Episode 22: Circular Economy with Jennifer Gerholdt (U.S. Chamber of Commerce Foundation) and Angela Nahikian (Steelcase)

Learn how more businesses are going green here!

Episode Intro Notes

Outline

• What is the circular economy?

• Facts about how our economy currently operates

• Why would companies want to transition to the circular economy?

• How could a company make the transition to a circular economy?

• Examples of the circular economy

• Jennifer Gerholdt and the U.S. Chamber of Commerce Foundation

• Angela Nahikin of Steelcase

What is the circular economy?

• The circular economy is about designing out waste. A circular economy is one that tries to use as few resources as possible when initially making a product, keeps in circulation as long as possible the resources that are used, and then recover and reuse materials at the end of a product’s useful life. In short, the goal is to have as closed loop a system as possible.

• As performance economy thinker Walter Stahel puts it, the “goods of today become the resources of tomorrow, at yesterday’s prices.”

• This contrasts with the linear economy (aka the take-make-dispose economy). This is where resources go from manufacturer to retailer to consumer to the landfill. In this kind of economy, goods are manufactured with planned obsolescence, which means goods are designed to become outdated so that the consumer goes and buys the new model. Planned obsolescence leads to massive amounts of waste.

• One report used the “take-make-take-make-take-make” description for the circular economy.

Facts about how our economy currently operates

We currently follow the “take-make-dispose” model, which refers to the way we source, use, and discard our products. Think about the clothing example that we cited in our sustainable apparel episode, where we discussed the surprising amount of clothes that ultimately end up in landfills. We first “took” the raw materials from the ground, “made” them into (hopefully fashionable) clothes, and once we were done with them, we tossed them in the trash to be permanently relocated to a landfill. It’s a linear system that has a clear-cut endpoint with no reuse involved.

Global business has a key role to play in moving from an economy based upon a ‘take­ make­ dispose’ model to one based on a restorative and regenerative system. The linear model is reaching its physical limits: Recent data shows that in 2015, global demand for resources was equivalent to 1.5 times what earth can support in one year. In 2010, 65 billion tons of raw materials entered the economy. This is expected to grow to 82 billion tons in 2020. Simply put, this kind of trajectory is not sustainable, which… is why we’re here Scott, right?

Why would companies want to transition to the circular economy?

First reason: we’re going to need to make products for a lot more people at the same time inputs are becoming more scarce and costly. We saw commodity prices overall rose by almost 150 percent from 2002 to 2010, erasing the real price declines of the last 100 years, and commodity prices will likely rise even more in the future if we keep extracting resources at the current rate. What kind of population growth are we talking? Three billion more middle class consumers by 2030. This translates to needing 50% more food, 45% more energy, and 30% more water to ensure the global population in 2030 has access to basic necessities. The circular economy provides a way to meet this additional demand with less resources.

Second reason: this is a major business opportunity. A shift toward the circular economy could generate, by 2025, an estimated $1 trillion annually in economic value, create more than 100,000 new jobs, and prevent 100 million tons of waste within the next five years, while restoring the natural capital and ecosystem services that are the foundation of healthy societies and economies globally. These numbers were generated by the major consulting company McKinsey and the Ellen MacArthur Foundation, which is a major player in the circular economy world as it was established in 2010 to accelerate the transition to a circular economy.

Third reason: A transition to a circular economy could improve relationships with consumers. For one, consumers get a better product and will likely be more satisfied since it lasts longer. Also, since often times the company comes back in at the end of the product’s lifecycle, that increases interaction with the consumer.

So how could a company make the transition to a circular economy?

The major consulting firm Accenture has identified five circular business models that companies can leverage—singly or in combination—to use resources more efficiently, resulting in lower costs, more revenue, and enhanced customer value. Here are the five models:

1. Circular supply chain. Replace scarce resources with fully renewable, recyclable, or biodegradable resource inputs.

2. Recovery and recycling. Recover and reuse resources at the end of a product’s useful life. An example here would be “cradle-to-cradle” designs.

3. Product life-extension. Extending the lifecycle of products via remanufacturing, repairing, upgrading, or remarketing.

4. Sharing platform. Share products and assets that have a low ownership or utilization rate. There’s lots of opportunity with this model considering in developed countries, cars are only used 5 to 10% of the time and 80% of goods stored in a typical home are only used once a month. Uber and AirBnB are examples of companies that use this model.

5. Product as a service. Customers use products through a lease or pay-for-use arrangement versus the conventional buy-to-own approach.

Examples of the circular economy

• Ara, the modular phone from Google. It has the shape of a smartphone but is made up of separate modules that can be swapped out as necessary when upgraded technology comes out. That way you can upgrade one part without getting rid of the whole phone. Google it. It’s cool! (Sadly, this project was ended by Google in September of 2016)

• Omni United, a tire company, has partnered with Timberland to design its tires in such a way that allows it to be recycled into Timberland’s footwear outsoles. Does that mean you can take them for a run and technically burn rubber?

• Southwest Airlines partners with Looptworks to repurpose its used seat leather into LUV Seat weekender duffle bags, shoes, soccer balls, thereby saving over 70% of CO2 emissions.

Jennifer Gerholdt and the US Chamber of Commerce Foundation

Jennifer has a master of science in environmental science and policy from Johns Hopkins. She has previously worked with World Wildlife Fund’s Global Forest and Trade Network engaging global companies on responsible wood and paper sourcing issues, and she has also worked as Senior Manager of Conservation International’s Business & Sustainability Council (BSC), a forum for influential companies that are committed to business and environmental leadership. Today, she is Senior Director of Sustainability and Circular Economy Programs at the U.S. Chamber of Commerce Foundation Corporate Citizenship Center. In this role, she directs high quality programming such as trainings, research, and roundtables for business leaders to help them maximize their positive contributions to society’s challenges.

The U.S. Chamber of Commerce Foundation is the non-profit arm of the U.S. Chamber of Commerce, which represents the interests of more than three million businesses in the United States.

Angela Nahikian and Steelcase

Angela Nahikian is the director of global sustainability at Steelcase, which is a company that provides services in three core areas: interior architecture, furniture, and technology. It’s a global company with $3.1 billion in revenue just in fiscal year 2016. Angela has been with Steelcase since 1991 in a variety of roles including product development, marketing, and now sustainability.