How To Generate More Business Using Circular Economy

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2 Contents Introduction... 2 Circular business... 4 Maersk Shipping... 6 Shaw Floors... 8 Thors Design Rype Office Philips Healthcare Neptuno Pumps Vigga DIRTT SAFECHEM Troldtekt Your future core business

3 Introduction The circular economy has received much attention throughout the last few years. At Ouroboros, our ambition is to contribute to this next generation of business in such a way that future generations will look back at this era as the time when the economic paradigm was re-shaped, and the time when the circular economy became a prominent driver for business development. Although there are numerous examples of the benefit of applying a circular economy, we have seen, through years of experience implementing its principles, that many companies struggle in understanding how to adopt and convert the principles into tangible business results. Quite often, we hear things like: Circular economy principles are sound, meaningful and appealing, but I can t see how we can benefit from them. Ouroboros specific expertise is creating value by working with circular economy at company level. We call it circular business, meaning working at the business economy level as opposed to at a societal macroeconomic level in identifying benefits. In this white paper, we select and present to you 10 cases on circular business. Unlike many circular economy case studies already out there, we emphasise the business value drivers and results rather than the process. This is basically the simplest way for us to show you how you can profit more, improve your core business, reduce your costs, adapt to changes in your business environment, develop new markets and more. In other words, we show you how to generate more business using circular economy. Circular business can be a tremendous driver that makes your business fit the needs and wishes of the marketplace both now and in the future. 2

4 And it is not only one solution or one approach: Whether you want to achieve 10% increased sales prices, secure your raw material supply, define new business opportunities, create 30% price reductions in the market or gain an even stronger position with improved reputational value, we invite you to study these cases and let them inspire you. If you are curious about how your company may benefit from the circular economy, please reach out to us. We would love to support you in your next steps and in unlocking your hidden business. Camilla Haugsten Jasper Steinhausen Erik Sælen CEO & Founding Partner Ouroboros AS Business Developer & Founding Partner Ouroboros AS Circular Economy Consultant Ouroboros AS 3

5 Circular business Circular business is a strategic business approach that focuses on maximizing the value of the resources or materials a company uses from suppliers all the way to the customers. The effects of such a mind-set is plentiful and ranges from mitigating risks tied to availability and prices on raw materials, ensuring efficient use of materials and turning waste into profit, but also very importantly designing products to meet the desire of the customers creating customizable, updated and well-functioning products and solutions. Examples of circular business can be found across a broad span of sectors. There is no single solution in pursuing a circular business, and the selected cases presented here all demonstrate different value creations. We explain shortly how the case companies have gained their business value and how you can do the same in your company! All with the purpose of inspiring you. Figure : Essential circular business opportunities 4

6 Case selection by value creation The cases below are divided into two main categories: Company value directly affecting your bottom line and customer value adding value to your clients and/or improving the quality of client relations. In addition, reputational value your sustainable performance is relevant across both categories as well: Tightening your relationship with your clients will definitely improve your reputational value, as will increased profits and better positioning in the market. And across all business forces, this approach will facilitate the sense of designing your continued success in business, both now and for the future. Maersk Shipping - Increase revenue Shaw Floors - Secure material supply Thors Design - Turn waste into profit Rype Office - Create new market opportunities Philips Healthcare - Increase workforce Neptuno Pumps - Reduce price Vigga - Increase customer loyalty DIRTT - Increase product flexibility SAFECHEM Pay for use instead of product Troldtekt - Increase work productivity 5

7 Maersk Shipping Achieving 10 % higher sales prices through material recycling systems A vessel comprises roughly of 98% steel in terms of materials, and thus contains a large amount of recyclable materials. However, usually steel of different qualities are mixed together in recycling processes during decommissioning, resulting in mixed lowquality steel with a correspondingly low price. How can the quality, and thus also the price, of the steel be maintained at a higher level during decommissioning? 6

8 Maersk Line has solved this problem by implementing principles of circular business. By introducing a so-called material passport for their new Triple-E container ships, it has become possible to easily trace 95% of the materials of vessels throughout the entire lifetime, including information on how to disassemble and recycle parts upon decommissioning. The result? Maersk Line has estimated that they will achieve 10% higher sales prices for vessels because the material passport allows for recycling steels of different gradients separately, utilizing the higher quality recycled steel once it is to be decommissioned years later. How can your company increase revenue through circular business? The principles of Maersk s circular business can easily be applied to a wide range of industries and products. By identifying and making tracking possible at component level, you can maintain value far more than what is the case in today s approach. Also, by making better use of your business waste products, you may create new revenue streams or increase your assets value, while at the same time reducing your environmental footprint and improving your reputation. Reuse of waste products will not always be possible within your own company. However, by collaborating with other companies, new use for your waste may be identified. Thus, by taking ownership of the waste you create claiming waste as unused resources you have the opportunity to create new revenue streams. Source (text): ellenmacarthurfoundation.org Source (image): Maersk Line 7

9 Shaw Floors Creating a secure raw material supply from old carpets As the number of people in the world (especially in the middle class) is expected to increase significantly in the coming years, there is a growing concern that the competition for raw materials will increase, and thus also the price of raw materials. By implementing principles of circular business, with focus on creating new carpets from old, Shaw has managed to create a business which is significantly less dependent upon virgin raw materials. The basic principle for their operations is easy to understand: By designing with the end in mind, the company was able to create EcoWorx backed carpet tile, a product that can be recycled into more carpet tile at the end of its useful life on the floor of offices, schools, and shops around the world. Featuring a toll-free number on the back, EcoWorx carpet tiles can easily be returned to the company, helping Shaw create a closedloop for recovered materials. 8

10 Their circular business principles show how one out of many big companies are working to secure their material supply for the future, reducing the risk for price volatility while at the same time improving the sustainability of the business. How can your company secure raw material supply through circular business? Raw material supply will be critical in all industries in the coming years, as global demands are expected to increase. Recovering materials through local units could give your company an additional material flow, reducing your risk for price volatility. Such solutions require planning and engaging with the client to ensure the return of the products to you rather than to landfills or waste management companies. Leasing models, buy back models or other incentive models that secures access to the material after end use, could provide you with the opportunity to use these materials several times. By collecting the units, you could provide a local presence with solutions for repairing products when recycling is not necessary, and sending other materials to larger recycling units. At the same time, this approach tightens your connection with your customers, as you gain an extra contact point with each of them. Source (text and image): Shaw Floors 9

11 Thors Design Making revenue from old wharves There are massive amounts of materials considered as useless waste products around the world. What if these materials could be used in new ways to create new revenue streams for your company? Getting cheaper or free raw materials instead of paying for them, or being paid for your waste, will obviously have a positive impact on your bottom line. Thors Design has created circular business around the principle of reusing materials from docks. By turning old Danish wharves into modern design furniture, they have created value from materials which otherwise would have been considered scrap. The result is furniture with extreme qualities and patina that cannot be purchased anywhere else. Thors Design has gained a reputation as a company with reuse as a central component of their business, and designing products that are long lasting. Thors Design is now testing different options for taking even more extensive stewardship for the products they develop to ensure that their products can be recycled and used again and again. 10

12 Examples of such stewardship models can, for instance, be that the consumers pay for the use of the product rather than the product itself (typically leasing or hiring models), or models where the user is offered a pay-back option at the end of the product s lifetime. Both models will create possible new material input for the company, while simultaneously creating less waste for the environment. How can your company turn waste into profit through circular business? In this example, Thors Design has created attractive design furniture from materials which otherwise could be considered as waste materials from harbour refurbishment projects. You can also do this! First of all, consider what the core materials in your products are and where they are otherwise used or by-products. Or turn it around and think about what your waste products are. Could you use these products for something new? Could you engage with other companies and create agreements where your waste is their input? Or do any local companies create waste which you could use? There are numerous examples already: Hair waste can be used as valuable input for creating better fertilizers or even chairs (!!); ocean plastic waste can be used for making plastic bottles or carpets. It s up to your creativity! Source (text): Source (image): 11

13 Rype Office Opening up new markets through remanufacturing of office furniture With global competition at a steady rise, there is a constant race for products with low prices and high quality. But how can you provide this to customers? Rype Office demonstrates how customers with limited budgets may afford high-quality products through maintaining and harvesting the value of products after the initial use period is over. Their circular business model refurbishes and remanufactures high quality used office furniture to as-new condition (or as desired by the client). This principle enables customers who previously could not afford high quality furniture to enjoy the ergonomic, aesthetic and long lasting benefits of good office furniture without paying the list price. By offering leasing, or selling with a buy-back offer, Rype Office further offers different economic solutions to the clients while securing access to the furniture for further remanufacturing. 12

14 Beyond new market opportunities and increased profit, remanufacturing (which involves taking the longest lasting elements of an item, such as the steel frame, and rebuilding the item around them) may offer a range of other desirable benefits: new client base; improved reputation; reduced environmental impacts; local job creation; and shortened lead time compared to manufacturing from virgin materials. The image shows an Orangebox G64 chair remanufactured to the highest quality level by Rype Office. The price for this chair is 649 new, compared to the remanufactured price from Rype Office of less than 250 with a 5-year warranty (the same as is provided with a new chair). How can your company create new market opportunities through circular business? Rype Office s circular business provides customers with more price options because remanufactured as well as new solutions are offered. Through a leasing model, the customer also has the option to choose products that would otherwise require large up-front investments. The result: More people can afford products which they otherwise would not have been able to afford. The same principles can be used for almost all non-consumable products. By remanufacturing, you may lower the price of your products. And by maintaining some sort of ownership (e.g. by leasing), your business may create a new flow of material input, allowing both for creating value from the old products as well as entering new markets all while fewer resources are extracted from the environment. Source (text and image): 13

15 Philips Healthcare Growing the workforce through remanufacturing of medical equipment There are many examples of businesses having to decrease their workforce during the last few decades due to increased automation and a demand for cutting costs. Philips Healthcare has created a successful business example, which demonstrates that there may be opportunities for increasing workforces through a transition to the circular economy by providing new services such as remanufacturing. Their circular business principles are based on maintaining and harvesting value from their products after the initial use period is over through their Diamond Select program. It provides reliable, refurbished medical imaging systems at an attractive price, making it possible for their customers to afford up-to-date technology. This allows them to provide a wider variety of high-quality services to their patients, while supporting profitability 1. 14

16 Remanufacturing and refurbishing requires skilled de-installation and transport, cleaning and disinfection, testing and replacement of parts, upgrading of software as well as quality control and reinstallation of equipment 2. Thus, through their remanufacturing services, Philips has been able to create more jobs in a service area which might become more and more relevant in the future. How can your company increase the workforce through circular business? Philips Healthcare s refurbishing system provides an example of a shift from a material-intensive business to a labour-intensive service-based business, based on the principles of remanufacturing used equipment. Your company may also increase workforce and revenue streams by creating remanufactured products. The key to creating a competitive edge is access to cheap materials (e.g. through take-back solutions), well-planned return logistics as well as use of advanced repairing equipment. It is, for instance, believed by experts that development related to 3D printing may improve the feasibility of such services Image: Philips Healthcare 15

17 Neptuno Pumps 30 % price reduction for remanufactured pumps with recycled materials In many industries, equipment such as pumps and valves that operate in highly corrosive and abrasive conditions end up as scrap materials after a short time. This means that valuable materials have a significantly shorter commercial lifetime than their actual potential. By implementing a circular business model, Neptuno Pumps has shown that it is viable to renew components and extend the lifetime of such valuable materials in their work towards the mining industry in Chile. Through remanufacturing old pumps, which usually would have been classified as scrap materials, Neptuno Pumps has been able to deliver as-good-as-new pumps at a significantly lower price. The lower price creates competitive advantages and at the same time creates possibilities for entering new markets, as more customers now may be able to buy equipment they otherwise could not afford. 16

18 In a specific project, the customer saved 30% compared to the normal price for a new pump. This has been enabled by the use of recyclable materials, as well as designing equipment that is easy to take apart, thus making upgrading cheaper and easier. How can your company offer products at a reduced price through circular business? At Neptuno Pumps, the price of their products was significantly reduced by using recycled materials and reusable components. This was enabled by careful selection of the materials used and the design of the products. Similar principles can be applied in your business as well. By designing your products to allow for reuse and easy upgrading, you have the opportunity to renew the market value of a used product and capitalise on them again. The results can be lower production prices for upgraded products or increased revenues through after-sales upgrading service. Some companies use it to offer easier maintenance and thus shorter downtime on the clients production system, either as a selling point or as a service sold with their product. Source (text): Article in World Pumps, September 2015 Source (image): Neptuno Pumps 17

19 Vigga High customer loyalty through a subscription service on babies clothes Most parents want their new-born children to have non-toxic high-quality clothing. However, it can seem to be a waste of money to buy expensive baby clothing when the child is growing by the day. Why should parents buy new clothing at all when their child will outgrow the clothes in a month or two? The Danish company Vigga has implemented their circular business to give parents the opportunity to get access to organic produced, high-quality safe clothing at a fair price and with minimal effort for the parents up until their child is three years old. The result is loyal customers, steady and predictable cash flow, a platform that can be and will be utilized for further products that fulfil needs for parents and a very strong story that underpins and builds up their brand value. The principle is quite simple, and is basically a subscription service. By subscribing to the baby clothes online, the to-be parents will receive the first set of baby clothes in time before the baby arrives. As time goes by and the baby grows, new clothes will automatically be provided by mail, resulting in maximal convenience for the busy parents. 18

20 Used clothes are sent back to Vigga, where they are quality inspected and washed in a professional eco-label laundry machine, before they are sent off to the next child. When the clothes are too worn out to be used further, the materials are used for other purposes. As for user experience: The clothes are produced with high-quality materials, and without use of harmful chemicals. They are easily adjustable to fit the child. They save parents valuable time, and prices are low because the clothes can be used multiple times. How can your company increase customer loyalty through circular business? Business models where the clients pay for the use of the product (for instance leasing models or pay-per-use) may provide your clients with convenient access to high-quality products for an acceptable price. Likewise, an incentive scheme to have used products returned creates an extra contact point with the client and the opportunity to resell them products that they now prefer. These examples may give you improved knowledge about your clients preferences over time, providing the opportunity for improving your service and creating long-lasting relationships. Additionally, you get access to valuable information which may improve your products, as well as new material flows. Source (text and image): 19

21 DIRTT Matching customer desire and need to change through flexible wall system Organisations change in size and needs faster than ever. Rehabilitating offices has become part of the toolbox in vitalisation processes in organizations. And new management paradigms come and go at an ever faster pace. Despite this appetite for change, office buildings are fairly static on average. However, by providing flexible and modular inner wall solutions for the building sector, DIRTT has been able to create an example of circular business which may serve the needs of its clients even though they may change over time. This will be ever more crucial as the speed of change keeps rising and thus static solutions become less and less desirable. DIRTT is manufacturing modular walls at off-site factories. The wall components are then easily installed when they arrive at the construction site. DIRTT s modular wall solutions provide high flexibility: It is possible to completely change the layout of the interior walls if desired at a later stage. So a change in the organisation or new management paradigm can now be supported by the physical structure. 20

22 Furthermore, by designing all components using special-made software, it is possible to remake parts if necessary at a later time. And, by choosing materials consciously and designing products for disassembly, all the DIRTT components can be taken apart and different materials can be separated, which are then recycled separately at their end-of-life, making the different materials ready for new life without compromising quality. How can your company increase product flexibility through circular business? In the above example, DIRTT provides flexible and modular solutions, giving the customers a reason to choose DIRTT. These same principles may apply to all industries. By designing your products for modularity, upgradability and repairability, you may attract customers who want products that can fit their needs today as well as tomorrow. And by designing for disassembly and recycling, you will likely find that the assembly process becomes easier and faster. Source (text): Source (image): DIRTT 21

23 SAFECHEM Chemical leasing provides cost transparency and high quality results In many industries, there is a vast need for solvents in order to clean parts efficiently. The use of solvents requires careful handling, and managing the spent solvent can be an issue. But do you need to buy such solvents when you are only interested in the service they provide? By implementing a circular and function-oriented business model called COMPLEASE TM Chemical Leasing, SAFECHEM helps solvent users to achieve the outcome they need, while securing a safer handling of their chemicals and relieving them from the need to develop extensive internal competence in areas outside the core business. 22

24 Through their business model, SAFECHEM provides their customers with high-quality solvents and the necessary competence and skills to perform the cleaning process in an optimized manner. SAFECHEM helps customers to perform the solvent maintenance, and takes back used solvents in a safe handling system. The solution relieves the customer from their admin efforts and costs of buying chemicals, while at the same time offering full cost transparency. The benefits are multiple: Effective process without the need to have the competences in-house, reduced risk of health and safety issues related to cleaning with chemical solvents, and a simpler cost structure that is easier to forecast. How can your company improve bonds with customers through pay-per-use models and circular business? Chemical Leasing is a function-orientated business model that stimulates resource efficiency, continuous innovation, collaboration, and enhanced performance. Through such a business model, your company may tighten the relation to your customer, increase retention rates on sales, create multiple sales of the same product, create new flows of material input by taking back the products, while at the same time reducing the waste from your products for the benefits of customers and the environment. In the SAFECHEM example, the circular business created new opportunities for leasing expert knowledge and creating improved bonds with customers. Source (text): 23

25 Troldtekt Increasing productivity and reducing illness for the customer through material consciousness As people spend a considerable amount of time indoors at work, indoor air quality plays a significant role in their general state of health 1. Pollutants affect health and concentration in a negative way, leading to reduced work productivity and illness. In order to ensure that the indoor climate does not cause irritations or affect people s health or ability to work 2, Troldtekt has been delivering acoustic solutions with a focus on indoor climate for decades. By carefully choosing the materials used in their products, Troldtekt ensures that the health of individuals is taken into account, improving the productivity and wealth of both their own workers and their customers. Their products are created to improve health and well-being for asthma and allergy sufferers, rather than cause irritation, nausea and headaches. 24

26 By focusing on certifying their products as health promoting, allergy preventing and environmentally friendly, they have gained a reputation as a provider of building solutions with impact on the bottom line for the companies using the buildings. At the same time, it is highly sustainable solutions. Whereas the health benefits of Troldtekt s approach are obvious, it is also an important part of circular business: Their conscious choice of non-toxic, degradable materials means that when acoustic panels have reached the end of life, materials can be recycled and used in new, health-improving products, removing costs of hazardous waste handling. How can your company increase productivity for your customers through circular business? In the above example, Troldtekt is able to help customers increase productivity by carefully choosing fully safe and non-toxic recyclable materials which improve, rather than degrade, the health and environment. The same may apply to your company: If your company is producing indoor products, your customers will benefit from increased productivity or other benefits by your choice of healthy materials, assisting you in creating satisfied customers. In your own company, your employees may benefit from improved working conditions the environment may benefit from cleaner air, soil and water, while your costs related to hazardous waste will also be significantly reduced Source (image): Troldtekt (photographer Adam Mørk) 25

27 Your future core business Three major changes are happening in the world of today. Each of them is significant, but combined they are game changing. The price on raw materials is just about three times as volatile today as in the 1990s. With two billion people moving into the global middleclass in the next 10 years and the corresponding expected growth, we will experience a tremendous increase in demand for raw materials. The result will have significant financial impact for companies. Overall production costs will rise, as will risk related to security of supply. The share of people who recognize the need for changing the way we use natural resources and what we discharge to nature is rapidly increasing. Although the actual change in habitual and behavioural actions still does not suffice for a full transition, the amount of attention to the problem has almost exploded. Companies are increasingly seen as either part of the problem or part of the solution. The exponential growth in computer power that we have seen for the last few decades continues. As more and more areas become digitalised, they start to follow the same potent development trajectory pushing the speed of change in the marketplace and society. The implication is that the average commercial lifetime of a product becomes shorter, leaving less time to earn money on a given product. This calls for a new game plan a new way of understanding, developing and running a business and its relation to value chains and the marketplace. The circular business approach is such a new alternative game plan. As you have just seen over the previous pages, companies combat, work with and take advantage of these change-defining market forces in creating circular business and so can you! 26

28 This paper uses case presentations to showcase how you can profit more, improve your core business, reduce your costs, adapt to changes in your business environment, develop new markets and more. In other words, how you can generate more business by applying the principles of circular economy. Ouroboros solely works for this purpose in contributing to new business models, product redesign and new partnerships. We call it circular business, working within the business economy at the company level. Our clients become better equipped for the reality of tomorrow and become frontrunners, first movers, or first followers in their respective markets. We make it a virtue to anchor the learning and skills development along with the solutions within the companies we work. We get you beyond your goals and help you unlock your hidden business. Reach out to us if you would like to explore your opportunities 27