Q&A: Saving Money With the Circular Economy
By participating in a circular economy, a company can cut costs by acquiring cheaper raw materials, disposing of less waste, and using less energy. A circular economy redirects potential waste to form new inputs and minimizes necessary resources for production. It is manufacturing with a mindset of restoration.
In MAPI’s July 12 webinar, Andy Mangan, executive director of the U.S. Business Council for Sustainable Development, will reveal results of the BCSD’s Materials Marketplace pilot study and explain how you can take advantage of the circular economy regardless of where you are in your sustainability journey.
The 2015 pilot project aimed to test the practicality of a large-scale materials matching program. The 23 participating companies uploaded 2.4 million tons of materials to the marketplace and identified 68 possible matches. The organization’s long-term goal is to expand the Materials Marketplace to a much, much larger audience. In January 2016, the marketplace won the World Economic Forum’s Circular Digital Disruptor Award.
In this interview, Andy describes how the Materials Marketplace is becoming a “learning machine,” notes what findings surprised him, and provides advice to companies looking to start getting serious about resource efficiency and cross-industry innovation. To learn more about the benefits of participating in the circular economy, register for our July 12 webinar, The Materials Marketplace: Building Momentum for a Circular Economy.
Based on the data you’ve collected from the pilot project, how do you want to adapt the marketplace’s structure or features?
We are turning the Materials Marketplace into a learning machine that adapts our knowledge base digitally and also creates bridges to flow materials data from companies directly into the database. We are organizing the platform to get innovation out the door quickly using cloud capabilities and shared feedback loops from users. We’re launching this summer with the U.S. Materials Marketplace and a new marketplace in Turkey financed by the European Bank for Reconstruction and Development.
We’re going to take the things that have worked and digitize the software. We’ll be continuously learning and improving based on what users are telling us. You won’t see version 3.0 because it will be continuously upgraded. As we’re building, we’ll have to charge small participation fees. But the goal is to make it free for participating companies with the whole operation funded through fees assessed on successful transactions.
Did any of the opportunities for by-product synergy surprise you?
Yes, many. No one really knows how all of these industries can work together, in part because companies don’t share materials and waste data outside the company. When that sharing does happen, there are continuous surprises and new possibilities emerge. A recent example is the steel window blanks that are stamped out of auto bodies during the early automating process. They’re now being used in prototypes designed for a range of furniture offerings. Architects are looking at them as building skins or architectural pieces. Perfect, abundant steel, reused instead of remelted.
Another factor we’ve recognized is the human factor, something unpredictable that must be acknowledged and addressed, which means the marketplace can’t be totally automated at this stage. We have found great cross-industry connections—reusing spent caustic from petroleum processing in Kraft papermaking is one example—that have produced millions of dollars in revenue and savings. We discovered this great reuse 15 years ago and at the time thought we would replicate it wherever similar businesses were in close proximity, but that’s not what happened. We had to engage with people in different parts of the organization, work through the various arguments and obstacles, get them on board, and move ahead at a comfortable pace, even when there are millions of dollars on the table. These kinds of systems changes take time, patience, and corporate courage.
Your goal is to reach 100 participating companies by the end of the year. What’s your recruiting process?
We’re talking to influential organizations and telling the story of cross-industry innovation through material information sharing. We’re hosting webinars to explain the process and outcomes. We’re also using examples, case studies, collaborating companies, and software developments to help people connect with what we are doing, why it’s important, and how it works. And we are talking to interested government and policy leaders, including the U.S. EPA, several state governments, World Bank, European Bank, and others interested in the marketplace as a pathway to sustainable economic development.
We started the U.S. Materials Marketplace with a couple of great partners in the World Business Council for Sustainable Development and the Corporate Eco Forum, but to scale it we need to connect with more great organizations like MAPI and its members.
The hurdle of getting more participation is key since the marketplace concept doesn’t reach its full potential without a robust, broad, and dynamic group of streams involved.
What function within companies seems best suited to be the marketplace liaison?
People responsible for material flows (if they exist in a company), the sustainability manager, or someone in purchasing or supply chain. Really, it’s the person with the passion and belief in the concept and its values who makes it work. Ultimately, a company’s sustainability leader can talk to her counterpart in another company, but to make it happen many people in those companies have to get involved—marketing, purchasing, regulatory, and supply chain. And of course, it makes a difference when you have strong support from the top.
What useful feedback did you get from participating companies?
They wanted more companies involved to provide more opportunities. They recognized that understanding each other’s operations more deeply produced unexpected prospects and they wanted more of that diversity. We also heard the need for more engagement to help facilitate company-to-company involvement, examples, and case studies. Some companies wanted help doing the deep analysis of their materials. We have that capability—to analyze materials, develop potential opportunities, test them, and perform a full analysis where needed.
What do you think is keeping companies from making their supply chains more sustainable?
Companies are doing a good job focusing on sustainable supply chains, but it’s sometimes hard to connect outside of the company and throughout the value chain. Among the opportunities the marketplace offers is the ability to bring groups of companies together to explore possible solutions.
Marketplace participants can connect with others in their value chains as well as logistics companies to pursue these challenges. The loss of moving air instead of product is a huge focus of logistics firms, so they are interested in finding ways to fill the air.
What advice do you have for a company that is looking to get serious about resource efficiency?
A good first step is an assessment of the materials flowing in and out of the company’s operations. If the company has multiple business units, it would be worth looking across those units to see if they are interacting and sharing information about the use of materials and logistics. Companies have asked us to deploy the marketplace software across their various business units so they can identify and pursue internal synergies first. That’s a pretty good way to get moving toward working with other companies.
Beyond resource efficiency, what aspect of sustainability deserves more attention within manufacturing?
Another critical sustainability aspect for manufacturing is water. Much of manufacturing depends on water and in much of the world there's either too much or too little. Water is incredibly complex, with issues of quantity, quality, access, and rights. It's the ultimate sustainability issue, combining environmental, social, and economic impacts. We're seeing the real value of getting manufacturers in the same room with the wide range of water stakeholders, including agriculture, other industry, communities, government, NGOs, and academia. In our Louisiana Water Synergy Project, we've seen that kind of stakeholder collaboration build trust, reduce conflict, and generate truly innovative solutions.
We’re working on material reuse as a sound carbon reduction strategy. The energy-saving value and related carbon-reduction value of reuse vs. new materials isn’t in dispute. But getting credit for the carbon reduction is not on the table yet. When we looked for a scientific trail showing how and why this could be done, we didn’t find it. So the business council is working on a scientific paper that aims to present how to measure the energy savings using lifecycle assessment techniques and other methods as well as how to verify the savings. Given the Paris Agreement’s objective of holding global temperature increases to two degrees or less, there’s a huge need for more ways to cut carbon and to get credit for it. And it would unleash unprecedented creative solutions.
Is your company ready to save money on materials, energy, and waste costs by moving from a “disposable” to “restorative” approach? Join Andy for MAPI’s July 12 webinar to learn more about the circular economy and how your organization can participate.