Circular Advantage: 4 key values 1 silver bullet...and Minority report. Tomas Haglund Flemström Copenhagen

Transcription

1 Circular Advantage: 4 key values 1 silver bullet...and Minority report Tomas Haglund Flemström Copenhagen

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3 Material use per capita Growth vs. resource use GDP per capita

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10 Key take aways Focus on customer value & business model (4 values to remember 1 silver bullet) Be on top of technology change (Minority report not far away) Manage the S-curve (Building positive momentum)

11 Go circular!!!

12 Appendix I Describing pictures

13 Appendix Content Research background Circular Advantage & the 5 business models Key takeaways Copyright 2014 Accenture All rights reserved. 13

14 Resource use In today s economy growth and prosperity is tightly linked to natural resource use and competition for supplies is growing Log plot of Resource use and Economic development (2010, 166 countries) 1 Tons/ Cap billion additional consumers expected to join the middle class by 2030 (+100% vs. 2013) Chile Australia Sweden China Brazil Germany 10 Niger India Colombia Bangladesh ,000 Economic development GDP/Cap 10, ,000 1 SERI and Dittrich, M. (2014). Global Material Flow Database, World Bank (2014) GDP per capita in current US$ (outliers Mongolia & Bahamas removed) 2 OECD Development Centre, Working Paper No. 285, The Emerging Middle Class in Developing Copyright Countries 2014 Accenture All rights reserved. 14

15 Due to intensified demand, in 2000 the era of cheap and plentiful resources with stable falling prices came to an end Commodity price & GDP index Index (2010=100) For every 1% growth in GDP commodity price index fell 0.5% For every 1% growth in GDP commodity price index rose 1,9% Energy Raw Materials Metals & Minerals Commodity index Food Fertilizers Precious Metals GDP index World Bank (2014), Accenture analysis Copyright 2014 Accenture All rights reserved. 15

16 Growth in cost of extracting different resources will impact business more than physical supply limitations... Years left for selected major commodities Years left of... Reserves Sub-economic reserves Bauxite Rising energy & economic cost of extraction Black Coal Oil Iron ore Copper Lead Nickel Zinc Copyright 2014 Accenture All rights reserved. Data: Mudd (2010), Resources Policy, Volume 35, Issue 2, June 2010, Pages

17 ...but the likely strongest driver of disruption will be commodity price driven technological innovation Example disruption: Urban mining Enabled by technologies like M2M sensors to automatically identify and sort waste streams, RFID tags and resource passports to track and trace product use and connected reverse vending machines to link up consumers Copyright 2014 Accenture All rights reserved. Source: Boliden, Future Exploration Network 17

18 The room for improvement is huge with 60-90% of material value currently lost and in scope for circular recovery Inefficiency in global value chains the Circular Economy opportunity Virgin and scrap material value ($ per ton) Virgin (new material) Scrap (material in waste stream) Plastic (PET) Textiles (Polyester) % % 60-90% of embedded resource value is lost in global value chains today... Steel Wood % % to be recovered by leveraging Circular Economy business principles Sources for cost data: Accenture analysis based on Steel Benchmarker, WRAP, Copyright 2014 Accenture All rights reserved. 18 Yarns and Fibres, Skogsstyrelsen, Let s recycle

19 By 2030 the Circular Economy can unlock $4tn value opportunity from decoupling growth and resource use Resource supply / demand imbalance and value potential USD $ trillion Pessemistic scenario Expected 35 Optimistic Circular Economy value opportunity Rising costs for material, energy, land, water Volatility in commodity markets Economic and social risks of runaway commodity prices Key Q: What can be done and what solutions are scalable? Copyright 2014 Accenture All rights reserved. Source: Accenture analysis 19

20 Agenda Content Research background Circular Advantage & the 5 business models Key takeaways Copyright 2014 Accenture All rights reserved. 20

21 To find what solutions are scalable Accenture & WEF YGL studied pioneering companies over 18 months Key Q: What can be done and what solutions are scalable? Method Case selection 1 Approach Biggest global analysis to date of Circular Economy business principles and success criteria Academic research combined with global case analysis Case distribution over geographies and company sizes 2 Criteria Accenture and WEF YGL taskforce Companies leveraging the 4 Circular Economy value levers Focus on innovative cases using new technology North America: 78 Latin America: 47 Europe: 94 Middle East & Africa: 41 Asia Pacific: 62 Proven growth at speed and scale 3 Selection 120 global cases ranging from very recent start-ups to some of the largest multinationals in the world Companies with proven results and experiences to mine for key success factors Small (1-10 employees) 15% Large (250+) 56% 29% Medium (11-250) Copyright 2014 Accenture All rights reserved. 21

22 5 business models, 5 capability shifts and 10 technologies were identified as sources of Circular Advantage Example companies studied 50 executive interviews 120 case studies 5 business models 5 capability shifts 10 enabling technologies Copyright 2014 Accenture All rights reserved. 22

23 At core of the solution lies the move from linear to circular value chains to protect and recover resource value Linear vs. circular value chains From linear to circular Make Remanufacture Resell Reuse Take Linear Value Chain Waste Re-process Circular Value Loop Repurpose Take back Low return & recycling Waste & externalities Selling volume Manage resources in production Growth tied to resource use Closed & open loops Zero waste & value recapture Selling performance Manage resources in markets Growth decoupled from resource use Copyright 2014 Accenture All rights reserved.

24 In our research we found five circular economy business models that have proven resource light growth is possible Business models of the circular economy Circular Supplies: Provide renewable energy, bio based- or fully recyclable input material to replace single-lifecycle inputs Resource Recovery: Recover useful resources / energy out of disposed products or by-products Product Life Extension: Extend working lifecycle of products and components by repairing, upgrading and reselling Sharing Platforms: Enable increased utilisation rate of products by making possible shared use / access / ownership Product as a Service: Offer product access and retain ownership to internalise benefits of circular resource productivity Copyright 2014 Accenture All rights reserved. Source: Circular Economy book project

25 Success stories are many and spread across innovative disrupters and established industry leaders Circular economy success cases Examples Impact Circular Supplies Sustainable biofuels and bio-based materials Project Liberty plant opened with $75m annual production value Resource Recovery Landfill-free manufacturing facilities $1bn in annual revenue from byproduct recycling and reuse Product Life Extension Remanufacturing of industrial equipment $3bn turnover 1, employees, 50% lower price, 60% less CO 2 Sharing Platforms Product as a Service Leisure rental of unused properties Lighting as a Service pay for lux Pay for power, not panels home energy systems $250m rev., 100% growth (2013) 13k lightings upgraded at 0 cost in WDC, $2m per year value split $6bn market capitalisation Copyright 2014 Accenture All rights reserved. Source: Circular Economy book project 1 Estimated from company data 25

26 Three main types of technologies was found to support innovation and change along the circular value chain Circular economy enabling technologies Life & Material sciences Modular design technology 380m supporters for $50 modular handset to be released in 2015 Cloud Digital Enabling entirely new ways to access and understand product use-phase and aid customers in use efficiency Advanced recycling tech $300m refurbished equipment take back and remarketing Trace and return systems $15bn taxi company in 45 countries with zero cars Launching a share anything platform starting with cars 3D Printing Analytics Mobile Social M2M Communication Hybrid Enabling moving physical objects back and forth from value chains with digital services to drive down cost Engineering Enabling production and supply of new types of resources as well as new product designs to use them Source: Circular Economy book project Copyright 2014 Accenture All rights reserved. 26

27 Five major shifts in business capabilities are critical to deliver circular economy business models successfully Circular economy capability shifts 2. Innovation & product development From designing for single use to designing for many life cycles and users 5. Return chains From compliance to opportunity driven take-back 1. Strategy From focus only on core business to manage complex & collaborative networks 3. Sourcing and manufacturing From homogenous supply chain to heterogeneous resource flow innovation and cascading 4. Sales & product use From never seeing your product again to customer and asset life cycle management Source: Circular Economy book project Copyright 2014 Accenture All rights reserved. 27

28 Agenda Content Research background Circular Advantage & the 5 business models Key takeaways Copyright 2014 Accenture All rights reserved. 28

29 There are five key takeaways related to how business should drive their change agenda Key takeaways Driving forces Driving change Key driver: Sustainability and resource productivity 1 2 Zoom in on opportunity Identify core user value Understand exposure Identify inefficiencies Map drivers per market Multi-lifecycle customer view Function not product New biz models to decouple Simultaneous driver: Increasing competition and customer centricity 3 Secure key technology Understand trends Identify power positions Secure control Key enabler: Business models and technologies 4 5 Build momentum Build capabilities together Balance quick wins and long term position Manage momentum Cross-functional pilots Find external enablers & ecosystems Source: Circular Economy book project Copyright 2014 Accenture All rights reserved. 29

30 Circular Advantage Point of view Thought Leadership: Circular Advantage: Innovative Business Models and Technologies to Create Value without Limits to Growth. Copyright 2014 Accenture All rights reserved. 30