By allowing its customers to upgrade early, Vodafone is satisfying demand among mobile phone consumers for the very latest devices. Looked at another way, however, the company is now leasing rather than selling handsets, giving it a means of retrieving and recycling equipment.
As the rising cost of materials, as well as legislation such as Europe’s Waste Electrical and Electronic Equipment (WEEE) directive, increase the pressure to return materials to the industrial supply chain, the idea of a circular economy is gaining momentum.
But some argue that, if the concept is to take hold on a massive scale, radical shifts in mindset will be needed and companies must learn to work more closely with each other.
Certain models provide easy wins for companies and consumers. For Vodafone customers on a 24-month plan, the new Red Hot programme gives them access to the latest devices by allowing them to upgrade 12 months early.
At the other end of the chain, companies adopting this type of model – another is O2 Lease, a smartphone leasing service – can sell their phones into secondary markets or to recycling companies that extract the valuable materials from them for reuse.
What is interesting about such business models, however, is that companies are not necessarily promoting the idea of green or sustainable products. Rather, the appeal for mobile phone consumers lies in the ability to get hold of the latest model as soon as it comes out.
“They don’t tell you you’re leasing it; they tell you you’ll get access to the best performance and because of the business model, they can give you a better deal,” says Jamie Butterworth, chief executive of the Ellen MacArthur Foundation, which is working with companies such as Cisco, Philips, Renault and Kingfisher to accelerate the transition to the circular economy.
Often opportunities are missed because companies are unaware that other businesses could find uses for their waste
Of course, in some ways the idea of the circular economy is nothing new. The cradle-to-cradle philosophy of production and manufacturing pioneered by William McDonough and his consultancy, MBDC, has been around for more than a decade.
The idea of taking a circular, rather than a linear, approach to industrial production, also referred to as closed loop manufacturing, has long been embraced by companies such as Desso and Interface. Both flooring companies have developed innovative recycling technologies.
For Umicore, the Belgium-based materials technology group, the shift to the re-use model started in the 1990s, when the company transformed its business by exiting its traditional mining operations to become a specialty metals refining, recycling and recovery business.
Developing advanced recycling technologies was part of this. “And metals can be recycled infinitely without losing any of their physical chemical properties,” explains Marc Grynberg, the company’s chief executive.
Umicore can retrieve precious metals from everything from mining and industrial waste to the circuit boards from old computers and mobile phones.
Its transformation was prompted by the need to address the negative environmental impact associated with mining and smelting. “We started with a problem to fix,” says Mr Grynberg. “But as we moved in this direction, we found there were opportunities that others could not seize.”
Often these opportunities are missed because companies are unaware that other businesses could find uses for their waste.
It was for this reason that Peter Laybourn founded International Synergies. Its National Industrial Symbiosis Programme (NISP) uses resource matching workshops and other means of sharing knowledge to help companies explore whether their energy and by-products can be turned into valuable resources that can be sold to other companies.
In the UK, for example, NISP helped Denso Manufacturing, which makes air conditioning units, engine cooling systems and automotive components, find a way to remove the moisture from the filter cake produced in its effluent treatment plants so that it could be used by other companies.
When crushed, the cake becomes an active agent in the absorption of oil and solvent. This agent can then become a fuel source and the residual ash can be used to improve the quality of soil. Meanwhile, Denso is saving £30,000 a year.
Intermediaries such as NISP play a critical part in the circular economy, argues Mr Laybourn, by filling information gaps and acting as a matchmaker for companies. “The key success factors are bringing people from different sectors together face-to-face and having good, clean, accurate data,” he says.
Mr Grynberg believes companies must start thinking about resource management in a different way. “You need to move from seeing sustainability as a set of additional constraints, like having to reduce your CO2 footprint or water use, to detecting new opportunities if you work differently,” he says.
As raw materials continue to rise in price, these opportunities look increasingly compelling. “What we’ve seen in the past ten years is a significant increase in the price of energy, metals, and agricultural and non-agricultural commodities,” says Mr Butterworth of the Ellen MacArthur Foundation. “And that’s really beginning to drive some action.”
This is why the foundation has done research to quantify the financial benefits of the approach. It reckons that, if companies work together to build circular supply chains which dramatically increase recycling and re-use rates, $1 trillion a year could be added to the global economy by 2025. “Putting a figure on the size of the prize gains a lot of interest,” says Mr Butterworth.
