Circular economy an imperative now

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Circular economy an imperative now

Friday, 10 January 2020 | Ravindra Ojha

The growing Indian economy will continue to compel geologists, technocrats, economists, manufacturers, service providers and policymakers to explore superior options to face the challenge of increasing material consumption and depleting natural resources

In a major decision, the 2020 Tokyo Olympics authorities have decided that the medals at the games will be made from 50,000 tonnes of electronic-waste produced in Japan.

 A US firm has designed a 99 per cent recyclable battery, which for a product so chemically complex and hazardous, is of enormous importance. Highly deficient in precious-metal resource India, which produces a whopping two million tons of e-waste annually is at the cusp of mobilising its recycling strategy. The world seemingly has realised the true need of the circular economy.

The Indian economy will continue to compel geologists, technocrats, economists, manufacturers, service providers and policymakers to explore superior options to face the challenge of growing material consumption and depleting natural resources.

The increasing consumption demand for material is primarily due to increased population and prosperity, demographic changes, lifestyle transformations and intervention of disruptive technologies. The result is increased volatility in product prices and ecological imbalance, affecting societies adversely. Scarcity of material is a concern but the good news is that the circular economy approach can serve as a powerful solution.

The circular economy seeks to eliminate all kind of wastes in the market, i.e. waste of resources where material/energy cannot be regenerated; wastage of capacities  where assets are hardly or not fully utilised, e.g. poor utilisation of family-owned cars; underutilisation of life-cycles through accelerated development of new products, processes and business models resulting in difficult-to-serve demand peaks, e.g. smartphones; and waste of embedded value where precious metals/energy are lost in waste streams, e.g. gold and palladium in e-waste.

The widely-used linear business model of “mine-refine-shape-assemble-use-discard” ends up in waste generation. India expects to double its consumption of metallic resources by 2030. Its per capita consumption of stainless steel touched a new peak of 2.5 kg in 2019 (ISSDA report). Consumption of copper is likely to double in the next five years. India is also the largest consumer of gold in the world.

For such a growing consumption and the widening production-consumption gap, material recyclability and improved natural resource productivity can provide sustainable relief.

The concept of recycling/reuse is not new in Asia. Second-hand garment, furniture, utensil and vehicle markets, though unstructured, are common in India. This phenomenon is replacing the linear model by the circular model of “mine-refine-shape-assemble-use-collect-reprocess-reuse” with a “10-R” approach as its backbone.

The first “R” attempts to reduce material consumption by using products with longer life instead of use-and-throw. Also, additive-manufacturing and 3-D printing in new product development and in manufacturing of spare parts of aircraft can lead to practically no waste generation.

In the remarket route, the discarded products are resold and utilised in an alternate market in different avatars, e.g. Cars24; OLX in the used automotive market. Large volumes of defective products are discarded even when repair can provide a longer life, e.g. kitchenware.

In the refill route, the product under breakdown due to End-of-Life (EoL) of one of its parts may get a new lease of life if the defective part is replaced with a new EoL part. Refurbishing or remanufacturing is another business route. For instance, machine tools, home-appliances are refurbished to near original state of performance. Remanufactured car engines can be 30-50 per cent less expensive.

The retro-fitment route upgrades  existing machine tools, which is a growing industry today. In the reuse of parts route, discarded products get their parts having residual EoL stripped-off, to be used in another product, like in electronic goods. The reuse of high-value metals route extracts gold, palladium, iridium from e-wastes to be used in other applications. In the reprocess scrap route, instead of discarding engineered products like motors, batteries and canisters, metals like steel, copper, lead can be recovered efficiently through scrap melting.

Finally, the rental route is a product-as-a-service business model providing tangible goods as a service. In place of purchasing a product, provide a shared-platform for multiple end-usage. For instance, UK-based hydrogen fuel cell car manufacturer  Riversimple behaves as a lessor rather than a manufacturer by charging a rental, covering maintenance, fuel and insurance from its customers. Instead of selling robots for spot welding to car manufacturers, robot manufacturers can not only build, own and operate robots but also sell the client world-class weld spots, thereby maximising utility and life of robots and delivering more reliable cars.

The 10-R approach can accelerate the circular economy drive but not without associated barriers and challenges. 

One of the first barriers is the inferior positioning of remanufacturing business with original equipment manufacturers. Creating a sense of urgency and awareness of its larger benefits and introducing material circular in schools/colleges can trigger the change. The challenge in handling the probabilistic reverse-logistics for collection of discarded products in terms of varying quantum, quality and frequency is genuine. It induces volatility in business. Low collection-efficiency of products after EoL is a big challenge. To facilitate collection, ownership will have to move upstream in the supply chain. Rental/shared-platform related approach can majorly eliminate issues of collection.

Lack of strong product design- based reverse supply chain is leading to a challenge in improving collection of EoL products. Smart designs, taxing virgin-material application and moving towards zero-landfills may be the way out. The current, less privileged informal sector MSMEs engaged in repair and maintenance of products will have a critical role to play in the effectiveness of the approach. A higher degree of transparency of ownership coupled with access to smartphones and internet; reducing costs of sensors are facilitating mapping of physical systems digitally to track EoL of products.

Lack of incentive for product-return in today’s disposable society with “cash-rich” and “time-poor” consumer needs revisiting. Rapid awareness creation of the key drivers to circularity to the young population is the order of the day. A quick implementation of a comprehensive circular economy policy by the Government has become inevitable, as the Centre finalises the legal framework for effective looping of material in the automotive sector and National Resource Efficiency Policy. Hope this happens sooner than later.

(The writer is Professor, Operations, at Great Lakes Institute of Management)

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