RealIZM recently interviewed Dr. Max Marwede, a researcher at Fraunhofer IZM and active proponent of the circular economy. He told us about ways to change the traditional linear economy by committing to the principles of the circular economy that can not only reduce negative impact on the environment, but actually create new business opportunities. This interview made us think about the ecological, economical, and social aspects of products.
RealIZM: Can you explain the concept of a circular economy in a nutshell?
Max Marwede: The most prominent term at the moment is “circular economy”, branded by the Ellen MacArthur Foundation and McKinsey who developed this term and the theory. However, the principles behind the circular economy existed before the term. They just strategically combined in a new brand the different aspects of several concepts, such as eco-design, cradle-to-cradle, blue economy, or biomimicry.
A circular economy is the economy of closed material loops, which keep products alive for as long as possible through repair and maintenance, re-use, and remanufacturing. The idea is to try and avoid having to produce more new goods. In Germany, we have another term – “Kreislaufwirtschaft” – which speaks more about getting the materials back at the end of life. The circular economy as it is understood around the world revolves around combining business development and product design to keep a product going for as long as possible and creating value from the resources you invested across the entire lifecycle of the product.
RealIZM: How does the circular economy work in practice?
Max Marwede: You have different loops, and you take the product apart more and more after each loop. You can, for example, re-use and repair your product after their first use. You are trying to keep it alive or revive it in its original state. You may also decide to upgrade the product, for example to add new features.
You then go one loop further and start to re-manufacture your product. At this point, you would have to invest more money to get the product back to its former state, so the next step would be to disassemble it and harvest its parts. You try to re-use certain components of your product straightaway, so you break up the product, take the parts out, and maybe try to reuse components for another product or a product from the same range. The last step is material recycling. Now you destroy the product down to its different materials, and you try to put the materials back into manufacturing. It’s very hard to keep the same level of quality in the material at this point. It is easy with metals, but with plastics, it’s nearly impossible to get the same quality back. The materials you get back at the end of life of a product are usually of worse quality, so you cannot put things back to serve the same function as before. That’s why material recycling represents the last “loop”.
RealIZM: Could you tell us about the main trends in circular economy?
Max Marwede: I would see the main trends in service and business development.
It could be business models, such as the sharing economy, pay-per-use models, rental models, or re-manufacturing models. Furthermore, one of the most important aspects is a combination of product design and business model development. As a service provider, it is in my own interest that I develop a product which is reliable, which is repairable, which I can monitor remotely, for example, and which I can maintain. The business model has a direct effect on the product design.
The other thing is digital service development for different business models. Imagine a pay-per-use service, and you pay me by the hour to drive from A to B, then I need to know how for how long you were on the road, where the car is now, whether the tank is empty, and I have to charge you for that time. I need platform services for my customers and partners in the value loops, e.g. for repair or for my maintenance cycles. I have to know when my product needs to be repaired before it breaks. There are other trends in combination with digitalization and IoT aspects. For example, you have condition monitoring for the product. You need not just software, but also additional hardware to know where your product is and which state it is in, how many operating hours it has been running, and so on. So, overall you need a lot of digital technologies, such as condition monitoring, predictive maintenance, self-sufficient sensor systems, or ledgers to get the circular economy going.
One other important point is that you have to move away from product design to system design.
Who are your partners? What are the services you provide? Who are your stakeholders? It’s system design, not just product design.
RealIZM: Is the development of new materials a trend in the circular economy?
Max Marwede: The development for new materials is indeed a trend in many cases. You can use renewable materials, for example. But it does not mean that the environmental impact of renewable materials is better than that of non-renewable materials.Think about separating technical cycles and biological cycles; that means separating metals and plastics from degradable materials. Then you have two different streams, one goes back into the natural biosphere and can degrade in the environment, and the other one concerns the technical materials, which you try to keep in the techno-sphere. For example, metals go back to the metal smelter or plastic to the refinery.
You need to develop new materials that you have to adapt. For example, in the composition of plastics, you have to develop additives that can make plastics recyclable for several cycles. You have to develop materials that can degrade without emitting any toxic substances.
There are many examples of materials for which we do not have the right technologies to recycle them. The only way is to make the product long-lasting and reliable. You produce materials that you can use for as long as possible and prolong the life of the product as a result.
RealIZM: Which global problems might the circular economy help us solve?
Max Marwede: It can mitigate the problem of climate gases, reduce the environmental impact of mining or producing additional virgin materials, components, and products, and reduce the overall consumption of materials. These are the main environmental issues we can solve just by prolonging a product’s life. We should avoid toxic and other harmful substances, which might harm the environment, animals, or humans, or nature at large.
RealIZM: Could you tell us about the challenges that you see in this field?
Max Marwede: The biggest challenge right now is that there is currently no real need to transform your company towards the circular economy. The current linear model works better from the commercial side. Furthermore, recycling will never let you offset the environmental impacts you had during production. Recycling is literally the last thing you want to do, because you invest a lot of money to create a product, and you lose most of the money during recycling.
So again, there is no pressure to change the system. The pressure could come from the legal side or the environmental risk side. The legal side means that national or European legislators push the topic and that companies are forced to turn to circular economy behavior. This is already happening, but it is going too slow. And on the other side, there are the environmental risks. There was a study by the World Economic Forum: They analyzed the most important business risks and asked countless experts. Five of the 10 most important business risks at the moment are environmental risks.
The social issue is another big challenge that is not officially addressed by the circular economy. The circular economy aims at decoupling resource use from production, but all the social aspects are not addressed. That is why we, in our research group, came up with a new term. We are speaking about a “circular society” that can integrate the social sphere into the circular economy. What about human labor for fast fashion or for electronics, people working under dire conditions in Southeast Asia, India, or Pakistan? All these social aspects are not officially addressed by the circular economy model. What about the stakeholders involved in product development and system development? Can they have an influence? Participation in the design process, co-creation, co-design, and different aspects of participation in the value that is being created or equal value distribution: None of this is addressed in the original concept. To be frank: It’s about making more money with less environmental impact.
I think the circular economy is not the only approach, because it’s still based on economic growth. We have to speak about sufficiency. How many products do we want to own? Does every one of us really need to own thousands of products? Do we need to fly several times a year for weekend trips? Is this necessary?
There is a lot to discuss.
RealIZM: What do you think about how we can change our thinking?
Max Marwede: I think, we all have to start with ourselves. If you’re a customer, if you’re a normal participant of the economy, you should know what you need. Do you look for products that can be repaired or are long lasting? As a company, you have to have a long-term strategy, about how you want to turn your company over to the circular economy and still create a sustainable business. That’s a matter of ethics. In my opinion, it’s a mindset that has a lot to do with ethics and a change in mindsets. You know that you’re part of nature, and you have to develop a system that allows nature to live and recover its resources. In the end, it is about human existence on Earth.
We are just using up our natural resources, but not putting a dollar into it. But the time could come when we cannot blank out the risks anymore. Our entire society has to pay for those risks, such as natural disasters or health problems. If you want to avoid that, you have to change yourself or think about the way you are doing business now.
RealIZM: How many years will we need to see change come about?
Max Marwede: My guess would be 25 years. I would guess that my generation and the upcoming generations really want to change things, as you can see in the Fridays for Future movement. In a business, the first step is to train your employees. You should go to eco-design conferences and trainings. Moreover, you can learn from other companies, from scientists or other partners. You can start a pilot project, where you try to apply the CE concept. You can try – step-by-step – to change your business model or your product design, and you can start to use digital tools to support the long life of your product.
RealIZM: What is the state of the art in the circular economy?
Max Marwede: On the scientific side, everything is more or less clear. We can contribute with process development, product development, or the implementation of digital technologies. The difficulty lies more on the business side. For so many companies, it is unclear how they can make this concept economically viable. There are some good examples of actual existing business cases, which we have to study. We also have to change the way people are thinking. It’s not just money. It’s about reducing our environmental impact. You will also enjoy greater customer loyalty and create better networks in your supply chains and life-cycle value chain. Moreover, people at your company will feel more engaged, because they think that they are doing something good for the world.
RealIZM: Have any governmental and commercial organizations got behind the idea yet?
Max Marwede: The European Commission is pushing the concept. For example, the Netherlands and the Nordic states are bringing regulations forward. France is quite active. I’m a bit disappointed that once upon a time, 20 years ago, Germany was the forerunner with ”Kreislaufwirtschaft”, but now we are lagging behind.
RealIZM: Are there companies already implementing the principles of the circular economy?
Max Marwede: There is a list of about 100 companies who have committed themselves to the circular economy, the CE100. In Europe, Philips and BSH are very active in terms of sustainable development and eco-design. Apple also has a strong sustainability strategy. And there are some startups that follow circular economy principles, such as FairPhone.
RealIZM: Are any standards in place that govern the principles of the circular economy?
Max Marwede: The most important circular economy standard in Europe istheeco-design directive. Formally, it is concerned with energy efficiency, but it now integrates resource efficiency aspects as well. There is a standardization committee behind it, which now develops metrics to measure resource efficiency aspects, such as reparability or recyclability. Moreover, there are a lot of informal tools out there, which can be directly implemented at any company. If you need more advice, you can also turn to consultants or scientists and speak about the co-development tools and methods that you can use.
RealIZM: What can IZM offer for the circular economy?
Max Marwede: At the Environmental and Reliability Engineering Department, we are working, for instance, on ourtraining Eco-Design Learning Factory, where you can learn how to develop circular systems. It teaches you about the practical tools and methods. We also have training on the topic of “Environmental Life Cycle Assessment”. We offer advisory services on current legislation. We can do disassembly studies, life-cycle assessments, or reparability studies for your products. We can contribute eco-design recommendations to make your products more environmentally friendly and help prototype your concepts. On the reliability side, we have the means to simulate and test lifetimes and failure modes. And, of course, as Fraunhofer IZM, we are developing the IoT needed to enable the circular economy. We are already cooperating with different companies, including the Deutsche Telekom, Apple, or ShiftPhone – supporting those to procure or develop more sustainable phones.
This interview was conducted by Yulia Fedorovich from Fraunhofer IZM Marketing & Business Development department.
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