From Line to Circle: The Practicalities

Making the transition from line to circle is a daunting task, but the elephant does not need to be eaten in one bite. The good news is that the past decade offered ample opportunities for experimentation, and thousands of companies went through a trial-and-error process to figure out how to make it happen. Three simple and well-known options are available for consideration:

• Reuse

• Refurbish

• Recycle

Reuse has been around for a long time. The key to reusing your waste with a real financial bang is to explore opportunities beyond the obvious. Collaborative consumption tales of FLOOW2, Uber, and Airbnb are examples of such creative sharing, but there is another way of looking it. A recent McKinsey & Company report, for example, suggests betting on the power of “cascaded use”—whereby reuse is spread across many different industries in the value chain, such as “when cotton clothing is reused first as second-hand apparel, then crosses to the furniture industry as fiber-fill in upholstery, and the fiber-fill is later reused in stone wool insulation for construction—in each case substituting for an inflow of virgin materials into the economy—before the cotton fibers are safely returned to the biosphere.”

Another way of taking the reuse idea to the next level is through what is known as the model of industrial symbiosis, in which byproducts of one industrial process can become a valuable raw material for another. In manufacturing, for example, steam produced in one factory can be sold to another plant nearby. The best-known example of industrial symbiosis is located in Kalundborg, Denmark, where seven companies reuse each other’s by-products or residuals from production on a commercial basis, including energy cooperation, water cooperation, and by-product cooperation. Here is one example: More than 98 percent of the sulfur in the flue gas from the Asnæs Power Station is removed before it leaves the plant, and then it gets reused by the plasterboard manufacturer Gyproc as a substitute for imported gypsum. The symbiosis reduced CO₂ emissions by 265,000 tons annually, which would be equivalent to annual emissions from electricity use of about 80,000 single-family houses. The symbiosis reduces water use by 30 percent, while 100,000 tons of gypsum are salvaged from the flue gas desulphurization each year.

But it is the service industry where the innovation has boomed recently. (This one is for all of you working in services and havingtrouble discovering your Overfished Ocean Strategy!) And one service industry powers up all the others: IT. “Cloud computing is hot, literally. Electricity consumed by computers and other IT equipment has been skyrocketing in recent years, and has become a substantial part of the global energy market. In 2006, the IT industry used 61 billion kWh electricity (or 3% of total energy consumption in the United States), and is the fastest growing industrial sector”—that was a starting point for a group of Microsoft researchers backed by the Computer Science Department of the University of Virginia. The remarkable thing is that all the millions spent on electricity used to power up data servers gets converted into heat—so IT professionals have to spend millions on electricity to power up the air conditioning systems needed to cool them off! That is one wasteful process. The solution to the growing resource trouble? Use the data servers as furnaces to heat homes.

Physically, a computer server is a metal box that converts electricity into heat. The temperature of the exhaust air (usually around 40°– 50°C) is too low to regenerate electricity efficiently, but is perfect for heating purposes, including home/building space heating, clothes dryers, water heaters, and agriculture. We propose to replace electric resistive heating elements with silicon heating elements, thereby reducing the societal energy footprint by using electricity for heating to also perform computation…. Home heating alone constitutes about 6% of the US energy usage. By piggy-backing on only half of this energy, the IT industry could double in size without increasing its carbon footprint or its load on the power grid and generation systems.

While Microsoft’s efforts are still in the research stage, the direction of their thinking is groundbreaking, perhaps even disorienting. The invitation to all of us is loud and clear: it’s time to take reuse to another level!

Refurbishing (replacing one or a few parts of a used or broken product) and remanufacturing (completely overhauling the used product, restoring it to a new condition) offer another opportunity for value creation—by restoring the product to nearly its original state. The key to refurbishing and remanufacturing success is finding a cost-effective and consumer-friendly process for collecting the product you wish to work with. GameStop collects its wide range of electronics to be refurbished at a handful of collection centers, but its own retail chain makes this easy. Shaw provides a toll-free number for customers to call, and they pick up anything more than 500 yards of carpet. TerraCycle, the worm-poop fertilizer company we visited in chapter 1, has come up with an even more innovative collection system, as it creates a significant value for the collectors well beyond a traditional financial return.

The company uses soda bottles, juice pouches, and hundreds of other nonrecyclable or hard-to-recycle waste items and turns them into backpacks, picture frames, clipboards, and a wide range of other products that are sold at Walmart, Target, and many other outlets. To collect the magnificent diversity of raw material, TerraCycle created a unique fundraising opportunity, whereby schools, churches, and other organizations earn money for valuable social causes, all while keeping tons of waste out of the landfill. As of mid-2013, more than 36,041,000 people had collected more than 2,508,577,000 units of waste (yes, that is in billions!), generating more than $5,685,000 for charitable causes.

HP, which transformed refurbishing into a wide-ranging global offering called Renew that provides “nearly twice the hardware for the price,” uses a trade-in program for the collection of its “raw material.” Customers follow a simple online process to get a free quote for the product they would like to sell back. If the quote is attractive, theparticipant can get new HP products in return and receive cash back for what is left over. Collect and prosper!

Recycling requires a completely different level of complexity, whereby the product is broken down into incomprehensibly small parts and the resulting raw material is sold into an often-different industry. In the world of overfished oceans, recycling seems to be the hottest business idea around. Just a second ago, my simple Google search for “start recycling business” produced 59,700,000 results, offering in-depth why and how manuals on starting your own recycling company. The reason for this is clear: it’s an opportunity for strong growth. Frost and Sullivan, a consulting company specializing in growth, estimates that recycling services alone will more than double in market size from $158 billion in 2011 to $322 billion in 2017.

Recycling is the best-known way of turning trash into cash. However, most innovative companies find a way to generate additional value through their recycling activities, aside from the financial benefit of the raw-material recovery. In 2007, Coca-Cola took on one of its many reputational risks—plastic bottles—and recycled them into $15 million in sales. Drink2Wear T-shirts were made from recycled plastic bottles (much like fleece and other apparel you own that already contains recycled bottles) blended with cotton and featured slogans such as “Make Your Plastic Fantastic” and “Rehash Your Trash.” The T-shirts became so popular that in 2008, Coke expanded its product portfolio to include totes, loungewear, and caps. The products appeared in more than 1,500 stores throughout the United States—promoting recycling to the customers, fostering a positive brand image for the company, and creating value from previously trashed raw material, all at the same time. As of 2012, Coca-Cola had sold more than one million Drink2Wear units, bringing in more than $15 million in retail sales. Recycle, please.