sustainable Strategy Includes a Plastics
Commitment,” Plastics Today, accessed September 23, 2014, http://www.
plasticstoday.com/articles/IKEAs-new-sustainable-strategy-includes-a-plastics-
commitment-140923.
17. Vattenfall website, http://corporate.vattenfall.se/nyheter/nyheter/import-
nyheter/aska-ar-inte-avfall/
18. Eco-Business, “Closing the Loop: Starbucks’ Milk Comes from Cows Fed by its Coffee
Waste,” accessed May 9, 2014, http://www.eco-business.com/news/closing-
loop-starbucks-milk-comes-cows-fed-its-coffee-waste/?utm_medium=email&utm_
campaign=May+14+newsletter&utm_content=May+14+newsletter+Version
+A+CID_13efe7ebdd0fffdc5212e9786be8c1e5&utm_source=Campaign%20
Monitor&utm_term=Closing%20the%20loop%20Starbucks%20milk%20
comes%20from%20cows%20fed%20by%20its%20coffee%20waste.
19. SUPERVALU, “SUPERVALU to Add 250 Stores to Zero Waste Program in
Current Fiscal Year, Bringing Company Total to over 300,” Company News
Release, accessed April 17, 2012, http://www.businesswire.com/news/
home/20120417006697/en/SUPERVALU-Add-250-Stores-Zero-Waste-Program.
20. Edie (Environmental Data Interactive Exchange), “Kimberly-Clark Pilots
Circular Economy Model as it Charts Progress on Water and Waste,” accessed
August 11, 2014, http://www.edie.net/news/5/Kimberly-Clark-pilots-circular-
economy-model-as-it-charts-progress-on-water-and-waste/?utm_source=daily
newsletter&utm_medium=email&utm_content=news&utm_campaign=daily
newsletter.
21. SKF, “SKF Life Cycle Management,” accessed October 31, 2014, http://www.
skf.com/group/our-company/the-power-of-knowledge-engineering/life-cycle-
management/index.html.
22. SKF, “Industrial Market, Regional Sales and Services,” accessed September 10, 2014,
http://www.skf.com/irassets/sites/default/files/cmd/vartan_vartanian_cmd_
2014_final.pdf
23. Accenture interview with Vartan Vartanian, December 12, 2013.
 1
Notes

25
24. Walmart, “Closed Loop Fund Brochure,” accessed November 24, 2014, http://
www.resource-recycling.com/images/e-newsletterimages/Closed_Loop_Fund_
Brochure.pdf
25. Joel Makower, “Why the World’s Biggest Companies are Investing in Recycling,”
GreenBiz, accessed August 18, 2014, http://www.greenbiz.com/blog/2014/
08/18/why-worlds-biggest-companies-are-investing-recycling.
26. Hannah Gould, “10 Things You Need to Know about MP’s Report on Circular
Economy,” The Guardian, accessed July 24, 2014, http://www.theguardian.com/
sustainable-business/10-things-need-to-know-mp-report-circular-economy.
27. General Motors, “The Business Case for Zero Waste,” accessed November 24,
2014, http://www.gm.com/content/dam/gmcom/VISION/Environment/
More_Environment/pdf/Landfill%20free%20blueprint%20_%20FINAL%20
5_28.pdf.
28. Cisco, “Corporate Social Responsibility Report,” 2013, accessed November 24,
2014, http://www.cisco.com/assets/csr/pdf/CSR_Report_2013.pdf.
29. Cisco, “The Cisco Certified Difference,” December 2012, accessed November 24,
2014, https://www.cisco.com/web/ordering/ciscocapital/refurbished/docs/The_
Cisco_Certified_Difference_CustomerView.pdf.
30. Cisco, “Corporate Social Responsibility Report,” 2013, accessed November 24,
2014, http://www.cisco.com/assets/csr/pdf/CSR_Report_2013.pdf.
31. Cisco, “2014 Corporate Social Responsibility Report,” accessed November 24,
2014, http://www.cisco.com/assets/csr/pdf/CSR_Report_2014.pdf#page=105.
32. Cisco, “Remanufacturing for a Greener Planet with Cisco Certified Refurbished
Equipment,” accessed November 24, 2014, http://www.cisco.com/web/
ordering/ciscocapital/refurbished/resellers/docs/downloads/Cisco_Capital_
Green_Tech_Lifecycle_brochure.pdf.
33. Accenture interview with Javier Flaim, December 6, 2013.
34. Accenture interview with Javier Flaim, December 6, 2013.

12 The Power of Policy

1. United Nations Global Compact and Accenture, “The UN Global Compact-

Accenture CEO Study on Sustainability 2013: Architects of a Better World,”
accessed September 2013, http://www.accenture.com/Microsites/ungc-ceo-
study/Documents/pdf/13-1739_UNGC%20report_Final_FSC3.pdf.
2. United Nations Global Compact and Accenture, “The UN Global Compact-
Accenture CEO Study on Sustainability 2013: Architects of a Better World,”
accessed September 2013, http://www.accenture.com/Microsites/ungc-ceo-
study/Documents/pdf/13-1739_UNGC%20report_Final_FSC3.pdf.
3. United Nations Global Compact and Accenture, “The UN Global Compact-
Accenture CEO Study on Sustainability 2013: Architects of a Better World,”
accessed September 2013, http://www.accenture.com/Microsites/ungc-ceo-
study/Documents/pdf/13-1739_UNGC%20report_Final_FSC3.pdf.
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Notes

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4. The Economist, “All Eyes on the Sharing Economy,” accessed March 9, 2013,
http://www.economist.com/news/technology-quarterly/21572914-collabora-
tive-consumption-technology-makes-it-easier-people-rent-items.
5. The Economist, “All Eyes on the Sharing Economy,” accessed March 9, 2013,
http://www.economist.com/news/technology-quarterly/21572914-collaborative-
consumption-technology-makes-it-easier-people-rent-items.
6. Jessica Conrad, “The Next New Economy,” Resilience, accessed March 21, 2014,
http://www.resilience.org/stories/2014-03-21/the-next-new-economy
7. The Economist, “All Eyes on the Sharing Economy,” accessed March 9, 2013,
http://www.economist.com/news/technology-quarterly/21572914-collaborative-
consumption-technology-makes-it-easier-people-rent-items; and Bruce Watson,
“Airbnb’s Legal Troubles: The Tip of the Iceberg for the Sharing Economy?”
The Guardian, accessed November 20, 2013, http://www.theguardian.com/
sustainable-business/airbnb-legal-trouble-sharing-economy.
8. Brad Tuttle, “The Other Complication for Airbnb and the Sharing Economy:
Taxes,” Time, accessed June 15, 2013, http://business.time.com/2013/06/15/
the-other-complication-for-airbnb-and-the-sharing-economy-taxes/.
9. Brad Tuttle, “The Other Complication for Airbnb and the Sharing Economy:
Taxes,” Time, accessed June 15, 2013, http://business.time.com/2013/06/15/
the-other-complication-for-airbnb-and-the-sharing-economy-taxes/.
10. The Economist, “All Eyes on the Sharing Economy,” accessed March 9, 2013,
http://www.economist.com/news/technology-quarterly/21572914-collaborative-
consumption-technology-makes-it-easier-people-rent-items.
11. European Commission, “The Roadmap to a Resource Efficient Europe,” http://
ec.europa.eu/environment/resource_efficiency/about/roadmap/index_
en.htm.
12. European Commission,“Action for a Resource Efficient Europe,”accessed June 17, 2013,
http://ec.europa.eu/environment/resource_efficiency/documents/action_for_a_
resource_efficient_europe_170613.pdf.
13. Written 2014 Accenture Interview with Dr. Janez Potočnik.
14. Green Alliance, “More Jobs, Less Carbon: Why We Need Landfill Bans,” accessed
February 2014, http://www.green-alliance.org.uk/resources/More%20jobs,
%20less%20carbon_%20why%20we%20need%20landfill%20bans.pdf.
15. House of Commons Environmental Audit Committee, “Growing a Circular
Economy: Ending the Throwaway Society,” accessed July 17, 2014, http://
www.publications.parliament.uk/pa/cm201415/cmselect/cmenvaud/214/214.pdf.
16. House of Commons Environmental Audit Committee, “Growing a Circular
Economy: Ending the Throwaway Society,” accessed July 17, 2014, http://www.
publications.parliament.uk/pa/cm201415/cmselect/cmenvaud/214/214.pdf.
17. Paul Sanderson, “Government Rejects MPs’ Recommendations on Circular
Economy,” Resource Efficient Business, accessed November 3, 2014, http://
www.rebnews.com/news/resource_efficiency/government_rejects_mpsr_rec-
ommendations_circular_economy.html#.VFinGJIamZs.twitter.
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18. Danish Government, “Denmark without Waste: Recycle More – Incinerate Less,”
2013, http://mim.dk/media/mim/67848/Ressourcestrategi_UK_web.pdf.
19. Scottish Government (2013), “Safeguarding Scotland’s Resources”, http://
www.scotland.gov.uk/Resource/0043/00435308.pdf.
20. Circle Economy (2013), “Green Deals: NL as a Circular Hotspot & Circular
Procurement,” http://www.circle-economy.com/news/green-deals-nl-as-a-circular-
hotspot-circular-procurement
21. Chinese Government (2008), “The Circular Economy Promotion Law of the
People’s Republic of China,” http://www.cecc.gov/resources/legal-provisions/
circular-economy-promotion-law-of-the-peoples-republic-of-china-chinese.
22. People’s Daily Online, “Li Keqiang’s Speech at Summer Davos Opening Ceremony –
Full Text,” accessed September 11, 2014, http://english.peopledaily.com.cn/n/
2014/0911/c90883-8780942.html.
23. Dajian Zhu, “China’s Policies and Instruments for Developing the Circular
Economy,” accessed June 15, 2014, http://europesworld.org/2014/06/15/
chinas-policies-and-instruments-for-developing-the-circular-economy/#.
VHOqhVfF_i-
24. “China Sets Up Association to Promote Circular Economy,” Global Times, accessed
December 1, 2013, http://www.globaltimes.cn/content/828920.shtml.
25. “China Sets Up Association to Promote Circular Economy,” Global Times, accessed
December 1, 2013, http://www.globaltimes.cn/content/828920.shtml.
26. Izumi Tanaka, “Promotion of Resource Efficiency in Japan,” Swedish Institute for
Growth Policy Studies, accessed November 24, 2014, http://www.tillvaxtanalys.
se/download/18.7b5d698213b66033de8d7/1354785052944/PM2008_009_
Promotion_of_Resource_Efficiency_in_Japan.pdf.
27. Stephan Lutter, Stefan Giljum and Mirko Lieber, “Global Material Flow
Database,” accessed March 2014, [Key indicators table], http://www.
materialflows.net/fileadmin/docs/materialflows.net/SERI_WU_MFA_technical_
report_final_20140317.pdf.
28. Cat Johnson, “Sharing City Seoul: A Model for the World,” Shareable,
accessed June 3, 2014, http://www.shareable.net/blog/sharing-city-seoul-
a-model-for-the-world.
29. National Environment Agency (Singapore), “Singapore Packaging Agreement,”
accessed October 31, 2014, http://app2.nea.gov.sg/energy-waste/waste-
management/singapore-packaging-agreement.
30. California Department of Toxic Substances Control, “Green Chemistry,” accessed
October 31, 2014, http://www.dtsc.ca.gov/PollutionPrevention/GreenChemistry
Initiative/index.cfm.
31. The White House, “National Bioeconomy Blueprint,” accessed October 31, 2014,
http ://www.whitehouse.gov/sites/default/files/microsites/ostp/national_
bioeconomy_blueprint_april_2012.pdf.
32. Ex’Tax website, “Knowledge Centre,” accessed October 31, 2014, http://www.ex-
tax.com/knowledge-centre/.
 4
Notes

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33. House of Commons Environmental Audit Committee, “Growing a Circular
Economy: Ending the Throwaway Society,” accessed July 17, 2014, http://www.
publications.parliament.uk/pa/cm201415/cmselect/cmenvaud/214/214.pdf.
34. Puma website,“Environmental Profit and Loss Account,”accessed October 31, 2014,
http ://about.puma.com/en/sustainability/environment/environmental-
profit-and-loss-account.
35. Delft University of Technology Website, “The Model of the Eco-Costs,” accessed
October 31, 2014, http://www.ecocostsvalue.com/.
36. WRAP website, “Who We Are,” accessed October 31, 2014, http://www.wrap.
org.uk/content/who-we-are.
37. European Commission, “Waste Electrical and Electronic Equipment (WEEE),”
http://ec.europa.eu/environment//waste/weee/index_en.htm
38. Éco-Mobilier, “The Eco-Contribution for Foreigners,” accessed October 31, 2014,
http://www.eco-mobilier.fr/international.
39. Veolia website, accessed October 31, 2014, http://www.veolia.com/en/
our-customers/achievements/industries/circular-economy/france-eco-mobilier.
40. Accenture Interview with James Grayson, October 29, 2013.
41. Environdec website, accessed October 31, 2014, http://www.environdec.com/.
42. All-Party Parliamentary Sustainable Resource Group, “Remanufacturing: Towards
a Resource Efficient Economy,” accessed March 2014, http://www.policy
connect.org.uk/apsrg/sites/site_apsrg/files/apsrg_-_remanufacturing_report.pdf.
43. United Nations Environment Programme, “UNEP Launches Global Initiative
for Resource Efficient Cities,” accessed June 18, 2012, http://www.unep.org/
newscentre/default.aspx?DocumentID=2688&ArticleID=9179.
44. United States Department of Agriculture, “BioPreferred”, http://www.
biopreferred.gov/BioPreferred/.
45. Kathleen Stokes, Emma Clarence, Lauren Anderson and April Rinne, “Making
Sense of the UK Collaborative Economy,” Nesta, accessed September 2014,
http://www.collaborativeconsumption.com/wp-content/uploads/2014/09/
making_sense_of_the_uk_collaborative_economy_full_report_fv.pdf.
46. International Labor Organization, “Global Employment Trends 2014,” accessed
January 2014, http://www.ilo.org/wcmsp5/groups/public/---dgreports/---
dcomm/---publ/documents/publication/wcms_233953.pdf.
47. International Institute for Labour Studies, “Green Policies and Jobs: A Double
Dividend?,” 2009, http://www.ilo.org/wcmsp5/groups/public/---dgreports/---
dcomm/documents/publication/wcms_119186.pdf.
48. Energy Transition: The German Energîewende website, “Environmental Taxation,”
accessed October 31, 2014, http://energytransition.de/2012/10/environmental-
taxation/.
49. Ex’tax website, “The European Commission on Ex’tax,” accessed November 24,
2014, http://www.ex-tax.com/knowledge-centre/taxes/european-commission-
about-extax.
50. Ex’tax website, accessed November 24, 2014, http://www.ex-tax.com/.
 5
Notes

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51. Der Grüne Punkt, “Corporate Mission: Responsibility,” accessed November 2011,
http ://www.gruener-punkt.de/fileadmin/docs/punkt/2011_Der_Gruene_
Punkt_Unternehmen_Verantwortung_Web_eng.pdf.
52. Eco-Cycle website, “Zero Waste: Producer Responsibility,” accessed October 31,
2014, http://www.ecocycle.org/zerowaste/overview/producer-responsibility.
53. International Material Data System website, accessed November 24, 2014,
http://www.mdsystem.com/imdsnt/startpage/index.jsp.
54. European Commission, “REACH – Registration, Evaluation, Authorisation and
Restriction of Chemicals,” last updated September 17, 2013, accessed November
24, 2014, http://ec.europa.eu/enterprise/sectors/chemicals/reach/index_en.htm.

13 Capturing the Advantage: Getting Started

1. Accenture Interview with Feike Sijbesma, May 28, 2014.

2. Accenture Interview with Jean-Philippe Hermine, December 10, 2013.
3. Accenture interview with Henrik Sundström, Bengt Banck, Cecilia Nord and
Vanessa Butani, February 10, 2014.
4. European Commission, “Environment: Higher Recycling Targets to Drive
Transition to a Circular Economy with New Jobs and Sustainable Growth,”
accessed July 2, 2014, http://europa.eu/rapid/press-release_IP-14-763_en.htm.
5. European Environmental Bureau,“Not Bad, but Can Do Better: Leaked EU Proposal
on Circular Economy,” http://www.eeb.org/EEB/index.cfm/news-events/
news/not-bad-but-can-do-better-leaked-eu-proposal-on-circular-economy/.
6. Accenture Interview with Mario Abreu, February 17, 2014.
7. “Companies Pursue Cross Sector Growth as Digital Technologies Dissolve
Traditional Industry Boundaries, Accenture Research Finds,” Accenture News
Release, accessed January 21, 2014, http://newsroom.accenture.com/news/
companies-pursue-cross-sector-growth-as-digital-technologies-dissolve-
traditional-industry-boundaries-accenture-research-finds.htm.
8. Accenture Interview with Steve Howard, February 19, 2014.
9. Accenture Interview with Steve Howard, February 19, 2014.
10. Accenture, “The Commodity Imperative: Making the Journey from Procurement
to Management of Integrated Margin,” 2014, http://www.accenture.com/
SiteCollectionDocuments/PDF/Accenture-Commodity-Imperative-Journey-
Procurement-Management-Integrated-Margins.pdf.
11. Rip Empson, “CEO Brian Chesky Says Airbnb will be Filling More Room Nights than
All Hilton Hotels by the End of 2012,” Tech Crunch, accessed December 12, 2012,
http://techcrunch.com/2012/12/12/cloudera-ceo-mike-olson-by-december-31st-
airbnb-will-be-filling-more-room-nights-than-hilton-hotels/.
12. Conferences that Work, http://www.conferencesthatwork.com/wp-content/
uploads/2014/01/airbnb-growth-tweet.jpg.
13. Accenture Interview with Feike Sijbesma, May 28, 2014.
Index

Accenture, 12, 41, 105, 136, 168, 197 Audi Unite, 25

resource supply and demand imbalance, automotive & transportation, waste
quantifying, 15–16 reduction in, 31
Strategy, 72 Avis, 109, 110
Adidas, 38
Adler, 65, 129 Best Buy, 81
advanced recycling technology, 141, 142–3 Beta Renewables, 41
AeroFarms, 139 big data analytics, 133, 138–40
agriculture & food, waste reduction in, 31 BIKKER & Company, 128
Airbnb, xxiv, 26, 84, 86, 91, 93, 96, 117, Bio-Based Industries (BBI), 41
191, 201 biocapacity, 15
“Meetups,” 93 biological nutrients, 35
AirCarbon, 59 BioPreferred® program, 181
AkzoNobel, xxii, 38–9, 43–4 BMW, 77, 117
Alfa Laval, 155 DriveNow™, 102, 107
Amazon, xx, 70, 71, 103, 117 business-as-usual approach to economic
Kindle, 70–1 development, end of, 5–8
American Eagle Outfitters, 129 Business-to-Business (B2B) model,
Amsterdam Economic Board 88–90, 92
“Green Deal,” 173 Business-to-Consumer (B2C) markets, 61
anthropocene, 14 buy-back programs, 74
apparel industry, waste reduction in, 31 by-products, recovering, 58–9
Apple, 74, 117
Aquafil, 64 C & A, 65
Arab Spring, 13 California
Arkema Group, 126 “Bioeconomy” blueprint, 175
Asos, 75 “Green Chemistry” package, 175
Asset Efficiency Optimization, 163, 164 car2go, 102, 107, 110–11, 117,
assets, encouraging increased productivity 134, 203
of, 180–1 carbon tax, 176
Atlas Copco Group, 102 Cargill, 38
6
25

Carlsberg/Carlsberg Group, 126–7
Carlsberg Circular Community, 126, 127
Caronetas Caronas Inteligentes, 89
Castorama France, 127
“Cat® Reman” business, 79
Caterpillar, xxiii, 77, 79–80, 83, 191
“Cat® Reman” business, 79
CE100 program, 22
Celtic Renewables, 144
Certech, 127
CExchange, 81
Chaparral Steel Company
Project STAR (Systems and Technology
for Advanced Recycling), 142–3
China Association of Circular Economy, 28
circular advantage, 5, 23
capabilities, 198–201
capturing, 191–205
gaining, 24–32
timing, 201–4
circular business models, 117–30
ecosystem, expanding, 125–30
right approach, choosing, 121
right external enabling environment,
creating, 122–5
right model, picking, 118–21
Circular Economy Package, 171, 195
circular economy, 4–5
data tables from modeling, 208–19
policy. See circular economy policy
roots of, 19–23
and sharing economy, overlap
between, 85
in 21st century, 21–3
circular economy policy
circular opportunities, reviewing
regulations for, 182–3
extended producer responsibility
policy, implementation of, 185–7
global product passport, 187–8
initiatives, 175–81
accelerating toward zero waste,
176–9
7
Index
25
assets, encouraging increased
productivity of, 180–1
playing field, leveling, 175–6
intervention, 169–70
new partnerships, shaping, 184
political vision, forming, 182
power of, 168–88
research, education and information,
promoting, 184
responses from government, 170–5
taxation and financial incentives, 183
taxation, shifting, 184–5
circular supplies, sourcing and
manufacturing, 158–61
rationale for, 159
shifting strategy, activities skills
associated with, 159–60
Circular Supply-Chain business model,
35–51, 141, 199
adoption of, 40–2
to life, bringing, 45–50
scaling, 43–5
supplies fuel circle, bringing, 50–1
variations of, 37–40
Circularity Center
“Plastic to Oil,” 128–9
Cisco/Cisco Systems, 77, 117, 167
Clinton Foundation, 96
Closed Loop Fund, 164–5
cloud computing, 106, 132–3, 136–7
Coinstar™, 82
Commodity Price Risk Management
(CPRM), 200–1
commodity trap, 163
company
as channel player, 74–5
field service, 75–6
complex and collaborative circular
networks, managing, 149–54
new strategy, rationale for, 150
shifting strategy, activities skills
associated with, 151–3
computer-aided design (CAD), 145
 8
Index
25
construction industry, waste reduction
in, 31
consumer electronics, waste reduction
in, 31
Consumer-to-Consumer (C2C) model,
88–90
continuous customer engagement, 161–4
new sales and product use
capabilities, rationale for, 161–2
shifting strategy, activities skills
associated with, 162–3
CopenhagenConnecting, 140
Cradle to Cradle® Design Framework,
21–2, 52–3, 64, 127
Cradle to Cradle® Products Innovation
Institute, 22
Craigslist, 74, 137
CRAiLAR Technologies, xxii, 38
Crate & Barrel, 47
Crowd Companies Council, 109
crowdshipping, 31, 88, 123
CSR Netherlands
“Green Deal,” 173
customer value propositions, 5, 31, 76,
103, 119, 130, 151, 162, 196
Daimler, 109, 117
car2go, 102, 107, 110–11, 117, 134, 203
Daimler Mobility Services, 111
Dataserv Group, 143
De Lage Landen International (DLL),
106, 124
decentralized circular energy, 151
Deliv, xxiv, 88
Dell, xxiii, 47, 59, 78, 187
demand and resource supply, imbalance
between, 9–14
dematerialization, 136, 137, 151
“Denmark without Waste,” 172
Desso/Desso Group, 64–5, 106, 143
Cradle-to-Cradle® system, 64
Refinity®, 64, 143
TakeBack™ program, 64
DHL, xix
digital freemium model, 70
Digital Lumens
intelligent lighting systems, 139
digital technologies, 76, 95–6, 132–40,
197–8
big data analytics, 133, 138–40
cloud computing, 132–3, 136–7
machine-to-machine communication
technology, 132, 135–6
mobile technology, 132, 133–5
social technology, 133, 137–8
disposal and collection, 164–7
DOEN Foundation, 96
Domestic Material Consumption
(DMC), 208
double dividend, 185
DriveNow™, 102, 107
DSM, 45, 47–50, 51
Bio-based Products & Services, 48–9
“DSM in Motion,” 47
Duales System Deutschland
(Green Dot® scheme), 186
eBay, 74, 137, 162, 203
ecoATM™, 81–3
eco-effectiveness, 21, 125
eco-efficiency, 21, 125
ecological footprint, 15, 49
economic opportunity, sizing, 28–32
Econyl®, 64
ecosystem, 125–30
eco*trak® reporting system, 146
Ecovative, 45, 46–7, 51
Ecover, 40
Electrolux, 12, 72–3, 194
Ellen MacArthur Foundation, 22, 28
Circular Economy, 127
End of Life Vehicle regulations, 180
end-of-life products, recovering,
57–8
energy sector, waste reduction in, 31
engineering technologies, 140–4
advanced recycling technology, 141,
142–3
 9
Index

25
life and material sciences technology, Geneva Association, 17
143–4 Germany
modular design technology, 140–2 Duales System Deutschland
Eni, 44 (Green Dot® scheme), 186
Environmental Audit Committee, 172 German Ecological Tax Reform, 185
Environmental Product Declarations Getable, 88
(EPDs), 179 Girl Meets Dress™, 103
Environmental Profit and Loss (EP&L), 66 Global Footprint Network, 15
EPEA Internationale Umweltforschung global product passport, 187–8
GmbH, 127 global warming, 8–9
e-Play, 81 global water demand, 7
Esprit, 65 gofossilfree.org, 12
European Commission, 9, 170, 171, 185 Google
European Community Project Ara, 130
Waste Electrical and Electronic “Green Deal,” 173
Equipment Directive, 178, 187 Green Index®, 64
European Resource Efficiency Platform, 127
European Resource Efficiency Hennes & Mauritz (H&M), 12, 66, 122,
Roadmap, 170 123, 129
European Union Commission, 28 Hilton, 201
European Union, 172 Hitachi, 12
Circular Economy Package, 171, 195 Honda
Ex’tax, 185 KahShare, 102
extended producer responsibility (EPR) household recycling, 19
policy, 177–8 hybrid technologies, 144–7
implementation of, 185–7 3D printing, 145, 146–7, 166
trace and return systems, 145–146
Facebook, 93, 133, 137, 138
field service company, 75–6 ICARRE 95®, 154
floating car pool, 107 I:CO, 65–6, 122–3, 129
FLOOW2, 88–9 ifixit.com, 76
Flyknit™, 27–8 IKEA, 38, 39, 40, 42, 44, 158, 200, 203
Food 4 Less, 58 circular advantage, 39–40
Footlocker, 65 INDRA, 153
Forever 21, 65 industrial equipment, waste
Freedom of Information Act, 180 reduction in, 31
innovation, 154–8
GameStop, 78, 81 lifecycle approach to, 156
Gazelle, 26, 75, 78, 81, 117, 187 rationale for, 154–5
General Electric (GE), 136, 146 shifting strategy, activities skills
General Motors (GM), xxiii, 166 associated with, 155–6
OnStar, 91 Innoverne, 131
RelayRides, 91 Interface, 57, 125–6
zero-waste operations, 56 zero-emission aspiration, 125
 0
Index

26
International Labour Organization Max Shoes, 129
(ILO), 185 Mazuma Mobile, 187
International Material Data System McDonough Braungart Design
(IMDS), 187–8 Chemistry (MBDC), 127
IT, waste reduction in, 31 MeadWestvaco Corporation, 126
Menicon, 160
Jack Jones, 129 Mercari, 134
Japan Michelin, 102
“Fundamental Law for Establishing a Michelin solutions, xxiv, 102
Sound Material-Cycle Society,” 174 Microsoft, 76
Johnson & Johnson Millennium Ecosystem Assessment, 8
Closed Loop Fund, 164–5 mobile technology, 132, 133–5
modular design technology, 140–2
KahShare, 102 modularization, 151
Kalundborg Symbiosis, 128 Montreal Protocol, 179
Kimberly-Clark Professional (KCP), 160–1 Mu, 102
Kingfisher, 127–8 Mud Jeans, 109, 156–8
Kroger Company, 58 municipal waste, recycling of, 8–9
Mushroom® Packaging, 47
Landfill Directive, 171 Music Go Round, 75
launderette, 106 MyWays, xix
leasing, 100
life and material sciences Natureworks
technology, 143–4 circular advantage, 38
Life Cycle Asset Management Netherlands, the
(LCAM), 124 “Green Deal,” 173
The Light Bulb Conspiracy, 68 The Netherlands Organization for
linear economy, 4 Applied Scientific Research, 28
risk, 192–4 Safeguarding Scotland’s Resources
linear growth model, end of, 17–18 initiative, 173
LinkedIn, 93, 133 Newlight Technologies, 59
LiquidSpace, 84 Nexia, 131
Lyft, xxiv, 26, 84, 86, 96, 134 NGO Circle Economy
“Green Deal,” 173
machine-to-machine (M2M) Nielsen Company, 87
communication technology, 132 Nike, 191
“make and sell” approach, 105 Flyknit™, 27–8
MakerBot, 146 Nintendo, 81
Marks & Spencer, 61–2, 103 nongovernmental operations
Marriott, 201 (NGOs), 125
material use and economic nonrenewable resources, finite nature
development, relationship and increasing scarcity of, 6
between, 3 The North Face, 65, 129

Novo Nordisk, 128
Novozymes, 40–1, 128
Océwood® (OCEPLAST), 127
Omni United, 152
Once Upon a Child, 75
Optus, 71, 72
Organisation for Economic Cooperation
and Development (OECD), 8
original equipment manufacturers
(OEMs), 92
Outerwall Inc. See Coinstar™
Owens-Illinois, 126
Oxfam International, 23, 61–2
Packaging Directive, 171
pay for use, 100
Peerby, xxiv, 96–7
peer-review-and-rating system, 97
Peer-to-Peer (P2P) model, 88
People’s Republic of China
China Association of Circular
Economy (CACE), 173–174
Circular Economy Promotion Law, 173
performance agreement, 100
Petainer Manufacturing USA, 127
Peugeot
Mu, 102
Philips, xxiv, 108, 109, 112–13, 117,
191, 196
Philips Lighting Services, 112
Photanol, xxii, 39
pilot analysis, 26
planetary boundaries, transgression of, 7–8
“Plastic to Oil,” 128–9
Play It Again Sports, 75
playing field, leveling, 175–6
PlayStation, 81
POET LLC, 49, 50
polluter pays principle, 176
The Port of Rotterdam Authority, 128
Poshmark, 75, 187
power drill, 26
1
Index
26
Power-by-the-Hour™, 101
precycling premiums, 179
Pro Tech Network, 76
Procter & Gamble (P&G), xxiii
Closed Loop Fund, 164–5
zero-waste operations, 56
Product as a Service (PaaS) business
model, 88, 99–114, 120, 132,
135, 140, 198, 199
forms of, 100
to life, bringing, 109–13
scaling, 107–9
service at scale, 113–14
product development capabilities, 154–8
lifecycle approach to, 156
shifting strategy, activities skills
associated with, 155–6
Product Life-Extension business model,
68–83, 117, 122, 124, 131–3,
145, 162, 198
to life, bringing, 78–83
primary activities of, 71
role of, 74–6
scaling, 76–8
Project Ara, 130
Project LIBERTY, 49–50
Project STAR (Systems and Technology
for Advanced Recycling), 142–3
PTT Global Chemical, 38
Puma, 65–6, 129
Environmental Profit and Loss
Account, 176
Quicar, 102
The Rabobank Group, 124
Rabobank Rotterdam, 128
Ralphs, 58
ReCommerce, 71, 117
Recovery & Recycling business model,
52–67, 141, 145, 162, 198, 199
benefits of, 53–4
closed loop, 54
 2
Index

26
Recovery & Recycling business Rolls-Royce, 101–2
model – continued Power-by-the-Hour™, 101
end-of-life products, recovering, 57–8 Roquette Frères, 49
to life, bringing, 63–6 Royal Society for the encouragement
maturity curve, riding, 60–1 of Arts, Manufactures, and
open loop, 55 Commerce (RSA), 155
scaling, 61–3
waste and by-products, recovering, Safeguarding Scotland’s Resources
58–9 initiative, 173
zero-waste operations, 55, 56 Sanoma Media, 96
Recyclebank, 123–4, 167 sat nav automate process, 25
Recyclogistics, 146 scale(ing)
Redbox Automated Retail, 83 Circular Supply-Chain business model,
Refinity®, 64, 143 43–5
Regulation on Registration, Evaluation, Product as a Service business model,
Authorization, and Restriction 107–9
of Chemicals (REACH), 188 Product Life-Extension business
RelayRides, 85, 91, 138 model, 76–8
Renault, 153–4, 194 Recovery & Recycling business model,
ICARRE 95®, 154 61–3
Twizzy™, 102 service at, 113–14
renewable energy, 35 Sharing Platform business model, 93–6
renewables, increasing stress on, 7 Sealed Air Corporation, 47
Reno, 65 service models, 151
Rent the Runway, xx, 26, 103 shale gas, 9–10
Rent Tycoons, 96–8 Sharing Platform business model, 84–98,
rental, 100 131–3, 135, 145, 198, 199
resource constraints, 18, 119, 151, 202 benefits of, 84
resource efficiency, 124–5 Business-to-Business model, 88–90
resource stewardship, 19, 168 and circular economy, overlap
resource supply and demand, imbalance between, 85
between, 9–14 Consumer-to-Consumer model, 88–90
return chains, 164–7 convenience, 90–1
new sales and product use to life, bringing, 96–8
capabilities, rationale for, 164–5 price, 91
shifting strategy, activities skills quality, 92–3
associated with, 165–7 scaling, 93–6
reusability, 157 trust, 93
Rexam, 126 users of, 87–8
Ricoh, 57 Singapore
right business approach Packaging Agreement (SPA), 174
choosing, 121 Singapore Telecommunications Ltd
picking, 118–21 (SingTel), 71–2
RKW Group, 126 SITA, 57, 153
 3
Index

26
Sixt Turntoo, 109, 123
DriveNow™, 102 21st century, circular economy in, 21–3
SKF Group, xx, 135, 163–4 Twitter, 133
social technology, 133, 137–8 Twizzy™, 102
SOEX Group, 65
SolarCity/SolarCity Corporation, xxv, Uber, xxiv, 85, 86, 88, 95, 96
26, 102 UK Department for Environment, Food,
SOPAVE, 57–8 and Rural Affairs, 28
Spare to Share, 138 Unilever
Spotify, 137 Closed Loop Fund, 164–5
Sprint, 59 United Nations (UN), 23
Starbucks Corporation, 160 Conference Rio+20, 23
Steelcase, 47 Global Compact-Accenture study, xxv,
Storefront, 88 12, 168
Suez Environnement S.A., 57, 153 International Resource Panel, 3
Sunrun, 102 United States Department of Agriculture
SUPERVALU, 160 (USDA)
supplies fuel circle, bringing, 50–1 BioPreferred® program, 181
sustainability, 167 US Department of Energy, 50
Sustainable Development Goals (SDGs), 23 US Energy Information Agency, 10
US Environmental Protection Agency
TakeBack™ program, 64 (EPA), 82
“take-make-waste” industrial model, 4, uSell.com, 78
20, 78
Taobao, 74 value chain inefficiency, 194–5
TaskRabbit, 124 value destruction tax (VDT), 109
taxation, 183 value engineering, 195–7
carbon tax, 176 value-added tax (VAT), 109, 176
shifting, 184–5 Van Gansewinkel, 128
technical nutrients, 35 Vattenfall, 160
technological innovation, 151 Veolia Environmental Services, 127
Techreturns, 130 Verizon, 134
Telenor Group, 106 Vivint Solar, 102
TerraCycle, 129–30 Volcom, 129
Tetra Pak/Tetra Pak International, 62–3, Volklore, 75
196–7 Volkswagen
thredUP, 75, 187 Quicar, 102
3D Hubs, 98
3D printing, 98, 145, 146–7, 166 Walmart, 58–9, 78, 80–1, 83, 117
Tianjin Ziya Industrial Park, 128 Closed Loop Fund, 164–5
Timberland, 63–4, 152 waste
Green Index®, 64 hierarchy, 172
trace and return systems, 145–146 recovering, 58–9
trade-in programs, 74 recycling of, 8–9
 4
Index

26
waste – continued World Wildlife Fund for Nature (WWF)
taxation, 169 2014 Living Planet Report, 4, 7
types of, 119, 151–2 WRAP, 142, 177
Waste & Resources Action Programme
(UK), 28 Xbox, 81
Waste Electrical and Electronic Equipment Xerox Corporation, 142
(WEEE) Directive, 178, 187
Waste Framework Directive, 171 Yerdle, 94
Waste Management, 63 Young Global Leaders (YGL) community,
Wechat, 133 of WEF, 22–3
Weibo, 133
Whatsapp, 133 zero waste
World Economic Forum (WEF) accelerating toward, 55, 56, 125,
Young Global Leaders community of, 176–9
22–3 Zipcar, 26, 85, 109