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Circular Economy

Webinar of 21 February 2012

Ellen MacArthur Foundation (EMF)

Walter R. Stahel

Visiting Professor, University of Surrey

Founder-Director, The Product-Life Institute, Geneva

www.product-life.org, productlife.org@gmail.com

Winsemius, Pieter (2002) One Thousand Shades of Green

Sustainability

développement durable – Nachhaltigkeit

Today’s linear industrial economy more growth means more throughput

resources materials manufacturing distrib. P.O.S. use waste

micro-economic profit optimisation P.O.S. CONSUMER STATE

The manufacturer’s liability for industrial goods concerns the manufacturing quality. Property and liability are transferred to the CONSUMER at the P.O.S. and the State BUT: asbestos, tobacco, GHG emissions class action suites

zero-life products

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1 Wealth preservation instead of wealth substitution,

Re-use is the prime strategy for markets near saturation

number of scrapped cars

1960 1995

new car registrations

destroyed stock flow

What has changed in the 21st century : 1

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Redefining

‘Quality’

as integrating

the

‘Factor Time’

into

corporate

strategy

physical asset management = managing performance over time

Industrial recycling processes

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ECONOMICS of a Circular Economy - managing stocks:

reusing and remanufacturing goods & components (loop 1)

Re-using molecules

Remanufacturing goods

Source: Stahel, Walter (EU report) 1976

X X

Less: energy-intensive activities and

less wasted resources

environmental impairment

Reuse goods, remarketing

EU waste directive 2008

Source: Stahel, Walter 1976

labour

Job creation: product-life extension is a strategy to

substitute manpower for energy (EU report 1976)

factory factory

labour

parts

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10 years 20 years 30 years

labour

The quality angle of the circular economy

The circular economy is

• regional, meaning less transport volumes and shorter distances in the processing chain,

• more labour-intensive than manufacturing because economies of scale are limited and component quality has to be established first,

• a high-quality world: Stradivari instruments and expensive watches do not live forever by design, but through periodic remanufacturing,

• the knowledge and know-how of past technologies are necessary for retrofitting infrastructure and equipment (i.e. employing silver workers).

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The economics of a Circular Economy

1 manage stock instead of flow optimisation, wealth preservation instead of substitution, utilisation value replaces exchange value as the central notion of economic value, wealth management replaces value added,

2 substitute labour for energy and material inputs,

3 create local jobs at all skill levels, quality, 4 reduce resource consumption and

environmental impairment, 5 foster caring (stock optimisation is based on

preserving existing values).

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Sustainable competitiveness:

material efficiency means profits

• A circular economy (better design and more efficient use of material) could save European manufacturers US$630bn a year by 2025, according to a report by the Ellen MacArthur Foundation, London.

• The report, produced by consultancy McKinsey, only covers five sectors that represent a little less than half of the GDP contribution of EU manufacturing, but still calculates that greater resource efficiency could deliver multi-billion Euro savings equivalent to 23 per cent of current spending on manufacturing inputs.

Sustainable competitiveness through re-use:

remanufacturing example ICE1-ReDesign

• The 59 ICE1 trains of the German Bundesbahn clocked up 15 million km each in the first 15 years of operation.

• The cost of the ReDesign was €3 million per train, procurement costs for a new train are €25 million.

• In addition, Re-Design saves social costs of €1 million on a global level (Stern report).

• ReDesign conserves 80 per cent of materials and embodied energy – a total of 16'500 tonnes of steel and 1180 tonnes of copper - and prevents 35'000 tonnes of CO2 emissions and 500'000 tonnes of mining waste (‚Rucksäcke‘).

• ReDesign includes a technologic upgrading of the trains and an increase in the number of seats. Each seat now offers individual power outlets and internet connection.

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Sustainable competitiveness through re-use

A 2004 sectoral study on restoring used automotive engines

compared to a like-new condition showed lower economic costs (30-53%) and much lower environmental costs compared to manufacturing engines:

• raw material consumption down by 26-90%, • waste generation down by 65-88%, • energy consumption down by 68-83%, • 73-78% fewer carbon dioxide (CO2), • 48-88% less CO, • 72-85% less NOx, • 71-84% less SOx, • 50-61% less non-methane hydrocarbons emissions.

Source: Smith, VM and Keolian, GA (2004) The value of remanufactured engines, life-cycle environmental and economic perspectives, Journal of Industrial Ecology, 8(1-2) 193-222

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900 mio t GHG emissions

Lifetime optimisation

Goods as services

Circular Economy (restorative)

Source: WRAP (2009)

GHG reductions

German EEG

feed-in tariff law

Stock management involves caring

– preserving manufactured capital (buildings, infrastructure, equipment, goods) preserves the embedded energy, water, GHG emissions,

– fostering people’s quality of life (skills, education and health services, knowledge),

– maintaining culture and cultural heritage capital (incl. technology), museums,

– making best use of natural capital (e.g. producing bio food from organic agriculture, wooden furniture, leather shoes, wool textiles),

– creating a new relationship with goods.

CARING, social innovations: a new relationship with goods

• is the most profitable and competitive business model of the Circular Economy,

• is sustainable and preventive as manufacturers internalise the cost of risk and of waste,

• leads to radical and rapid new product design for take-back and reuse of goods and components,

• achieves the highest resource efficiency and security as it maintains ownership of material,

• exploits sufficiency and prevention as profit strategies

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The Performance Economy -

selling / buying goods as services

What changed in the 21st century : 2

The shift from sinking to rising resource prices

Sustainable

taxation is a

booster to

increase:

resource

security,

and jobs

prevent

GHG

emissions

Copyright/author: Walter R. Stahel 2011

RESOURCE SECURITY

JOB

CREATION

GHG EMISSION REDUCTION

SUSTAINABLE

TAXATION

C

E

14/02/2012 The Performance Economy 20

Where to find more information: The Performance Economy Walter R. Stahel published by Palgrave Macmillan London March 2010 ISBN 978-0-230-58466-2 productlife.org@gmail.com http://product-life.org

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Thank you for your attention