Generally speaking, companies have strategies, structures and operations that remain entrenched in the linear economy. But is this still tenable? Here are five business models to help you think circular.
Today, it is no longer enough to invest in sustainable development here and there. Natural resources are becoming depleted and the environmental impact so serious that we can no longer be satisfied with doing things "less badly" than in the past. Companies are now expected to make a positive impact by breaking the link between growth and the use of natural resources.
The head of any company that claims to be responsible will be curious about the opportunities for growth that will present themselves if they do things differently, and wonder about the environmental, social and societal benefits (aside from financial) that they could generate using their own resources, technology and time frames.
To produce a positive impact, companies will need to free themselves from linear thinking before they can embrace the circular economy. They probably also have to reconsider their value chain, though they will not be able to do so overnight. In their quest for inspiration and greater momentum, some have been quick to emulate innovative SMEs.
How can transformation occur, what are the priorities and where do we start?
An analysis of 120 cases carried out by Accenture drew out five business models representing the same number of approaches to the circular economy.
Introducing sustainability in the supply chain
The first potential way to change your business model involves modifying the choice of raw materials used to make the product. This entails looking for alternative, renewable materials by adapting the supply chain upstream in order to achieve the long-term goal of a sustainable product and a process that is ideally waste-free. For example, industrialists can replace plastic, a linear component, with bioplastic or another material that is renewable or can be recycled. Ecover is the best example to cite in this respect: by introducing a sustainable chemical ingredient when it launched the first phosphate-free washing powder in the 1980s, it reduced the demand for toxic and non-recyclable substances. It has since expanded its business to produce a vast range of products.
The same approach can be taken downstream in the production chain. An excellent illustration of this is Sigma: in the knowledge that our homes are generally full of toxic products, Sigma marketed the first paint that purifies the inside air.
Recovering rather than producing
Among those inspired by this second model are certain carpet manufacturers including Desso and Interface, who are switching to 100% recyclable products. The challenge for them is to maintain contact with customers in order to recover their carpets as cheaply as possible when they are no longer needed. For carpets with an aluminium backing (a pure product that is easy to recycle), the companies may even need to make contact 20 to 30 years later and put in place a reverse supply chain.
What are the other challenges for carpet manufacturers who wish to recycle the potential residual value of their products? One is not to destroy the item during recovery. This is why Desso invented Refinity, a technique enabling it to separate the fibres – from the thickest to the finest. At the end of the purification stage, a new carpet can therefore be manufactured from the old one using their Cradle to Cradle® technique. This process significantly reduces the amount of resources used and waste generated. It allows the product to be reconstructed without the need for new ingredients, closing the circle with almost zero waste.
Quentin Denis, from Accenture, says: "This choice to recover waste materials can produce surprising results, such as the metamorphosis of a mining company with processes that were 100% linear into the number one defender of recycling technical materials. This is the way in which Umicore drastically changed its core business to move from extractive mining to what is known as 'urban mining'. DSM is another mining company that has completely transformed itself to become what it describes as a manufacturer of circular products."
What is waste to some can become an ingredient for others. In other words, there is a different way to close the circle in a way that bypasses waste. For Engie, this meant establishing operations in close proximity to ArcelorMittal in Ghent so that it could transform all steam produced – wasted energy in theory – and feed it back into the electricity network. Another example from Switzerland is IBM, which transforms the hot air produced at its centre in Uitikon into hot water for the local public swimming pool. The company says the volume of heat produced can heat the equivalent of one swimming pool or 80 houses.
To sell or lease? When obsolescence becomes taboo
Product-service systems, whereby a company prefers to sell its product as a service, are now in vogue. This third business model can occur alone or in conjunction with other concepts currently also emerging, such as the shared economy or the hub economy. But they can all operate in isolation, and confusion awaits the uninitiated.
An excellent example are the product-service systems operated by Rolls Royce, which has been producing turbines for aeroplanes and leasing them to airlines since the 1960s. How does Rolls Royce benefit? According to Quentin Denis, they "retain the right to carry out maintenance, allowing them to derive an additional source of revenue and improve performance. By leasing products instead of selling them once, they make their revenue more predictable because aeroplanes fly for decades. What really stands out is that this completely changes their focus on quality since they are concerned to ensure long-term performance in order to avoid breakdowns, for example", Denis continues. Which is one way for companies to turn their backs on built-in obsolescence...
The shared economy frequently illustrates that it can boost revenue insofar as it multiplies the number of users who can access an asset that is under-utilised.
The hub economy: fighting against waste
Using an app to share information about a provider's excess capacity or to allow users (private or professional) to publicise an under-utilised product or service is the concept underpinning a further model based on the hub economy.
Lyft, a resource for sharing lifts in motor cars, was born from the observation that 80% of seats in urban vehicles are empty. Thus the app allows a user who needs transport to identify the vehicle of another user exactly when it is needed. The journey is paid for via the app and costs 20 to 30% less than a taxi, including the commission of 20% paid to Lyft.
The bicycle delivery service Deliveroo is another example. It allows restaurant kitchens to exploit their surplus capacity and to add a new facet to their business – home delivery. This then provides an additional source of revenue despite limited human resources in their restaurants. This idea can also be found in the logistics sector in relation to online hubs set up in order to share lorry capacity and prevent vehicles from returning empty.
Quentin Denis is in favour of the concept, providing its stated aim is to achieve a positive impact for all actors involved: "These hubs operate via a network effect", he says. "This is achieved when there is significant volume, both in terms of offer – service providers, owners of Airbnb properties or Uber drivers, for example – and demand from holidaymakers or passengers. This network effect gives the players a strong competitive advantage that they can potentially abuse to change the rules of the game overnight, increase commission or reduce earnings, for example."
Products with longer lifespans
Components lost to the linear process once worn out can become useful again: this is the principle that motivates the final model. By improving a product, repairing it or making it again we can give it a new life, and the product can then go on to be resold or even personalised. And it is the challenge posed by obsolescence that Google is tackling by reinventing mobile phones that no longer meet the needs of users. By breaking them down into units it can choose to repair only what is broken and reduce costs, for example, and/or upgrade only the functions that are needed. The device lasts longer, and extending its use in this way can also lead to additional revenue. And as the need for resources diminishes, waste and cost amounts reproduce the same sort of curve.
Are you ready to embrace circular thinking? Throw off your shackles and go for it wholeheartedly – but be aware that quick wins closely connected to the product are also a responsible step forward before transformation is possible.
In the future, will we use CO² to build?
It sounds somewhat futuristic, but today building with CO² is possible. Thanks to accelerates carbonation, CO² is used to produce building material. A sustainable footpath in Ghent illustrates how promising this new technology is.
In mid-December, CO2 Value Europe, a think- and do- tank representing the carbon capture and utilisation (CCU) community in Europe, held a webinar about the use of CO2 to create building material. Concrete examples of this sustainable technology were given to illustrate the potential they can offers, especially in the hard-to-abate construction sector. BNP Paribas Fortis and CO2 Value Europe are partners in issues related to financing innovative and sustainable technologies. As an institution, we work hard to promote corporate sustainability.
The second-most polluting industrial sector
As well as being one of the largest in the world, the cement industry's high levels of flue gas emissions also make it one of the most polluting. Cement is a crucial component in concrete, which is vital for the building sector. A sustainable alternative to cement could make a huge difference. One option here is carbonation, also known as CO2 mineralization. While this CCU technology is not yet well known, it has the potential to play a crucial role in mitigating climate change.
Giving nature a helping hand
Carbonation is a natural process, where minerals react with CO2 to create e.g. limestone and dolomite. In nature, this process takes thousands of years, but today, thanks to innovative methods, this time can be cut down to some minutes. This process requires relatively small amounts of energy and can be used to create several different products, including bricks where CO2 is sequestered permanently.
CO2 all the way
The development of CCU technology has accelerated sharply in recent years. We now have cement alternatives that meet the building sector’s technical requirements. There are various ways to store CO2 into construction materials. For example, CO2 can be injected as an alternative to water for hardening cement. What’s more, CO2 can be used to convert mineral waste from steel and mining industries into new products such as aggregates, which can be used as a basis for paving or building blocks.
Good for the planet
Mineralization of CO2 has a significant impact on the environment, because it has an effect at different levels. The annual global reduction in CO2 emissions is estimated to be 250 - 500 million tonnes by 2030 (source CO2 Value Europe).
- CO2 can be captured from flue gas emitted by industrial processes used to create steel, cement, and chemicals, with no need for concentration or treatment.
- CO2 can be captured directly from the atmosphere to create negative carbon emissions, i.e. carbon removal.
- In both cases, the CO2 will be stored permanently in building materials.
- Mineral waste and even construction waste are used together with CO2 to make new building materials, so it reduces landfills and the associated costs.
- Recycling carbon and construction wastes means fewer new natural resources are exploited.
What’s the catch?
New developments are never without their challenges, and this is no exception. Offering a competitive, quality alternative to concrete in a circular economy requires investment and adaptation.
- Factories will have to adapt their plants. Locating them close to significant sources of CO2, like a steel factory, is recommended so the CO2 and the waste fractions do not have to be transported.
- Manufacturing new products takes energy and creates CO2 emissions, even if the products are made using carbon dioxide and waste. It is why renewable energy should be used as much as possible to increase the sustainability of the processes.
- The commercialization of accelerated carbonation technologies is quite recent, and some processes are not optimally equipped for this yet.
- The lack of appropriate regulatory frameworks is also a drawdown to allow for a fast deployment of CCU technologies. This is an area CO2 Value Europe is especially working on.
Despite these challenges, Andre Bardow (Professor of Energy & Process Systems Engineering, ETH Zurich) told us during the webinar that he is convinced CO2 mineralization reduces the CO2 footprint from a life cycle perspective, even more than carbon capture and storage (CCS).
Zero domestic waste
There are already companies producing low-CO2 construction materials around the world. One of them is in Limburg. Orbix, in Genk, has successfully extracted minerals from steel production waste (known as slag) which are used as a basis for eco-friendly concrete stone. Not only is liquid CO2 used to produce concrete stone rather than polluting cement, but residual waste that would otherwise be dumped in landfill is also recycled.
There is a great example of this in Ghent, where Orbix worked with the Flemish research institute VITO to create the Stapsteen project for the city. Visitors can walk on Belgium’s first-ever circular economy footpath in the Leewstraat: 100m2 made entirely from sustainable bricks, saving a full 2 tonnes of CO2.
Do you have sustainability plans for 2021? Our experts at the Sustainable Business Competence Centre can provide advice about innovations like CO2 mineralisation and support your sustainable transition.
Robovision: “Within five years artificial intelligence will have become omnipresent”
Robovision has emerged as the best-known AI player in the Benelux countries. However, this young firm has an even more extensive vision. “Healthcare, agriculture, the environment… within five years artificial intelligence will have become omnipresent,” foresees CEO Jonathan Berte. BNP Paribas Fortis is an important partner in their growth.
Jonathan Berte, who trained as a civil engineer, smiles as he thinks back to the pioneering years at Robovision. “In fact, when I was a kid I had a really analytical mindset. In the scouts and at school I used to keep note of absolutely everything. It was really important for me to collect information. I was a kind of ‘infoholic’. But just gathering information gets you nowhere. That also goes for information that’s just stored on hard disks. The added value comes from using that information efficiently.”
How exactly do you do that at Robovision?
“Technology is evolving at lightning speed. These days just about everybody has a smartphone in their trouser pocket. Apart from anything else, these devices create a great deal of information, so we need to keep up on the algorithmic front and artificial intelligence helps us with that. That’s how we can provide governments, institutions and companies large and small with a platform for automated decision-making on the basis of visual data. In addition we constantly ask ourselves how we can democratise artificial intelligence. So in a way we’re like the Airbnb of artificial intelligence.”
What might that visual data be for example?
“In May, in collaboration with the University of Antwerp and security firm Securitas, we set up a smart camera in a shopping street in order to measure to what extent people were complying with social distancing requirements. This is important information for the decision makers in this country. Of course we don’t have to look through the images ourselves. We get them analysed using a specific type of artificial intelligence – self-teaching algorithms or what are known as neural networks. They’re designed somewhat along the lines of our own brains, though not nearly as complex.”
Which brings us to the fashionable expression ‘deep learning’. Are machines eventually going to make themselves smarter than us humans?
“Oh, that’s already underway at this very moment – in radiology, among other fields, plus also in games. Remember the legendary Go match between South Korean grandmaster Lee Sedol and a computer, which was beautifully represented in the 2017 documentary film AlphaGo? We’re also focusing on deep learning, because neural networks are very efficient at dealing with visual data. However, it will be some time yet before AI can equal a human being in intuition for instance.”
You’ve now evolved from a startup to a scaleup. Where do you want to be in five years’ time?
“The society of tomorrow will be one in which everything will be properly measured and dealt with. For instance, we’re also working in the field of horticulture, where AI can be applied in quality control – to spot fruit with an abnormal shape or colour, say. Lots of agricultural and horticultural businesses have got into difficulties over the last few months because pickers from Eastern Europe weren’t able to enter this country. Those businesses will very probably be investing in AI and automation over the next few years. In these kinds of fields, the coronavirus has taken us to a digital society almost overnight.”
What sort of partners do you need in order to succeed in your aims?
“During our growth from startup to scaleup, BNP Paribas Fortis has always been an important partner. You have really taken a lot of trouble to understand our story. Of course you do need to grasp our plans from a banking standpoint in order to be able to assess the risks. But quite apart from that, I have the feeling that you’re particularly good when it comes to supporting the whole tech and startup scene.”
Sunglasses that can help save the oceans
Yuma Labs makes sunglasses from recycled PET bottles. The Belgian firm has grown from a one-man startup into a company that manufactures items for other brands as well. But can the firm combine growth with sustainability? At BNP Paribas Fortis we certainly think so.
Yuma Labs (originally named YR Yuma) is the brainchild of Sebastiaan de Neubourg, explains his business partner Lenja Doms. She tells us: "Sebastiaan was working as a consultant, but he was itching to set up his own business. His idea was to use a 3D printer to make sunglasses from recycled plastic. He then found out at first hand why no-one had tried this before. Because it proved to be quite a bit harder than expected,” laughs Lenja.
By 2017 Sebastiaan had a workable prototype and he started a crowdfunding campaign for his sustainable sunglasses. It was an immediate hit. However, the project wasn’t first and foremost about achieving successful sales, reveals Lenja. “Sebastiaan saw the sunglasses primarily as a tool for making people aware of the basic principles of the circular economy. There’s no such thing as waste. A used Polyethylene terephthalate (PET) bottle provides the raw material for a new product, such as a pair of sunglasses.” And to complete the circle, the customer is encouraged to trade the sunglasses back in at the end of their life, in exchange for a new pair at an attractive discount.
Sustainable manufacturing, as Yuma Labs does it, inevitably means that the final product is more expensive. “Fully twice as expensive,” Lenja points out, explaining: “We certainly don’t want to see the circular economy pigeon-holed as the province of the elite. We already take account of the entire life-cycle of a product, and we take responsibility for the recycling and re-use of the materials. And let’s be quite clear about this: that’s more costly than just putting a product on the market without worrying about what happens to it later.”
Aiming for growth
In summer 2019, Lenja Doms and Ronald Duchateau came on board the Yuma team. This provided an opportunity to broaden the focus and look further than the consumer market. This month, Yuma Labs announced a collaborative project with a major fashion company. This upscaling will enable Yuma Labs to reach out to a much larger audience.
A good mix
In order to grow, a business needs financial resources. Yuma Labs has looked into quite a number of possible solutions, says Lenja. “These days there are a lot of initiatives designed to support sustainable businesses – from banks, the government and private investors. We’ve always tried to find the right balance between our own capital and external finance, and to achieve a good mix of different forms of finance between capital, grants and loans.”
Lenja has a golden tip for other businesspeople in the circular economy: "All too often I observe that the economic side of the story is neglected because companies keep on trying to find the perfect solution or the perfect product. There’s no sense in that. You shouldn’t try to be whiter than white.”
Creating added value
At BNP Paribas Fortis, Maxime Prové is the Account Manager for Yuma Labs. He endorses Lenja Doms’ view on this. “Entrepreneurs who set out to do sustainable or social business must also have a desire to create added value, otherwise the business won’t last,” Maxime points out, underlining: “You can’t pursue a sustainable, environmental or social business model unless it’s underpinned by a profit-making scenario. That’s the only way you’ll be able to grow, hire more people and make a greater impact.”
Photo: Karel Hemerijckx
Scale-up concludes mega contract in the midst of the coronavirus crisis
The Antwerp-based scale-up IPEE transforms ordinary toilets into innovative products. BNP Paribas Fortis is more than just the financial partner. IPEE have already come into contact with the right people via the bank’s network several times.
“The traditional urinal has no brain. The infrared eye simply detects that someone is standing in front of the urinal. The result? A lot of wasted water and misery”, says Bart Geraets, who founded IPEE in 2012 together with Jan Schoeters.
The scale-up devised new measuring technology that makes it possible to detect through the ceramic of a urinal when someone is urinating or when the urinal is blocked. With this innovative technology, the scale-up designed urinals that use half as much water and toilets that can be operated without touching them.
“IPEE is an atypical scale-up that innovates in a sector where little has changed in the past few decades”, says Conchita Vercauteren, relationship manager at the BNP Paribas Fortis Innovation Hub.
Jan Schoeters: “At first we mainly focused on durability. But we soon felt that with non-residential applications, the potential water saving is subordinate to the operational aspect. We had to be able to offer added value for each stakeholder in the purchasing process.”
We opted for sleek designs to appeal to architects and end users. The simple installation attracts fitters and maintenance people see the advantages of the sleek design - that is easy to clean - and toilets that do not overflow.
Until 2015, Schoeters and Geraets, along with Victor Claes, an expert in measuring methods and originator of the IPEE technology, put their energy into product development and market research. The financing came mainly from money that they collected in their network of friends, fools and family.
They had to go elsewhere to obtain the funds for production and marketing. Geraets: “We had a product, but it wasn’t ready to sell. To take that step, we needed investors.”
Looking for new investors was a challenge. Schoeters: “We aren’t software developers and we don’t work in a sexy sector. So we miss out with a large target group of investors.”
The young scale-up attracted the attention of Ronald Kerckhaert, who had sold his successful company, Sax Sanitair, at the end of 2015. “He pushed us to think big, more than we dared ourselves. And he never headed for an exit. His express goal was to put our product on the world market”, says Schoeters.
IPEE has achieved impressive growth since then. The product range was expanded and new sectors were broached: educational institutes, office buildings and hospitals. The technology is now used by Kinepolis, Texaco, Schiphol and Changi Airport (Singapore).
“We very soon turned to Asia, because new technology is embraced more quickly there”, Geraets explains. The IPEE technology is distributed in Singapore - where the scale-up has its own sales office - China, Thailand and Vietnam, among other places. About half the turnover comes from abroad, although the coronavirus crisis will leave its mark this year.
“My biggest headache is achieving healthy growth”, says Bart Geraets. One advantage for IPEE is that in coronavirus times, hygiene stands high on the agenda. The scale-up's touchless toilet facilities meet that demand.
At the same time, the shortage of water and the need to use water sparingly is very topical. Geraets: “We notice that in these strange times we are gaining an even bigger foothold. In the midst of the coronavirus crisis we concluded a contract with the world’s biggest manufacture of toilet facilities. Now it’s a matter of further professionalising our business, the personnel policy and the marketing.”
The company’s main bank is an important partner here. Schoeters: “It is more than just a financial organisation. We have already come into contact with the right people via the bank’s network several times. Our bank feels more like a supporter that is also putting its weight behind our story.”