How to make use of an ancient principle of nature in the economy
Circular economy concepts are currently experiencing a boom, not least fueled by setbacks caused by the current pandemic. Not only is this reflected in increasing public interest, but there is also growing business demand for solutions with a strong focus on practical application. Steinbeis expert Dr. Christoph Soukup explains the underlying reasons for this and describes how firms can benefit from this trend.
A brick made from rubble (X.2010.040,03) (© Historical Museum, Frankfurt. Photo: Horst Ziegenfuss)
Everybody is talking about the circular economy at the moment, and reports such as a PwC study in 2019 [1] are even declaring that it will soon be the new normal. The underlying idea is quite simple. It’s based on a principle of repeated cycles found in nature. In nature, nothing goes to waste. Everything is organized in such a way that anything left over after one process can be used in the next. Leftovers either become a nutrient in a new cycle or the starting product for another natural process that dovetails with that cycle. Whether it’s blossoms and pollen in spring, fruits in the summer or leaves floating down from trees in the fall: In the cycles of nature, everything is put to good use.
The circular economy – a long-established principle
The idea of applying this system to business is not entirely new – quite the opposite. Whenever there have been raw material shortages or more scarcity than abundance, materials have been recycled – over and over again. This was the case in the Middle Ages, it has happened in post-war periods, and it is still the case today in less developed countries.
For example, in the years following World War II, the rubble recovery company TVG became famous the world over for recycling war rubble in Frankfurt. It ran a plant for processing and recycling rubble to produce building bricks and roof tiles needed to reconstruct parts of the city destroyed by bombing.
The concept of using something and then simply throwing it away afterwards only caught on slowly after World War II. But even then, companies continued to produce recycled goods. The best of example of this is the EUR-pallet, which celebrates its 60th anniversary this year. It’s a model of success that has proven its worth a million times over and is respected far beyond Europe. The interior dimensions of modern trailers and vans are now even made to match standard EUR-pallet sizes.
The throw-away society
Our current economic system is based on growth and a focus on linear principles. Raw materials are extracted and used to make products, which are then used by customers.
At the end of their usable lives – short or long – those products are segregated and become waste. It’s a one-way street that concludes on the garbage dump. In Europe, we consume resources the equivalent of three Earths’ worth of renewable raw materials. With non-renewable mineral resources, which took several million years to form, there are many indications that reserves will be depleted. One thing is clear: In the long run, this doesn’t look good. An example that’s quite enlightening: 100 – 200 tons of rock have to be shifted (mostly by blasting) just to produce one kilogram of gold. The yield is much better with cell phones, which all have electrical contacts containing gold: 6 – 8 tons of discarded devices are needed, meaning that an “urban mine” contains 25 to 30 times the amount of gold compared to natural deposits.
Revisiting an old concept
So let’s get back to the idea of the circular economy. Adidas, Fairphone, IKEA, Philips – a number of firms are now looking into ways to bring circular economy principles back to life again.
The only difference is that whereas previously, this was out of economic necessity, now the idea is being taken up again for environmental and sustainability reasons. At the end of the product life cycle, materials won’t be simply thrown away, ideally they can be re-used. This is in keeping with the aims of the circular economy and it pays dividends for companies. This is also seen in the example of Lorenz Meters, a Swabian manufacturer of water meters that a few years ago set up a “disassembly line” in its factory. Used water meters – that were originally produced by the company and have been taken out of service – now come back to the disassembly line where they’re dismantled so components can be cleaned, recalibrated, and put back into brand-new meters.
“Like so many others, normally we’d be in China now. But by taking back our meters, we’ve succeeded in slashing material costs and not only has that protected our production activities in Germany, it even offers price advantages versus manufacturers of disposable products in low-wage countries – right now, the Supply Chain Act is closing in on those competitors,” says Wilhelm Mauss, CEO at Lorenz.
The circular economy is more than just recycling
Current forms of recycling focus heavily on optimizing waste recovery, whereas business models based on circular economy principles consistently take a different approach.
Recycling is only the last stage of a multitude of (better) options for re-using resources. Aside from the aforementioned example of re-manufacturing, materials can be repaired, refurbished, or repurposed. Recycling is only the final option, when no other ideas can be found for unwanted products without a function. The moment you start developing products with an eye to re-using them later, you invest less and less energy in the idea that “garbage” needs to be recycled.
Of course, restructuring the economy into closed-loop systems is no mean task, and it takes time. The first steps have already been taken, but a new mindset is needed if we are to consistently focus on the circular economy.
Steinbeis experts show the way
The Steinbeis Consulting Center for Circular Economy accompanies and supports companies seeking to make decisive improvements in the sustainability of their products and services without neglecting profitability.
“We offer a toolbox of different circular economy instruments that provide a starting point for achieving quick results. We also have lean workshop formats that offer an uncomplicated point of entry for a reasonable investment in terms of time and money,” says Christoph Soukup, who leads the Steinbeis Enterprise.
One of the topics he works on is material efficiency. Doing costings on material flows offers manufacturing companies an opportunity to significantly improve material efficiency. Materials that end up in the trash are already written off on the accounting ledger, because they are costed into prices from the outset. Analyzing material flows in production highlights energy and materials that don’t end up in products: offcuts, residual materials, waste, scrap, or overproduction.
Resources – that should be invested in value creation – also flow into such activities, and aside from fueling purchasing costs they also require extra effort. This quickly makes it possible to find ways to optimize processes. The good thing about this: “Material savings have a direct and indirect impact on operating results, especially under current circumstances,” highlights Soukup.
Once advised by a Steinbeiser – now a Steinbeiser himself
Soukup was once advised by Mario Buric, who has been advising business founders and startups for many years and supported him with his move into self-employment. As part of the Steinbeis EXI consulting program, they developed the idea, formulated the specific offer, and embarked upon the first customer projects. One particularly interesting task was deciding what type of company to set up. A variety of models were considered, including a number of unconventional options. In the end, the decision was made to set up a Steinbeis Enterprise. “A number of things won me over about the idea – the reputation of the Steinbeis brand, the almost inexhaustible pool of experts at Steinbeis, and flexibility in designing my own portfolio,” says the business founder.
What’s the best way to safeguard the future of your company? The 2021 to 2027 funding period has started in the European Union, involving significant amounts of money (in total, more than €1,800 billion). A variety of funding programs revolve specifically around the circular economy. Interested in finding out more? Simply get in touch!
Contact
Dr. Christoph Soukup (author)
Steinbeis Entrepreneur
Steinbeis Consulting Center Circular Economy (Stuttgart)
Mario Buric (author)
Freelance project manager
Steinbeis Consulting Center Business Start-up (Stuttgart)
www.steinbeis-exi.de