A culture of innovation is critical to develop the technologies and processes required to reshape business models, design and production methods, and mechanisms for the reuse and recycling of materials. It is also vital to generate the new policies, regulations and financing structures necessary to foster a circular economy.
While these individual pockets of innovation will matter, given the large interdependencies required to deliver the circular economy a broad systems approach is required as well as a willingness to review the entire production paradigm, including at city level.
New York plays host to a broad range of talents and technology-savvy markets. High volumes of materials pass through the city round the clock. This combination of factors makes it a potential incubator of innovative circular solutions at scale. Cities can facilitate innovation because of the proximity of stakeholder groups, making it easier to share success stories across sectors and to incubate ideas. Events can be a good forum for sharing, but so can innovation hubs and public–private partnerships.
Designed through a collaborative process that began in late 2016, the NYC Zero Waste Design Guidelines42 are both a tool and an inspiration for those who plan, construct and manage buildings, streets and neighborhoods. They educate stakeholders about the role of design in managing waste materials and recognizing waste as a design flaw.
In 2018 NYCEDC and New Lab launched the Circular City, a program that tests solutions designed to address the increasingly complex and urgent challenges facing cities. This year, the program will feature technology pilots that support NYC’s transition to the circular economy.
Most innovations will require financing to become viable and achieve scale. This is typically beyond the remit of traditional banks because of the non-traditional revenue models used. This therefore requires innovative forms of finance.
Achieving meaningful scale is a typical barrier for start-ups with a proven concept, which is where accelerators can provide invaluable access to advice, finance and markets.
Closed Loop Partners’ Center for the Circular Economy’s Circular Business Accelerator brings together industry experts, academic researchers and entrepreneurs to develop and scale circular solutions. London has also created a Circular Economy Accelerator to support circular start-ups in growing and commercializing their innovations, while the European Commission is developing “Innovation Deals” to support circular innovation and address regulatory obstacles to that innovation.43, 44
Technology innovation will also play a significant role in enabling the circular economy. Access to data will help consumers and businesses understand where products are being sourced and how they are being used, while blockchain technology can enhance supply chain transparency and reduce the volume of waste sent to landfill.
Cisco Systems’ Connected Goods for Circularity Showcase demonstrates how technology can be used to create data assets, scale circular value chains and engage customers. It features three main elements.
1 Technology – making goods uniquely identifiable (and thus traceable) through their life cycles so they can be returned for refill or brought back for their next life.
2 Business – fostering an ecosystem of partners that touches every step in a product’s life cycle.
3 Human – providing a kinesthetic experience for the people who interact with the products, keeping them engaged throughout that product’s life cycle.
Business model innovation is arguably one of the most important developments required to achieve the transition to the circular economy. Accenture has identified five specific business models that will help deliver this change.45
Circular supplies – provide renewable energy, bio-based or fully recyclable input material to replace single-life cycle inputs.
Resource recovery – recover useful resources/energy out of disposed products or by-products.
Product life extension – extend the working life cycle of products and components by repairing, upgrading and reselling.
Sharing platforms – enable increased utilization rate of products by making possible shared use/access/ownership.
“Product-as-service” – offer product access and retain ownership to internalize benefits of circular resource productivity.
One of the most exciting potential developments is the transition from a product-based model (selling goods as the single interaction between producer and consumer) to one based on services (leasing a service as a continuous relationship). This can deliver a significant improvement in resource efficiency; doubling the average use of a product by providing it as a service can reduce resource pressures and carbon footprint by half, if not more.46
There is a strong business case supporting this transition. In the face of commoditization and increasing competitive pressure, services can generate revenue growth for business by:
offering a stable and recurring revenue stream stemming from activities such as support, maintenance and repair, which can extend well beyond the useful life of a product and generate high profit margins;
facilitating deeper relationships with customers due to longer contractual agreements;
providing manufacturers with a better idea about their customers’ needs and the conditions under which their products operate, potentially leading to circumstances where they can customize their offerings; and
offering manufacturers more accurate feedback about the performance of their products in the field, which can lead to product improvements and redesigns.47
IKEA, the world’s largest furniture retailer, is testing furniture rental models and has had early success with students and short-term expatriate workers, according to chief executive Jesper Brodin. Volvo Cars has started a subscription service that covers everything related to a vehicle except fuel, and where customers can choose to change cars after 12 months. Elsewhere, Lego is exploring the introduction of a rental service for its building bricks.48
44
European Commission, “Identifying barriers to innovation” https://ec.europa.eu/info/research-and-innovation/law-and-regulations/innovation-friendly-legislation/identifying-barriers_en#:~:text=Innovation%20Deals%20help%20innovators%20who,aims%2C%20news%20and%20contact%20details.
45
Accenture, Circular Advantage: Innovative business models and technologies to create value in a world without limits to growth (2014)
46
Hollinger, D., and Milne, R., “Lego looks at putting together potential rental service,” Financial Times (October 14, 2019)
47
Bellos, I., and Ferguson, M., “Moving from a product-based economy to a service-based economy for a more sustainable future,” chapter from Sustainable Supply Chains (2015). Available online via: https://mason.gmu.edu/~ibellos/bfchapter.pdf
48
Hollinger, D., and Milne, R., “Lego looks at putting together potential rental service,” Financial Times (October 14, 2019)
