Circular Economy

Circular economy to become $26bn industry in Australia by 2025: World Economic Forum

Throwaways are out: Advocates for the "circular economy" say the future of economic growth is in recycling, re-using and re-purposing goods and resources.

By Mark White

A Danish company rents baby clothes for the first year of their life. Google's Project Ara is a modular smartphone, with features that can be upgraded separately. A trial of 99 per cent recycled asphalt is underway in Boroondara, Victoria.

These are all examples of the circular economy, an approach to business which could be vital for our future prosperity.

The idea of a circular model is once it's out of the ground it keeps circulating. 

James Moody, entrepreneur.

Anyone who lived through the Depression will recognise the ideas behind it: recycling, re-using and re-purposing everything possible. It's being revived in a world that will see an extra three billion middle-class consumers by 2050 while resources diminish and the G7 begins the transition to a no-carbon economy.

The difference from the 1930s is that economic growth can still happen despite fewer resources being consumed, with innovation and technology squaring the circle. The aim is to produce "cradle to cradle" goods designed so they can have a second life – and maybe even a third and fourth. Waste from one manufacturing process could be raw material for another, for example.

"We've always had a very linear model," says entrepreneur James Moody, a panellist on the ABC's The New Inventors show. "We dig it out of the ground, turn it into something, consume it and stick it back in the ground [as landfill]. The idea of a circular model is once it's out of the ground it keeps circulating."

The World Economic Forum estimates the circular economy could be worth $1 trillion worldwide and $26 billion in Australia by 2025. Doing more with less would bring more wealth and jobs, less landfill, resource depletion and environmental damage. Can we afford not to join the virtuous circle?

UTS's Institute for Sustainable Futures (ISF) co-hosted the World Resources Forum Asia-Pacific's recent 'Wealth from Waste' event, and has issued an action agenda. "We're careful not to brand it under a green umbrella," says the ISF's Damien Giurco. "We need to engage business to say this is an economic opportunity … sometimes business thinks environment equals cost and regulation, but a lot of the rest of the world's just getting on with making more money, which is a win win." Consulting firm Accenture has identified five business models driving the circular economy: circular supplies (including renewable energy); resource recovery; extending product life; "sharing" platforms; and offering products as a service.

But what would a circular economy look like? Giurco offers a cafe owner taking empty milk cartons – a resource – over the road to be fed into a 3D printer to produce bespoke tea cups they can sell the next day. Carpet company Desso and electronics giant Philips are releasing a light-emitting carpet, combining signage and furnishings. Aussie firm Interface uses discarded fishing line from the Phillippines for its Net Effect carpet range. H&M, Nike and Puma are using plastics and polyesters for clothing lines.

Candice Quartermain, the founder of business network Circular Economy Australia, sees it enabling access to goods which wouldn't otherwise be possible – such as taking a cheaper Uber instead of a registered taxi. The outcomes will "allow us to be, on average, wealthier or more diverse in what we can earn and how we can work".

Moody, whose company Sendle uses spare courier capacity to deliver parcels door-to-door across Australia as if they were catching buses across a network, says, "We'll have a lot better services, things will get cheaper… even better, more affordable. You'll have access to a car when you need it because you're sharing it with neighbours." One idea is to turn goods into services. "I don't need to own an air-conditioner, I just want hot or cold air," he says. Instead of buying a washing machine, you could lease it – meaning the company would have an incentive to build something which lasted more than a few years before breaking down.

Moody even thinks there doesn't need a big cultural shift for people to hire instead of buy cars. But new research from the UK's Nottingham Trent University suggests people are culturally programmed to own goods. "The problem at the moment is that the whole renting market is about appealing to a very narrow segment – people who can't afford to buy, who aren't credit worthy, paying ridiculous prices," co-researcher Professor Tim Cooper told The Independent. "No one in their right mind will rent unless they have to. So the market's got to be transformed [from businesses relying on selling replacements to make money]".

Rob Pascoe is MD of Closed Loop Australia, which advises companies like Qantas and KFC on reducing waste. "To be sustainable you must make money," he says. "The reason we can do it … is that waste is a resource. Waste going to landfill is a failure of a system." He says a circular approach is a "fundamentally different way of thinking" — designing what the waste will consist of and then taking it back, rather than just accepting it will happen. Pascoe likens it to his gran washing out the milk bottles – now they cut the cartons into little bits, wash them and remould them, but the concept's the same.

There is machinery in five of the world's top 20 restaurants, including the best, Noma, in Copenhagen, which turn organic waste into fertiliser. "You can improve revenue streams just as you can improve the cost base by not wasting resources." An EU report estimates every 1 per cent increase in resource efficiency in the continent is worth up to $33bn and can create 200,000 jobs. Dismantling rubbish is already bringing dividends for social enterprises such as Mission Australia's (MA) Soft Landing NSW mattress recycling program.

It began in 2009, when people started dumping unwanted mattresses in the MA clothing bins following the introduction of a dump gate fee. They saw a business opportunity in the steel, and set up a recycling plant the year after with a grant.

Since then 300 people have found full-time work extracting the steel (which is pressed and sold on), timber (helps build toys), foam (carpet underlay) and textile (used for their punching bags business). They returned $19 for each initial seed funding dollar, and report a $3 social return on each dollar invested – measured in terms of creating jobs for their workers, many of whom face barriers to getting work such as criminal records or mental health issues.

"The greatest thing about the program is you can't pull a mattress apart the wrong way," says MA's Bill Dibley. "You can do it the fast way or the hard way but you'll pull it apart. Most of the people we deal with have had negative reinforcement most of their life, this straightaway gave positive reinforcement because they achieved their goal."

John Weate, founder of Tuncurry's Resource Recycling, turned one job on a $50,000 contract into 30 jobs for Aboriginal men and $2m turnover per year. "Our focus is helping them out of prison so they don't return but get jobs and skills," he says. Workers sort and recover materials from waste streams in the shire, and the model has been replicated in Gladstone, Queensland, with 22 jobs.

On the NSW south coast their partners Green Connect have given 112 refugees their first chance in the Australian labour market in less than a year. They pick up bulk waste from the shire twice a year: 250 tonnes of metal, worth $26,000, plus repurposing and reselling goods, worth $120,000 a year, and another $60,000 on discarded building materials. Imagine scaling that up across the country.

Monash University's Dr Ruth Lane is studying the logistics of collecting e-waste. Processing is only profitable for big business, but not for households. There's more gold in a kilogram of mobile phones than gold-containing ore, but the issue is how to get those phones to processing efficiently – as well as extracting the value here, and not sending them overseas.

She says, "There may be some new technologies on the horizon that will allow us to a certain level of reprocessing at a smaller scale and take a plant to where the source is … there's a lot of possibilities on the horizon."

The CSIRO's Dr Heinz Schandl says his data shows that Australia has been focused on short-term gains from the "extractive economy" instead of planning for the opportunities offered by the circular economy. Manufacturing would need to be "rebuilt in the domains of renewable energy, green products and eco-efficient production", with a "large-scale reskilling" of many workers resulting in many new jobs opening up. "To achieve a circular economy will require leadership that is focused on the long-term which often missing," he says.

There are other bumps in the road. Uber uses cars more efficiently and is cheaper than registered taxis, but pushes the cost of business on to the drivers. ISF's action agenda calls for renewable energy to help with the circular economy's energy inputs, but it seems an uphill battle given Prime Minister Tony Abbott's notorious disdain for the sector and love of coal.

"This is a $26bn opportunity by 2025," adds Quartermain. "If you're not getting your ducks in a row right now to maximise on that opportunity, you're going to miss out."

BIG NUMBERS

US$1 trillion – WEF estimate of global material cost savings of a circular economy by 2025

$26 billon – local cost savings of the same by 2025 $70bn – material value of global e-waste in 2014

$9.3 billion – additional value to Australian business of using a collaborative economy

$6 billion – metal contained in waste streams in Australia per year, equivalent to half of all metal consumed

Reference: http://www.smh.com.au/national/circular-economy-to-become-26bn-industry-in-australia-by-2025-world-economic-forum-20150704-gi19n3.html

Action agenda for a circular economy released at World Resources Forum

A World Resources Forum keynote panel (L-R): (l to r): Dr Alex Wonhas (CSIRO), Prof Masamichi Yoshimura (Toyota Technological Institute), Janet Salem (UNEP), Prof Stuart White (ISF).

A World Resources Forum keynote panel (L-R): (l to r): Dr Alex Wonhas (CSIRO), Prof Masamichi Yoshimura (Toyota Technological Institute), Janet Salem (UNEP), Prof Stuart White (ISF).

The value of a circular economy to Australia could be $26 billion a year by 2025, according to an action agenda released at the World Resources Forum Asia Pacific being held this week in Sydney.

The agenda, released by the Institute for Sustainable Futures at the University of Technology Sydney, has been designed to bring focus to the significance of resource productivity and innovation for Australia’s future.

“At the core of this alternative economic model is re-thinking design to maintain the value (economic and functional) of resources (energy, water, materials, knowledge) in the economy. This is achieved by re-energising and re-imagining traditional practices of reuse, repair, remanufacture and recycling,” the authors state.

Rather than simply focusing on cycling materials, the paper refers to a circular economy as “a broad suite of strategies that includes technology innovation as well as business model innovation, new design thinking and novel modes of consumption”.

“Our ambition with this call to action is to seed new conversations and collaborations – between business, academia, government and the community – needed to drive a new wave of responsible prosperity for Australia in the Asian Century,” the action agenda states.

“By bringing together business, research, technology and policy, we can deliver the skills, products and services to sustain prosperity at home and in our region.”

Four “opportunities for Australia’s future” were presented:

Replenish stocks and rethink value

Australia needs to build a productive economy that preserves and replenishes stocks of natural capital rather than degrading them, and should establish a national system of environmental and waste accounts, recognising both are valuable resources. By adopting the “take-make-recreate” approach of the circular economy Australia can go from being a global leader in primary resource production to being a leader in generating value through resource productivity.

Design for renewable energy and resource cycles

Australia has an opportunity to couple renewable energy to value-add in other sectors, including advanced manufacturing, mining and minerals processing and future transport – boosting resource productivity.

Harness disruptive innovation for production and consumption 2.0

New materials and digital technologies, advanced and additive manufacturing, and open innovation are transforming conventional business practices. Australian firms can influence the design of products for easy remanufacturing and recycling, whether made locally and overseas.

Leverage know-how into new networks and markets

Australia starts from a vast base of knowledge, skills, and technological and technical know-how, that can be aligned to provide a competitive advantage for capturing new markets and growing strategic networks. Australia is a leading provider of advanced services to mining, with more than half of the software used globally for operating mines developed in Australia. This know-how can be applied to access new markets in waste and unconventional resources.

Recommendations for federal, state and local government include:

  • Embed resource productivity in a coordinated policy agenda – targeted, coordinated and consistent policies across federal, state and local governments on resources and energy productivity integrated with national waste management policy is needed, including levies on resource extraction and waste disposal, appropriate targets for recycling and resource productivity, and ambitious targets for renewable energy
  • Promote a market for secondary resources and products – public procurement policies such as the NSW Government Resource Efficiency Policy have significant potential to promote the purchase of goods made with secondary inputs and to de-risk investment in new resource management infrastructure. Expanding the significant steps towards supporting the return phase of products at end-of-life should be a priority, such as via product stewardship regulations and container deposit legislation.
  • Create an enabling environment for technology and business – governments can play an important role in creating the optimal conditions for innovation in technology and business by de-risking investment in R&D and new infrastructure. Key to this is encouraging industry-university collaboration for innovation through tax incentives that foster private investment in R&D. In addition to support for R&D, governments can enable deployment towards commercialisation, such as demonstrated by international policy measures such as UK’s Catapult Initiative.

Opportunities for business include:

  • Design-led system innovation – significant opportunities for energy and resource efficiency are being seized through design-led innovation from IT- enabled demand management systems to “virtualisation”.
  • New business models – New business models for the circular world allow businesses to diversify their revenue streams, engage with new markets, and de-risk in light of resource constraints. New value is being created through five archetypal new business models:
  • Substitute with renewable inputs:
    • Maximise material and energy efficiency
    • Create wealth from wastes
    • Adopt a stewardship model
    • Promote access over ownership
  • Encourage sufficiency and new modes of consumption – incentivising responsible use of products and services, designing for long-life, providing warranties for secondary products and offering virtual over physical upgrades
  • Collaboration for commercialisation – new strategic sector-wide partnerships can promote circular outcomes, as can industry-university partnerships

By Cameron Jewell