Building responsible prosperity: the new conversation
The figures make compelling reading, particularly for business leaders. The World Economic Forum estimates global material cost savings of a circular economy could be US$1 trillion each year, by 2025.
For the same time period, there are also attractive metrics for Australia. Based on World Bank estimates on our relative share of global GDP from 2013, the value of a circular economy could be $26 billion a year. Deloitte Access Economics published a report last year on the Collaborative Economy and identified that making the most of opportunities in this model would be worth $9.3 billion in additional value for Australian businesses.
Damien Giurco, research director at the UTS ISF (University of Technology Sydney, Institute for Sustainable Futures), along with colleagues Nick Florin and Elsa Dominish, published a paper titled ‘Action Agenda for a Circular Economy’. The goal was to achieve greater focus on the importance and benefits of resource productivity and innovation.
The paper characterises these as themes of national importance, yet Giurco believes Australian companies have not fully tapped into the potential opportunities. “One part of the equation is how to recover value from scrap, waste and existing resources; the other is coming to terms with disruptive innovation,” he says. “The digital era has changed both the way we consume and how we move things around.”
ISF believes there needs to be a new conversation. “How do we use technology, along with energy and resource productivity to create the future we prefer and, most importantly, how can we collaborate to drive a new wave of responsible prosperity?” Giurco asks.
In the paper, the researchers say current levels of interaction between business, academia, government and the community are limited. Their ambitious call-to-action is to seed new conversations and collaborations.
Driving the change
So how do we drive change? The researchers identified four opportunities for Australia’s future.
1. The four Ps – replenish stocks and rethink value
The paper points out that the four Ps – planet, people, policies and practices – are stretched to their limits and need radical alignment to support long-term prosperity. Referencing their own work and a host of Australian and international studies, they contend that:
- Australia must focus on improving its economic productivity, competitiveness and sustainability to build a productive economy that preserves and replenishes stocks of natural capital rather than degrades them.
- Australia should establish a national system of environmental and waste accounts, recognising both are valuable resources.
- We need to rethink the value of resources, acknowledging value not just when first sold, but across their full life cycle. By adopting the ‘take-make-recreate’ approach of the circular economy, Australia can go from being a global leader in primary resource production to being a leader in generating value through resource productivity. This opportunity applies to manufacturing, construction, transport, logistics and the waste sector.
- Rethinking value requires raised awareness, a digitally-enabled skill-base, and alignment between policy and industry that promotes innovation.
- A new business focus is needed for delivering long-term economic and social value while improving the productivity of energy, water, materials and knowledge.
2. Design for renewable energy and resource cycles
According to the United Nations Environment Program, US$270 billion was invested globally in renewable energy last year. The researchers believe that not only brings significant cost reductions, but is disrupting patterns of centralised supply.
“Australia has an opportunity to couple renewable energy to value-add in other sectors, including advanced manufacturing, mining and minerals processing and future transport – boosting resource productivity,” Giurco says. “Australia should be looking at tapping into its vast solar resources to power mines and drive intensive minerals processing operations. It’s a clear opportunity to add value to Australian exports, powered and processed by clean energy.
“Simply doing what was done last year with waste contracts can be a potential barrier to innovation.
“We also need to future-proof current industries in adapting to a carbon-constrained world, especially in heavy industry and manufacturing, and we must challenge old limits to cycling resources. Recycling, reuse and remanufacturing processes rely on cheap energy and logistics to be viable. A greater uptake of renewable energy to power these processes would overcome many of these limits.”
Global supply chains must look to the social and environmental impacts of the way they do business. The researchers found growing consumption rates and new consumer awareness are driving an increasing emphasis on these impacts.
“There’s greater expectation for responsible sourcing of resources and stewardship along the supply chain, supporting fair labour standards and eliminating adverse effects on human and environmental health,” Giurco says. “New collaborations and information exchange across industries along the supply chain are critical for ensuring that resources and products provide a pathway to second life through reuse, remanufacturing or recycling.”
3. Harness disruptive innovation for production and consumption
The researchers believe disruptive innovation must be thoughtfully harnessed to make sure it improves well-being. “New materials and digital technologies, advanced and additive manufacturing, and open innovation are transforming conventional business practices,” says Dominish.
“Australian firms can influence the design of products for easy remanufacturing and recycling, whether made locally or overseas. These innovations can overcome barriers affecting traditional value pools in Australia’s manufacturing and processing industries, such as the distance to market and size of the market.
Researcher Nick Florin says we should take full advantage of such innovations as:
- real-time digital tracing and tracking of materials, so that business models can be aligned with effective resource management
- greater transparency of material flows and ownership that can shift the business model from focusing on the volume of sales to a more value-added service oriented approach, and
- 3D printing, with open innovation, which could enable distributed manufacturing of niche components for machines with lower material inputs – it could also enable the timely replacement of non-durable parts of products, extending operating lifetimes with shorter downtimes.
“Innovation is not limited to technology and materials; it’s also emerging in business models, and the way consumers own and use products and services,” says Giurco.
4. Leverage know-how into new networks and markets
The researchers say Australia starts from a vast base of knowledge, skills, and technological and technical know-how, which can be aligned to provide a competitive advantage for capturing new markets and growing strategic networks.
“Half of the software used globally for mining was developed in Australia. This know-how can be applied to access new markets and unconventional resources. Likewise, Australian technologies for mining and minerals processing can be exploited for delivering value from above ground metal waste streams,” explains Giurco.
What about scale?
Giurco says economies of scale are changing. In the past, recycling was all about collecting, aggregating and delivering to central processing.
“Modularisation and process intensification can change all that. In future we may see a small recycling plant fit on the back of a semi-trailer, which drives from town to town to achieve the processing required for a geographic area that previously wouldn’t have been able to justify the cost of transporting waste, and so on,” he says.
“In years gone by it may have made sense to send waste to China or Korea for processing, but Australia needs to find its niche in this new landscape.
“Indeed, we need to think differently in terms of geographic scale more widely; in years gone by it may have made sense to send waste to China or Korea for processing, but Australia needs to find its niche in this new landscape, one that’s consistent with new business models and designs. We need new information on where the value from waste lies.
“What does this mean for corporates? I don’t know if this has been sufficiently considered. Simply doing what was done last year with waste contracts can be a potential barrier to innovation. We need to work with stakeholders along the supply chain to bring about a change in the system. We must rethink when it’s appropriate to contract out waste services and when it may be preferable to bring parts of them in-house, even just to pilot new approaches, which can later be scaled up.
“Let’s take those ‘keep cups’ for takeaway coffee as an example. What if we had something equivalent for lunchboxes that big corporates and places like shopping centres could roll out? The aim there is to keep things out of landfill, but it requires a transformation in thinking; that it’s not just the right thing to do, but an opportunity, that there’s new value to be derived, whether in base economic terms or in creating healthier environments for all.
“The bottom line is that unless we change our thinking, and bring together business, research, technology and policy to try new things in practice, we may never derive the insights and create the unforeseen spin-offs that are going to improve our long-term well-being.”