Part 2: What business practices allow the case companies to operate within the circular

4.3.1 Identifying Circular Strategies and Growth Initiatives

In practice, CE can be promoted and supported by the creation of new innovative business models which embed CE principles into their value propositions throughout the value cycles. However, assessing the realization of the value propositions of new Business Models (BM) is not straightforward and requires comprehensive reasoning.

The ReSOLVE Framework identifies the circular business strategies used by the case companies in order to grow and deliver the value created by their BMs. All case companies operate in very different industries. Nevertheless, by operating in the CE, the case companies deal with the preservation and enhancement of the natural capital, optimization of resource consumption and system effectiveness. Therefore, ReSOLVE Framework analysis will work as an extension of the Butterfly Diagram analysis. Whereas previously the Butterfly Diagram analysis has highlighted how the case companies exploit the loops and cycles of the CE, ReSOLVE Framework starts from these results to investigate how the cycles can be translated into circular business strategies. In this sense, it is also evaluated each case company contribution and commitment towards the UN Sustainable Development Goals as an empowering tool for circular business models to foster sustainable development (UN, 2018).

As presented in chapter 3.7, the ReSOLVE Framework is divided in six typologies. Regenerate considers how the case companies contribute to the regeneration of natural capital and the reduction of leakages from production.

Share regards the extent to which the business activities of the case companies extend the life cycle of products and materials. Optimize refers to the practices aimed to increase the performances of production processes and products. Loop involves the activities that preserve components and materials, exploiting the most efficient cycles.

Virtualise implies the replacement of physical products with disrupting virtual solutions. Lastly, exchange stands for the shifts from traditional techniques with more innovative ones (McKinsey & Company, Ellen MacArthur Foundation, 2015).

Table 3: Case company placement on the ReSOLVE Framework. Adapted from Ellen MacArthur Foundation, 2016.

72 As shown in Table 3, the ReSOLVE Framework has been applied to the six case companies highlighting in which typologies of the framework they operate by analyzing their business practices. However, none of the case companies have implemented Virtualise business activity, in the sense that they have not replaced their physical product with a virtual service.

The aim of this analysis is to outline a framework for the evaluation of environmental value propositions of circular business models based on the case companies, as illustrated in Table 3. The framework assesses the environmental impact of the value proposition around the six categories, highlighting the synergies between the typologies, and the benefits for the environment and society.

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4.3.2 Kaffe Bueno: Scandinavia´s first Biorefinery From principles to practices: Optimise, Loop, Exchange

The ReSOLVE Framework as a managerial tool is embracing change by addressing both technological and internal issues as well as strategic aspects. This section will demonstrate how such an innovation is taking place in Kaffe Bueno´s business activities through following typologies: Share, Loop and Exchange.

Kaffe Bueno has based its BM on the development of innovative techniques. With the biorefinery, the company processes five tons of SCG per month, producing ingredients for cosmetics, pharmaceuticals and functional foods industries. The SCG comes from selected hotels and corporate partners, that, in turn, can increase their brand value and reduce their waste management costs by 15%, exploiting the free recycling service offered by Kaffe Bueno (A. Franco, personal communication, March 6, 2019).

By optimising valuable biological nutrients through the use of alternative material inputs (e.g. cascading by using by-products or extracting biochemical feedstock from biological nutrients), Kaffe Bueno extends the products’

economical and biological life cycle and adds value to people and planet.

Furthermore, Kaffe Bueno has enabled innovative solution by having designed a drying bin, equipped with an IoT sensor to preserve the coffee waste and strategically gain time with facilitated logistics. Hence, it is enabling the exchange category in a combination with smart resource selection in a hi-tech application. By being a hi-tech company, Kaffe Bueno is coherently focused on finding technologically advanced solutions to run its business activities. As the company has stated, the level of technology and access to knowledge in Denmark, compared to other countries, was decisive for choosing to establish their business here (A. Franco, personal communication, March 6, 2019).

Other factors are involved, as knowledge, motivation and financial resources of the start-up by re-designing the recycling process by incorporating loop category. Kaffe Bueno aims to extract oil for cosmetic purposes and flour for culinary usage. The process ideally would end with both products simultaneously, resulting in minimized consumption of energy. Also, Kaffe Bueno is currently having collaborations with laboratories elsewhere in Europe since in Denmark the potential of their technology has not been supported and understood. Currently, the biggest challenge of Kaffe Bueno is to acquire financial funding, because of the risk averse investors and are lacking path dependencies regarding the profitability and scalability for the long-term investments (A. Franco, personal communication, March 6, 2019).

A growing group of for-profit companies around the world are adopting business models that address social and environmental issues, using business as a force for good. For instance, Kaffe Bueno is B-Corporation certified. In other words, the company’s supply chain has been certified to all of its stakeholder: from suppliers, to customers, to nature. That means that Kaffe Bueno has full traceability of the raw material and sustainable practices of production is verified. This allows to secure high-quality through all the steps of production. In the same time, it brings together business community that supports one another.

74 Kaffe Bueno keeps its vision in an exchange approach by using the cleanest technological solutions for production, subsequently contributing positively to the environment. Its vision declares sustainability from resource use and environmental degradation, notably through improved resource efficiency, while improving at the same time the society's well-being by incorporating UN Sustainable Development Goal (SDG no.12), ensuring sustainable consumption and production patterns. In turn, this represents the company’s commitment towards fighting climate change (SDG no.13).

4.3.3 SvampeFarm: Urban Mushroom Farm for greener future From principles to practices: Regenerate, Loop, Exchange

As Butterfly Diagram analysis showed, re-design products and proper sorting is necessary to make more conscious efforts. The ReSOLVE Framework points out the need for change on a design level. There are some overlaps of some of the proposed activities and the creative solutions exemplified in the assed case studies. Therefore, in this section it will be demonstrated how such an innovation is taking place in SvampeFarm´s business activities through these identified typologies.

SvampeFram is addressing essential pivot of the CE thinking, namely a minimized leakage to landfill, thus regenerating value back (Ellen MacArthur Foundation, 2013). It is essential to farm in a way that enriches rather than degrades the soil, as it further creates value to animals and workers. Local and urban agriculture can help to reduce greenhouse gas emissions and recycle nutrient-rich food scraps, such as coffee waste. SvampeFarm is locally growing mushrooms by using coffee waste as fertilizer. The collaborations with Norreport Coffee Factory, stores, hospitals, like Gentofte and gas stations leads to reduce emissions connected to the transportation of the spent coffee grounds and mushrooms (M. Pellegrini, personal communication, February 11, 2019). Thus, the company also reduces resource inputs and waste outputs while enhances the public interest in protecting green spaces by participating to related initiatives¹¹.

In contrast to Kaffe Bueno, SvampeFarm has discovered a low-tech solution to the recycling problem by using the fridges available in hospital and gas stations to extend even more the life of the raw resource (M. Pellegrini, personal communication, February 11, 2019). Creative solutions could be hi-tech based innovation or low-tech based on available resources. Furthermore, both companies are in the process of re-designing the recycling process by incorporating resource loops. In comparison, the Svampekit aims to be re-usable not only once, but even ideally twice for the growth of two mushroom batches (M. Pellegrini, personal communication, February 11, 2019).

On the other hand, Svampefarm explores recycling opportunities of other raw resources like “beer mash”, a waste product from beer-brewing, which is rich in proteins, fibers and nutrients and can also be used for feeding animals

11 Last year SvampeFarm took a part at the Dansk Naturfredningsforening, a Danish nature society by sending the kit to 220,000 students around Denmark. Hence, the collaboration not only made urban areas more liveable by enhancing the natural systems that keep urban agriculture to be positive overall, but also brought enriched the community by educating people

75 at farms. Actually, it is as good as coffee waste to grow mushrooms (M. Pellegrini, personal communication, February 11, 2019). Hence, it enables the business activity in the next typology of exchange. That might increase not only the positive impact of resource reuse within another industry, but also engage current CE “non-customers” and stakeholders. Thus, generating synergies between the typologies, by opening new opportunities for CE through regenerate, exchange and by creating new loops.

Although SvampeFarm is a low-tech company that bases its BM on the efficiencies of the CE, another goal is the successful design of the products to achieve a zero waste. To accomplish that, SvampeFarm would still need to find a solution for their plastic bag included in the packaging. At the same time, the biggest challenge is to change people’s mindsets since it is a very long and slow process.

4.3.4 Sprout: A Small Pencil with a Big Idea From principles to practices: Regenerate, Share

Kaffe Bueno and SvampeFarm, have illustrated the importance of the sustainable consumption patterns in CE and its role in the transition towards a circular business model. This is also recognized by Sprout, which acknowledges that product innovation speeds up the growth of the company's business activities by creating conscious consumers from a simple product like pencils. Thus, the company focuses on these identified typologies of the ReSOLVE Framework: Regenerate and Share.

With its original 100% biodegradable pencil, Sprout is tapping into the regenerate type of the ReSOLVE Framework.

Meaning once the stub of the pencil is left, it can be composted. The company uses only FSC-certified wood. In this regard, delivering business benefits by guaranteeing environmental and social responsibility. Moreover, Sprout is extending its sustainable product offer, with make-up pencils and wooden teaspoons, which are also fully biodegradable and designed to communicate green values.

Besides, by having unique and innovative design of the plantable pencil, Sprout is repurposing the meaning of the pencil after its lifecycle, thus enabling the share category. In other words, the stub of the used pencil, can be reused and planted to grow herbs. In this case the pencil makes people to rethink about how they are consuming products and what happens afterwards. The idea contributes to the CE principles by rebuilding and restoring natural capital. The main challenge, however, is to shift away the consumption of plastic ball pens and increase the awareness that the products ends up in the landfill. Nevertheless, it has been noticed a change in people consumption that has pushed Sprout in reducing the price of its product over time. This shows that people are not willing to pay extra money for something that is sustainable, because consumers expectations that a product is sustainable to a higher extent (M. Stausholm, personal communication, February 25, 2019).

To contribute to the education of the sustainable consumption, Sprout is collaborating with schools and restaurants. Furthermore, big corporations and government organizations have started to notice the shift. For instance, the Vatican State has used the Sprout pencil for fundraising. Also, the Danish Government is using it as

76 a communication tool by engraving a personalized message on the pencil. Companies like IKEA, Porsche and Disney are also buying the Sprout pencil with their own logo and green messages. Companies make 90% of Sprout´s clients. The perception of Sprouts’ sustainability has gained exposure and in the last few years Sprout has sold more than 12 million pencils, in 80 countries (M. Stausholm, personal communication, February 25, 2019).

Despite Sprout conducts its business mainly within the share typology to repurpose the use of pencil, it is still a great challenge to minimize packaging as both private consumers and businesses demand it. Nevertheless, their goal is to create CE, which is designed to produce no waste and no pollution. By contribution to the SDG n. 12, the goal is increasing consumers awareness of sustainable consumption.

4.3.5 Schoeller Plast: Seizing Circular Economy Opportunities From principles to practices: Share, Optimize, Loop, Exchange

In a CE, the focus is not only on ‘doing more with less’ but also to harness the full value of the resources, e.g. by extending the lifetime of components and materials. Contrary to the companies who deal with biodegradable materials and nutrients on the biological side of the Butterfly Diagram, companies on the technical side of the Butterfly Diagram focus in minimizing the leakages from the usage and assembly of non-biodegradable products.

In this process, Schoeller Plast takes advantage of the following typologies of the ReSOLVE Framework: Share, Optimize, Loop and Exchange categories.

Since Schoeller Plast maintains technical materials, the company does not regenerate directly to the ecosystem.

Nevertheless, it reduces the leakages originated from the production processes indirectly regenerates the natural capital.

Furthermore, Schoeller Plast also fits in the share typology by reusing its products over time, by designing them in order to last as long as possible and to permit full restoration by tracking the base plastic material of which each crate is made. Schoeller Plast can count on wide range of skills and abilities: an internal design and development department that provides a qualified advice during the initial stages, 2D and 3D product visualizations, material choice consultancy and mold flow analysis (Schoeller Plast, 2019).

In the injection molding production step, the company applies a mark in order to track the material base of the crates. Therefore, the company can optimize the production process and forecast the degradation time of the embedded materials. For this reason, Schoeller Plast extends the life cycle of the crates, by prioritizing the smallest loop of the Butterfly Diagram, which is maintaining, over reuse and recycling and, thus, the most efficient. In this sense, the company contributes towards responsible consumption and production (SDG no. 12) and sustainable industrial innovation (SDG no. 9). In turn, this represents the company’s commitment towards fighting climate change (SDG no.13) (Schoeller Plast, 2019).

77 By producing a wide range of plastic products, the company optimizes the use rate of the machineries (J. Pedersen, personal communication, February 27, 2019). Optimized production capacity results from the intensive use of the machinery. Instead of buying additional production machineries, the company adjusts its plant in order to eliminate capacity in excess.

Finally, Schoeller Plast also pursues exchange business practices by using a technologically advanced crate structure and assembly process. The company can produce them in different colors, shapes and designs, satisfying the needs of customers through different sectors. Consistent investments in hi-tech machineries allow an automated molding process. More specifically, the company owns 25 molding machines that can impart a pressure that ranges from a minimum of 25 to a maximum of 1,250 tons (Schoeller Plast, 2019). This gives the company the possibility to offer its customers short delivery times, high reliability and adaptability. Most importantly, the know-how - built over 50 years of activity - has provided the company with effective design skills and capabilities. With this regard, the company has exchanged old and traditional production processes, innovating in technologies and machineries and using alternative inputs for the crates (i.e. from wood to plastics, from plastics to recycled plastics). This represents the main circular business activity for Schoeller Plast which enables the others. Without an innovative and hi-tech assembly line, none of the loops would be closed.

To sum up, the company has developed a leading position in the production of plastic crates for the beverage industry while maintaining its efforts for a sustainable consumption and production. This commitment is coherent with the growing concern over plastic packaging and increasing regulations over their production. Ultimately, this context is pushing Schoeller Plast’s customers in moving away from plastic crates and looking for new alternative solutions. Nevertheless, the company's commitment to CE is translated in steady efforts in the share, optimize, loop and exchange categories of the ReSOLVE Framework.

4.3.6 Refurb: Profiting from Green IT

From principles to practices: Share, Optimize, Loop

Some companies like Schoeller Plast are increasing the resource efficiency by using materials from their own production processes or from returned products and components. Some others, like Refurb, are improving resource efficiencies by using materials and products that have already been produced by others. As shown in Table 3, Refurb conducts its circular business activities by exploiting the typologies: Share, Optimize and Loop.

Hence, it is conveyed that Refurb sustains the second hand-market for electronic and IT appliances. This consists in the share category of the ReSOLVE Framework. The company’s practices reduce the loop speed of the items and, as mentioned in the Butterfly Diagram, 98% of the materials is kept in the refurbished item. Hence, only the 2% of it is sent to recycling, exploiting the product value to its highest degree and reducing the waste to the minimum (M. M. Karlberg, personal communication, February 25, 2019). Hence, Refurb contributes to the share category by sustaining the second hand-market for electronic and IT appliances. The company’s practices reduce the loop speed of the items processing the 98% of the appliances acquired.

78 In this regard, is possible to assert that Refurb business is aimed in increasing the performances of products, namely electronic appliances. By leveraging on its proprietary software (i.e. technology), the company reuses the energy and materials embedded in the products. This also brings to an optimization of the business model itself, because refurbished items have been estimated to be a highly profitable business due to reduced input costs. It has been estimated that the turnover of remanufacturing activities can be up to 50% higher compared to a manufacturing company (European Remanufacturing Network, 2015). This has contributed to an exponential growth in the latest years. This makes Refurb the biggest refurbishment company in Denmark with a processing capacity of more than 70,000 units a year (Refurb, 2019). However, this outperforming processing capacity has now exceeded the supply of appliances. This represents a new challenge for the optimization of the business model of Refurb.

Nevertheless, the company is now able to process more devices than the number of appliances it can buy. The company is working on solving this misalignment between demand and supply. In this sense, it contributes to the attainment of SDGs, in particular towards a more responsible consumption and production (SDG no. 12), sustainable communities and cities by offering appliances at a lower price (SDG no. 11), and climate action and life on land by reducing the production of e-waste (SDGs no. 13 and 15) (Refurb, 2019).

By exploiting a closed loop and prioritizing the inner cycle of remanufacturing, Refurb maintains the value of the product, whereas in the recycling cycle is entirely lost. However, remanufacturing is still less efficient than maintain and reuse cycles in terms of product value conserved (Ellen MacArthur, 2015).

To sum up, Refurb business practices categorized through the ReSOLVE Framework explicit the benefits of the refurbish / remanufacture and reuse cycles within the CE. Together considered, the optimization of the processes has allowed to extend the loop length of the materials embedded in IT and electronic appliances. Nevertheless, the misalignment between demand and supply is a new threat for the company.

4.3.7 Plastix: When the Money floats in the Ocean.

From principles to practices: Optimize, Exchange

While Schoeller Plast and Refurb focus on improving the efficiencies around products, Plastix bases its activity of recovery of the plastic raw material embedded in fishing nets and ropes. Here, it will be defined what is the meaning of circular business strategies for a clean tech plastic recycler and how the loops are closed from a business perspective. Table 3 represents the classification of Plastix business practices: Optimise and Exchange typologies, although it also contributes to Share and Loop to a minor extent.

Its circular business activities are linked to the preservation of the marine environment and oceans’ pollution. By specializing in the recycling of fishing nets, Plastix has risen awareness on their environmental impact of not collected fishing nets.

79 The company’s optimized operations derive from the focus on specific plastic polymers. By focusing on PP and PE-HD plastic polymers, Plastix reduces the variety of machineries needed for the recycling process. This choice is coherent with the diffusion of the two polymers. Currently 85% of plastic products are made of PP and PE-HD (H.

A. Kristensen, personal communication, April 8, 2019).

Most importantly, Plastix has exchanged the traditional methods used in the recycling industry by bringing a new way of recycling plastics in term of specialization, production and collaborations. Plastix has specialized in an innovative niche of the plastic recycling industry. Currently, there are no other plastic recyclers focused on the maritime industry. Plastix’s choice to serve the maritime industry is innovative as it is the only company together with Aquafil, to be specialized in fishing nets and ropes recycling. Hence, it is able exploit the current situation of arising awareness for the environmental issues. In addition, Plastix has built a three-level “Certification Program for Input Suppliers”, that allows its suppliers to certify their partnership with Plastix and promote their “green profile”. The levels illustrate the amount of CO2 emissions saved, their contribution to reduce the number of landfilled or lost fishing nets, and their participation to the recycling process (Plastix, 2019).

Due to its technological investments, Plastix has developed a highly structured production facility. This is one of the pillars on which Plastix has set its business activities, called “evidence-based” approach to product development. In order to improve the quality of its raw material, Plastix elaborates the data collected in the laboratory. The company argues that this approach is at the basis of the CE since it enables a smooth transition.

For this reason, the company believes that the “evidence-based” approach has to be matched with a trial and error or “step-by-step” production process. If the manufacturers would design their ropes in a take-back system approach, they would have an incentive to design ropes for disassembly. Instead, product designers and engineers now mainly evaluate how the product relates to customers’ needs without considering how it will be dismantled (H. Kristensen, personal communication, April 8, 2019).

This has brought the company to collaborate with manufacturers that use Plastix granules with their products, in order to better follow the design and development of new products. This becomes a true competitive advantage over other recyclers. The Ocean Box produced by Schoeller Plast, the OceanIX exercise bike by Body Bike and the Ocean chair by the design company Mater (Plastix, 2019) are three examples of products created from partnerships. Additionally, collaborations reinforce the company’s commitment to the SDGs. Through these collaborations (SDG no.17), Plastix promotes a sustainable economic growth (SDG no.8). Additionally, Plastix counts on a flexible and optimized industrial infrastructure (SDG no.9). This implies a sustainable production and consumption pattern (SDG no.12) which contributes to fighting climate change (SDG no. 13), with a specific focus on the conservation of oceans (SDG no. 14) (H. A. Kristensen, personal communication, April 8, 2019).

In conclusion, it is conveyed that Plastix has included in its BM Optimise and Exchange, as its main business activity.

At the same time, the company is seeking further efficiencies and opportunities especially across the supply chain, which represent the current challenge for Plastix. It has emerged that by a careful control and measurement of production processes and resource consumption, cost cuts and growth paths emerge, not only in economic terms, but also societal and environmental.

In document Competitive Business (Sider 73-83)