Why we need a circular economy and how emerging technology can push us there

April 23, 2020 – Ryan Raitano

Introduction:

Imagine an economy with no waste and no pollution. An economy where the same materials and resources are continuously cycled and through its functions the environment is regenerated. This is an ideal example of a perfectly capable circular economy. A theory which is based upon living organisms and natural systems, a constant cycle of resources and energy which benefit everyone as a whole. Although this seems out of reach in our current state of affairs, this type of economy is entirely possible. With human ingenuity and the use of emerging technologies, we have the ability to close the loops in our economy and combat the climate change crisis.

Climate Change:

There is no debate that the concentration of greenhouse gasses in the earth’s atmosphere has a direct correlation to the average global temperature on earth. According to the U.N and 97% of climate scientists, the concentration of greenhouse gases and the average global temperatures have been steadily rising since the Industrial Revolution. This indicates that humans are at the root of this issue. If we continue down this path of increasing emissions, there could be insurmountable consequences for humanity.

A special report by the Intergovernmental Panel on Climate Change (2018), outlined that if the world were to continue down its path of emitting greenhouse gasses with no structural changes to decarbonize and reduce emissions, then adaption to the new world created by climate change would be exceedingly difficult. Due to climate change, our world is expected to suffer a variety of negative impacts: extreme weather events, resource constraints, economic volatility, disrupted ecosystems, reduced biodiversity, food security, and restricted tourism. Practically everything we know on earth will be touched in one way or another by climate change. Consequently, it is imperative that strong actions be taken to combat climate change. The world will not support human societies in their current form if we continue with business as usual.

In order to limit these profoundly negative changes, we must curb our greenhouse gas emissions to a point where the average temperature of the earth will only heat an additional 1.5 degrees Celsius since pre-industrial levels. However, this mission to curb global warming to 1.5 degrees creates tremendous opportunities to re-design traditional business structures and the structure of the economy itself.

What is a circular economy?

Traditionally, our economy encompasses a linear model approach to the earth’s resources. One in which finite resources are used to create products with finite lifespans, which then end up as waste in landfills or are incinerated. This model lacks recognition that our resources are limited and doesn’t allow for the structural changes necessary to fight climate change.

In contrast, a circular economic model (often referred to as a closed loop system) is one where the outputs of one process sustain the inputs of another process. Therefore, materials are kept at their highest possible value while waste and pollution are limited or completely phased out, allowing for natural systems to regenerate. You may be familiar with conventional sustainable business strategies that are built upon at least a few of the of the five Rs: reduce, reuse, repair, recycle and regulate. While these strategies are a good start to a more sustainable business environment, they do not address the fact that products/resources will still end up as waste by end of life. Closing the loop in these systems addresses this problem and creates value out of waste. To put it simply, a circular economy will limit the extraction of natural resources, while also transforming pollution and waste into sources of value. Revising our traditional thinking and accommodating a circular economy will give humanity a fighting chance against climate change.

Value of a circular economy:

Adaptation of a circular economy worldwide can bring extraordinary value to all facets of life. Closed loop systems address mounting resource-related challenges, create economic value, spur innovation and generate abundant environmental benefits. Not only are these benefits observed in theory, they are also actively being redeemed in certain corners around the globe.

An industrial symbiosis project in the Danish town of Kalundborg has exemplified the environmental, societal and economic value of the circular economic model. A project known as Kalundborg Symbiosis, which dates back to 1973, has closed the loop between dozens of industrial activities from completely unrelated industries. Examples of participants in this closed loop project include a refinery, a power plant, an enzyme producer, a producer of insulin and a manufacturer of gypsum board. The value created from these facilities under the circular model used in this park is measured by their environmental, societal and economic benefits.

The environmental benefits from the circular economic approach to manufacturing in Kalundborg are discernible. The following statistics attest to the effectiveness of a closed loop economy:

• Annual savings of 635,000 tons of CO₂.
• 3 million m³ of water saved through recycling and reuse.
• 30,000 tons of straw converted to 5.4 million liters of ethanol.
• 150,000 tons of gypsum from desulphurization of flue gas replaced imported natural gypsum.

This is just one example of the positive environmental impacts that can be realized though a circular model.

In addition to the benefits to the environment, many other aspects of society prosper with the implementation of this type of economy including increased welfare and prosperity. In Kalundborg, annual socioeconomic savings of 20.5 million dollars (CAD) have been attributed to the circular economy of the Symbiosis Project. Furthermore, the local community prospers from the improved competitiveness of its local industry, which secures employment. Apparently, having a world-renowned project in town makes it easier to retain and attract talent.

Of course, if a circular economy didn’t make financial sense, there would be no point in pursuing it. Fortunately, the Symbiosis Project’s financial track record speaks for itself. Participants in the closed loop project can save money in two ways: they have considerably less waste to dispose of, or they have the opportunity to receive low-cost energy or raw materials for production. This results in a combined annual economic savings of 35.3 million dollars (CAD). This is further proof that there are tangible economic benefits to employing this type of economy.

Li-Cycle Corp. is another excellent example of a company involved in the circular economy. Li-Cycle specializes in returning the elements of a lithium-ion battery back into the supply chain through a process of resource recovery. Traditionally, when lithium batteries reach their end of life they are landfilled or partially recycled through pyro-metallurgical processes (which have an average recovery rate of only 30-50%). However, these methods are inefficient and lead to environmental decay, wasted resources and add a negative aspect to the otherwise environmentally-friendly vision of electrification. Instead, Li-Cycle proves there’s value in contributing to the circular economy through environmental, social and economic benefits by utilizing a circular model in the process of li-ion battery resource recovery.

In terms of the environment, the benefits Li-Cycle provides to the battery industry are two-fold. First, Li-Cycle provides an end of life process to fully recover the resources of a battery. This means that batteries are not wasted through inefficient recycling methods or even worse, landfilled potentially damaging local ecosystems. Since Li-Cycle has a recovery rate of between 80-100% of materials from all li-ion batteries, Li-Cycle provides a valuable sustainable resource to produce new batteries or other materials. This is the second part of Li-Cycle’s benefit to the environment because it can now fill a portion of the market demand for battery materials from recovered resources. Companies like the ones in Kalundberg and Li-Cycle are embracing the circular economy at full speed and it’s only a matter of time until more catch on. Fortunately, this transition may come a lot sooner than we think, thanks to emerging technology.

How does this connect to new software and technology?

Although the traditional linear economic model is unsustainable, one reason it has remained as the default economic system is due to its simplistic nature. In order to adapt a circular economy, there are many complex moving parts involved. This is where we need to onboard the aid of technology to help us shift into a circular model.

Blockchain:

An emerging circular economy can be very complex and difficult to navigate. This is often the result of the sizeable number of participants and the global network of supply chains. Therefore, in order to make a circular economy mainstream, participants across the board must co-operate where needed. Thankfully, there is a technological solution making it easier and more accessible for these global networks of participants in the circular economy to operate: blockchain.

Blockchain can provide a global network of participants with a credible set of data and transactions on which the entire network can make collective decisions. Blockchain is a virtual chain of blocks, where each block has the capacity to store certain information. This chain of information is upheld through a network of computers, where unique copies of blocks are held across the computer network. Therefore, if one copy of one block were to change the rest of the chain would remain untouched and intact with original information. This is what makes blockchain technology secure and trustworthy, which is perfect for the implementation of a circular economy.

In practice, blockchain makes it easier to track where certain products/materials have come from and where they’re going. Ideally, products are tagged from inception by applying certain blockchain markers to it. These markers are then turned into a “token” on a blockchain network. The tokens are then used to track the product through the supply chain. This allows for full transparency from start to finish of a product/material lifecycle and enables collective decision-making across the board to formulate new circular chains of supply based on the information given through the blockchain.

Volvo recently announced they were the first carmaker to apply global blockchain traceability to their cobalt supply for their electric vehicle batteries. One of the main downsides is the questionable supply chain for critical materials such as cobalt. With the strong traceability that blockchain provides, Volvo can ensure that their materials are sourced responsibly. Using blockchain technology will be the first step to opening transparent supply lines all over the world which leads to opportunities in building a circular supply. Because let’s face it, it would be much easier to implement full circle supply lines when everyone knows where the supply is actually coming from.

Artificial Intelligence:

Another excellent technological tool that is paving the way for a circular economy is the emergence of artificial intelligence. AI is an umbrella term for any technology that can learn, reason and perform human-like functions (pattern recognition, prediction, optimization) with more accuracy, speed and efficiency than humans. Given mankind’s inefficient linear industrial/economic systems, AI can help solve some of the more complex problems that stand in the way of adopting a truly circular economy.

There are three main ways that AI can contribute to a circular economy. These include product design, business models and circular infrastructure. In a circular economy, a product can be re-integrated into the supply chain with much more ease if it was designed for a circular lifestyle, rather than a linear one. Products like Interface’s cradle to cradle carpet are designed with the purpose for reuse in a circular economy. However, products like these exist among millions of products that are not designed for a circular economy. AI can enhance the development of new products, components and materials that are perfectly developed for a circular economy. This can be done through machine learning design processes that speed up the transition from prototype to testing and eventually bringing the product to market.

AI and machine learning can be a great tool to operate circular business models. AI can put a spotlight on the competitive strength of circular economy business models which include product-as-a-service and leasing. By bringing together real-time and historical data from products and users, AI can advance product circulation and asset utilization through pricing and demand forecasting, predictive maintenance and resourceful inventory management. Onboarding the help of AI to transform a company’s business model into a more circular and resourceful one can make a tremendous task much easier to manage.

In order to adopt a circular economy, there must be important infrastructure in place to provide reverse logistics required to close the loop. Processes that sort and disassemble products, remanufacture components and recycle materials all fall within the circular infrastructure needed to close the loop on supply chains worldwide. For example, the Li-Cycle’s lithium-ion battery resource recovery process falls within this category. Moving forward, AI can be a valuable tool to find critical information and develop upon existing infrastructure in ways that push us towards a circular approach.

As a matter of fact, the potential value AI can provide by helping to design out waste in a circular economy using the three main methods above is up to USD 90 billion a year in the consumer electronics industry alone according to a report by the Ellen MacArthur Foundation and Google. This goes to show that technology will truly be a key factor while moving towards a circular economy.

Conclusion:

Overall, the technological advancements we have been observing in our society are the answer to developing a more circular based economy. If employed, a circular economy creates value across environmental, economic and social lines. Technological developments like AI and Blockchain are some of the many triggers that are firing our industries into closed loop systems during a time period where we need to fight against climate change. The possibilities of a circular economy are endless, the technological tools are there, all that remains is if society is willing to adapt.