Foreword

The Nordic governments and the Nordic Council of Ministers have set high climate targets for the Nordic countries and companies are important players and key actors in reaching the climate goals. Nordic Innovation is an agency for the Nordic governments and works to promote sustainable development through supporting entrepreneurship, innovation and competitiveness among Nordic companies.

The green transition is coming fast, and all companies need to adapt to the new reality. One way to do it, is to join the circular economy and implement a circular business model. A circular business model can help you both retain and create new values, for you and for your customers, thus giving you a competitive advantage. There are many different models that can work for your company.

Nordic Innovation has made this circular playbook to show you some of them. The aim is to enable manufacturing companies and individuals to start the circular journey and to serve as inspiration on how to do it. You will find different circular business models, technologies and tips and examples. The playbook is made with the best experts, together with Nordic companies and we hope you will find it useful.

I would like to thank Accenture and Sitra for their excellent cooperation regarding this playbook. I would also like to thank the national innovation organisations in the Nordics (Vinnova, The Danish Business Authorities, Innovation Norway, Business Finland, Innovation Centre Iceland and Rannis) for all their input to the playbook and the company workshops we have run.

Oslo, 15 March 2021

Nordic Innovation
Svein Berg, Managing Director

Introduction

This playbook will help you:

Define general and clear business benefits from circular adoption
Develop the right operating models to realize full benefit
Establish the means to drive change

This playbook is tailored to companies in the Nordic manufacturing industry, giving examples for the following five sub-sectors:

→ Machinery & equipment
→ Maritime
→ Energy
→ Transportation
→ Construction

This playbook can be leveraged by companies that want to

Better meet customer expectations and deliver customer outcomes
Enable outcome-oriented solutions and new levels of efficiency through technology and digitalization
Improve resource utilization and mitigate risk from regulatory, investor and societal pressures

The playbook calls for action by

→ CHAPTER 1 Describing the rationale for why the circular economy is relevant
→ CHAPTER 2 & → CHAPTER 6 Identifying circular business models with highest value potential per sub sector
→ CHAPTER 3 & → CHAPTER 4 Outlining required organizational and operational changes
→ CHAPTER 5 Providing a blueprint of a transformation journey for companies to achieve circular advantage

SORTCUTS TO PLAYBOOK CONTENT:

Guidance for companies on how to achieve a step-change towards the circular economy and successfully make the transition

→ CHAPTER 1 Why is the circular economy relevant? Rationale for Nordic manufacturing companies to engage in the circular economy

→ CHAPTER 2 What concrete opportunities exist? Current state analysis and circular opportunities for the manufacturing industry

→ CHAPTER 3 Which capabilities are required? Introduction to organisational requirements for circular business models

→ CHAPTER 4 Which technologies can support? Overview of technologies that can enable circularity

→ CHAPTER 5 How to design the transformation journey? Guidance on key steps towards circular advantage and how to overcome typical barriers

→ CHAPTER 6 Industry deep dives: Machinery & equipment, maritime, energy, transportation and construction

→ SHORTCUTS TO PLAYBOOK TOOLS

A set of tools complement the playbook, and help you get started with your circular journey

Business model development toolkit: Set of exercises for identifying inefficiencies and customer pain points, assessing relevance of circular business models, and prioritising them. Chapter 1, 2 and 6
Business model canvas: Template for crystallising your circular business model. Chapters 1-5
Value case tool: Tool for calculating high-level business case for circular business models. Chapter 2
Capability maturity assessment: Tool for assessing your company’s maturity in circular capabilities. Chapter 3
Technology maturity assessment: Tool for assessing your company’s maturity in technologies enabling the circular economy. Chapter 4
Culture gap analysis: Tool for analysing how circular your company culture is. Chapter 5
Ecosystem partner identification: Tool for identifying ecosystem partners to support your circular business idea Chapter 5
Funding requirement analysis: Tool for reflecting on funding requirements and required activities to secure funding for your circular idea. Chapter 5
Roadmap development: Tool to support you in planning your circular transformation journey. Chapter 5

The playbook and supporting tools will provide you with in-depth understanding on how to achieve circular advantage

The playbook consists of 6 chapters and supporting tools for identifying company specific circular opportunities

→ 1. Why the circular economy?

Burning platform for the circular economy

Inefficiencies of the linear value chain
Drivers of the circular economy
Leading examples

→ 2. What opportunities exist?

Circular opportunities for manufacturing industry

Current state analysis
Circular business models
Value benefits

→ 3. Which capabilities are required?

9 circular capabilities

Detailed description
Required know-how
Recommended approach
Leading practices

→ 4. Which technologies can support?

19 technologies enabling circular business models

Detailed descriptions
Circular relevance
Assessment parameters
Risk assessment

→ 5. How to design the transformation journey?

Circular transformation journey and roadmap

Envision and plan
Deliver and adapt
Barriers incl. culture, ecosystem collaboration, finance

→ 6. Industry deep dives

Current state analysis and circular opportunities for

Machinery & Equipment
Maritime
Energy
Transportation
Construction

+ Supporting tools, including for example value case tool, business model canvas, capability gap assessment tool, etc. → READ MORE

While reading the playbook, use the business model canvas to start developing your circular business opportunities

What is a business model canvas?
The business model canvas is a tool that helps you to crystallize your circular business idea by reflecting on its key building blocks, including your value proposition, infrastructure, customers and financing.

How to use it?
Chapter 1–5 supports you with filling in the canvas. We also recommend using the tool and questions with your team to support discussion and ideation.

“The Nordic prime ministers have a vision of the Nordics being the most integrated and sustainable region by 2030. One of the action areas is the adoption of circular business models by Nordic companies. The playbook provides companies with the tools to do just that. I hope it will be widely used by companies in the Nordics to enhance their competitiveness and value creation by going from a linear value chain to a circular ecosystem. It also builds on the Nordic common strongholds like access to raw materials, a digital and highly educated population, and the ability to adapt. In this lies great potential for being the most competitive and circular companies in the world. After all, if we don’t do it, someone else will.”

Marthe Haugland, Senior Innovation Advisor, Nordic Innovation

“We have an urgency to change our economy to respond to climate change, decreasing biodiversity, the dwindling availability of resources and waste-related problems. A big change in industrial culture, mindset, capabilities and behavior is needed; Shifting the focus from production to the customer and maximizing the value of the existing products with data and new technologies, while decoupling value creation from resource consumption. Not only is the circular approach financially very viable, it is realistically the only way to be able to operate in the future. This Playbook is a manual for change. It gives you tools to build up your sustainable business models and design the transformation journey from industrial value-chains to cross sectoral ecosystems. By taking steps towards circular business you gain competitive advantage, attract investors and create sense of purpose.”

Jyri Arponen, Senior Lead, Business Development, Circular and Data Economy, The Finnish Innovation Fund Sitra

“Achieving a circular economy requires a fundamental shift in how companies operate and generate revenues. This playbook and tools, provide a great starting point for companies to assess, test and innovate together with peers and ecosystem partners to drive lasting change. I’m thrilled to see how our network of companies and the number of innovations keep expanding every year.”

Anna Belvén Töndevold, Nordic Sustainability Strategy Lead, Accenture Strategy

Executive Summary

Complementary drivers accelerate the shift towards enhanced sustainability and the circular economy in the Nordics

Customer centricity
Better customer values can be delivered through offering outcomes instead of selling product. Profit is generated by delivering solutions that fit specific customer needs, minimizing inefficiencies and improving consumer experience.

Sustainability
Our overuse of natural resources drives increased regulatory pressure, investments are shifting towards responsible businesses and businesses raise supplier requirements.

Technology
Technology enables new innovative efficiencies and drives new communication channels, processes and ways of working, and ultimately enables better use of resources and economic growth.

Source: Accenture. → Appendix 2 for more details

The circular economy is about turning inefficiencies in linear value chains into business value

1. UNSUSTAINABLE MATERIALES

Material and energy that cannot be continually regenerated – for example, direct and indirect materials are not renewable or bio-based

2. UNDERUTILISED CAPACITIES

Underutilised or unused products and assets – for example, products are not operating full hours or full functionality is not useful

3. PREMATURE PRODUCT LIVES

Products are not used to fullest possible working life – for example due to new models and features or lack of repair and maintenance

4. WASTED END-OF-LIFE VALUE

Valuable components, materials and energy are not recovered at disposal – for example, not recycled or recovered at end of life

5. UNEXPLOITED CUSTOMER ENGAGEMENTS

Sales organisation focus on selling functionality of products rather than addressing the customer problem – for example, missing opportunities to engage customers throughout the product life-cycle to offer additional services and add-on sales

– for example, missing opportunities to engage customers throughout the product life-cycle to offer additional services and add-on sales

Putting the customer at the centre enables companies to focus on the value adding activities.

Source: Accenture. → Appendix 2 for more details

By adopting sustainable and circular business models, companies can create value in four dimensions

Brand enhancement and risk reduction are typically achieved in the long-term, therefore companies need to take a longer time horizon into account when making investments in circular business models.

Source: Company websites, Accenture. → Appendix 2 for more details

Five business models reduce the inefficiencies and create value for companies

Source: Accenture. → Appendix 2 for more details

Did you know? On the Circular Economy site, there is an exercise package called Business model development toolkit, where you can make the same analysis for your company → READ MORE

Current adoption level of circular models in the Nordic manufacturing industry is highest within circular inputs and product use extension


BUSINESS MODEL	SUB-MODEL	ADAPTION LEVEL	COMMENT
CIRCULAR INPUTS	Build to last	Very high	Products are designed for long lifecycles – however, use of modular design principles is not very common yet, but being explored
CIRCULAR INPUTS	Circular suppliers	High	Input materials are mostly recyclable (e.g. steel), while use of sustainable indirect materials, such as renewable energy, varies a lot
SHARING PLATFORM	Share	Low	Sharing platforms are seen as challenging to implement for some products, as many of the products are fixed installations or have a high degree of customization
PRODUCT AS A SERVICE	Product as a service	Medium	Only a few companies have adopted the model, while many are currently exploring it. Some companies are finding it challenging to find an investment model and achieve a win-win situation for both customers and the company
PRODUCT AS A SERVICE	Performance as a service	Low	Many companies are currently exploring the model, and some have never heard of it
PRODUCT USE EXTENSION	Repairs & Maintain	Mdium	Most companies provide at least some repair and maintenance services. However, some report that they are not leveraging their full potential
PRODUCT USE EXTENSION	Upgrade	High	Many companies are already applying the model, and most others are exploring how to apply it
	Resell	Medium	Companies are not seeing reselling as a relevant opportunity for products that have very long lifecycles
	Remanufacture	Low	Remanufacturing is not seen as relevant for products with very long lifecycles
RESSOURCE RECOVERY	Recycle / upcycle	Low	Companies find it challenging to ensure recycling of products, e.g. because products might be scattered around the world, the products are not built for circularity and it is difficult to separate materials and even know the product composition
RESSOURCE RECOVERY	Return	Medium	Most companies recycle some of their manufacturing waste

Source: Analysis based on output from Nordic Circular Industries workshops. → More detailed information on the output in Appendix 1

Did you know? On the Circular Economy site, there is an exercise package called Business model development toolkit, where you can analyze the relevance of each circular business model for your company. → READ MORE

Moving from a linear to a circular value chain requires different capabilities

Source: Adapted from earlier Accenture publication. → Appendix 2 for more details

Digital, physical and biological technologies are developing at rapid pace, enabling circularity

TYPE OF TECHNOLOGY

Digital: Technologies based on computer sciences, electronics and communication which make use of increasing information intensity and connectedness of physical resources

Physical: Technologies based on basic property of materials, energy, forces of nature and their interaction

Biological: Technologies based on biology, aspects including but not limited to biological systems, living organisms, or derivatives thereof, to make products and processes for specific use

Sources: 1. IEEE Engineering360 / 2. Bank of America, Merrill Lynch / 3. International Data Corporation (IDC), Accenture, → Appendix 2 for more details

Five steps are critical to envision and plan a successful transformation

KEY ELEMENT NO. 1: “ENVISION AND PLAN”


	①	②	③	④	⑤
	Why: Define for the circular economvisiony	What: Screen opportunities and size value	Assess capability gaps	Assess technology gaps	How: Design roadmap	Start first pilot
Key activities	1.1 Vision Define aspirational description of achievements in mid- and long-term future	2.1 Business models Assess potential of circular business models to address inefficiencies	3.1 Capability gap assessment Understand and analyse internal capabilities	4.1 Technology assessment Evaluate opportunities of technologies	5.1 Barriers Identify potential internal and external implementation barriers and activities to mitigate them
		2.2 Value proposition Develop high level description of the value proposition for new products and services			5.2 Implementation Define the roadmap to implement target business model
		2.3 Value case Assess potential revenues, costs and investments for selected business models
	Chapter 1	Chapter 2	Chapter 3	Chapter 4	Chapter 5

Did you know? On the Circular Economy site, there is a technology maturity assessment, with which you can assess the maturity of your company in technologies enabling circularity and identify actions to develop it. → READ MORE

Five steps are critical to envision and plan a successful transformation

Key element no. 1: “envision and plan”

KEY ACTIVITIES

1. Why: Define vision for the circular economy → CHAPTER 1

Vision: Define aspirational description of achievements in mid- and long-term future

2. What: Screen opportunities and size value → CHAPTER 2

Business models: Assess potential of circular business models to address inefficiencies
Value proposition: Develop high level description of the value proposition for new products and services
Value case: Assess potential revenues, costs and investments for selected business models

3. Assess capability gaps → CHAPTER 3

Capability gap assessment: Understand and analyse internal capabilities

4. Assess technology gaps → CHAPTER 4

Technology assessment: Evaluate opportunities of technologies

5. How: Design roadmap → CHAPTER 5

Barriers: Identify potential internal and external implementation barriers and activities to mitigate the
Implementation: Define the roadmap to implement target business model

START FIRST PILOT!

Why is the circular economy relevant?

Rationale for Nordic manufacturing companies to engage in the circular economy

1

CHAPTER SUMMARY: WHY IS THE CIRCULAR ECONOMY RELEVANT?

The circular economy is relevant as it offers companies the opportunity to turn inefficiencies in linear value chains into business value
These inefficiencies go beyond production waste, focusing on underutilised capacities, premature product lives, unsustainable materials, wasted end-of-life value and unexploited customer engagements
Three drivers underpin the shift towards circular: the trend of increased customer-centricity, sustainability and enabling technologies
Global and Nordic companies have already started to successfully address inefficiencies through circular principles and are unlocking value from waste

SHORTCUTS TO CONTENT IN THIS CHAPTER

→ The circular economy is about turning inefficiencies in linear value chains into business value

→ Circular business models can further strengthen customer relationships by addressing frequent customer pain points

→ Complementary drivers accelerate the shift towards enhanced sustainability and the circular economy in the Nordics

→ Better customer values can be delivered through offering outcomes instead of selling products

→ Our overuse of natural resources drives regulators, investors and companies towards sustainability

→ Technologies are developing at a rapid pace and enable companies to deliver on the circular economy objectives

→ Leading companies from the manufacturing industry have already started addressing inefficiencies using circular principles

→ Digital disruptors can take over customer relationships by leveraging the customer data they have available

→ Nordic technology adaptors are already successfully using the three drivers to generate value and fight disruptors

→ By adopting sustainable and circular business models, companies can create value in four dimensions

→ The value of a circular initiative is driven by two levers, defined as either value migration or value addition

→ Why sustainability and circularity? Business model canvas

THIS CHAPTER WILL HELP YOU TO:

Understand why the circular economy offers an advantage compared to the linear value chain in terms of addressing inefficiencies and untapped value potential
Learn why now is a good time to shift from linear to circular business

The circular economy is about turning inefficiencies in linear value chains into business value

1. UNSUSTAINABLE MATERIALES

Material and energy that cannot be continually regenerated – for example, direct and indirect materials are not renewable or bio-based

2. UNDERUTILISED CAPACITIES

Underutilised or unused products and assets – for example, products are not operating full hours or full functionality is not useful

3. PREMATURE PRODUCT LIVES

Products are not used to fullest possible working life – for example due to new models and features or lack of repair and maintenance

4. WASTED END-OF-LIFE VALUE

Valuable components, materials and energy are not recovered at disposal – for example, not recycled or recovered at end of life

5. UNEXPLOITED CUSTOMER ENGAGEMENTS

Sales organisation focus on selling functionality of products rather than addressing the customer problem – for example, missing opportunities to engage customers throughout the product life-cycle to offer additional services and add-on sales

– for example, missing opportunities to engage customers throughout the product life-cycle to offer additional services and add-on sales

Putting the customer at the centre enables companies to focus on the value adding activities.

Source: Accenture. → Appendix 2 for more details

Circular business models can further strengthen customer relationships by addressing frequent customer pain points

Complementary drivers accelerate the shift towards enhanced sustainability and the circular economy in the Nordics

Customer centricity
Better customer values can be delivered through offering outcomes instead of selling product. Profit is generated by delivering solutions that fit specific customer needs, minimizing inefficiencies and improving consumer experience.

Sustainability
Our overuse of natural resources drives increased regulatory pressure, investments are shifting towards responsible businesses and businesses raise supplier requirements.

Technology
Technology enables new innovative efficiencies and drives new communication channels, processes and ways of working, and ultimately enables better use of resources and economic growth.

Source: Accenture. → Appendix 2 for more details

Better customer values can be delivered through offering outcomes instead of selling products

From selling products ...
Profit is generated by selling as many products as possible, fuelling inefficiencies along the value chain

From Kongsberg selling engines…

… to offering outcomes
Profit is generated by delivering solutions that fit specific customer needs, minimising inefficiencies and increasing consumer experience

… to Kongsberg selling “Power by the hour” to customers for a fixed charge per hour of operation, per ship. Kongsberg offers planned maintenance and monitoring services for the equipment aboard from on-shore with the help of sensors

Source: Company website

Our overuse of natural resources drives regulators, investors and companies towards sustainability

Source: 1. Accenture. → Appendix 2 for more details / 2. European Commission / 3. CNN / 4. CDP

Regulations are being put into place to drive transition – The European Green Deal playing a key role locally

European Green Deal

Roadmap for making EU the first climate-neutral continent by 2050 through actions that

Boost the efficient use of resources by moving to a clean, circular economy
Restore biodiversity and cut pollution

Leverages all policy levers, including regulation and standardization, investment and innovation, national reforms, dialogue with social partners and international cooperation to boost the transition to a more sustainable future.

The new Circular Economy Action Plan supports companies to tap into new sustainable business opportunities

CIRCULAR ECONOMY ACTION PLAN

Set of initiatives to establish a coherent product policy framework:

Make sustainable products, services and business models the norm in the EU
Transform consumption patterns so that no waste is produced in the first place
Measures to reduce waste and ensure that there is a functioning market for high quality secondary raw materials

SUSTAINABLE PRODUCT POLICY FRAMEWORK

Designing sustainable products

A common set of design principles for all products
Includes principles as extending product lifecycles, increasing energy and resource efficiency, incentivizing product-as-a-service, promoting digitalization of product information etc.

Empowering consumers

Revision of the EU consumer law to ensure that consumers receive trustworthy and relevant information on products at the point of sale, including information on their lifespan and on the availability of repair services, spare parts and repair manuals

Circularity in production processes

Facilitating industrial symbiosis by developing an industry-led reporting and certification system and enabling the implementation of industrial symbiosis
Promoting the use of digital technologies for tracking, tracing and mapping of resources

Technologies are developing at a rapid pace and enable companies to deliver on the circular economy objectives

Source: 1. IEEE Engineering360 / 2. Bank of America, Merrill Lynch / 3. International Data Corporation (IDC), Accenture
→ Appendix 2 for more details

Leading companies from the manufacturing industry have already started addressing inefficiencies using circular principles


INEFFICIENCY	ILLUSTRATIVE EXAMPLES FROM MANUFACTURING COMPANIES
Unsustainable materials: Volvo, Wärtsilä	Volvo uses one third recycled materials in new trucks and designs them for recycling so that 90% can be recycled Wärtsilä applies a modular engine design to enable increased commonality and backward compatibility of parts
Underutilised capacities: eRent	eRent offers a platform for digital sharing and tracking of machines, devices and other goods
Premature product lives: Bosch, Schneider Electric, Konecranes	Bosch operates remanufacturing chains for high-quality components to ensure a high fraction stays in its loops The Schneider Electric Circuit Breaker Retrofit-program modernises and updates electrical distribution centres Konecranes provides a Lifecycle Care-program that includes consultation services, modernisation & maintenance
Wasted end-of-life value: Netlet, A.P. Møller - Mærsk	Netlet collects surplus material from construction sites and sell it discounted through platform and stores. In that way Netlet works as an enabler for construction companies, contributing to reducing waste from the construction industry Maersk introduced a Cradle-to-Cradle Passport for vessels, a database listing the material composition of the main parts of the ship, enabling better recycling of materials and parts
Unexploited customer engagements: Metso Outotec	Metso offers a cost per ton payment plan where the customers receive one invoice based on actual production tonnage

Source: Company websites

Digital disruptors can take over customer relationships by leveraging the customer data they have available

Disruptors may start with one service…

Disruptor gets access to customer data

2000-2010: Google evolved from providing search engine to browser to smart phone operating system

… developing into a key digital platform for users …

Disruptor extends access to digital and physical (e.g. location) data, becoming the interface for digital services for a certain product whose producer did see the opportunity and answered the need for digital innovations quick enough

2010 - ? : Google offers all sorts of applications incl. navigation and engages in development of self-driving car technology through Waymo collaboration

… with potential to commoditise products in the future

Disruptor getting into position to control all data and thus enabled to define customer experience, making the product in the field a commodity

Vision: Alphabet establishes biggest fleet of autonomous vehicles, wins race to safest technology and generates momentum to urge OEMs to use its platform and establishes monopoly

Source: Company websites

Nordic technology adaptors are already successfully using the three drivers to generate value and fight disruptors

HUSQVARNA allows customers to share battery driven garden appliances through their Battery Box solution

The appliances can be accessed via mobile technology
Customers avoid the hassle of owning the equipment, including storage and maintenance
Reduces the amount of idle garden appliances

KONGSBERG offers a “Power by the hour” service agreement where the customer pays a fixed charge per hour of operation

Remote monitoring of equipment using on-board sensors
Customers do not have to focus on planning maintenance and monitoring the performance
Incentivizes Kongsberg to prolong the lifetime of the equipment and capacity utilization

WÄRTSILÄ subsidiary Eniram offers full visibility of on-board operations of a vessel with an analytics solution

Advanced algorithms decompose and model data
Mobile app was jointly developed with customers
Fuel savings are derived from optimisation and breakdown is reduced

Source: Company websites

By adopting sustainable and circular business models, companies can create value in four dimensions

Brand enhancement and risk reduction are typically achieved in the long-term, therefore companies need to take a longer time horizon into account when making investments in circular business models.

Source: Company websites, Accenture. → Appendix 2 for more details

The value of a circular initiative is driven by two levers, defined as either value migration or value addition

TWO VALUE LEVERS?

1. Value migration

EBITDA impact of initiatives that cause revenue to shift from one player in the industry (who is not or less circular) to another player in the industry (who is more circular)
This shift can either be driven by brand value (environmentally conscious customers who value circular products or services) or new revenues (shift in revenues from new products to higher premium products such as resale or rental)

2. Value addition

EBITDA impact of initiatives that increase the total revenue size or reduce costs in the industry
This can be driven by
1. Revenue addition: Increases the revenue by charging higher price of a product or creating revenue streams in the industry from new products
2. Cost reduction: Reduces the cost and waste

Why sustainability and circularity?

Business model canvas

KEY QUESTIONS

What are the key trends affecting your company?

• What changes are occurring in end consumer behavior?

• What kind of sustainability commitments are your customers making?

• What kind of non-financial information are your investors or potential investors demanding?

• Which regulations have an impact on your operations?

• Which new technologies are relevant for your business?
To what extent does your business strategy address the trends and their implications? How could the strategy be updated to make it comprehensive?
How are the new trends affecting your customers? In which of your customer industries do you expect to see most demand for sustainable and circular solutions? What opportunities does this increase bring to your company?

BUSINESS MODEL CANVAS

Based on the information learnt in this chapter, fill in the following parts of the business model canvas:

Vision – describe your long-term vision and desired position
Market – reflect on customers, the required customer relationships, the channels you could use to reach them and what competition you will see on the market

What opportunities exist?

Current state analysis and circular opportunities for manufacturing industry

2

CHAPTER SUMMARY: WHAT OPPORTUNITIES EXIST?

To address inefficiencies in the linear value chain and circulate products and materials, manufacturing companies should explore the five circular business model
- Circular inputs
- Sharing platforms
- Product use extension
- Resource recovery
- Product as a service
Compelling circular business model examples from leading Nordic and global manufacturing companies demonstrates a strong case for circularity
Understanding current inefficiencies of the linear model is a helpful starting point to identify most promising circular business models

SHORTCUTS TO CONTENT IN THIS CHAPTER

→ The manufacturing industry accounts for 76% of total Nordic exports

→ Substantial inefficiencies occur in all parts of the manufacturing value chain

→ Companies might take different approaches when working with the circular economy based on the company structure and goal

→ Five business models reduce the inefficiencies and create value for companies

→ Business model specific sub-models modify different steps of the value chain to make it circular

→ Companies can explore the sub-models individually or as powerful combinations

→ Current adoption level of circular models in the Nordic manufacturing industry is highest within circular inputs and product use extension

→ The circular economy business models can boost bottom line results for manufacturing companies through reduced cost and increased revenue

→ Ørsted is decarbonizing their offshore wind production

→ Konecranes is offering material handling system as a service

→ Build to last and product as a service are evaluated as the most promising circular opportunities by Nordic manufacturing companies

→ A set of tools support you in identifying the most relevant circular business model(s) for your company

→ What opportunities exist? Business model canvas

THIS CHAPTER WILL HELP YOU TO:

Assess your company’s current state through evaluation of inefficiencies in your value chain
Understand and identify circular business models that can help your company address inefficiencies and achieve a competitive advantage

→ Supporting tools:

Business model development toolkit
Value case tool

The manufacturing industry accounts for 76% of total Nordic exports

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NORDIC EXPORTS BY INDUSTRY, 2019

The manufacturing industry accounts for 76% of Nordic yearly exports

The share of manufacturing exports differs between the Nordic countries, where Norway accounts for the smallest share of manufacturing (38 %). This is due to a high share of petroleum products (excluded)

NORDIC EXPORTS WITHIN THE MANUFACTURING INDUSTRIES, 2019

The five sub-sectors in scope account for 60% of Nordic manufacturing exports

The size of these industries varies in each of the Nordic countries. The highest export revenue comes from transportation equipment in Sweden, manufacturing of food products in Norway and Iceland, chemicals industry in Denmark, and metal and metal products in Finland

Source: Nordic Statistics database, table FOTR46 for Finland, Denmark, Sweden, Iceland and Norway

Substantial inefficiencies occur in all parts of the manufacturing value chain


	INEFFICIENCY	INEFFICIENCY LEVEL	DESCRIPTION OF QUANTITATIVE RESULTS	COMMENTS ON THE CURRENT STATE
①	Direct materials	Medium	For 39% of companies the spend on recyclable/renewable materials is 50% or more of direct material spend, while 26% spend less than 5% on renewables	Most input materials are recyclable and durable (e.g. steel) and the use of recycled material is fairly common
①	Indirect materials	High	73% of companies spend less than 50% of their indirect material spend on recyclable/renewable materials, and none of the companies spend more than 80%	Only some companies use sustainable indirect materials in production, such as renewable energy or recycled packaging materials
②	Availability	Medium	59% of companies report that their products are idle for less than 20% of the time, while 23% report that the products are idle more than 80% of the time	Even though there is a high available time of products, some products are often not utilised due to seasonal downtime. Also, all companies do not operate on a 24/7 basis
②	Operational fit	Very low	46% of companies fully customise their products to meet customer needs and requirements, while 38% meet customer expectations with a standard solution	The majority of the products are designed to fit customer needs and requirements, e.g. in terms of operational efficiency
③	Lifetime	Low	54% of companies report that their products last for over 20 years, while another 21% report that their product lifecycle is 11-20 years long	Most products are built for long lifecycles with high durability
③	Functionality	Low	For 42% of companies the share of revenues coming from products that are designed for a long life is 80%, while 26% of the companies have a share of long-life revenue below 10%	Products are designed to be long-lasting – however, design for enhanced reparability, modularity and upgradeability is limited and therefore reduces the lifespan of a product
④	Waste in production	High	33% of companies recycle over 80% of their production waste. However, 56% of companies say they recycle less than 50%	Many companies report that in general their level of production waste is very low. Still, there are companies with limited efforts in addressing
④	Take-back	Very high	For 68% of companies the share of products taken back from customers in dedicated return schemes at end-of-life is less than 5%	Few companies have dedicated take-back schemes as disposing products at their end-of life is often seen as the customer’s responsibility
④	Recycling	Medium	22% of companies recycle over 80% of products at end-of-life. Nevertheless, 56% say that they recycle less than 50% of products	While product recycling rates are high for some companies, the majority of the companies have lower recycling rates
⑤	After-sales	High	For 71% of companies the share of revenues from add-on sales is less than 10%, while for industry leaders it can be up to 60% depending on their strategy	The full potential of after-sales services is not exploited
⑤	Add-on sales	High	60% of companies state that their share of revenues from add-on sales is less than 10%	For most companies add-on sales efforts are currently limited

Source: Analysis based on output from Nordic Circular Industries workshops. → More detailed information on the output in Appendix 1

Did you know? On the Circular Economy site, there is an exercise package called Business model development toolkit, where you can make the same analysis for your company → READ MORE

Companies might take different approaches when working with the circular economy based on the company structure and goal

ESTABLISHED MANUFACTURING COMPANIES

Established manufacturing companies often approach the circular economy through adjusting their traditional business while in parallel exploring new circular business opportunities.

Profitability: increasing resource efficiency of existing production, assets, and infrastructure.

Growth: identify new revenue streams along the product lifecycle or product lifecycle through services, second life sales or recycling.

START UP COMPANIES

Start up companies often start with a circular value proposition from the start.

Profitability: establish resource efficient assets from the beginning, leveraging partnerships to enable focus on core activities.

Growth: scaling to expand offerings to new markets and customers with a high focus on customer engagement and feedback.

Five business models reduce the inefficiencies and create value for companies

Source: Accenture. → Appendix 2 for more details

Did you know? On the circular economy site, there is an exercise package called Business model development toolkit, where you can analyze the relevance of each circular business model for your company. → READ MORE

Business model specific sub-models modify different steps of the value chain to make it circular

Source: Accenture. → Appendix 2 for more details

Did you know? In Chapter 6, there is an industry-specific circular value chain illustration for machinery & equipment, maritime, energy and transportation industries. → READ MORE

Companies can explore the sub-models individually or as powerful combinations


BUSINESS MODEL	SUB-MODEL	DESCRIPTION
CIRCULAR INPUTS	Build to last	Design products that are durable and easy to repair (e.g. modular)
	Circular supplies	Use recyclable materials in production, e.g. renewable and bio-based materials, chemicals & energy to increase recovery rates
SHARING PLATFORM	Share	Develop solutions that enable increased use of capacity
PRODUCT AS A SERVICE	Product as a service	Offer customers to use a product against a subscription fee or usage based charges instead of owning it
	Performance as a service	Offer customers to buy a pre-defined service and quality level and commit to guaranteeing a specific result
PRODUCT USE EXTENSION	Repair & Maintain	Deliver repair and maintenance services to extend the life of existing products in the market
	Upgrade	Improve product performance by upgrading existing components with newer ones
	Resell	Resell products that have reached their useful life to second and third hand markets
	Remanufacture	Take back and perform industry-like restoration or improvement of original functionality of products and remarket them with lower price
RESOURCE RECOVERY	Recycle/upcycle	Collect and recover materials of end-of-life products and reuse them in own production
	Return	Return wasted parts and materials to the source (e.g. waste and by-products from own production)

Source: Accenture. → Appendix 2 for more details

Current adoption level of circular models in the Nordic manufacturing industry is highest within circular inputs and product use extension


BUSINESS MODEL	SUB-MODEL	ADOPTION LEVEL	COMMENT
CIRCULAR INPUTS	Build to last	Very high	Products are designed for long lifecycles – however, use of modular design principles is not very common yet, but being explored
	Circular supplies	High	Input materials are mostly recyclable (e.g. steel), while use of sustainable indirect materials, such as renewable energy, varies a lot
SHARING PLATFORM	Share	Low	Sharing platforms are seen as challenging to implement for some products, as many of the products are fixed installations or have a high degree of customization
PRODUCT AS A SERVICE	Product as a service	Medium	Only a few companies have adopted the model, while many are currently exploring it. Some companies are finding it challenging to find an investment model and achieve a win-win situation for both customers and the company
	Performance as a service	Low	Many companies are currently exploring the model, and some have never heard of it
PRODUCT USE EXTENSION	Repair & maintain	Medium	Most companies provide at least some repair and maintenance services. However, some report that they are not leveraging their full potential
	Upgrade	High	Many companies are already applying the model, and most others are exploring how to apply it
	Resell	Medium	Companies are not seeing reselling as a relevant opportunity for products that have very long lifecycles
	Remanufacture	Low	Remanufacturing is not seen as relevant for products with very long lifecycles
RESOURCE RECOVERY	Recycle/upcycle	Low	Companies find it challenging to ensure recycling of products, e.g. because products might be scattered around the world, the products are not built for circularity and it is difficult to separate materials and even know the product composition
	Return	Medium	Most companies recycle some of their manufacturing waste

Source: Analysis based on output from Nordic Circular Industries workshops. → More detailed information on the output in Appendix 1

Did you know? On the circular economy site, there is an exercise package called Business model development toolkit, where you can make the same analysis for your company. → READ MORE

The circular economy business models can boost bottom line results for manufacturing companies through reduced cost and increased revenue


CIRCULAR INPUTS	Build to last	Reduce production costs	Wärtsilä achieved 45% reduction in production development expenses, 44% lower cost for ongoing product care and 50% reduction in assembly time using modular engine architecture
		Increase market share	DESSO increased market share by 8% and EBIT from 1% to 9.2% in four years by producing carpets that are easy to disassemble by eliminating toxics and number of materials in carpets
	Circular Supplies	Reduce utility costs	Ecovative reduced energy costs by 75% compared to industry averages by developing home compostable bio-plastics based on mycelium
SHARING PLATFORM	Share	Reduce warehousing costs	FLEXE helps companies lower warehousing costs by 20-70% by providing a sharing service that helps optimise usage
PRODUCT AS A SERVICE	Product as a Service	Increase revenues	Michelin sells tires-as-a-service with a revenue potential of 3bn€ in 10 years
PRODUCT USE EXTENSION	Repair & Maintain	Reduce operating expenses	Nokia reduced OPEX by 20% by maximising value of aging equipment through modernisation of logistics, warehousing and dismantling
	Resell	Participate in secondary sales	~50% revenue increase from selling 2nd hand products
	Remanufacture	Increase gross profits	Caterpillar achieved 50% higher gross profits from selling remanufactured products at a 20% discount rate
RESOURCE RECOVERY	Recycle/upcycle	Generate revenue	GM’s by-product recycling and reuse initiatives have not only saved money, but also generated $1 billion in new revenue for the automaker
	Return	Reduce input material costs	Ford is cutting about 20% from the cost of swapping aluminium for steel in F-150 body panels by sorting, cleaning and returning scrap to the same mills that supply it with metal sheet

Source: Company websites

Did you know? On the circular economy site, there is a Value case tool, with which you can calculate a high-level business case for the circular economy business models for your company. → READ MORE

Ørsted is decarbonizing their offshore wind production

About

The Danish energy company Ørsted develops, constructs and operates offshore and onshore wind farms, solar farms, energy storage facilities, and bioenergy plants, and provides energy products to its customers.

Background

Ørsted has transitioned to become a world leading energy company in green wind-power solutions for both offshore and onshore installations
The company has set a target to reduce emissions from their supply chain by 50% by 2032 and then down to net-zero emissions by 2040
The largest emissions from the supply chain are coming from the manufacturing of wind turbines, foundations, substations and cables and from the maritime vessels transporting and installing offshore wind components

How they are working with circular inputs

Ørsted has initiated a three-step approach to decarbonize the offshore wind farm supply chain and operations (1) require science-based reporting from suppliers, (2) require renewable energy sources for producing wind farm components and (3) move towards 100% renewable wind farm operations fleet
Embedded in this approach is a close engagement with strategic suppliers. Together with each strategic supplier, Ørsted is designing an individual roadmap on how the supplier can deliver the required carbon reductions in a competitive market
Currently, many of the low-carbon technologies are not yet cost-efficient or available at scale. One of the goal’s with the supplier engagement is to generate a demand for low-carbon solutions and contribute to driving scalable and cost-efficient solutions in the market

Source: Company website

CASE STUDY: CIRCULAR INPUTS

Value realized

Actively engagement with suppliers to reach carbon neutrality
Promoting investment in low-carbon technologies

Konecranes is offering material handling system as a service

About

Konecranes is a Finnish manufacturer and service provider of cranes, lifting equipment and material handling products.
In 2013, Konecranes launched a material handling system as a service. The system handles smaller materials such as tools, spare parts and packages.

Drivers

Konecranes experienced two key drivers from their customers that lead to the introduction of the system
Firstly, the system is easy to buy for the customers as major up-front investment costs in the equipment is avoided. Instead, the customers pay a monthly fee.
Secondly, the lifecycle risk of owning equipment is eliminated as the leasing agreement can be terminated if there are any changes in demand and the service of the equipment is handled by Konecranes.

How Konecranes is working with product as a service

The solution consists of a closed unit shelving system, robots travelling within the shelving and an online portal where the customer can remotely track stock information. The material handling system is module based. The system can be adjusted to the customer’s volume, e.g. adding modules if they are experiencing a ramp up in volumes.
In addition, a dedicated Konecranes team performs continuous remote monitoring of the system. In the case of system failure, the service team replaces the defect module with a replacement module. Further diagnostics of the defect module is conducted at a Konecranes service center, ensuring minimum downtime on the site.
Konecranes leveraged their existing service capabilities and culture when launching this initiative. However, they had to develop a new way of working with remote monitoring as this is one of the key offering of the service, ensuring that the team had both a customer focused and engineering mindset.

Source: Interview

CASE STUDY: PRODUCT AS A SERVICE

Value realized

Prolongs the lifetime of the product by e.g. reusing components
Increases the safety of the workers through closed units
Easy for customers to buy and use

Build to last and product as a service are evaluated as the most promising circular opportunities by Nordic manufacturing companies


CIRCULAR INPUTS	Build to last	High potential
	Circular supplies	High potential
SHARING PLATFORM	Share	High potential
PRODUCT AS A SERVICE	Product as a service	High potential
	Performance as a service	High potential
PRODUCT USE EXTENSION	Repair & Maintain	Potential
	Upgrade	Potential
	Resell	Potential
	Remanufacture	Potential
RESOURCE RECOVERY	Recycle/upcycle	Potential
	Return	Potential

Circular inputs, product as a service and sharing platform are evaluated as the business models with the highest future potential.

Build to last is currently widely adopted by Nordic manufacturing companies, but further potential lies in looking towards more modular design, designing products for multiple lifecycles and for recycling
Companies are increasingly exploring as-a-service models and evaluate these as promising opportunities
Sharing platforms are currently among the least adopted models due to fixed or highly customized products, but companies find a high potential in sharing platforms for support functions such as logistics services, and for information sharing between actors in the value chain

Source: Analysis based on output from Nordic Circular Industries workshops.
→ More detailed information on the output in Appendix 1

A set of tools support you in identifying the most relevant circular business model(s) for your company

→ 1. Business model development toolkit
Set of exercises for identifying inefficiencies and customer pain points, assessing relevance of circular business models, and prioritising them
Estimated working time: 30-60 min

→ 2. Value case assessment tool
Tool for calculating high-level business case for circular business models
Estimated working time: 60 min

What opportunities exist?

Business model canvas

KEY QUESTIONS

What are the key sources of waste and inefficiencies in your company’s value chain?

• Hazardous R&D

• Unsustainable raw materials

• Hazardous manufacturing by-products

• Unsustainable energy sources or high energy consumption in manufacturing

• Unrecovered materials from end-of-life products
Which sustainable and circular business models would be the most relevant to address those waste streams and inefficiencies? How?
What kind of benefits do you expect to get from these new business models? How large are they in quantitative terms?

• Revenue generation
• Cost savings
• Brand enhancement
• Risk mitigation

BUSINESS MODEL CANVAS

Based on the information learnt in this chapter, fill in the following parts of the business model canvas:

Offering – detail what the solution you want to offer could look like, what the concrete value propositions to your customers is and draft an outlook on how it could be developed further or what other solutions could be connected with it

Which capabilities are required?

Introduction to organizational requirements for circular business models

3

CHAPTER SUMMARY: WHICH CAPABILITIES ARE REQUIRED?

When transforming from a linear to a circular value chain, new know-how regarding offerings, resource use, operations and organization is required
Nine capabilities enable companies to transform their value chain to increased circularity:

Design solutions to deliver customer outcomes
Design products for circularity
Source recycled or recyclable material
Produce, remanufacture and recycle products
Sell outcomes and lifecycle services
Take back products at end-of-life
Deploy technologies and data for delivering outcomes
Orchestrate ecosystem of partners
Transform mindset and steering

The capabilities need to be developed across the organization in several functions, including for example R&D, procurement and sales

SHORTCUTS TO CONTENT IN THIS CHAPTER

→ Moving from a linear to a circular value chain requires different capabilities

→ Nine capabilities enable companies to transform their value chain to increased circularity

→ Customer-centric design enables additional sales throughout the product lifecycle

→ Appropriate resource handling ensures that materials and products are kept in a closed cycle

→ Technology, partners and leadership play a key role in the circular transformation

→ Which capabilities are required? Business model canvas

THIS CHAPTER WILL HELP YOU TO:

Understand which capabilities are needed to operate your selected circular business model(s)
Assess capability gaps and identify actions to bridge them
Identify potential partners for whom to outsource non-strategic and underdeveloped capabilities

→ Supporting tools: Capability maturity assessment

Moving from a linear to a circular value chain requires different capabilities

Source: Adapted from earlier Accenture publication. → Appendix 2 for more details

Nine capabilities enable companies to transform their value chain to increased circularity

Source: Accenture → Appendix 2 for more details

Did you know? On the Circular Economy site, there is a capability maturity assessment, with which you can assess the capability gaps of your company and identify actions to bridge them. → READ MORE

Customer-centric design enables additional sales throughout the product lifecycle


	①	②	⑤
	DESIGN SOLUTIONS TO DELIVER CUSTOMER OUTCOMES	DESIGN PRODUCTS FOR CIRCULARITY	SELL OUTCOMES AND LIFECYCLE SERVICES
	Design/R&D	Design/R&D	Sales \| Aftersales
Required know-how	Ability to put customer needs and requirements at the centre of product design	Ability to design products for long lifecycles and sustainable material use	Ability to leverage customer insights to sell value-adding solutions
Recommended approach	Engage customers and partners in solution co-creation	Follow circular design principles in product design	Centre sales around customer outcomes throughout the whole product life
Improved customer-centricity through more frequent interaction and more customised solutions

①

DESIGN SOLUTIONS TO DELIVER CUSTOMER OUTCOMES

Customer-centric design, digital technologies and knowledge around DPLM¹ are core for solution design

Required know-how and activities

Customer-centric design
Centre development process around customer needs and the functional requirements, rather than the physical device. This way innovative solutions and product-as-a-service models are promoted
Smart and connected solutions
Consider how to develop smart products using new technologies such as sensors and big data that enable to deliver better outcomes for the customer through e.g. enhanced functionality
Digital product or application lifecycle management (DPLM or ALM²)
Include the design of the complete digital lifecycle into the initial design phase. The DPLM enables to speed up processes and increase efficiencies throughout the lifecycle by digitising and coordinating all relevant processes connected to the solution. Product lifecycle management data becomes an important part for generating insights and detecting potential new revenue streams

Guidance on customer-centric design

Design Thinking is a methodology for customer-centric design. It is an iterative process using a broad set of design methods (e.g. accessible through this link). The aim is to frame opportunities and innovate in close collaboration with customers and other relevant stakeholders. Through the customer interaction, Design Thinking is especially relevant when designing customer experiences and user interfaces for new solutions

Core to the methodology is to quickly move from prototypes to “minimum viable products” and reduce the lead time for development (see example approach on next page)

Example metrics

# of external stakeholders (including customers) engaged
# of days until minimum viable product is realised

Business model relevance

☑ Circular inputs
☑ Sharing platform
☑  Product use extension
☑  Resource recovery
☑  Product as a service

1. Digital Product Lifecycle Management / 2. Application Lifecycle Management

①

DESIGN SOLUTIONS TO DELIVER CUSTOMER OUTCOMES

Customers, partners and employees ensure proof-of-concept through iterative testing and learnings

①

DESIGN SOLUTIONS TO DELIVER CUSTOMER OUTCOMES

Changes in set-up and actors are required when moving from product to service innovation


CHANGES FROM TRADITIONAL TO SERVICE INNOVATION
	Product innovation	Service innovation
What	Understand customer usage and expected product attributes	Design and live customer experience or journey
How	Leverage traditional and robust processes	Perform iterative design and prototyping (to test, fail, learn and rebound quickly)
Who	Leverage companies’ distinctive forces and expertise around product/service	Manage an open ecosystem and perform open innovation – acquiring/partnering with new talents
Core skills	Draw on traditional product/service know-how	Apply design thinking and big data or analytics
Duration	Perform innovation cycle in years	Perform innovation cycle in weeks or months

①

DESIGN SOLUTIONS TO DELIVER CUSTOMER OUTCOMES

Prototyping spaces, digital acceleration centres and digitally enabled solutions are good practices

GOOD PRACTICES AND EXAMPLES

Co-creation and prototyping space
Establish a space in which companies, students and future customers can jointly develop, test and prototype new ideas

Example: Firstbuild, a GE Appliances backed co-creation space, offers access to the latest technology to design, prototype, or put the finishing touches to inventions. It also has a virtual community on a platform proposing challenges and ideating solutions

Digital acceleration centres
Create distinct development programmes around how digital solutions can enhance customer value

Example: Wärtsilä established four digital acceleration centres that act as incubators for new digital ideas. The work is based on agile methodologies and involves close interaction with customers and stakeholders. In a six week “sprint” 106 different concepts were developed for the digital vessel project that then were evaluated in more detail

Digitally enabled solution
Reflect on areas a product has impact on and the data required to add value to the customer. Ideate what means might exist to access and use this data

Example: ZF Friedrichshafen developed a fuel-economic transmission system that knows in advance when to shift gears by analysing the topography on the basis of GPS data feed

Enabling technologies
Internet of Things
Big data

Source: Company websites

②

DESIGN PRODUCTS FOR CIRCULARITY

Lifecycle thinking and circular design criteria are key in developing circular products

Required know-how and activities

1. Lifecycle thinking
Consider the whole lifecycle in the design process from production to use phase to end-of-life as more than 80% of the environmental impact of a product is determined at the design stage (See guidance on the right)

2. Circular design criteria
Develop and apply circular design criteria such as:

Design for a longer life through upgrading, reuse, refurbishment and remanufacture
Design based on sustainable and minimal resource use and enabling high-quality recycling of materials
Enabling cleaner material cycles though substitution of hazardous substances

See below for more information and examples

Guidance on life cycle thinking

Minimizing environmental impacts along the whole lifecycle and comparing alternatives against each other are key for sustainable product design. Lifecycle assessment (LCA) is a method that allows assessing products and services, and the process itself is described trough ISO 14040 and 14044

After defining the scope and boundaries of the analysis, the inventory and impact of products can be modelled. For this, data from environmental databases is available (e.g. resource depletion, CO2 emissions). Several tools from different providers exist on the market e.g. SimaPro, Umberto and GaBi

Example metrics

% of renewable, recycled or reused material in product
# of different components in product design

Business model relevance

☑ Circular inputs
☐ Sharing platform
☑  Product use extension
☐  Resource recovery
☑  Product as a service

②

DESIGN PRODUCTS FOR CIRCULARITY

Seven aspects are relevant for circular design


Aspect	How to incorporate it in a product	Example
1. Design out waste	Use less resources for producing the product	Volvo Trucks produces 3D printed tools and fixtures to reduce use
2. Design for upgrading and modularity	Allow exchange of components for updates or upgrades (e.g. standardise connections)	PuzzlePhone is built from three modular components available in different sizes and materials
3. Design for reuse, repair, refurbishment, remanufacturing	Allow for disassembly through using e.g. reversible connections	Caterpillar designs parts for manufacturing e.g. an engine block with a removable sleeve in the cylinder bore
4. Design based on sustainable resources	Use renewable or recycled materials	Renault uses recycled material for 36% of the total mass of a new vehicle
5. Design for minimal resource use along lifecycle	Make sure product is efficient in use phase (e.g. no resource intensive supplies)	Outotec dry tailings water treatment plant minimises fresh water intake during its operation
6. Design enabling high-quality recycling of materials	Limit number of different materials, use recyclable ones and make them separable	Philips constructs light bulbs in a sandwich construction that assures separation upon crushing
7. Design for cleaner material cycles	Substitute hazardous substances in products	Akzo Nobel created a new coating made from plant-based oils and recycled PET bottles instead of solvents

Source: Company websites

②

DESIGN PRODUCTS FOR CIRCULARITY

Several companies have good practices in circular product development, such as use of modular design

GOOD PRACTICES AND EXAMPLES

Modular design
Design your products in a modular way to improve reparability, upgrades and other benefits

Example: Wärtsilä developed a modular design for the medium speed engine product family as it allows standardisation and component commonality and flexibility for variances at the same time. The design enables updating technologies, improves serviceability and reduces the lead-time for product development

Design guide
Summarise all design criteria in line with company specific prioritisation in design guide with tool kit for product developers

Example: Philips offers design guide for product development with CE Spider Web in which solutions are rated for Disassembly, Maintenance, Modularity, Futureproof, Recycling and Energy use (Link to tool description)

Product passport
Document the materials used in a product and give guidance how to extract valuable parts to enable recycling at the end of a product’s life

Example: Maersk introduced a Cradle-to-Cradle Passport for vessels, a database listing the material composition of the main parts of the ship enabling better recycling of materials and parts. It requires input from all components’ suppliers and documents approximately 95% (by weight) of the materials used to build the ships

Source: Company websites

⑤

SELL OUTCOMES AND LIFECYCLE SERVICES

Centre sales around outcomes for customers and provide services throughout the whole product life

Required know-how and activities

Customer-centric sales process: Adopt customer perspective and knowledge on their industry to understand their needs, educate them on suitable existing or personalised solutions and invite them to joint solution development
Offering and pricing models: Develop new offering and pricing models for outcome-oriented solutions, such as performance-based models (see next page)
Customer engagement throughout lifecycle: Continuously engage with customers to get deep insights on how the product is used, what issues arise and what improvement potential exists. Offer online platform for customer interaction
Product use extension support: Provide services for product use extension such as spare parts, (remote) maintenance and repair services. Leverage data from connected products for predictive services (see guidance on the right)
Service delivery: If know-how or reach for services does not exist (yet), partner with other companies to deliver value proposition

Guidance on product use extension support

To support extension of product life, several after-sales services can be provided:

DIY guidance for maintenance and repair
Maintenance services (remote, predictive)
Repair support with VR
Repair service on customer site
Repair of sent-in products – using remanufacturing capabilities
Upgrades of software and parts

Example metrics

Level of customer satisfaction
Average duration of customer relationships
% of solutions sold (instead of product-only)

Source: Company websites

Business model relevance

☐ Circular inputs
☑ Sharing platform
☑  Product use extension
☐  Resource recovery
☑  Product as a service

⑤

SELL OUTCOMES AND LIFECYCLE SERVICES

Product as a service offering can be designed in different forms setting incentives for circularity



Offering	Ownership	Offering design	Incentives for circularity
Product-as-a-service models	Lies with producing company during useful life	Operating lease: Overarching concept, in which the lessor retains ownership of the asset, while the lessee pays for its use over a certain time	Longevity
Product-as-a-service models		Full service lease: Combines operating lease contract with additional services such as maintenance for the asset	Longevity, reparability and easy maintenance
		Performance-based payment: Combines operating lease with periodical fees dependent on use or delivered performance of the asset	Longevity, reparability, optimised use-phase consumption
		Rent: Differs from leasing in that it generally is for a shorter period. Maintenance and insurance are often included in the contract	Longevity, reparability and easy maintenance
Other productservice systems (not considered as PaaS¹)	Transferred to customer some time during lifecycle	Finance lease: All the risks and rewards connected to ownership of an asset is transferred to the lessee during time of lease (e.g. cost for maintenance, repair, resource use during use phase). At the end of the leasing contract, the ownership of the asset is passed over to lessee	No circularity incentives

1. Product as a Service

⑤

SELL OUTCOMES AND LIFECYCLE SERVICES

Companies are using new pricing models and are applying digital technologies

GOOD PRACTICES AND EXAMPLES

New pricing models
Develop new pricing models that allow offering solutions based on the value and outcome they deliver to the customers

Example: Philips extends its offering and provides light as a service complementary to its offering of light bulbs. The pricing schemes used are either paying per lux or paying a fixed charge per month. The service delivers the value to the customer in a whole new way. To provide it as efficient as possible, equipment is tracked with sensors

Enabling technology: Internet of Things

Customer-centric sales process
Use for example virtual reality in marketing and offer an app in which customers can configure products, have it displayed in their environment and seamlessly place an order

Example: BMW developed a virtual reality marketing app in which customers can compile the car they would like to buy, see interior in a 360° view and have it shown in e.g. their own car park

Enabling technology: Virtual Reality

Product use extension support
Offer a range of after-sales services to prolong the lifetime of the product

Example: Vestas offers a range of repair and upgrade services to their wind turbines. As wind technology matures, turbines already in operation can be upgraded to yield more energy and thereby improve an existing wind park business case

Enabling technology: Digital infrastructure

Source: Company websites

Appropriate resource handling ensures that materials and products are kept in a closed cycle


	③	④	⑥
	SOURCE RECYCLED OR RECYCLABLE MATERIAL	PRODUCE, REMANUFACTURE AND RECYCLE PRODUCTS	TAKE BACK PRODUCTS AT END-OF-LIFE
	Design/R&D \| S&P	(Re)manu-facturing \| Recycling	Take-back
Required know-how	Ability to specify and source materials that can easily be regenerated and recycled	Ability to handle waste in production, incl. material flows and remanufacturing	Ability to establish return systems that ease and facilitate disposal of end-of-life products
Recommended approach	Access circular materials from new sources	Integrate technologies to monitor and track material and product flows	Adapt programmes and approach based on secondary values of products
Improved management of resources to maximise returns on embedded values across product lifecycle

③

SOURCE RECYCLED OR RECYCLABLE MATERIAL

Circular sourcing reduces wasted value by matching required inputs with available circular material

Required know-how and activities

Circular materials and equipment: Make products or equipment that are produced following circular (design) criteria preferred choice for procurement. Source circular materials such as material for reuse or recycled material. To evaluate suitability of material as input, deep understanding of materials properties is required (e.g. quality requirements)
Procurement process modification: Integrate circular thinking into procurement process, e.g.
- Consider total cost of ownership for goods
- Include the circular economy in Requests For Proposals and Supplier Code of Conduct
- Use environmental KPIs such as carbon intensity as additional decision criteria in buying decision
Supplier engagement: Develop supplier network into ecosystem and e.g.
- Establish a bidirectional dialogue on required materials and available by-products
- Share knowledge on the circular economy and other environmental practices

How to source circular materials?

Establish collection infrastructure or draw on external take-back systems^[1] and build or source treatment capabilities^[2]
Engage in industrial symbiosis
Participate on resources marketplace platform
Establish waste company partnership to source treated material
Source resources on commodity market

Example metrics

% of spend on circular materials
% of key suppliers participating in supplier engagement programme
% reduction in material cost

Footnotes

^ Please see capability 6 “Take back products at end-of-life” if done internally
^ Please see capability 4 “Produce, remanufacture and recycle products” if done internally

Business model relevance

☑ Circular inputs
☐ Sharing platform
☑  Product use extension
☐  Resource recovery
☑  Product as a service

1 Please see capability 6 “Take back products at end-of-life” if done internally
2 Please see capability 4 “Produce, remanufacture and recycle products” if done internally

③

SOURCE RECYCLED OR RECYCLABLE MATERIAL

Circular resource marketplace platforms and industrial symbiosis can transform material sourcing

GOOD PRACTICES AND EXAMPLES

Circular resource marketplace platform
Participate on a platform that facilitates matching of required and available materials for recycling or reuse of different companies or engage in its development

Example: Netlet picks up surplus material from construction sites free of charge. This eases the construction firm’s ability to keep up with increasingly strict regulations regarding recycling and waste disposal. Netlet makes this surplus material available through both physical stores and through their online platform. Both companies and consumers can use the service, and all material is sold at a discounted price and is contributing to reducing waste in the construction industry

Enabling technology: Digital infrastructure

Industrial symbiosis (IS)
Develop symbiotic partnerships with cross-industry actors designing “waste as input” streams

Example: Kalundborg Symbiosis (Denmark) – Collaboration with 8 private and public partners started in 1970s. Has about 50 symbiotic exchanges such as steam, water, or specific flows. An example for a specific flow is Novo Gro30, biomass from pharmaceutical production that is then used as fertiliser, for wastewater treatment and biogas production

Source: Company websites

③

SOURCE RECYCLED OR RECYCLABLE MATERIAL

Using shared services and asking suppliers to apply circular principles are good practices in sourcing

GOOD PRACTICES AND EXAMPLES

Shared services and equipment
Realise cost reduction by sharing production equipment and services

Example: Instead of buying an own 3D printer, companies can use the platform 3Dhubs for 3D printing and CNC machining or source the service from providers such as UPS

Enabling technology: 3D printer

The circular economy in supplier code of conduct
Promote the circular economy in your supplier relationships through stating its importance in the code of conduct

Example: HP (Hewlett-Packard) includes the circular economy aspects into its Supplier Code of Conduct with the following statement: “Suppliers shall implement a systematic approach to identify, manage, reduce, and responsibly dispose of or recycle solid waste (non-hazardous) and waste water.”

Source: Company websites

④

PRODUCE, REMANUFACTURE AND RECYCLE PRODUCTS

Aim for material flow transparency in production and add remanufacturing know-how to skill-set

Required know-how and activities

Material flow management: Closely monitor and manage material flows on-site in production. Follow principles of prevent, reuse, recycle, recover and dispose. Try to keep materials separate to enable high-quality recycling
Digital production technologies: Unlock new levels of production efficiency through digital technologies such as sensors and big data that identify and predict maintenance issues. Facilitate tasks for workforce through wearables and improved machine-human interactions moving towards a digital plant
Remanufacturing: Develop skill and infrastructure required to sort, repair and remanufacture returned used products and components
Reprocessing and recycling: Build treatment capabilities to reprocess and recycle material from returned products or production waste

Guidance on remanufacturing process set-up

Check-in: Confirm that the returned part is valid for remanufacturing process through digitised quality analysis and the serial number and update status in system as “returned”. This process can be supported by use of RFID tags, Machine vision and AI
Sorting: Sort the returned parts to identify whether they need to be refurbished, repaired, remanufactured or go into recycling. Define decision rules for process. Update data in inventory
Remanufacturing: Repair, refurbish and remanufacture the part. Conduct quality check in the end to guarantee function

Depending on the return scheme, Step 1 and 2 could take place offsite during the take-back phase by e.g. service provider or dealer

Example metrics

% of waste recycled or % of waste sent to landfill
% of wasted materials from production recovered
# of parts remanufactured or % of returned parts remanufactured

Business model relevance

☐ Circular inputs
☐ Sharing platform
☑  Product use extension
☑  Resource recovery
☑  Product as a service

④

PRODUCE, REMANUFACTURE AND RECYCLE PRODUCTS

To raise resource efficiency, use robotics, keep waste separated and introduce remanufacturing

GOOD PRACTICES AND EXAMPLES

Robotics
Robotics in the production process reduces waste of material, while increasing efficiency

Example: EEN TIL EEN use a building software to transform a 3D design into production data. Robots cuts sustainable source plywood based on the digital blueprint

Enabling technology: Robotics

Production waste separation
Integrate waste management in production process and keep waste material flows separate to enable high quality recycling

Example: Ford engages with suppliers to recycle aluminium scraps from car production (e.g. stamping windows into body panels). To achieve the required level of purity, Ford invested in machinery to separate, clean and shred aluminium

Remanufacturing capabilities
Develop remanufacturing capabilities to sort and repair returned equipment to extend their lifecycles

Example: Various models of Scania trucks are dismantled and remanufactured at Scania Vehicle Recycling. Parts such as engines, gear boxes and differentials are inspected and adjusted internally. They are sold through local Scania workshops and distributed via the daily spare parts routine of Scania Parts Logistics

Source: Company websites

⑥

TAKE BACK PRODUCTS AT END-OF-LIFE

Return flow management requires a take-back programme, product tracking and return incentives

Required know-how and activities

Take-back programme: Develop a programme that enables customers to return products at the end of their useful life. Design and establish a reverse logistics network for this. Criteria to consider for the design are e.g. price, size of product, and frequency of exchange (see guidance on the right)
Tracking and monitoring: Track and monitor condition of product in its lifecycle by applying connected sensors and analytics
Return incentives: Incentivise product return through e.g. deposits, or establish a reverse logistics chain – either in-house or through partners

Guidance setting up a take-back programme

Take-back programmes are suitable for

Products with high end-of-life value
Companies with low costs for reversed logistics

To assess suitability…

… estimate economic value of product that is to be returned as the difference between price on market and costs for remanufacturing. The remaining share of revenue needs to cover return and set-up costs for the programme
… estimate cost of return by exploring different take-back options (through e.g. dealers, workshops, stores or direct collection at premises) operated internally or sourced from special providers

Example metrics

% of sold items returned
Cost per item returned
Days required for return flow

Business model relevance

☐ Circular inputs
☑ Sharing platform
☑  Product use extension
☑  Resource recovery
☑  Product as a service

⑥

TAKE BACK PRODUCTS AT END-OF-LIFE

Good practices inspire ways to incentivise product return, develop reverse logistics and manage waste

GOOD PRACTICES AND EXAMPLES

Incentivise product return
Provide incentives for customers to return products or components through e.g. refunds and discounts

Example: Caterpillar uses a proprietary core management system to globally manage core returns from dealers and Caterpillar inspection facilities and determine the core credit amounts that will be refunded

Reverse logistic channels
Develop own reverse logistic channels or partner with established companies to collect components and complete products

Example: CoremanNet, a subsidiary of Bosch, offers qualified core return solutions for the automotive spare parts market. The modular packages can be adapted to individual company requirements

Waste material management
Control waste material flows to secure high-quality material for recycling

Example: AF has developed new technology to harvest, clean and recycle contaminated construction materials, extracting 80% of the mass as reusable materials and 20% as contaminated mass for further treatment

Source: Company websites

Excess resource streams from geothermal power plants are being used by a range of companies

About

HS Orka is an Icelandic energy company operating two geothermal power plants producing electricity and hot water
A resource park has been developed to encourage increased and more efficient utilization of what the geothermal plants produce

Background

The objective of the resource park is to foster a “society without waste”
The resource park has been established in the neighborhood of the geothermal plants and other businesses have co-located with the powerplants to use the co- and by-products
Each of the companies of the resource park directly utilizes two or more resource streams from the geothermal plants

How they are working with unconventional use of resources

A spa and skin care clinic uses the geothermal fluid for a prime tourist attraction and to produce skin care and health products. Two more companies use the steam to process fishery by-products into dried fish products and high-value fish oil. Another company produces methanol using the waste CO2. A biotechnology company heats its greenhouses with heat provided by the power plants to make growth factors for medical research and skin care products
Other products and operations of the resource park include farming warm-water flat fish, natural treatment of skin disorders, algae farming, eco-friendly cosmetics with active substances from the area, hot and cold groundwater, steam, geothermal fluids etc.
In addition to 30 jobs at the power plants, more than 1000 jobs are estimated to have been created in the resource park

CASE STUDY: DESIGN & R&D + SOURCING & PROCUREMENT

Value realized

Increased utilization of side streams from the geothermal plants
Generation of more than 1000 jobs in connection to the resource park

Source: Company website

Technology, partners and leadership play a key role in the circular transformation

ORGANIZATION AND COLLABORATION


	⑦	⑧	⑨
	DEPLOY TECHNOLOGIES AND DATA FOR DELIVERING OUTCOMES	ORCHESTRATE ECOSYSTEM OF PARTNERS	TRANSFORM CULTURE AND STEERING
	Strategy & Leadership	Strategy & Leadership	Strategy & Leadership
Required know-how	Ability to collect, manage and derive valuable insights from technologies and real-time data	Ability to manage increasing number of ecosystem partners to jointly close the loop	Ability to develop and motivate circular competences and outcomes
Recommended approach	Leverage tools to generate and visualise data	Harness existing network of partnerships and use digital platforms for interactions	Integrate the circular economy objectives and organise around products/services to drive cross-functional collaboration
Successful transformation through full utilization of internal and external strengths and resources

1. Intellectual Property Rights

⑦

DEPLOY TECHNOLOGIES AND DATA FOR DELIVERING OUTCOMES

Know-how in IT is key for digitally enabled circular solutions and seamless integration with ecosystem

DEPLOY TECHNOLOGIES AND DATA FOR DELIVERING OUTCOMES

Required know-how and activities

Data infrastructure set-up: Develop the IT infrastructure of the company. A seamless integration of different technologies, databases and partners need to be in place for digitally enabled outcome-oriented offerings and resource efficient production. Management and integration of APIs (Application Programming Interfaces) is required for this
Data collection, analytics and visualisation: Draw insights from historic and real-time data from e.g. smart products through data analytics and visualisation to facilitate new offerings such as predictive maintenance. Use and develop tools for collecting data from customers, e.g. apps for reporting product malfunction
Monetising data: Use data from business operations and smart products to reduce cost and develop new revenue streams (see guidance on the right)
Data privacy and security: Ensure compliance with data privacy regulation and secure all data transactions internally and in exchange with customers

Guidance on data monetization

Manufacturing companies can monetise data by:

a) Reducing cost (focus on data from own operations)

Analyse historic data to identify structural inefficiencies
Analyse real-time data to detect incidents

b) Increasing revenue (focus on data from smart products)

Draw insights from historic use phase data to develop new offerings and products (see example on next slide)
Use real time use phase data to deliver services during the use phase, such as predictive maintenance
Sell anonymised data to interested third parties supporting their services e.g. data on weather condition

Example metrics

% of source data is accurate or reliability level of source data
Amount of historical data for analysis and algorithm reliability
% increase in responsiveness to specified actions or decisions

Business model relevance

☑ Circular inputs
☑ Sharing platform
☑  Product use extension
☑  Resource recovery
☑  Product as a service

⑦

DEPLOY TECHNOLOGIES AND DATA FOR DELIVERING OUTCOMES

Good practices include deploying technologies and drawing insights from generated data

GOOD PRACTICES AND EXAMPLES

Tech-enabled outcome orientation
Deploy sensors and develop smart products to generate data-enabled new business models

Example: Michelin introduced the first “Tire Monitoring Management System” for mining tires enabled through sensors in the tires recording and transmitting pressure and temperature

Enabling technology: Internet of Things

Data monetisation
Use data insights to reduce costs or generate revenue e.g. through predictive maintenance internally or provided as a service to customers

Example: Siemens models status of gas turbines with about 500 sensors in a turbine, and uses data to simulate operation while AI is simulating wear and tear of components to prompt maintenance measures to prevent downtime. Insights can be shared via cloud

Enabling technology: Internet of Things and Artificial intelligence

Data visualisation tools
Use data analytics and visualisation tools to extract insights from the pool of available data

Example: Available plug-and-play tools are for example Tableau, Microsoft Power BI or IBM Cognos

Enabling technology: Big data

Source: Company websites

⑧

ORCHESTRATE ECOSYSTEM OF PARTNERS

To orchestrate the ecosystem, identifying and engaging stakeholders, and IPR management are key

Required know-how and activities

Coordination of ecosystem partners: Facilitate combining efforts to jointly generate circular value from closed loops, new services etc. Have oversight of different partnerships established in procurement, sales and support to identify synergies
Engagement to co-innovate: Harness ecosystem for co-innovation and obtain and develop ideas for new products or services from a wide variety of sources, both internal (employees) and external (customers, suppliers, market research) to the firm
Intellectual property rights (IPR): Secure own IPR and assure legal compliance in ecosystem collaboration and co-innovation (see guidance on the right)

Guidance on managing IPR in open innovation

Develop inventory of own IP assets and maintain it
Set-up non-disclosure agreements with partners to secure confidentiality in discussions and negotiations prior to an official collaboration, or embed it into a memorandum of understanding
Sign a jointly developed consortium agreement defining responsibilities, listing ownership of existing IPs and allocating ownership and access of newly generated IP

Helpful tools and resources are available at the European IPR helpdesk online

Example metrics

# of ecosystem partners at each stage of product lifecycle
# of ideations with eco-system partners

Business model relevance

☑ Circular inputs
☑ Sharing platform
☑  Product use extension
☑  Resource recovery
☑  Product as a service

⑧

ORCHESTRATE ECOSYSTEM OF PARTNERS

Harness existing networks and partnerships and use digital platforms for interaction

GOOD PRACTICES AND EXAMPLES

Knowledge sharing networks
Join existing knowledge sharing platforms to leverage existing experiences and share own ones

Example: Factor 10 from WBCSD and CE100 from Ellen MacArthur foundation are initiatives that aim to accelerate the transition to the circular economy by bringing together companies from different sectors. Both organisations also publish CE content on their website, which is also available for non-member organisations

Cross-sector partnerships
Connect with stakeholders that have a similar mission and vision. To develop data-based solutions, cross-sector collaborations are required

Example: DIMECC Ltd launched the “Intelligent Industry Ecosystem” in December 2017, where Finnish companies create new data-based products and services. The ecosystem currently involves 10 companies, including e.g. Cargotec, Fastems, Konecranes, Nokia and Ponsse

Digital platforms
Build a platform to connect relevant stakeholders, collect ideas and find solutions

Example: Dell established the collaboration platform IdeaStorm for ideation and real-time product portfolio management

Source: Company websites

⑧

ORCHESTRATE ECOSYSTEM OF PARTNERS

Build the capability to manage the transformation at the right pace

Required know-how and activities

The circular economy competencies: Build, maintain and expand circular economy know-how to train and support the organisation
Culture and workforce: Motivate employees and enable culture shift to embrace cross-functional collaboration, ecosystem thinking and customer-centricity. Show leadership commitment, have transparent and engaging communication and conduct trainings
Steering mechanisms: Develop targets and metrics to promote and incentivise circular capabilities and products. Set incentives for employees to drive circular initiatives. Develop process to account for metrics and track development over time
Circular business case: Adapt a lifecycle perspective for business valuation and add qualitative indicators for intangible benefits

Guidance on steering mechanisms

Performance indicators and connected incentives need to be forward-looking and consider development over time, for example:

Design: Lifecycle emissions [e.g. CO₂ volume]
Sourcing: % of input coming from virgin vs recycled materials
Manufacturing: % of reused materials or components
Sales: Customer lifetime value [€]
Take-back: % of recovered assets

Example metrics

# of trainings held
% of variable salary connected to circular transformation

Business model relevance

☑ Circular inputs
☑ Sharing platform
☑  Product use extension
☑  Resource recovery
☑  Product as a service

⑨

TRANSFORM MINDSET AND STEERING

The transformation requires new targets, cross functional collaboration and culture change

GOOD PRACTICES AND EXAMPLES

Target setting
Integrate the circular economy objectives into company target(s) to demonstrate their importance and your company’s commitment

Example: Siemens has a corporate zero-waste to landfill target. Unilever sets multiple targets for different waste categories

Cross-functional collaboration
Facilitate exchange of information and joint solution development between different functional units of the business e.g. product development and sourcing

Example: Danone embraced the circular economy in its organisational structure by developing cross-divisional, cross-functional internal units for its core materials used in production (i.e. milk, water and plastics)

Culture change
Acknowledge that a transformation is required and actively support the organisation to unfreeze its current status, trigger mindset shift and ensure employees internalise it for good

Example: Philips CEO Frans van Houte is guiding his company to redesigning its products and considering how to capture their residual value. At the same time it is shifting from a transaction- to a relationship-based business model – that entails closer cooperation with customers and suppliers

Source: Company websites

Electrolux is linking financial incentives to delivery on sustainability targets

About

Swedish multinational manufacturer of home appliances, ranked the second largest appliance maker in the world
Electrolux products sell under a variety of brand names and are primarily intended for consumer user, but they also make appliances for professional use

Background

Electrolux is working towards climate neutral operations by 2030 and a climate neutral value chain by 2050
In 2019, they joined the UN Business Ambition for 1.5°C pledge, a global movement of business leaders working toward zero emissions by 2050, in line with the Paris Agreement
Electrolux is making an important contribution through its ongoing investment programs for cooling appliances – to reduce the climate impact of its factories and products

How they are working with strategy & leadership

In 2020, Electrolux took the commitment a step further by linking financial incentives to delivery on sustainability targets, 20% of the annual share-based incentives for Electrolux’ 300 top leaders will be based on how effectively they have managed to reduce CO2 emissions
Electrolux was one of the first 100 companies in the world to set science-based targets to reduce emissions in support of the Paris Agreement. The metrics from these targets will be used to link sustainability performance with their Long-Term Incentive (LTI) program
For participants to receive their maximum LTI payout, Electrolux must achieve certain tangible CO2 emission reductions within manufacturing, product usage and from phasing out the usage of high-impact greenhouse gases in appliances over the coming three years

CASE STUDY: STRATEGY & LEADERSHIP

Value realized

Tangible science-based targets to reduce CO2 emissions
Leadership incentives clearly linked to CO2 emission reductions

Source: Company website

Ruter is working with the circular economy through offering end-to-end mobility solutions

About

Norwegian public transport company responsible for planning, coordinating, ordering and marketing public transport. All transport services are performed by various operators

Background

Ruter’s strategy is to offer mobility solutions to all citizens that are sustainable for the environment, society and customers
They are seeking to support a sharing economy by ensuring that citizens can travel wherever they want, whenever they want with the extended public transport network, instead of using their own cars

How they are working with strategy & leadership

Ruter is promoting their mobility services through several areas. Two of these are the mobility ecosystem and data driven operations:

Mobility ecosystem: Ruter is collaborating with other mobility players to create an end-to-end offering to their customers (e.g. collaboration with car sharing, taxi, bicycles, scooters). One example is the pilot collaboration with Bærum municipality and the micro-mobility provider TIER. Travelers will be offered electrical bicycles and scooters as complementary to the existing public transport system to allow them to travel from a public transport hub to their end destination
Data driven operations: Technology is seen as a key enabler for sustainable mobility. Technology can be used to e.g. 1) Capture data on position, speed, number of passenger, remaining travel time etc. to optimize the capacity of the vehicles 2) Understand travels behavior and use nudging to influence how they travel (e.g. influence them to travel when there is less passengers) and 3) Share relevant travel data with other actors in the mobility ecosystem to ensure an end-to-end offering

CASE STUDY: STRATEGY & LEADERSHIP

Value realized

Lower environmental footprint of the region by reducing the number of cars in the region

Source: Interview

A capability maturity assessment tool helps you to understand your starting point and areas to develop

Tool for assessing your company’s maturity in the circular capabilities and identifying which capabilities to develop internally and which ones to outsource for external partners
Estimated working time: 15 min
→ READ MORE

Which capabilities are required?

Business model canvas

KEY QUESTIONS

Considering the key capabilities that companies need to mature in to succeed in circularity, what kind of development initiatives should your company start?
What are the key actions required to make these initiatives happen?
Who are the key partners you need to collaborate with?

BUSINESS MODEL CANVAS

Based on the information learnt in this chapter, fill in the following parts of the business model canvas:

Operating model – reflect on key partners and capabilities needed to operate

Which technologies can support?

Overview of enabling technologies

4

CHAPTER SUMMARY: WHICH TECHNOLOGIES CAN SUPPORT?

The digital reinvention of industry (Industry x.0) can deliver tangible benefits and enable the move towards the circular economy in the manufacturing industry
Industry x.0 summarizes the rapid development of digital, physical and biological technologies, providing levers for circularity
Companies can draw on a set of technologies that are applicable for different use cases and circular business models
To assess the viability of technology implementation, price development, scope of application, comparability of technologies and their benefits need to be considered
Finally, it is important to note that some new technologies come with risks that need to be balanced with their benefits

SHORTCUTS TO CONTENT IN THIS CHAPTER

→ The availability and use of technology can enable the move towards the circular economy in the manufacturing industry

→ The increasing speed of technology development forms the term Industry X.0, referring to technologies used tomorrow

→ Changes through Industry X.0 deliver tangible outcomes for companies

→ Accumulation of data is increasing and is opening new opportunities for companies to derive value

→ Besides digital technologies, physical and biological technologies develop at rapid pace, enabling circularity

→ Mobile devices, augmented reality and big data are digital technologies enabling the circular economy

→ IoT, machine learning and machine vision provide different value drivers for the circular economy

→ Blockchain, conversational systems and artificial intelligence are further enabling digital technologies

→ Digital twin and machine-to-machine (M2M) communication also enable circular business models, in addition to a solid infrastructure

→ 3D printing, UV spectroscopy and robotics are physical technologies supporting the circular economy

→ New materials, nanotechnology and energy harvesting are further physical technologies

→ Carbon capture and energy storage are also physical technologies supporting circular value

→ Bioenergy and bio-based materials support substitution of petrol-based materials

→ To assess the viability of implementing any technology, four aspects need to be considered

→ The new technologies come with risks that need to be balanced with their benefits

THIS CHAPTER WILL HELP YOU TO

Explore technologies that can enable your selected circular business model(s)
Assess your technology maturity and identify actions to develop necessary applications and tools
Identify potential technology partners and suppliers

→ Supporting tools: Technology maturity assessment

The availability and use of technology can enable the move towards the circular economy in the manufacturing industry

The Internet of things
“Information is at the heart of ensuring that businesses around the world can make the right decisions to eradicate waste and use resources effectively. The internet of things, with its smart sensors and connected technologies, can play a key role in providing valuable data about things like energy use, under-utilised assets, and material flows to help make businesses more efficient.”

Kate Brand, Lead for Sustainability, Google Inc.^{[1]Accenture analysis}

Footnotes

^ Ellen MacArthur Foundation

Entries to The Circulars, the world’s premier circular economy award, are all tech-enabled
100% of entries to “The circular” awards 2018 identified either a digital, physical or biological technology as part of their circular economy strategy – 51% were digital (e.g. Big Data and Machine Learning)^[1]

Footnotes

^ Accenture analysis

A system must be responsive
“Truly circular economies arguably cannot exist without the Internet of Things. No amount of clever design ensures a complex system will remain useful and efficient over time. To be sustainable, a system must be responsive; actions and behaviours must be connected via data and knowledge.“

Tim Brown, CEO of IDEO^[1]

Footnotes

^ Ellen MacArthur Foundation

Price development makes technology accessible for SME
“Predictive maintenance in performance contracts is not a novel development at the enterprise level. However, recent technological development increasingly enables performance models to trickle down to small and medium-sized enterprise (SME) customers where previously the tracking and logistics were prohibitively costly” as a report of the World economic forum points out.^[1]

Footnotes

^ World Economic Forum

Natural resource demand is growing dramatically
“With the advent of the 4th industrial revolution, we have a suit of innovations and technologies that can enable resource decoupling, yet we still live in a world where natural resource demand is growing dramatically.”

Dominic Waughra, Member of the Executive Committee, World Economic Forum^[1]

Footnotes

^ Circle Economy

The increasing speed of technology development forms the term Industry X.0, referring to technologies used tomorrow

Source: Adapted from earlier Accenture publications. → Appendix 2 for more details

Changes through Industry X.0 deliver tangible outcomes for companies

Accumulation of data is increasing and is opening new opportunities for companies to derive value


Data captured via IoT sources Sensors or embedded chips on products and assets (e.g. machinery, buildings, vehicles) that record IoT sources	Data captured via transactional information management systems Transactional information technology systems (e.g. customer relationship management, enterprise resource planning) that can record maintenance incidents or logistics activity
▼
Examples of use cases for the combined and aggregated data A manufacturer instruments the equipment and employ the sensors to gather performance data. The manufacturer uses the data to offer services to their customers, e.g. remote diagnostics The manufacturer employ the sensors to gather information on how their customers typically operate the equipment (e.g. speed, running intervals). The manufacturer uses the operational data to advise the customer on the most optimal way of operating the equipmentA manufacturer uses data collected in a disassembly processes at the end of life of a product in the design process of the new product to optimize the disassembly process The data from IoT and information technology system sources are aggregated and analysed to generate new opportunities both within one individual company or between a company and its customers and suppliers.


COLOUR CODES USED IN THE FOLLOWING TABLES AND FIGURES
DIGITAL	Technologies based on computer sciences, electronics and communication which make use of increasing information intensity and connectedness of physical resources.
PHYSICAL	Technologies based on basic property of materials, energy, forces of nature and their interaction.
BIOLOGICAL	Technologies based on biology, aspects including but not limited to biological systems, living organisms, or derivatives thereof, to make products and processes for specific use.

Besides digital technologies, physical and biological technologies develop at rapid pace, enabling circularity

Sources: 1. IEEE Engineering360 / 2. Bank of America, Merrill Lynch / 3. International Data Corporation (IDC), Accenture. Appendix 2 for more details

Did you know? On the Circular Economy site, there is a technology maturity assessment, with which you can assess the maturity of your company in technologies enabling circularity and identify actions to develop it. → READ MORE

Mobile devices, augmented reality and big data are digital technologies enabling the circular economy


Technology	Description and circular examples	Illustrative CE value driver	Business model relevance
SCALE-UP / AGING: Mobile devices	Combines hardware, operating systems, networks and software to provide users with real-time access to content. Example: NCC leveraged mobile devices for its “Loop Rocks” platform, which enables smart handling of construction waste. Construction site managers could upload details of excess materials via an app	Enables direct communication with customers	☐ Circular inputs ☑ Sharing platform ☑ Product use extension ☐ Ressource recovery ☑ Product as a service
MATURING: Augmented reality / virtual reality	Provides interactive fully immersive digital reality in a computer generated or video enabled environment (VR) or superimpose real world with text, sounds, graphics on top of the physical world via wearables (AR) Example: ThyssenKrupp enables the field service engineers repairing elevators with HoloLens displaying virtual models of the elevator, information on prior services and repair guidance	Avoids or significantly reduces costly maintenance work	☑ Circular inputs ☐ Sharing platform ☑ Product use extension ☐ Ressource recovery ☐ Product as a service
MATURING: Big Data	Computationally analyses extremely large data sets to reveal patterns, trends, and dependencies Example: Alstom uses big data to operate predictive maintenance tools that are able to monitor the health of trains and infrastructure	Enables descriptive and predictive analytics	☑ Circular inputs ☑ Sharing platform ☑ Product use extension ☑ Ressource recovery ☑ Product as a service

IoT, machine learning and machine vision provide different value drivers for the circular economy


Technology	Description and circular examples	Illustrative CE value driver	Business model relevance
MATURING: Internet of Things/industrial internet	Deploys wireless devices with embedded sensors that interact and trigger actions Example: SKF INSIGHT technology applied in railway and wind industry enables rotating machinery to communicate data on operating conditions to Cloud from which customers can extract information through the remote diagnostic service and receive reports and warnings	Enables exchange of data generated in sensor network and triggering of action	☑ Circular inputs ☐ Sharing platform ☑ Product use extension ☐ Ressource recovery ☐ Product as a service
MATURING: Machine learning	Enables machines to perform new tasks after being trained using historic data sets Example: Siemens deploys machine learning in gas turbine control systems to optimize the turbine´s emissions. The system was able to further reduce emissions by an additional 10-15% after experts´ optimization	Enables predictive analytics through algorithms and optimization	☑ Circular inputs ☑ Sharing platform ☑ Product use extension ☑ Ressource recovery ☑ Product as a service
MATURING: Machine vision	Provides a computing device with the ability to acquire, process, analyze and understand digital images, and extract data from the real world Example: A stamping technology manufacturer uses machine vision in quality control to prevent shipment of defective stampings	Processes pictures for quality control or automated waste sorting	☑ Circular inputs ☐ Sharing platform ☑ Product use extension ☑ Ressource recovery ☐ Product as a service

Blockchain, conversational systems and artificial intelligence are further enabling digital technologies


Technology	Description and circular examples	Illustrative CE value driver	Business model relevance
MATURING: Blockchain	Uses transaction digital ledgers that are shared by all parties participating in an established, distributed network of computers to enhance transparency and secure information sharing as the data is auditable, unchangeable and open Example: Provenance allows users to create and store digital record of assets for anything of value to track it throughout supply chains	Enables transparency and traceability in supply chain	☐ Circular inputs ☑ Sharing platform ☑ Product use extension ☑ Ressource recovery ☑ Product as a service
IMPROVING: Conversational system	Uses human voice and gesture recognition to trigger actions Example: Boeing uses voice control in manufacturing process to enable employees to receive data displayed on their virtual reality glasses without having to take hands off their work	Facilitates assembly and remanufacturing process	☐ Circular inputs ☐ Sharing platform ☑ Product use extension ☐ Ressource recovery ☐ Product as a service
IMPROVING: Artificial intelligence	Applies a set of technologies like machine analytics, learning and e.g. computer vision that enable machines to simulate human intelligence and act without explicit instructions Example: AMP recycling system utilises a machine learning, and computer vision driven robotic systems to intelligently sort waste	Enables process to become more efficient over time	☑ Circular inputs ☐ Sharing platform ☑ Product use extension ☑ Ressource recovery ☐ Product as a service

Digital twin and machine-to-machine (M2M) communication also enable circular business models, in addition to a solid infrastructure


Technology	Description and circular examples	Illustrative CE value driver	Business model relevance
IMPROVING: Digital twin	Is a virtual model of a process, product or service, pairing virtual and physical worlds. This allows the analysis of data and monitoring of systems to develop new solutions or conduct predictive maintenance Example: GE uses digital twins to simulate asset performance in different usage scenarios under varying conditions to develop maintenance solutions	Enables direct communication with customers	☑ Circular inputs ☐ Sharing platform ☑ Product use extension ☐ Ressource recovery ☒ Product as a service
IMROVING: Machine-to-machine (M2M) communication	Connects data, analytics and machines based on sensors and actuators Example: Hello Tractor has a “Smart Tractor” sharing platform that connects tractor owners with farmers. The system links SMS message requests with software that identifies nearby tractors with the required usability and functionality	Avoids or significantly reduces costly maintenance work	☑ Circular inputs ☑ Sharing platform ☑ Product use extension ☑ Ressource recovery ☑ Product as a service
Infrastructure	To apply and connect different digital technologies a solid infrastructure is required with efficient networks, high-speed internet connection, etc.. Technologies such as Edge or Fog Computing, Cloud, Scalable API should be considered and technological advancements followed to keep infrastructure up-to date

3D printing, UV spectroscopy and robotics are physical technologies supporting the circular economy


Technology	Description and circular examples	Illustrative CE value driver	Business model relevance
SCALE-UP/AGING: 3D printing	Creates 3D objects by forming successive layers of material under computer control Example: Daimler Trucks North America pilots sales of on-demand 3D-printed plastic parts enabling delivery of parts which are traditionally difficult to provide e.g. due to low or intermittent demand	Promotes repair by reducing inventory sizes and repair costs	☑ Circular inputs ☐ Sharing platform ☑ Product use extension ☐ Ressource recovery ☐ Product as a service
SCALE-UP/AGING: UV/IR/NIR/NMR spectroscopy	Uses different spectrums of electromagnetic radiation to analyze material based on the molecular composition of the matter Example: Trash-Sorting machine from TOMRA Sorting Recycling uses Near infrared sensors for sorting	Detects particular type of material in mixed waste stream	☐ Circular inputs ☐ Sharing platform ☐ Product use extension ☑ Ressource recovery ☐ Product as a service
MATURING: Robotics	Applies machines that are programmed to automatically carry out a complex series of actions. Especially suitable for repetitive and rule based processes using structured data. If combined with machine learning, robots can train themselves Example: Zenrobotics builds waste sorting robots that can sort and pick objects with various weight and shape and learn new sorting rules	Automates waste sorting	☐ Circular inputs ☐ Sharing platform ☑ Product use extension ☑ Ressource recovery ☐ Product as a service

New materials, nanotechnology and energy harvesting are further physical technologies


Technology	Description and circular examples	Illustrative CE value driver	Business model relevance
IMPROVING: New materials	Advances in material sciences have led to development of polymers or substances with modified molecular structure Example: BMW uses carbon fiber-reinforced plastic in its electric vehicle lowering the overall mass of the vehicle by over 100kg	Increases product use efficiency	☑ Circular inputs ☐ Sharing platform ☐ Product use extension ☑ Ressource recovery ☐ Product as a service
EMERGING: Nanotechnology	Manipulates matter on an atomic, molecular, or supramolecular scale. Examples are fullerene, carbon nanotubes and quantum dots Example: GloNaTech produces maritime coatings containing carbon nanotubes that facilitate release of microorganisms responsible for biofouling. It reduces flow resistance between the ship’s hull and the water in a environment friendly way	Improves environmental performance of product	☑ Circular inputs ☐ Sharing platform ☑ Product use extension ☐ Ressource recovery ☐ Product as a service
EMERGING: Energy harvesting	Captures small amounts of energy that would otherwise be lost, such as heat, light, sound, vibration or movement Example: EnOcean produces energy harvesting wireless switches using kinetic energy for switching application and energy harvesting wireless sensors using solar energy	Enables data gathering at locations where cables and battery changes are not feasible	☑ Circular inputs ☐ Sharing platform ☐ Product use extension ☐ Ressource recovery ☐ Product as a service

Carbon capture and energy storage are also physical technologies supporting circular value


Technology	Description and circular examples	Illustrative CE value driver	Business model relevance
IMPROVING: Carbon capture	Captures waste carbon dioxide from large point sources, transports it to a storage site and deposits it where it will not enter the atmosphere Example: Graviky, a spinoff from the Massachusetts Institute of Technology, recycles carbon dioxide emissions to produce ink	Reduces emissions in the atmosphere	☑ Circular inputs ☐ Sharing platform ☐ Product use extension ☑ Ressource recovery ☐ Product as a service
EMERGING: Energy storage	Prolongs the life of batteries, increases their storage capacity, or replaces existing chemical-based raw material with organic substances Example: Iberdrola, has built the largest pumped-hydro storage plant in Europe, where two reservoirs with over 500 meters of altitude difference are used to produce electricity during peak consumption times	Enables increased use of renewable energy	☑ Circular inputs ☑ Sharing platform ☐ Product use extension ☐ Ressource recovery ☑ Product as a service

Bioenergy and bio-based materials support substitution of petrol-based materials


Technology	Description and circular examples	Illustrative CE value driver	Business model relevance
IMPROVING: Bio energy	Is renewable energy derived from biomass which includes biological material such as plants and animals, wood, waste, (hydrogen) gas, and alcohol fuels Example: BioGTS produces biogas from biodegradable waste, industrial residues and agricultural biomasses	Substitution of petrol-based materials and cascading of biomass	☑ Circular inputs ☐ Sharing platform ☐ Product use extension ☑ Ressource recovery ☐ Product as a service
EMERGING: Bio-based materials	Composed out of biopolymers and other natural-fiber created partially or wholly by using pant feedstock Example: Mazda uses bioplastic in the interior of its cars and also launched it that as scratch and weather resistant material used as coating for cars	Substitution of petrol-based materials through renewable	☑ Circular inputs ☐ Sharing platform ☐ Product use extension ☐ Ressource recovery ☐ Product as a service

To assess the viability of implementing any technology, four aspects need to be considered

Price comparability

Price for digital technologies is decreasing over the years due to fast pace of technological development

By 2020, cost of IoT sensors will have decreased by 70% from 2004 ^[1]
Price for Robot arms dropped about 25% between 2014 and 2017 and will further decrease by 22% by 2025^[2]

Comparability

Comparing costs of different technologies for prioritisation purposes is misleading as they come with different applications and benefits

Prices for technologies are only comparable if they deliver the same function
Compare benefit of technologies to the company for prioritisation

Scope dependency

Costs for implementation are highly dependent on the scope

Depending on the scope of technology application (size of operation facilities, complexity of products, number of processes), the required units or the size of equipment will vary (e.g. robot arms: €20k-350k)^[3]

Business case

Whether the price for a technology implementation makes economic sense or not, depends on the achievable revenues or cost savings potential

Robotic process automation increases speed of process and can save 20-50% of costs^[4]
Combining technologies can increase benefits. Deploying Robotics, 3D printing, AI, Big data and Blockchain in industrial equipment can save e.g. €35k per employee
→ Accenture, Appendix 2 for more details

Footnotes

^ Bank of America; Merrill Lynch
^ IEEE Engineering360
^ IEEE Engineering360
^ Capgemini

The new technologies come with risks that need to be balanced with their benefits

EXAMPLE


ENVIRONMENTAL RISKS		DIGITAL RISKS
Harmful production	Even tough beneficial in use phase, the production of environmentally friendly technologies can have severe negative environmental impacts (e.g. mining process of rare earth elements)¹	Misuse of data	Data protection is of high public concern. The European General Data Protection Regulation now makes protection of EU residents’ data for collector and processor mandatory. Sanctions of up to €20mn or 4% of global revenue can be imposed⁵
Uncertainty of impact	The (eco)toxicological risk and impact of innovative materials is not clear upon first application and regulations are missing – e.g. nanotechnologies. Existing studies point to potential adverse effects on aquatic and possibly other organisms²	Data breaches	The average size of data breaches is 24,000 records and cost >$ 3mn based on costs of $141 for each stolen or lost record containing sensitive and confidential information⁶
Recycling challenges	An inkjet 3D printer can waste up to 40% of its ink. In addition, depending on the material used, this waste can not be easily recycled³	Cyberattacks	Over the last 5 years, average costs of cyber attacks have risen by 62%, mainly because of the time it takes to resolve them. While malware take about 6.4 days, malicious codes can take 55.2 days to resolve⁷
Additional consumption and waste	Around half a trillion connected devices by 2025 will result in additional waste, emissions and resources (including rare-earth elements) inherent in adding sensors, memory, and wireless⁴	Intellectual property protection	Open collaboration and connecting with ecosystem partners e.g. through IoT makes handling intellectual property protection more complex – software is e.g. excluded from the scope of patents in EU (different to US)⁸

Source: 1. The Guardian / 2. OECD/Alliance / 3. Autodesk, / 4. Sustainablebrands.com / 5. Openaccessgovernment.org / 6. IMB / 7. IT governance / 8. International bar association

A technology maturity assessment tool supports you in prioritising which technologies to focus on

Tool for assessing your company’s maturity in the technologies enabling circular business models and prioritizing those for development
Estimated working time: 20 min
→ READ MORE

Which technologies can support?

Business model canvas

KEY QUESTIONS

What technologies can be used to support the initiatives?
What are the key actions required to implement these technologies?
Who are the key partners you need to collaborate with?

BUSINESS MODEL CANVAS

Based on the information learnt in this chapter, fill in the following parts of the business model canvas:

Operating model – reflect on key partners and digital technologies needed to operate

How to design the transformation journey?

Guidance on steps to take advantage of the circular economy and overcome barriers

5

CHAPTER SUMMARY: HOW TO DESIGN THE TRANSFORMATION JOURNEY?

The transformation journey required to leverage the circular advantage has two key elements: I) Envision and plan and II) Deliver and adapt.
Typically, companies undergo three different stages where they first “Explore & shape” concepts for target business models, look for partners, design and test prototypes. They then “Attract & win” as they develop required processes and partnerships and pilot new solutions. Finally, they “Scale fast & keep growing” by adopting multiple circular business models across their operations
Companies often face barriers along the transformation journey, typically related to (a) organization & culture, (b) ecosystem and (c) finance
To overcome barriers, companies need to promote a customer-centric, outcome-oriented and collaborative culture, understand funding requirements for circular initiatives and develop an ecosystem of partners

SHORTCUTS TO CONTENT IN THIS CHAPTER

→ Organizations should start addressing two key elements: I) Envision and plan and II) Deliver and adapt

→ Five steps are critical to envision and plan a successful transformation

→ The transition from the traditional to the new business model is gradual and has three phases

→ In each phase, customer value delivery, collaboration and resource handling follow circular business logic

→ Companies typically face several barriers during their circular transformation journey

→ Organisational & cultural

→ Ecosystem-related

→ Financial

→ How to start the transformation journey? Business model canvas

THIS CHAPTER WILL HELP YOU TO:

Understand the key steps, common barriers and success factors on the circular transformation journey
Identify actions to be implemented in terms of culture, ecosystem partners and financing, to avoid typical pitfalls
Design a transformation roadmap with concrete next steps, responsibilities and milestones

Supporting tools:

Culture gap analysis
Ecosystem partner identification
Funding requirements analysis
Roadmap development

Organizations should start addressing two key elements:
I) Envision and plan and II) Deliver and adapt

Five steps are critical to envision and plan a successful transformation

KEY ELEMENT NO. 1: “ENVISION AND PLAN”


	①	②	③	④	⑤
	Why: Define for the circular economvisiony	What: Screen opportunities and size value	Assess capability gaps	Assess technology gaps	How: Design roadmap	Start first pilot
Key activities	1.1 Vision Define aspirational description of achievements in mid- and long-term future	2.1 Business models Assess potential of circular business models to address inefficiencies	3.1 Capability gap assessment Understand and analyse internal capabilities	4.1 Technology assessment Evaluate opportunities of technologies	5.1 Barriers Identify potential internal and external implementation barriers and activities to mitigate them
		2.2 Value proposition Develop high level description of the value proposition for new products and services			5.2 Implementation Define the roadmap to implement target business model
		2.3 Value case Assess potential revenues, costs and investments for selected business models
	Chapter 1	Chapter 2	Chapter 3	Chapter 4	Chapter 5

The transition from the traditional to the new business model is gradual and has three phases

KEY ELEMENT NO. 2: “DEFINE AND ADAPT”

Source: Accenture. → Appendix 2 for more details

In each phase, customer value delivery, collaboration and resource handling follow circular business logic


	I. EXPLORE & SHAPE	II. ATTRACT & WIN	III. SCALE FAST & KEEP GROWING
	Develop concepts for target business models, look for partners, design and test prototype(s)	Develop processes and partnerships and pilot new solution to convey benefits	Adopt multiple circular business models across own operations and value chain
Customer value delivery	Apply customer-centric design process and detail concept with needs addressed and potential functions Prototype and test new solution with customers	Implement pilot concepts and enable customers with new solutions Raise awareness and promote new solutions	Apply circular concepts across offerings within product and service portfolio, incorporating multiple business models Use circularity as a differentiator to remain competitive and profitable
Organisation & collaboration	Assess and strengthen internal capabilities and processes Identify cooperation partners complementing own capabilities	Ensure dedicated resources focusing on opportunities and engage broader organisation Define circular targets to incentivise and drive change in organisation Engage in external dialogues, collaborations and partnerships	Ensure strong buy-in across business and at leadership level Use credibility, scale and leverage to solve global circular barriers
Resource handling	Analyse and prepare required changes in production	Improve internal knowledge of circular materials and processes Adapt production to manage circular materials and products	Incorporate circular thinking across business units, demonstrating proven impact at multiple levels
← TIME →

Did you know? On the Circular Economy site, there is a tool called Roadmap development, which supports you in planning your circular transformation journey. → READ MORE

First, a dedicated project team contributes to the pilot and stakeholders are engaged selectively


I. EXPLORE & SHAPE

Description

New solutions are developed in a customer-centric approach, analysing their needs and pain points and engaging them in the development process
The solutions are prototyped and tested with the customers to assure fit
The business model is not yet changed in this stage. A dedicated project team within the company contributes to the prototype
Company boundaries are opened to selected stakeholders. Customers and potentially required partners are invited to contribute and take part in the development and take an active part. This way the developed prototype matches customer needs and demand as well as possible

Example: Michelin Case

Michelin embarked on the journey to transform from a product-sales focused company towards a solution provider
To achieve the goal to increase sales of one of its segments from €300mn to €3bn over a period of 10 years, innovative solutions to complement the portfolio were required
In the first step, when developing a tire solution for mining tires, Michelin focused on understanding pain points in the value chain, and discussed who would be able to pay for a solution and who could be partners to deliver the solution

Later, stronger cross-functional collaboration and interaction with partners is required to bring concepts to market


	I. ATTRACT & WIN

Description

The new business model is piloted with target customers and runs parallel to the traditional business model
Cross-functional collaborations are established by involving key functions in solution development
A customer-centric culture is introduced throughout the company and customers play an integral part in solution development
The company boundary gets more permeable as more and more stakeholders are engaged to form an ecosystem

Example: Michelin Case

Michelin established an incubator programme office that is in charge of identifying client needs as well as internal processes that can be improved to respond to them
The programme office provides guidance on agility and methods to involve external and internal stakeholders
Michelin grows the identified projects as far as possible and tests them on the market to ensure their viability

Finally, to scale and adopt multiple circular initiatives, all stakeholders need to converge to an ecosystem


		III. SCALE & GROW

Description

The new business models are scaled and the business is pivoted to the new, phasing out old business models
Customer-centricity is fully established and applied throughout the organisation and integrated across the portfolio
An ecosystem of partners has developed, and it is characterised by multilateral exchanges and interactions instead of one-to-one relationships

Example: Michelin Case

Michelin leverages the overall ecosystem by drawing on
- Strategic partners to jointly develop solutions to ensure credibility through a network of recognised partners (e.g. insurance company, telecom provider)
- Business partners to benefit from their technical or commercial expertise to extend solution benefits with non-core services (e.g. automotive manufacturer)

The business transforms over time, incorporating prototyping, customer-centricity and ecosystem engagement into its DNA


I. EXPLORE & SHAPE	II. ATTRACT & WIN	III. SCALE FAST & KEEP GROWING
Develop concepts for target business models, look for partners, design and test prototype(s)	Develop processes and partnerships and pilot new solution to convey benefits	Adopt multiple circular business models across own operations and value chain
Illustration of company state

Key characteristics Customer-centric approach to find minimal viable product through rapid prototyping Engage with key partners and customers through dedicated project team	Key characteristics Pilot new business model with target customers in parallel to traditional business model Establish cross-functional collaborations by involving key functions in solution development Focus all processes around customer needs and open company boundary to engage with more and more stakeholders	Key characteristics Phase out old business models Embrace and live a customer-centric culture Connect with an ecosystem of partners in multilateral exchanges
←TIME→

Companies typically face several barriers during their circular transformation journey


ORGANISATIONAL & CULTURAL	ECOSYSTEM-RELATED	FINANCIAL

RECOMMENDATIONS WILL GUIDE YOU THROUGH THE SECTION


	TYPE OF BARRIER	CHALLENGES	RECOMMENDATIONS
INTERNAL	Organisational & cultural	Change in culture requires changes in behaviour, value and mindset of employees Cross-functional collaboration and customer-centricity required for the culture of circular business are often not yet well developed in linearly operating companies – neither on company or function-level As the owner of customer relationships, the sales team needs to endorse the new circular culture The transformation process needs to be well managed and embraced by leadership to support change in the long-term	1. Address all components of culture 2. Define company-wide and function-specific components 3. Put special focus on sales team 4. Manage culture change with a dedicated programme
EXTERNAL	Ecosystem-related	Full circular potential in value chains from joint delivery of services and new configuration of value chains requires a diverse set of capabilities. Only big companies will be able to establish such an ecosystem themselves – others can develop an ecosystem of partners To engage with ecosystem partners, actors that can provide the required capabilities and know-how need to be identified Framework conditions form the prerequisite of how the ecosystem and business models can unfold. While some new business models face the challenge of operating without any legal guidance, others face hindering conditions	5. Understand full circular advantage from collaborative ecosystem opportunities 6. Identify partners to develop ecosystem 7. Be aware of framework conditions and actively engage to shape them
EXTERNAL	Financial	Companies with a well running business model do not perceive a need to invest in circular business models that come with different funding requirements, risks and returns With change in cash flow and asset structure, product as a service models change the overall business logic as compared to many other business models. This leads to risks financiers and businesses must assess and mitigate With e.g. changing cash flow structures, funding requirements vary for all business models, and therefore need to be well assessed and described Funding sources are scarce, as only few financiers have circular economy experience	8. Holistically assess circular benefit 9. Understand business model specific funding requirements 10. Develop mitigation strategies for PaaS specific risks 11. Determine funding requirements 12. Identify funding partner and instrument

Behaviour, values and mindset changes are required to deliver outcome-oriented solutions


ORGANISATIONAL & CULTURAL

1. ADDRESS ALL COMPONENTS OF CULTURE

The culture of circular business has company-level and function-specific components

EXAMPLE


ORGANISATIONAL & CULTURAL

2. DEFINE COMPANY-WIDE AND FUNCTION-SPECIFIC COMPONENTS


		CULTURE
		Values	Mindset	Behaviours
Company-level		Sustainability Customer value creation Collaboration and teamwork	Minimising resource consumption and environmental impact is key for license to operate Things that increase client value are prioritised Sharing among colleagues is caring	Voice new ideas Use impact on client value as measure to prioritise activities Share know-how and experience across functions
Function-specific	*Design/R&D*		The resource efficient way will be the better way in the long-run	Apply circular design criteria Consider the whole lifecycle in design
	*Sourcing & procurement*		Recycled, reused or renewable material should be used where possible	Explore new suppliers for material source
	*Manufacturing*		Repairing a product or component is better than producing a new one	Support designers in design for repair
	*Sales & aftersales*		Every unmet request of a customer is a potential new solution	Have dialogue with customers to explore unmet needs
	*Take-back & recycling*		Failing high recovery rates is failing value capturing	Aim at recovering and recycling as much as possible of products
	*Strategy & leadership*		Leading by example is most effective	Publicly praise employees for their contribution to the journey

Did you know? On the Circular Economy site, there is a tool called Culture gap analysis, which helps you to understand how circular your company culture is and identify actions to develop it further. → READ MORE

Shifting aspects of the sales operating model supports culture change towards outcome-orientation


ORGANISATIONAL & CULTURAL

3. PUT SPECIAL FOCUS ON SALES TEAM


COMPONENTS OF SALES FUNCTION	REQUIRED CHANGES TO ENABLE OUTCOME-ORIENTATION			REQUIRED CHANGES TO FACILITATE CUSTOMER-CENTRICITY
Skills & competences	Features	→	Financials	Production	→	Value-chain
Skills & competences	Know-how on costs to deliver solutions and cost implications for modifications are needed when selling customised solutions with differing features			Highest customer value is achieved when use of capabilities throughout the value chain is optimised for why sales team needs to have close exchange with partners
Interaction	Silos	→	One-company	Inside-out	→	Outside-in
Interaction	The sales team needs to e.g. forward customer needs to design department and request input on feasibility of customer wishes			The sales team needs to embrace external information to advance solutions instead of pushing product information and products out to the market
Processes & tools	Stand-alone	→	Integrated	Internal	→	Collaborative
Processes & tools	Integrated databases are required to get easy access to information from the whole product lifecycle			Processes for continuous engagement along product lifecycle are required and exchange of data needs to be enabled through e.g. platforms
Metrics	Snapshot	→	Longitudinal	Product	→	Customer
Metrics	Performance indicators and connected incentives need to be forward-looking and consider development over time			Sales volume needs to be measured per customer instead of per product or product family to optimise the value delivered to a customer

The culture transformation in a company can be facilitated by a dedicated change programme


ORGANISATIONAL & CULTURAL

4. MANAGE CULTURE CHANGE WITH DEDICATED PROGRAMME

Case study: Component manufacturer

A component manufacturer faced the challenge of below average ESG^[1] performance, reputation of poor service quality and, connected with this, reduction in market share. This is their culture transformation journey:

They started the journey with a survey across all levels and some in-depth interviews with key internal and external stakeholders to get a holistic view of the situation and to develop a vision of where to transform to.
They developed a change story describing how they got into the current position, where they want to be, how they plan to get there and what the change means for the individual employee.
The transformation process started with engagement workshops in which employees were asked to select a number of initiatives in which they would have the opportunity to demonstrate their commitment to change – giving employees a long-list to decide from increases uptake of activities.
Furthermore, “catalyst projects” aiming to demonstrate visible changes in values and behaviours were started. They were cross-functional, on top of the company agenda and highly visible.
The transformation process was accompanied by several communication tools to constantly make employees aware of it. This included intranet posts, articles in corporate magazines, workshops and emails answering questions.
For leadership, dedicated peer-learning sessions were conducted to exchange experiences and discuss challenges and opportunities.
The first phase of the programme culminated in a event to celebrate the successes of the catalyst project and officially launch the new vision
Footnotes
1. ^ Environmental, social and corporate governance

OVERVIEW OF ACTIVITIES

Planning

Develop vision
Formulate change story
Conduct engagement workshops

Engagement

Kick-off catalyst projects
Release company-wide communications
Conduct regular leadership peer-learning sessions
Celebrate company event

Taking an ecosystem approach opens new circular business opportunities

EXAMPLE


	ECOSYSTEM-RELATED

5. UNDERSTAND FULL CIRCULAR ADVANTAGE FROM COLLABORATIVE ECOSYSTEM

BUNDLED OFFERINGS: Make e.g. sharing concepts more attractive for customers

Ecosystem design: Partner with companies offering complementary services or products (e.g. insurance for shared products)

Opportunity: Enables to capture value from underutilised capacity of products by addressing potential customer pain points upfront

Challenges: Identifying relevant product or service combinations + Potential cannibalisation of individual product or service sales

Business model relevance

☐ Circular inputs
☑ Sharing platform
☑  Product use extension
☐  Resource recovery
☑  Product as a service

JOINT DELIVERY OF SERVICES: Increases service spectrum to deliver product use extension

Ecosystem design: Partner with companies delivering use phase services and technology companies enhancing own product e.g. for remote control

Opportunity: Enables to operate business models that require capabilities currently not available at a company (e.g. onsite maintenance and repair service

Challenges: Distribution of captured value among partners

Business model relevance

☐ Circular inputs
☑ Sharing platform
☑  Product use extension
☐  Resource recovery
☑  Product as a service

VALUE CHAIN RECONFIGURATION: Improves collection of material for reuse and recycling

Ecosystem design: Partner with companies throughout the whole value chain jointly working on resource recovery

Opportunity: Enable high quality recycling of large (mostly) uniform material that is currently not recoverable in a linear value chain

Challenges: Exchange of information on material or material composition + Work towards unification of input material (as required) + Purity of recovered material in collection

Business model relevance

☑ Circular inputs
☐ Sharing platform
☐  Product use extension
☑  Resource recovery
☐  Product as a service

Indeed, achieving the full circular advantage often requires building an ecosystem of partners


	ECOSYSTEM-RELATED

5. UNDERSTAND FULL CIRCULAR ADVANTAGE FROM COLLABORATIVE ECOSYSTEM


	TRADITIONAL APPROACH		ECOSYSTEM APPROACH
Offering	Products and services	→	End-to-end solutions	→
Objective	Maximising profits	→	Maximising customer value	→
Interactions	Bilateral	→	Multilateral	→	Enhanced capability to deliver extended value propositions and superior customer experiences
Solution development	In-house R&D	→	Open innovation	→
Relationship strategy	Partner relationship management	→	Ecosystem orchestration	→

The transformation to a circular ecosystem typically happens in three stages


	ECOSYSTEM-RELATED

5. UNDERSTAND FULL CIRCULAR ADVANTAGE FROM COLLABORATIVE ECOSYSTEM

Ecosystem partners can help in bridging internal capability gaps


	ECOSYSTEM-RELATED

6. IDENTIFY PARTNERS TO DEVELOP ECOSYSTEM

Customers

Current or potential new customers
Reveal insights on needs and iteratively improve solution'

Circular economy thought-leaders

Universities, networks and peers with extensive CE knowhow
Serve as source of inspiration, sounding board and (peer-) learning forum

Suppliers & delivery partners

Goods and services providers for internal use and collaborative solution delivery (waste, material management, logistics, insurance, payment solutions, …)
Grant access to circular material, are partners for joint generation of circular material or partners for service delivery

Financiers

Public institutions, banks, investment funds, supply chain partners
Give access to funding required for offering the CE business model

Technology providers

Providers of technologies and software enabling digital solutions or internal processes
Engage in solution and production process design and supply required technology

Public and societal actors

Governments, associations and other representatives
Influence public perception and opinion and influence or set framework conditions

Did you know? On the Circular Economy site, there is a tool called Ecosystem partner identification, which helps you in identifying ecosystem partners to support with your circular business idea. → READ MORE

The ecosystem actors generate value in different parts of the value chain

ILLUSTRATIVE EXAMPLE FROM ECOSYSTEM IN PERSONAL MOBILITY INDUSTRY


	ECOSYSTEM-RELATED

6. IDENTIFY PARTNERS TO DEVELOP ECOSYSTEM

New circular business models redefine the business ecosystems

ILLUSTRATIVE EXAMPLE FROM SUB-MODELS AND VALUE IN PERSONAL MOBILITY INDUSTRY


	ECOSYSTEM-RELATED

6. IDENTIFY PARTNERS TO DEVELOP ECOSYSTEM

Source: 1. IEA 2020, Global EV Outlook 2020, Sustainable development Scenario / 2. Circular Economy Handbook - Appendix 2 for more details

Regulations around the circular economy are evolving but there are still regulatory barriers present


	ECOSYSTEM-RELATED

7. BE AWARE OF FRAMEWORK CONDITIONS AND ACTIVELY ENGAGE TO SHAPE THEM


TYPE OF REGULATORY BARRIER	BUSINESS IMPACT	EXAMPLE CASE
Missing regulations	Uncertainty about legal status of operations or requirements to pursue the business Risk of engaging in new model that then is prohibited by new regulations	Sharing platforms such as Airbnb and Uber face difficulties of missing framework that provide required flexibility – e.g. missing appropriate tax collection laws
Current regulations promoting linear models	Distortion of competition for circular businesses due to prices from linear models that do not show true costs (neglecting environmental costs or externalities)	6.5% of global GDP went to subsidising fossil fuels in 2013 Tax payers pay more than 90% of the cost of recycling plastic	→	Engage in shaping regulations through - Partnering with larger players - Seeking for legal assistance - Participating in political discourse
Current regulations hindering circular models	Costs from increased administration Hindrance to harness circular value opportunities	Definition of material classifications (e.g. “secondary material” status vs. “waste” status) WEEE is the only category where hazardous substances have been comprehensively restricted for by legislation

A clear value case helps companies to overcome hesitations towards engaging in the investment


		FINANCIAL

8. HOLISTICALLY ASSESS CIRCULAR ECONOMY BENEFIT

Did you know? On the Circular Economy site, there is a Value case tool, with which you can calculate a high-level business case, including investment need, for the circular economy business models for your company. → READ MORE

Income throughout a product lifecycle can increase by 75% through circular business models

EXAMPLE


		FINANCIAL

8. HOLISTICALLY ASSESS CIRCULAR ECONOMY BENEFIT

Circular business models have three funding requirements that vary in level of risk and return


		FINANCIAL

9. UNDERSTAND BUSINESS MODEL SPECIFIC FUNDING REQUIREMENTS


FUNDING REQUIREMENTS	APPLICABILITY FOR BUSINESS MODELS		FINANCIAL IMPLICATIONS	LEVEL OF RISK/RETURN
Incremental investments to extend offering portfolio	Circular Inputs Product Use Extension Resource Recovery	→	Investments to e.g. modify production equipment or set up reverse logistics processes are required Incremental revenue and/or cost reduction opportunity exists If deposit system is introduced in take-back, additional cashflows are generated
Significant investment to finance balance sheet extension	Product as a service¹	→	Required working capital increases due to changes in cashflow and extension of balance sheet (assets offered to customer as-a-service need to be pre-financed) Assets distributed to customers have limited value as collateral
Significant investment to finance new and potentially disruptive offering	Sharing Platform	→	High investments are required for platform due to “winner takes it all” effect Potential to disrupt industry exists but with uncertainty of success for this strategy and related return on investment

1. Deep dive → See chapter 6

Financial, legal and market-related risks need to be mitigated to convince financier to fund PaaS model


		FINANCIAL

10. DEVELOP MITIGATION STRATEGIES FOR PAAS SPECIFIC RISKS


RISKS OF PRODUCT AS A SERVICE MODEL		MITIGATION STRATEGIES
Financial	Default of payback due to longer payback periods for the required working capital Illiquidity and costly collection of collateral due to assets being located at customer sites Decreasing value of collateral over time due to depreciation Unknown residual value of many products, due to small market of circular output companies	Shorten payback period by changing pricing model to get higher cash flows in beginning Show benefit of higher and more stable profit margins based on additional lifecycles and reduced dependence to volatile commodity prices Leverage supply chain for securities i.e. supply chain finance/ reversed factoring
Legal	Discontinued payment of service in case of client bankruptcy by liquidator and limited ability to get product back (depending on products e.g. power-by-the-hour) Legal ownership of assets might get lost due to legal accession (e.g. in real estate)	Collect deposit to reduce risks connected to bankruptcy Design service cut-off function (e.g. remotely disable engine in case of default of payment) to incentivise continued payment Diversify contract and client portfolio
Market-related	Lacking demand of offered service as customers and companies are currently used to owning products Lower solvency of customers attracted by PaaS due to reduced level of individual payments Availability of stable second hand market required for valuing collateral	Check creditworthiness of customers Introduce risk premiums in pricing scheme
Mitigation strategies are important to convince internal or external financiers, depending on the individual funding requirements

Across all business models, funding requirements can be determined in four steps


		FINANCIAL

11.DETERMINE FUNDING REQUIREMENTS

1. Model expected net cash flow

Estimate price or monthly fee appropriate for product or service (depending on e.g. asset handling, insurance, services, operating costs)
Model growth scenario taking into account the cyclic back-flow of assets in different conditions
Calculate expected net cash flow based on fees and scenario

2. Define financing needs
To offer circular business models companies need to

Secure finance for upfront investments: Development of product, set-up of infrastructure, training of workforce etc. need to be financed
Secure working capital during operations: Especially relevant for PaaS – Products and spare parts delivered to customers but paid-back over a certain period of time need to be pre-financed. Capital needs to be flexibly available as new products need to be financed as soon as new contracts are signed

3. Asses risks and offer securities
The cashflow logic of all circular business models but PaaS is similar to linear value creation. Therefore, only for PaaS risks and collateral assessment varies. Following aspects are relevant:

Client quality: Depends on solvency and a combination of number and diversity of clients. A strong portfolio offers security as it buffers the risk of default of payments
Asset quality: Depends on the existence of a second hand market for the product and the condition of used products. A high resell price reduces risk as it gives high collateral. In the worst case, collateral is scrap value of a product
Contract robustness: Depends on specifics of clauses such as termination fees or instalment fees that reduce risk of high fluctuation of customers and deposits reducing risks of default in payback in case of bankruptcy

4. Select funding sources^{[1]1 European commission (2016): Flash Eurobarometer 441 - European SMEs and the Circular Economy}
Companies can more easily use internal funding or approach external financiers. If external funding is required, the appropriate funding instrument and source is dependent on funding volume and risk. Factors influencing the risk are e.g.

Availability of collateral in company
Maturity of offering

The next pages give details on instruments and sources.

Footnotes

^ 1 European commission (2016): Flash Eurobarometer 441 - European SMEs and the Circular Economy

Did you know? On the Circular Economy site, there is a tool called Funding requirement analysis, which helps you to reflect on your funding needs and sources → READ MORE

Besides bank loans, other funding sources and instruments can be explored for circular economy funding


		FINANCIAL

12. IDENTIFY FUNDING PARTNER AND INSTRUMENT


FUNDING SOURCE	FUNDING INSTRUMENT	APPLICATION IN CIRCULAR BUSINESSES	INDICATIVE LEVEL OF RISK/RETURN
Banks	Corporate debt (e.g. Bank loans, credit lines)	Traditional lending that can finance circular investment needs Requires guarantees from company
	Leasing	Can enable Product as a service business models Applicable for products with predictable residual value or creditworthy company
	Invoice factoring, purchase order financing	Can increase working capital and thus support PaaS business model Applicable for companies with solid client or supplier base
	Warehouse financing	Can enable e.g. product life extending businesses models that might lead to increase in inventory Applicable for products with predictable residual value in mid- to high price range as storage fees need to be considered
Capital markets	Equity finance Debt finance (Green bonds)	Only applicable for larger and mature circular businesses that meet the scale and requirements of the capital markets
For-profit investors	Crowd funding	Applicable for circular businesses that involve the (local) community or those based on ideas that appeal to the crowd
For-profit investors	Venture capital, private equity	Only partly applicable for circular businesses as high growth and relatively fast payback horizons are required
Foundations & impact investors	Grants, loans	Suitable for circular businesses that are at a pilot stage and not profitable yet or are lacking a track record (Depending on financier, high level of return is not expected)	Depending on financier, high level of return is not expected

Source: Based on ING (2015): Rethinking finance in a circular economy

The Nordic banks and private funding institutions are open for circular and sustainable businesses. In addition, public funding sources can be approached to secure further funding


		FINANCIAL

12. IDENTIFY FUNDING PARTNER AND INSTRUMENT

BANKS: MOST COMMON SME FINANCE SOURCE

Danske Bank has no specific circular economy focus but general sustainability and carbon reduction strategy
DNB has principal target to integrate sustainability considerations in operations and a Sustainable Business Framework that governs sustainable lending activities
Ekobanken grants loans to operations that create social, environmental or cultural added value
Nordea has mission to enable transition to a sustainable future. Addresses UN’s SDGs and e.g. has experience with product use extension from customers
OP Financial Group has green bond framework and e.g. supports DriveNow car sharing model in Helsinki region
Arion Banki is focusing on financing projects on sustainable development and green infrastructure, and evaluates loan portfolio according to green criteria

OTHER PRIVATE FUNDING INSTITUTIONS

Grannenfelt Finance – financial solutions provider , drawing on different sorts of funding solutions (equity, debt, EU or government funding)
Loudspring accelerator for companies that aim to save natural resources – generally in early stage
Taaleri – financing company operating the world’s first Private Equity CE Fund
Tesi – venture capital and private equity company, has the circular economy as a new focus

PUBLIC FUNDING INSTITUTIONS

The European Investment Bank and European Commission funds initiatives via the European Fund for Strategic Investments (EFSI), provides guarantees via InnovFin and research support under Horizon Europe
C-VoUCHER supports European SMEs in creation of new innovative business models with CE, i.e. open calls
Finnish ministry of economic affairs, e.g. provides €2m funding for CE initiatives in 2019
Business Finland offers funding programs for SMEs, e.g. aiming to expand internationally
CLIC Innovation – open innovation cluster with mission to facilitate creation of breakthrough solutions, e.g. in CE
Innovasjon Norge supports companies in developing their competitive advantage and enhance innovation
Erhvervsstyrelsen works to create growth and development opportunities in Denmark, e.g. CSR
Vinnova is Sweden’s innovation agency that fund research and innovation projects, e.g. CE
RE:Source is a strategic, Swedish innovation program focusing on developing circular, resource efficient material flows. Has financed 150 projects since 2016
Tillväxtverket builds networks to facilitate cooperation and finance efforts to boost sustainable growth
NMI (Innovation Center Iceland) encourages innovation and promotes the advancement of new ideas in the Icelandic economy, e.g. through idea development and funding
Rannis supports research, innovation, education and culture in Iceland. E.g. administers competitive funds

INVOLVING SUPPLY CHAIN PARTNERS IN FINANCING DISCUSSIONS (E.G. THROUGH SIGNED CONTRACTS) CAN SUPPORT THE FUNDING PROCESS

Source: Company and organization websites

Various tools will help you get started with your circular transformation journey

1. Culture gap analysis
Tool for analyzing how circular your current company culture is and outlining activities to bridge identified culture gaps
Estimated working time: 15 min

2. Ecosystem partner identification
Tool for identifying external partners that can help in bridging internal capability and technology gap
Estimated working time: 15 min

3. Funding requirement analysis
Tool for reflecting on funding requirements of your selected circular business model
Estimated working time: 15 min

4. Roadmap development
Tool for planning your circular transformation journey, including list of activities and key milestones
Estimated working time: 30-45 min

→ READ MORE

How to start the transformation journey?

Business model canvas

KEY QUESTIONS

What are the key actions required to make the opportunities happen?
Who are the key partners you need to collaborate with?
What barriers might you encounter when implementing the initiatives? How can you mitigate them?

BUSINESS MODEL CANVAS

Based on the information learnt in this chapter, fill in the following parts of the business model canvas:

Financial aspects – make a high-level estimate on revenues, costs, and required investments
Enabling companies – list companies that can support the development of your circular business model, such as financiers and technology providers

Industry deep-dives

Current state analysis and circular opportunities for machinery & equipment, maritime, energy, transportation and construction

6

CHAPTER SUMMARY: INDUSTRY DEEP-DIVES

Machinery & equipment, maritime, energy, transportation and construction are important ecosystems within the Nordic manufacturing industry, representing 60% of Nordic manufacturing exports
Therefore, these sub-sectors play a key role in driving wider adoption of circular business models across the Nordic business landscape
This section takes a deep-dive into the current state of these five sub-sectors, looking at inefficiencies in the current value chains and showcasing circular economy examples
Overall, inefficiencies occur in all parts of the linear value chains. Still, compelling circular business model examples from Nordic and international companies exist, and inspire others for action

THIS CHAPTER WILL HELP YOU TO:

Gain in-depth knowledge of the current state and circular economy examples of your industry
Compare your starting point to others in your industry and identify most relevant circular business models for your company

THE PLAYBOOK TAKES A DEEP DIVE INTO FIVE IMPORTANT ECOSYSTEMS WITHIN THE NORDIC MANUFACTURING INDUSTRY

Machinery & equipment: Manufacture of machinery and equipment, including e.g. engines and turbines, pumps, compressors and valves, agriculture, forestry, mining and metallurgy machinery, and lifting and handling machinery → Read more

Maritime: Manufacture of ship parts and maritime equipment, such as hull, propulsion and power engines, other systems and solutions and interior equipment → Read more

Energy: Manufacture of electrical equipment, such as batteries, accumulators, wiring and wiring devices, electric lighting equipment, transformers and electricity control apparatus → Read more

Transportation: Manufacture of motor vehicles, trailers and semi-trailers, and their parts and equipment → Read more

Construction: Manufacture of buildings and their materials and components → Read more

Machinery & equipment

Current state analysis and circular opportunities

Currently, the machinery & equipment value chain is focused on building efficient, long-lasting products


	RAW MATERIAL PROCESSING	COMPONENTS MANUFACTURING	MANUFACTURING	LOGISTICS	OPERATION/END-USE	DECOMMISSIONING
EXAMPLE ACTORS	SSAB, Hydro, Outokumpu	Danfoss, AQ Group, Stala Tube, Componenta, Nordic Aluminium	Kongsberg, Kone, ABB, Cargotec, Marel, Konecranes, Ebmpapst	Havator Group, Wallenius Wilhelmsen, ILS - Inventory Locator Service, Janhunen Oy	YIT Oy, HKScan, Vattenfall, Skanska, Fortum, Södra	Delete Group Oy, Purkupiha, Norsk Gjenvinning
KEY PRODUCTS AND SERVICES	Production of raw materials including Steel Iron Aluminium alloy	Manufacturing components, such as Simple metal components that mainly include bending, moulding and casting (pipes, screws, hinges etc.) Other components such as plastic support structures and electrical equipment	Manufacturing all types of machinery and equipment, such as Engines and turbines Pumps, compressors and valves Agriculture, forestry, mining and metallurgy machinery Lifting and handling machinery	Providing transportation services, such as Transportation of entire plants, large shipments of industrial equipment, production lines, large-scale systems and devices	Creating products and services of industrial customers in various sectors, such as Logistics, automotive, general manufacturing, mining, agriculture, pulp & paper, construction and energy	Offering products and services, such as Recycling: including the demolishing, transportation and recycling of old industrial equipment Providing raw materials extracted from the recycled products
EXAMPLE CE INITIATIVES*	Circular supplies – using and creating materials with high recyclability	Build to last – component technical life is a very important KPI for a manufacturing company	Build to last - applying modular design Product use extension services (repair & maintain, upgrade and remanufacture) are increasingly common	N/A	Build to last, circular supplies, repair & maintain and upgrade – the operators aim for a deep relationship with the end-user	Recycle & return – the decommission companies make business from returning raw materials back to the start of the value chain

*Examples of the circular economy initiatives pursued by some Nordic companies in the industry

However, inefficiencies occur in all parts of the machinery & equipment value chain


INEFFICIENCY	DESCRIPTION OF CURRENT STATE
UNSUSTAINABLE MATERIALS	Most input materials are recyclable and durable (e.g. steel) and the use of recycled material is common. Use of sustainable indirect materials, such as renewable energy is limited, and there are currently large investments in production sites and logistics networks to optimize energy consumption during production, product operation and end-use
UNDERUTILISED CAPACITIES	Industrial machinery is often not utilized on optimal capacity levels even if most machinery and equipment are customized to fully fit customer needs
PREMATURE PRODUCT LIVES	Products are built to last for long lifecycles, typically more than 10 years, but they are not necessarily designed for reparability or upgradeability. Many companies still acknowledge a large potential in enhancing services like repair, maintenance and upgrade services as these are not fully exploited today, for example through predictive and condition-based maintenance
WASTED END-OF-LIFE VALUE	Products and equipment are designed for long lifecycles and are often not designed with a focus on ease of dismantling and recycling. Many companies are showing a large interest for take-back schemes for their products, but few companies have managed to do this successfully
UNEXPLOITED CUSTOMER ENGAGEMENTS	The full potential of after-sales and add on sales is not exploited, but many companies are exploring new service-based offerings

Analysis based on desktop research, insights from workshops with SMEs and interviews with industry experts.

To address these inefficiencies, machinery & equipment companies should explore the five circular business models

Source: Accenture. → Appendix 2 for more details

The five business models can be broken down to sub-models to circulate products and materials along the value chain


BUSINESS MODEL	SUB-MODEL
CIRCULAR INPUTS	Build to last
	Circular supplies
SHARING PLATFORM	Share
PRODUCT AS A SERVICE	Product as a service
	Performance as a service
PRODUCT USE EXTENSION	Repair & Maintain
	Upgrade
	Resell
	Remanufacture
RESOURCE RECOVERY	Recycle/upcycle
	Return

Source: Accenture. → Appendix 2 for more details


BUSINESS MODEL	SUB-MODEL	EXAMPLES
Modular product design can improve operational efficiency and enhance durability and reparability of products
CIRCULAR INPUTS	Build to last	The Outotec cPlant is a modular flotation plant that offers fast, effective and affordable solutions for small mine sites or sites requiring extra capacity. The flotation plant is based on pre-fabricated and functionally tested modules inside container-sized steel frames that can be easily transported and installed, and quickly connected to the process.
	Circular supplies	Atlas Copco’s nitrogen generator has a modular design based on the customer’s specified flow, purity and pressure figures. If the customer requires extra capacity at a certain point, modules can be easily added to the existing nitrogen generator. The nitrogen generators can be used in parallel to achieve the most cost-efficient solution.
Sharing platforms increase utilisation rates and maximise value contribution of products
SHARING PLATFORM	Share	EquipmentShare is a construction machinery marketplace, including equipment such as forklifts, mobile generators and drill rigs. The rental price depends on the equipment weight, and the platform takes a cut of every transaction that occurs on the marketplace. EquipmentShare also offers software that connects the machines and provides insight about how the equipment operates to increase utilization, productivity and efficiency on the jobsite.
		eRent is a Finnish start-up company that offers a digital platform for companies where machines, devices and other goods can be shared and tracked. eRent aims to improve the utilization rate of equipment and eRent’s main clients are equipment rental agencies, construction firms and other industrial companies from all different sectors.
PaaS1 transfers cost-of-ownership to the producer which can incentivise more efficient use of resources
PRODUCT AS A SERVICE	Product as a service	AMECO Heavy Machinery Rental Services rents industrial machinery such as cranes to construction businesses in America and Africa. The focus is on shorter-term projects, typically with a duration of up to six months.
	Performance as a service	As part of Metso’s lifecycle services, Metso offers a Cost per Ton Payment Plan opportunity. If choosing this, customers receive only one invoice based on their actual production tonnage which takes into account all associated cost for maintaining the equipment, including wear parts, spares, labor and any other needed Metso services.
		With a GE Oil & Gas Contractual Service Agreement (CSA), GE carries the risk of equipment malfunction. The service is tailored to meet the unique needs and requirements of each customer and it includes asset performance management for continuous equipment monitoring and diagnostics to maximize equipment availability and reliability.
Remanufacturing, upgrade, and maintenance can extend product lifecycles and release new sources of value
PRODUCT USE EXTENSION	Repair & Maintain	Ramirent conducts repair and maintenance of all their machines and are starting exploring telematics and analytics to advance these services. They are also reselling old equipment to second-hand markets and conducts remanufacturing to extend the lifetime of the equipment.
	Upgrade	SR-Harvesting buys old Valtra and Valmet tractors from both Finland and abroad. The company disassembles, cleans, repairs and sells any parts that can be repaired, and recycles the rest of the material. The repaired parts cost 55% of new similar parts and have a 6-month warranty.
	Resell	The Cat Reman program recovers materials through differentiated technology and employs environmentally sustainable practices to restore worn components to good-as-new condition. Remanufactured products are sold at a lower price with a like-new warranty. With the program, Caterpillar recycles 134 million lbs annually, and can preserve ~85% of original energy "value add“.
	Remanufacture	Ponsse Reman offers a quick, inexpensive and eco-friendly way of replacing damaged spare parts. Reman parts is a service developed by Ponsse and is based on recycling and reconditioning used parts. The customers receive a credit for the returned part when they simultaneously buy a Reman part.
Decommissioning and recycling can offer a competitive cost advantage in raw material supply
RESOURCE RECOVERY	Recycle/upcycle	ZenRobotic develops and sells waste-sorting robots that separate different materials for reuse from waste. ---ZenRobotics can adapt to changing waste-management and legislation requirements, and it tackles the profitability issues of waste sorting. More precise sorting allows over 95% of waste materials arriving to waste-treatment facilities to be sorted for recycling.
	Return	Each year, 80 000 tons of gypsum waste is generated in Norway. Even though gypsum has a recycling rate of over 90%, the majority of the waste has previously gone to landfill sites. To capture this opportunity, Norsk Gjenvinning has together with their technology partner New West Gypsum Recycling established a gypsum recycling plant. The recycled gypsum powder is a very attractive product for the gypsum producers due to the high volume and quality.

Source: Company websites

Maritime

Current state analysis and circular opportunities

The maritime value chain is complex with a large group of heterogeneous players with varying circular maturity levels


	SHIP DESIGN	RAW MATERIAL PROCESSING	COMPONENT & EQUIPMENT MANUFACTURING	ASSEMBLY & INTEGRATION	OPERATION	MAINTENANCE & UPGRADE	DECOMMISSIONING
EXAMPLE ACTORS	NSK Ship design, SSPA, Foreship, ENGnD	Hydro, SSAB, Outokumpu	ABB, Kongsberg, Promeco, Mobimar, Wärtsilä	Helsinki Shipyard, Kleven, Kaefer, Ulstein, Team Electric Oy, Moen	Finnlines, Containerships, Wallenius Wilhelmsen	Ulstein, Turku Repair Yard/BLRT Group	Delete Group Oy, Grieg Green, Hans Langh
KEY PRODUCTS AND SERVICES	Provides ship design, offshore engineering and construction support Services span from concept development to project management during shipbuilding	Produces raw materials including: Aluminum & stainless steel Composite material Syntactic foam Concrete	Creates main equipment and integrated solutions, incl. Superstructure, rigging, etc. Propulsion and power engines Other systems and solutions (e.g. HVAC, energy mgmt., navigation, safety etc.) Interior equipment (e.g. cabins, bathrooms, doors, etc.)	Manufactures the hull of the ship and assembles the ship by cutting, forming, welding, fitting and joining the different parts of the ship together Finalises the ship by Painting & coating the ship Installing machinery & equipment Furnishing the interior.	Equips the ship for transporting goods and/or passengers, and operates it	Conducts repair, maintenance and conversion projects, incl. e.g. damage repairs, equipment replacements, refurbishing, and repainting	Provides various services for end-of-life vessels Dismantling & cutting into blocks Sorting out and processing materials Washing & waste disposal
KEY PRODUCTS AND SERVICES				Conducts dock and sea trials to test the ship and make final fixes Organises a celebratory launch for the ship
EXAMPLE CE INITIATIVES*	Build to last – modular design principles	Circular supplies – creates material with high recyclability	Build to last – high use of modular design principles, some use of recycled materials Return waste materials to source Product-as-a-service – only some players have started providing these	Build to last - applying modular design Product use extension services (repair & maintain, upgrade and remanufacture) are increasingly common	Rental agreements – chartering	Lifecycle services – repair, refurbishment, repainting, etc.	Recycle/upcycle Return

*Examples of the circular economy initiatives pursued by some Nordic companies in the industry

Still, inefficiencies occur in all parts of the maritime value chain


INEFFICIENCY	DESCRIPTION OF CURRENT STATE
UNSUSTAINABLE MATERIALS	Most input materials in ships are recyclable and durable (e.g. steel or aluminum). On average, 96% of ship materials can be recycled or reused. Use of sustainable indirect materials is limited, and most efforts are focused on optimizing the safety and energy efficiency of the ship during its operation (e.g. improving the fuel efficiency).
UNDERUTILISED CAPACITIES	Underutilized capacities are one of the larges inefficiencies in the maritime industry. Many ships are left unused for long periods of time, have long idle times when in port or operated with limited use of available capacity, creating significant unnecessary costs and emissions. In 2020, the global container fleet idle time reached 10%. In terms of operational fit, ships are typically custom-built, while for maritime equipment both standardization and customization are used.
PREMATURE PRODUCT LIVES	Ships are built to last for long lifecycles, and a typical life of a ship is 20-30 years. However, ships can be scrapped prematurely due to overcapacity in the market. Ship operators are increasingly interested in refurbishment and upgrade projects to revitalize their fleet at the end of lifetime, but the cost efficiency of these upgrades is often a blocker. Non-standardized equipment and components make remanufacturing of ships challenging.
WASTED END-OF-LIFE VALUE	The ships are dismantled and recycled at end of life due to revenue gained from selling the scrapped steel and other bulk materials. However, there are some limitations to profitably recycling materials such as fabrics, small manufactured items, and motors that cost more to reduce to scrap than the scrap is worth.
UNEXPLOITED CUSTOMER ENGAGEMENTS	After-sales and add-on sale efforts are limited for most maritime industry players, but original equipment manufacturers are now starting to establish stronger customer engagement relationships with the ship owners. The companies are now expanding their service portfolio and are exploring as-a-service business models.

Analysis based on desktop research, insights from workshops with SMEs and interviews with industry experts. Public material from Alphaliner.

To address these inefficiencies, maritime companies should explore the five circular business models

Source: Accenture. → Appendix 2 for more details

The five business models can be broken down to sub-models to circulate products and materials along the value chain


BUSINESS MODEL	SUB-MODEL
CIRCULAR INPUTS	Build to last
	Circular supplies
SHARING PLATFORM	Share
PRODUCT AS A SERVICE	Product as a service
	Performance as a service
PRODUCT USE EXTENSION	Repair & Maintain
	Upgrade
	Resell
	Remanufacture
RESOURCE RECOVERY	Recycle/upcycle
	Return

Source: Accenture. → Appendix 2 for more details


BUSINESS MODEL	SUB-MODEL	EXAMPLES
Modular design principles and use of recyclable materials facilitate lifecycle extension and resource recovery
CIRCULAR INPUTS	Build to last	Kavika: Products are manufactured from durable, recyclable materials (stainless or acid-proof steel), and are therefore fully recyclable at the end of their lifecycle. All excess materials from production are recycled and reused.
	Circular supplies	ABB has a strict approach to ensuring that all materials and components used in their products are sustainable. The company has built sustainability into their product and technology development process, focusing on product design, material selection, and minimized material use and emission generation in manufacturing processes.
		Kongsberg: The ship, Yara Birkeland, is the world’s first zero emission, autonomous container feeder. The ship will be a fully battery powered solution, prepared for autonomous and unmanned operation.
		Wärtsilä applies a modular architecture in engine design to enable increased commonality and backward compatibility of parts. This approach enables reduced product development costs, faster time-to-market, reduced maintenance time and costs and higher reusability of materials and components.
Sharing platforms are most relevant in the operation phase, and can increase use of vessel capacity
SHARING PLATFORM	Share	AMLA facilitates vessel sharing arrangements between member operators to maximize efficiency and reduce maritime logistics costs. Through AMLA, member operators can increase revenue by shipping other operators’ cargo or reduce their chartering costs by taking space on a fellow member’s vessel. The platform allows members to access available shippings up to a week ahead and view real time information on estimated cost and CO₂ savings.
		Blockshipping has created the Global Shared Container Platform (GSCP), which aims to be the first real-time registry of the world’s approximately 27 million shipping containers and a joint platform for all players in the industry for container sharing. The platform aims to reduce the amount of empty containers, which is a significant issue in the shipping industry. The platform is powered with blockchain and sensor technology and thus allows performing a wide range of transactions efficiently, such as container sharing. According to Blockshipping, the platform has potential to reduce costs for the global shipping industry by $5.7 bn and reduce global CO2 emissions by more than 4.6 million tons every year.
Demand for as-a-service models for maritime equipment is increasing, providing new opportunities to explore
PRODUCT AS A SERVICE	Product as a service	The ‘Power by the Hour’ service agreement for vessels hands the responsibility for service planning and performance to Kongsberg instead of the ship operator. The operator pays a fixed charge per hour of operation, per ship, and Kongsberg monitors the equipment aboard each vessel from onshore with the help of onboard sensors. The agreement insures the operator against downtime due to equipment failure and ensures optimized equipment performance. Kongsberg has estimated that the model could reduce customers’ maintenance cost by as much as 25% over a 10-15 year contract.
	Performance as a service	Wärtsilä has an advanced 12-year performance-based maintenance agreement with Carnival Corporation which covers all engine maintenance and monitoring work of 79 vessels and their 434 engines. The agreement includes Wärtsilä’s Dynamic Maintenance Planning (DMP) and Condition Based Maintenance (CBM), which leverage data analytics for real-time asset optimization and predictive maintenance. The value of the agreement is approximately EUR 900 million, enabling significant annual savings in fleet operational costs for Carnival.
Lifecycle services provide significant revenue potential for equipment manufacturers
PRODUCT USE EXTENSION	Repair & Maintain	Smedegaarden sells high-quality second-hand maritime equipment from scrapped vessels such as engines, engine parts, gearboxes, thrusters, pumps and anchors.
	Upgrade	ABB: Condition based maintenance service predicts equipment failure modes and risks related to potential failures and provides advice on when to perform repair and maintenance actions based on actual equipment condition and performance monitoring. The solution increases reliability and availability of the vessel and reduces maintenance costs.
	Resell	Schottel offers various modernization solutions for its propulsion equipment to upgrade their performance instead of replacing them with new ones, including e.g. modernization of steering systems and interfaces and propulsion upgrades. The solutions reduce maintenance time and costs, prevent unexpected stops and downtime and reduce damage and risk of breakdown.
	Remanufacture	Evac is offering both retrofit and refurbishment services to upgrade the components of existing systems. Upgrades extend the lifespan of the system and allow older vessels to benefit from the latest technologies.
		Wärtsilä offers remanufacturing services for engine components, bringing worn out components back to their full functionality. The quality of remanufactured components is equal to new ones, while their price is significantly lower. Therefore, the solution substantially reduces costs of maintenance while also reducing environmental footprint through material reuse.
		Piikkiö Works offers turnkey wet cell refurbishment (Wetref) for cabins, which is a complete solution for upgrading the ageing wet cells of a ship. Refurbishment extends the lifecycle of the cabins and upgrades them to meet changing customer expectations.
Resource recovery of ship parts, materials and equipment enables both cost and environmental efficiencies
RESOURCE RECOVERY	Recycle/upcycle	The material from Wärtsilä’s end-of-life components is used to create recycled material. Recycled material, such as end-of-life coins and bronze propellers from propulsion equipment is used in casting new propellers, thus reducing the environmental impact of the products.
	Return	Maersk: Cradle-to-Cradle Passport is a database listing the material composition of the main parts of the ship, enabling better recycling of materials and parts used in vessel construction. The database will cover about 95% (by weight) of the materials and updating it involves around 75 suppliers to the ship.
		Sea2Cradle provides a hassle-free way for ship owners to handle the recycling of their vessel by making a ship recycling plan, finding a buyer, and supervising the dismantling and recycling at the demolition yard. The company has high standards for green ship recycling, currently recycling more than 95% of all materials and aiming for 100%.
		Kongsberg provides a recycling service for recycling all Kongsberg Maritime products and equipment. The service is free of charge and ensures that worn equipment is recycled or disposed responsibly.

Source: Company websites

Energy

Current state analysis and circular opportunities

Currently, the electrical equipment value chain aims to build durable and energy-efficient products


	COMPONENTS MANUFACTURING	COMPONENTS DISTRIBUTION	MANUFACTURING	WHOLESALE	INSTALLATION & OPERATION	COLLECTION
EXAMPLE ACTORS	Sumitomo Electric Industries, Crydom, Amphenol	Arrow Electronics, Mouser Electronics	Danfoss, ABB, Schneider Electric, Vacon, Fischer Lighting, Northvolt, Alfa Laval, Vexve	Ahlsell, SLO, Onninen, Solar		ABB, Renas, L&T Lassila & Tikanoja
KEY PRODUCTS AND SERVICES	Manufacturing electrical components such as diodes, transistors, hall and current sensors, thyristors, opto-electronics, displays, discharge devises and resistors	Distributing electrical components, often with a large variety of products from numerous suppliers globally	Manufacturing electrical equipment such as batteries, accumulators, wiring and wiring devices, electric lighting equipment, transformers and electricity control apparatus	Distributing electrical equipment	Producing power generation, distribution and other utilities Key customers are in the sectors of e.g. construction, energy, raw material producing or industrial equipment manufacturing	Collecting and recycling electrical waste
EXAMPLE CENITIATIVES*	Build to last - products are planned to be durable and energy efficient at the product installation & operation -phases	N/A	Product use extension services and recovery and recycle services initiatives are increasing	N/A	Product and performance as a service - selling results instead of a product	Recycle/upcycle and return - re-usage and remanufacturing is getting more common

*Examples of the circular economy initiatives pursued by some Nordic companies in the industry

Still, inefficiencies occur in all parts of the electrical equipment manufacturing value chain


INEFFICIENCY	DESCRIPTION OF CURRENT STATE
UNSUSTAINABLE MATERIALS	Electrical equipment manufacturers aim to produce components and products that are energy efficient during their use phase, but not necessarily having any focus on sustainability of the production. For the majority of electrical equipment companies, the use of both direct and indirect recyclable or renewable materials in production is limited.
UNDERCAPACITIES UTILISED	Capacity use of energy equipment is not always optimized, even if they are often built to fully meet customer needs and requirements through customization. This is due to both unexpected downtime on the equipment and fluctuations in customer demand where the equipment is not used.
PREMATURE PRODUCT LIVES	Electrical equipment is often replaced due to limited opportunities for upgrades and customers opting for the products with the newest technologies. Not all electrical equipment reach their technical life targets due to challenging conditions and improper care. Equipment maintenance often happens according to schedule, not need, which increases the wasting of resources.
WASTED END-OF-LIFE VALUE	Recycling of electrical equipment is very limited, as the volume and the value of recovered materials is low. It is therefore challenging to achieve volumes at scale and a cost-efficient process. Also, many products are sold outside the Nordics and Europe, making their take-back and recycling challenging due to disconnected producer responsibilities. New Nordic collaborations such as Recipo, the collective collection and recycling system for electrical and electronic equipment, have been created to mitigate some of these challenges.
UNEXPLOITED CUSTOMER ENGAGEMENTS	There are some companies working on increasing their share of revenues from both after sales and add-on sales, however, on a general basis providing outcome-oriented solutions is very rare in the industry.

Analysis based on desktop research, insights from workshops with SMEs and interviews with industry experts.

Therefore, electrical equipment manufacturing companies should explore the five circular business models

Source: Accenture. → Appendix 2 for more details

The five business models can be broken down to sub-models to circulate products and materials along the value chain


BUSINESS MODEL	SUB-MODEL
CIRCULAR INPUTS	Build to last
	Circular supplies
SHARING PLATFORM	Share
PRODUCT AS A SERVICE	Product as a service
	Performance as a service
PRODUCT USE EXTENSION	Repair & Maintain
	Upgrade
	Resell
	Remanufacture
RESOURCE RECOVERY	Recycle/upcycle
	Return

Source: Accenture. → Appendix 2 for more details


BUSINESS MODEL	SUB-MODEL	EXAMPLES
Modular design principles and use of recyclable materials facilitate lifecycle extension and resource recovery
CIRCULAR INPUTS	Build to last	Schneider Electric initiated a program in January 2015, where they started upgrading products that had become obsolete while in storage. This means that instead of traditionally dismantling the products to raw materials and reusing the raw materials, they use as much of the old products components in new versions. The approach has been successful with product groups such as circuit breakers and wiring devices.
	Circular supplies	Danfoss: Vacon NXP System Drives have a modular design which enables customization and cost savings. The product design also means that faults are reduced to certain components and the components can be changed quickly in case of a breakdown.
Sharing platform initiatives are mainly focused on the usage phase, allowing businesses and consumers to sell their excess energy
SHARING PLATFORM	Share	Power Ledger is a blockchain-based cryptocurrency and energy trading platform that allows for decentralized selling and buying of renewable energy. The peer-to-peer energy marketplace allows sale of surplus renewable energy generated at residential and commercial developments connected to existing electricity distribution networks, or within micro-grids.
		SOLshare is the world’s first peer-to-peer solar electricity trading platform that leverages existing solar home systems (SHS) in an off-grid context to create a bottom-up smart grid. The platform allows individuals to share their excess electricity with roughly a dozen other homes, of which some are equipped with solar panels and others not.
Product as a service business models align customer and client objectives to minimise product lifecycle costs
PRODUCT AS A SERVICE	Product as a service	Solnet offers solar power systems as a service, both on a turnkey basis and through service agreements, in which the customer pays a rate for the produced electricity. Solnet’s customers are primarily owners of large property portfolios.
	Performance as a service	Philips has several case examples of selling light as a service. This performance-based service can be sold through several business models, such as both pay-per-lux and monthly subscriptions. These service-based models often lead to lower lifecycle costs, energy reductions and better optimization and simplicity for the end-user.
Remanufacturing and maintenance services offer a deeper customer relationship and new business opportunities
PRODUCT USE EXTENSION	Repair & Maintain	ABB Transformer Remanufacturing and Engineering Services reduces downtime and minimizes risk, while also extending the life of the transformers. The service provides quick and quality repairing in case of a transformer breakdown, time or condition-based maintenance and repair services instead of reinstall.
	Upgrade	Helvar has an offering of comprehensive lifecycle services, from scheduled routine maintenance visits and remote system management to a fully managed comprehensive system maintenance package, which includes network and energy monitoring, system optimization and a guaranteed upgrade path.
	Resell	Fischer Lighting extend the lifetime of used lighting fixtures by producing modular LED solutions built on existing fixtures. The solution offers all the functionality, lighting quality and energy saving technology expected from state-of-the-art LED. The LED solutions frequently lead to fewer disruptions in the installation phase, as it will not be necessary to rebuild or restructure ceilings. The solutions can be taken apart, eliminating the need to discard the lamp or fixture in connection with future upgrades.
	Remanufacture	The Schneider Electric Circuit Breaker Retrofit program modernizes and updates electrical distribution centers. As a result of a timely upgrade, the maintenance costs can be significantly reduced, the product life prolonged and the technical capabilities improved.
Collection and recycling can offer a competitive advantage to raw material supply, especially for scarce materials
RESOURCE RECOVERY	Recycle/upcycle	The total Siemens recycling rate is 90%, which is far beyond complying with legal requirements. Siemens has its aims set even higher, by targeting for 0% waste to landfill, 100% of air emissions controlled and 6% improvement in energy efficiency.
	Return	Grundfos has a take-back scheme for used circulators. The scheme covers the Danish home market and has been developed in cooperation with wholesalers. All major circulator wholesalers are participating in the voluntary scheme, corresponding to more than 200 wholesalers across Denmark.
		SF6 is a commonly used gas by many manufacturers of medium- and high-voltage switchgear, and although it is not poisonous, it has high global warming potential. Schneider Electric has established systems were 99% of SF6 can be recycled, recovered and reused. In addition, they can recover 97% or more of the other material in a switch gear. The equipment owner pays Schneider Electric for these recycling services.

Source: Company websites

Transportation

Current state analysis and circular opportunities

The transportation value chain is fairly circular, but improvement areas still exist - especially in resource use


	RAW MATERIAL PROCESSING	COMPONENTS MANUFACTURING	MANUFACTURING & ASSEMBLY	DISTRIBUTION	USE	REPAIR & MAINTENANCE	DISPOSAL & RECYCLING
EXAMPLE ACTORS	SSAB, Hydro, Plastix, Outokumpu	Nokian Renkaat, Raufoss, Fenno, Veoneer, Ekeri	Volvo, Scania, Valmet	Volvo, Scania, Veho, Bilia	DHL, DSV, DB Schenker, Nobina	BilXtra, Assistor, Werksta, Atoy Autohuolto	Hellik Teigen AS, Stena Recycling, Suomen Autokierrätys
KEY PRODUCTS AND SERVICES	Produces raw materials including Steel Aluminium Rubber Plastic Glass Fabrics	Manufactures main parts and equipment of vehicles, including Bodies, trailers, semi-trailers Parts, accessories and systems (incl. engines, brakes, seats, wheels, tires, exhausts, windows, HVAC etc.)	Provides services such as manufacturing engineering, body welding, painting and final assembly of vehicles	Distributes vehicles for sale Sells both new and used vehicles and provides after sales support Provides vehicle sharing & rental services	Provides logistics services or transports people from one place to another	Provides repair & maintenance services (incl. damage repairs, repainting, reinstallation etc.) Sells spare parts and accessories	Provides collection, treatment and recycling services for end-of-life vehicles, incl. separation of reusable components, crushing, and separation of materials to be reutilised
EXAMPLE CE INITIATIVES*	Circular supplies – creates material with high recyclability	Build to last – durable products that are easy to repair, somewhat modular design Return	Build to last – somewhat modular design principles Return	Rentals – renting, leasing Resell – market for used vehicles	N/A	Lifecycle services – repair, maintenance, refurbishment Remanufacturing	Recycle/upcycle Return

*Examples of the circular economy initiatives pursued by some Nordic companies in the industry

Indeed, inefficiencies occur in all parts of the transportation value chain


INEFFICIENCY	DESCRIPTION OF CURRENT STATE
UNSUSTAINABLE MATERIALS	Most input materials are recyclable (e.g. metals), however design of products is not optimized for continuous regeneration (materials are mixed together in components), which increases the use of virgin materials. The main inefficiency in terms of unsustainable materials are unsustainable sources of energy, even though the electrification of vehicles are increasing. The use of sustainable energy sources also requires significant investment in the infrastructure.
UNDERUTILISEDCAPACITIES	Typically, private vehicles are left unused for long periods of time and their full capacity is not used, creating significant unnecessary costs. For rail and buses, availability and reliability are key metrics and capacity utilization is a key strategic priority for the companies. The demand forecast that creates the transport schedules can be improved by e.g. using predictive technologies, however there are natural times where there will be lower utilization (e.g. during night).
PREMATURE PRODUCT LIVES	Most vehicles and vehicle components are durable and have long lifecycles. Still, private vehicle maintenance mainly happens according to schedule, not according to need, wasting some lifecycle effects. In the public transport industry, there is a high focus on expanding the lifecycle of assets. However, maintenance schedules and plans are set up with a high degree of safety measures and rigid maintenance intervals, which can contribute to wasting some lifecycle effects as well.
WASTED END-OF-LIFE VALUE	Most manufacturing waste and the majority of end-of life products are recycled by the customer. The use of e.g. metals in the products make this attractive also from a customer perspective. However, increased complexity e.g. due to rise of customization, use of glue in fixation, advanced electronics and product documentation regulations makes recycling, repair and recovery of vehicles and trains increasingly challenging. Dedicated product take-back schemes from the manufacturer are rare.
UNEXPLOITED CUSTOMER ENGAGEMENTS	After sales and add-on sales opportunities from the manufacturers are relatively well exploited, compared to other manufacturing sub-sectors. Suppliers are actively engaging with their customers on e.g. the maintenance operations.

Analysis based on desktop research, insights from workshops with SMEs and interviews with industry experts.

To address these inefficiencies, transportation companies should explore the five circular business models

Source: Accenture. → Appendix 2 for more details

The five business models can be broken down to sub-models to circulate products and materials along the value chain


BUSINESS MODEL	SUB-MODEL
CIRCULAR INPUTS	Build to last
	Circular supplies
SHARING PLATFORM	Share
PRODUCT AS A SERVICE	Product as a service
	Performance as a service
PRODUCT USE EXTENSION	Repair & Maintain
	Upgrade
	Resell
	Remanufacture
RESOURCE RECOVERY	Recycle/upcycle
	Return

Source: Accenture. → Appendix 2 for more details


BUSINESS MODEL	SUB-MODEL	EXAMPLES
Modular design principles and use of recyclable materials facilitate recovery of parts and materials
CIRCULAR INPUTS	Build to last	Around one third of materials in a new Volvo truck come from recycled materials, and up to 90% of the truck can be recycled at the end of its life, thanks to labelling components for easy identification and dismantling.
	Circular supplies	Modularity and standardization in engine design have been key principles at AGCO Power for decades. Common platforms thinking, with similar basic designs and shared parts, reduce waste in production and make the after sales operations more efficient
Sharing platforms are more relevant in the vehicle use phase, where they enable capacity optimisation
SHARING PLATFORM	Share	TNX offers an innovative freight matching platform which matches cargo to vehicles, and optimises road transport by consolidating or bundling offers and generating dynamic and intelligent routes. Thanks to the service, utilisation of trucks can be increased and empty running reduced.
		Uber Freight is an on-demand freight service for trucking carriers which connects truck drivers with cargo that needs to be hauled long distances. The goal of the service is to reduce the hassles of trucking, including e.g. downtime and deadhead miles.
The product as a service models strengthen customer relationships through shared risk and frequent interaction
PRODUCT AS A SERVICE	Product as a service	Tire as a Service leasing programme allows Michelin customers to lease tires against a pay-per-mile fee. The service allows Michelin to establish the necessary control to re-introduce tires returned at the end of the leasing period, while reducing the risk associated with replacement for customers. The company also offers sensor based-data analytics for predictive maintenance and fuel optimization.
	Performance as a service	MAN offers trucks-as-a-service on a pay-per-use basis. MAN owns the truck and uses telematics and digital connectivity to manage the risk and maintenance of the truck while the fleet operator is responsible for the fuel and driver costs.
		Volvo Service Agreements guarantee the best possible uptime for buses and trucks against a monthly fee. For example, the Volvo Gold Contract includes 100% uptime promise, remote diagnostics and preventive maintenance, and covers all repairs.
Various services can significantly prolong the lifecycle of a vehicle while also generating additional revenues
PRODUCT USE EXTENSION	Repair & Maintain	HealthHub is a condition-based predictive maintenance tool that monitors the health of trains, train infrastructure and signaling systems. The tool uses advanced data analytics to extend and maintain the useful life of trains.
	Upgrade	Renault reuses parts coming from its end-of-life vehicles, sales network, plants or suppliers, and sells these second-hand parts (body, lights, shield, etc.) through affordable repair offers.
	Resell	Renault reconditions or remanufactures used parts, which are collected in the sales network, sorted and refurbished. The process involves complete dismantling, cleaning, sorting, refurbishment and replacement of faulty or worn parts, reassembly and inspection.
	Remanufacture	Scania Service Exchange takes used and worn components (e.g. engines, gearboxes and clutch parts), strips them down completely and remanufactures them. Components are remanufactured to the original Scania specifications and then tested exactly as brand new parts, and finally resold at a lower price.
Thanks to legislative initiatives, the transportation industry is a forerunner in resource recycling
RESOURCE RECOVERY	Recycle/upcycle	Nokian Tyres: Scrap tyres, or tyres that do not meet quality standards, are taken to recycling directly from production. 79% of production waste is recycled, 11% recovered as energy, and 8% reused. Discarded tyres serve various reuse and recycling applications, they can e.g. be utilised as material or for energy production
	Return	Ford performs closed-loop recycling, with auto parts materials recycled back to the same use. For example, the company recycles 5 million pounds of aluminium scrap a week, which is enough to build 37,000 new F-series truck bodies. Ford also upcycles some materials, such as milk bottles to be used as automotive components and industrial fabrics to be used in seats.
		GM recycles 84% of its worldwide manufacturing waste and has 111 landfill-free facilities. By-product recycling and reuse generates approximately $1bn in annual revenue for the company.

Source: Company websites

Construction

Current state analysis and circular opportunities

The construction value chain is fragmented with numerous suppliers who have various circular maturity levels


	BUILDING PLANNING AND DESIGN	MATERIAL AND COMPONENT MANUFACTURING	LOGISTICS	CONSTRUCTION	OPERATION	DEMOLITION
EXAMPLE ACTORS	Sweco, Mad, Cowi	Saint-Gobain, Kone, Wienerberger, Caverion	DB Schenker, Bring, PostNord	NCC, Skanska, Veidekke	Coor, Toma	Remeo, Sortera Group, Norsk Gjenvinning
KEY PRODUCT AND SERVICES	Provides planning and design for the components, systems and ultimately the complete building, including material choices.	Produces materials, such as cement or steel, and partly/fully assembled components such as ventilation systems, elevators or floor panels.	Transports material and components from the production site to the construction site and transports packaging and surplus material away from the construction site.	Constructs the complete building on the site, including cutting and assembling of individual components.	Operates the building to accommodate the requirements of the tenants, such as energy management and required maintenance, upgrades and refurbishment.	Demolition of the building and separation of components and material if possible. The material is either recycled or sent to landfill.
EXAMPLE CE INITIATIVES*	Build to last - buildings are planned to be energy efficient at the operation phase and use of material banks to track material information throughout the lifecycle	Circular supplies - the end materials are made of recyclable materials and materials that are durable	N/A	Build to last - use of pre-fabricated and modular components which minimizes waste generation at the site	Product and performance as a service - selling lightning as a service instead of a product Circular supplies - smart energy management	Recycle/upcycle and return - recycle construction waste Sharing platform - re-selling of surplus material or waste material

*Examples of the circular economy initiatives pursued by some Nordic companies in the industry

Inefficiencies occur in all parts of the construction value chain


INEFFICIENCY	DESCRIPTION OF CURRENT STATE
UNSUSTAINABLE MATERIALS	Virgin materials are normally used rather than secondary materials or materials with recycled content. This is because recycled materials have the same quality requirements as virgin products and since virgin material is so cheap, recycled material is not able to compete on the price. The construction sector is a large generator of waste, waste from the construction sector accounts for 30-40% of the total waste generated in the Nordics.¹
UNDERUTILISED CAPACITIES	During the construction process, equipment and logistics assets present areas with underutilized capacities. Equipment used in construction process are typically idle for long time periods. Due to a fragmented supplier market and use of multiple suppliers in the construction process it is challenging to optimize logistics to and from the construction site causing large inefficiencies in transportation. Buildings are often underutilized during the lifetime as both buildings and leases offer limited flexibility.
PREMATURE PRODUCT LIVES	Typically, buildings are built for a specific purpose and as user needs changes it is difficult to repurpose the buildings, causing buildings to be decommissioned prematurely. Since the cost of building and the cost of operating and maintaining buildings are often not born by the same actors, buildings are built with poor material and design choices. As a result of this, buildings are taken down prematurely and potential lifecycles are wasted.
WASTED END-OF-LIFE VALUE	Complexity in construction and lack of information about how the built asset is assembled make recycling and recovery of materials challenging because components can not be disassembled, and materials can not be separated from each other. Buildings are built for a long lifetime and take back-schemes from manufacturers of components at end of life are very rare.
UNEXPLOITED CUSTOMER ENGAGEMENTS	There is often a lack of communication between building owners and entrepreneurs resulting in limited discussions on finding optimal, sustainable solutions and on options for product use extension and repurposing of buildings.

1 . https://norden.diva-portal.org/smash/get/diva2:1188884/FULLTEXT01.pdf

Analysis based on desktop research, insights from workshops with SMEs and interviews with industry experts.

Therefore, construction companies should explore the five circular business models

Source: Accenture. → Appendix 2 for more details

The five business models can be broken down to sub-models to circulate products and materials along the value chain


BUSINESS MODEL	SUB-MODEL
CIRCULAR INPUTS	Build to last
	Circular supplies
SHARING PLATFORM	Share
PRODUCT AS A SERVICE	Product as a service
	Performance as a service
PRODUCT USE EXTENSION	Repair & Maintain
	Upgrade
	Resell
	Remanufacture
RESOURCE RECOVERY	Recycle/upcycle
	Return

Source: Accenture. → Appendix 2 for more details


BUSINESS MODEL	SUB-MODEL	EXAMPLES
Modular design principles and documenting and tracking materials facilitate recovery of materials at end of life
CIRCULAR INPUTS	Build to last	Moelven has designed Modus system walls, where the components are designed to be able to be taken apart and reassembled in a new design. When business needs change, the design of the room can be changed without having to add new materials as the walls can be moved and reused
	Circular supplies	The Madaster platform creates transparency in the built environment through allowing product and material data to be stored, enriched, shared and managed throughout the building lifecycle. The material passport gives insight into materials, components and products used to create a building, and into their quantities.
		SpaceIQ uses sensor data in its comprehensive workplace platform to allow customers to optimize the use of office space. The platform combines all relevant data sources such as employee information, floor charts, facility services etc.
Sharing platforms are relevant in the construction phase and building use phase, where they enable resource and capacity optimisation
SHARING PLATFORM	Share	Netlet collects surplus material from construction sites and sell it discounted through their platform and in stores. In that way Netlet works as an enabler for construction companies, contributing to reducing waste from the construction industry.
		Plastcom: The plastic resale platform is a marketplace specially developed for the plastic industry, allowing companies to sell and buy slow-moving stock, virgin leftovers, production waste etc.
		Airbnb is an online marketplace that connects people who want to rent out their homes with people who are looking for accommodation.
The product as a service models strengthen customer relationships through shared risk and frequent interaction
PRODUCT AS A SERVICE	Product as a service	Philips extends its offering and provides light as a service complementary to its offering of light bulbs. The pricing schemes used are either paying per lux or paying a fixed charge per month. The service delivers the value to the customer in a whole new way. To provide it as efficient as possible, equipment is tracked with sensors.
	Performance as a service	WeWork provides flexible shared workspaces allowing companies to lease office space “by the seat”, with all of the IT and communications included. The solution enables companies to grow and shrink office footprints according to their needs.
		Temporary Space rents building modules to schools, offices, kindergardens and to other purposes. The modules allows the customers to increase their capacity when needed, without spending resources on expanding their premises permanently. When additional capacity is no longer needed, Temporary Space recovers the modules and rents them out to other customers.
Various services can significantly prolong the lifecycle of a building, such as refurbishment of old buildings
PRODUCT USE EXTENSION	Repair & Maintain	An increasingly important market for NCC is refurbishment of residential buildings and offices from the 1960s and 70s. One example is the Portland Towers in the Port of Copenhagen, which has been transformed from cement silos to modern offices. During the refurbishment project, a total of seven floors were added to the outside of the silos.
	Upgrade	Veidekke is currently renovating the existing building stock of a nursing home in Norway. In this project, Veidekke will make changes to the floorplan and install new surfaces, new technical systems and additional rooms. The roofs, ceilings and facades will also be renovated, including installing additional insulation. Solar panels will also be installed on the roof to further reduce the energy needs of the building.
	Resell	Fram Eiendom is a real estate development company which specializes in acquisition and development of high quality properties. In spring 2020, they completed the Valkyrien project in Oslo, which refurbished six individual properties and connected them together to establish a joint department store and apartment complex. The work included complete alterations to the floor plans, new surfaces, new facades etc., while still retaining the old material and components where possible.
	Remanufacture
Construction waste is a large challenge for the industry, but there are several ongoing initiatives
RESOURCE RECOVERY	Recycle/upcycle	Gamle Mursten upcycles old bricks for new buildings. Thanks to a patented cleaning technology, called the REBRICK process, the company ensures that building waste can be recycled. Old bricks are cleaned, sorted manually and stacked by robots and sold for new building and renovation projects where clients want to minimize the impact of unnecessary CO2 emissions on the environment.
	Return	AF Gruppen has developed new technology to harvest, clean and recycle contaminated construction materials, extracting 80% of the mass as reusable materials and 20% as contaminated mass for further treatment.
		The real estate developer JM is working together with the recycler Norsk Gjenvinning to recycle construction waste from JM’s construction sites in Norway. Currently, they are recycling 68% of all construction waste, which makes them a leading company in the construction industry. One example is the waste from wood, which is sorted at the construction site, processed by Norsk Gjenvinning and finally used in furniture production in Sweden.

Key contacts

Would you like to know more about the circular economy opportunities?

Marthe Haugland
Senior Innovation Advisor
+47 971 35 126
m.haugland@nordicinnovation.org

Jyri Arponen
Senior Lead, Business Development
+358 40 766 2906
jyri.arponen@sitra.fi

Anna Belvén Töndevold
Nordic Sustainability Strategy Lead
+46 730 51 32 96
anna.b.tondevold@accenture.com

Appendix 1

Current state analysis and circular opportunities

Introduction: Circular maturity survey

Purpose
The Circular maturity survey was conducted to understand the starting point of Nordic manufacturing SMEs in adopting the circular economy principles.

Content
The survey included two reflections:

Inefficiency assessment
Current adoption of circular business models

The first reflection focused on understanding the occurrence and level of the five inefficiencies of the linear model:

Unsustainable materials
Underutilised capacities
Premature product lives
Wasted end-of-life value
Unexploited customer engagements

In the second reflection, companies were asked to assess their current adoption level of the 11 circular sub-models.

Outcome
In total, 28 Nordic manufacturing SMEs replied to the survey. The responses were collected in workshops and through an online survey in September – October 2020.

Detailed results of the survey are presented below.

Results – Circular maturity survey: Inefficiency assessment

1. Unsustainable materials: Material and energy that cannot be continually regenerated (e.g. direct and indirect material is not renewable or bio-based)

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2. Underutilised capacity: Underutilised or unused products and assets (e.g. products are not operating full hours or full functionality is not used

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3. Premature product lives: Products are not used to the fullest possible working life (e.g. due to new models and features or lack of repair and maintenance

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4. Wasted end-of-life value: Valuable components, materials and energy is not recovered at disposal (e.g. not recycled or recovered at end of life

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5. Unexploited customer engagements: Material and energy that cannot be continually regenerated (e.g. direct and indirect material is not renewable or bio-based

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Results – Circular maturity survey: Business model adoption

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Results – Circular maturity survey: Business model potential

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Appendix 2

Additional details on sources

5 Circular business models

Accenture – Lacy, P. & Rutqvist, J. (2015). Waste to Wealth: The Circular Economy Advantage. 1st ed. English: Palgrave Macmillan.
Accenture – Lacy, P., Long, J. & Spindler, W. (2020). The Circular Economy Handbook: Realizing the Circular Advantage. 1st ed. English: Palgrave Macmillian.

3 drivers for Circular Economy

Accenture presentation, Circular Materials Conference (2018)
Adapted from Accenture – Lacy, P., Long, J. & Spindler, W. (2020). The Circular Economy Handbook: Realizing the Circular Advantage. 1st ed. English: Palgrave Macmillian.

4 types of inefficiencies in the linear value chain

Accenture – Lacy, P. & Rutqvist, J. (2015). Waste to Wealth: The Circular Economy Advantage. 1st ed. English: Palgrave Macmillan
Accenture presentation, Circular Materials Conference (2018)
Accenture – 3D Printing vs 3D-TV

Development of resource demand

Accenture – Lacy, P. & Rutqvist, J. (2015). Waste to Wealth: The Circular Economy Advantage. 1st ed. English: Palgrave Macmillan

Circular technology development

WBCSD - CEO Guide to the Circular Economy (2017)
Accenture presentation, Circular Materials Conference (2018)

Circular technology descriptions

Adapted from Accenture – Lacy, P., Long, J. & Spindler, W. (2020). The Circular Economy Handbook: Realizing the Circular Advantage. 1st ed. English: Palgrave Macmillian.
World Economic Forum, in collaboration with Accenture – Driving the Sustainability of Production Systems with Fourth Industrial Revolution Innovation (2018)

Circular sub-models

Adapted from Accenture – Lacy, P., Long, J. & Spindler, W. (2020). The Circular Economy Handbook: Realizing the Circular Advantage. 1st ed. English: Palgrave Macmillian.
Accenture presentation, Circular Materials Conference (2018)

9 Circular capabilities

Adapted from: Accenture – Lacy, P. & Rutqvist, J. (2015). Waste to Wealth: The Circular Economy Advantage. 1st ed. English: Palgrave Macmillan.

Industry X.0

Accenture – Schaeffer, E. (2017). Industry X.0: Realizing Digital Value in Industrial Sectors. 1st ed. English: Kogan Page Publishers.
Accenture Research – Combine and Conquer: Unlocking the Power of Digital (2017)

Incremental savings from combining technologies

Accenture Research– Combine and Conquer: Unlocking the Power of Digital (2017):

The wise pivot

Accenture Point of View – Leading in the NEW: Harness the Power of Disruption (2017)

Sustainable value creation framework

Accenture – Lacy, P., Long, J. & Spindler, W. (2020). The Circular Economy Handbook: Realizing the Circular Advantage. 1st ed. English: Palgrave Macmillian.

About this publication

Nordic Circular Economy Playbook
– Circular business models for the manufacturing industry

© Nordic Innovation, 2021

Layout: Mette Agger Tang

Disclaimer: This playbook is part of the program Nordic Sustainable Business Transformation by Nordic Innovation. Accenture is responsible for all its content.

This Nordic Circular Economy Playbook is a manual for change. It gives you the tools to build your sustainable business models and design the transformation journey from industrial value-chains to cross sectoral ecosystems. By taking a step towards a circular business, you take a step ahead of your competitors. The Nordic Circular Economy Playbook builds on the Circular economy business models for the manufacturing industry playbook by the Finnish Innovation Fund Sitra.

One of the three main pillars in the Nordic Vision 2030 is a green Nordic region. This can be achieved through a sustainable circular and bio-based economy, and this playbook will give Nordic companies the tools to start the journey and involve their entire value chain.

Foreword

Introduction

The playbook and supporting tools will provide you with in-depth understanding on how to achieve circular advantage

While reading the playbook, use the business model canvas to start developing your circular business opportunities

Executive Summary

Complementary drivers accelerate the shift towards enhanced sustainability and the circular economy in the Nordics

The circular economy is about turning inefficiencies in linear value chains into business value

By adopting sustainable and circular business models, companies can create value in four dimensions

Five business models reduce the inefficiencies and create value for companies

Current adoption level of circular models in the Nordic manufacturing industry is highest within circular inputs and product use extension

Moving from a linear to a circular value chain requires different capabilities

Digital, physical and biological technologies are developing at rapid pace, enabling circularity

Five steps are critical to envision and plan a successful transformation

Five steps are critical to envision and plan a successful transformation

Key element no. 1: “envision and plan”

Why is the circular economy relevant?

Rationale for Nordic manufacturing companies to engage in the circular economy

1

The circular economy is about turning inefficiencies in linear value chains into business value

Circular business models can further strengthen customer relationships by addressing frequent customer pain points

Complementary drivers accelerate the shift towards enhanced sustainability and the circular economy in the Nordics

Better customer values can be delivered through offering outcomes instead of selling products

Our overuse of natural resources drives regulators, investors and companies towards sustainability

Regulations are being put into place to drive transition – The European Green Deal playing a key role locally

The new Circular Economy Action Plan supports companies to tap into new sustainable business opportunities

Technologies are developing at a rapid pace and enable companies to deliver on the circular economy objectives

Leading companies from the manufacturing industry have already started addressing inefficiencies using circular principles

Digital disruptors can take over customer relationships by leveraging the customer data they have available

Nordic technology adaptors are already successfully using the three drivers to generate value and fight disruptors

By adopting sustainable and circular business models, companies can create value in four dimensions

The value of a circular initiative is driven by two levers, defined as either value migration or value addition

Why sustainability and circularity?

Business model canvas

What opportunities exist?

Current state analysis and circular opportunities for manufacturing industry

2

The manufacturing industry accounts for 76% of total Nordic exports

Substantial inefficiencies occur in all parts of the manufacturing value chain

Companies might take different approaches when working with the circular economy based on the company structure and goal

Five business models reduce the inefficiencies and create value for companies

Business model specific sub-models modify different steps of the value chain to make it circular

Companies can explore the sub-models individually or as powerful combinations

Current adoption level of circular models in the Nordic manufacturing industry is highest within circular inputs and product use extension

The circular economy business models can boost bottom line results for manufacturing companies through reduced cost and increased revenue

Ørsted is decarbonizing their offshore wind production

Konecranes is offering material handling system as a service

Build to last and product as a service are evaluated as the most promising circular opportunities by Nordic manufacturing companies

A set of tools support you in identifying the most relevant circular business model(s) for your company

What opportunities exist?

Business model canvas

Which capabilities are required?

Introduction to organizational requirements for circular business models

3

Moving from a linear to a circular value chain requires different capabilities

Nine capabilities enable companies to transform their value chain to increased circularity

Customer-centric design enables additional sales throughout the product lifecycle

①

Customer-centric design, digital technologies and knowledge around DPLM1 are core for solution design

①

Customers, partners and employees ensure proof-of-concept through iterative testing and learnings

①

Changes in set-up and actors are required when moving from product to service innovation

①

Prototyping spaces, digital acceleration centres and digitally enabled solutions are good practices GOOD PRACTICES AND EXAMPLES

②

Lifecycle thinking and circular design criteria are key in developing circular products

②

Seven aspects are relevant for circular design

②

Several companies have good practices in circular product development, such as use of modular design GOOD PRACTICES AND EXAMPLES

⑤

Centre sales around outcomes for customers and provide services throughout the whole product life

⑤

Product as a service offering can be designed in different forms setting incentives for circularity

⑤

Companies are using new pricing models and are applying digital technologies GOOD PRACTICES AND EXAMPLES

Appropriate resource handling ensures that materials and products are kept in a closed cycle

③

Circular sourcing reduces wasted value by matching required inputs with available circular material

③

Customer-centric design, digital technologies and knowledge around DPLM¹ are core for solution design

Prototyping spaces, digital acceleration centres and digitally enabled solutions are good practices

GOOD PRACTICES AND EXAMPLES

Several companies have good practices in circular product development, such as use of modular design

GOOD PRACTICES AND EXAMPLES

Companies are using new pricing models and are applying digital technologies

GOOD PRACTICES AND EXAMPLES

Circular resource marketplace platforms and industrial symbiosis can transform material sourcing

GOOD PRACTICES AND EXAMPLES

Using shared services and asking suppliers to apply circular principles are good practices in sourcing

GOOD PRACTICES AND EXAMPLES

To raise resource efficiency, use robotics, keep waste separated and introduce remanufacturing

GOOD PRACTICES AND EXAMPLES

Good practices inspire ways to incentivise product return, develop reverse logistics and manage waste

GOOD PRACTICES AND EXAMPLES

Harness existing networks and partnerships and use digital platforms for interaction

GOOD PRACTICES AND EXAMPLES

The transformation requires new targets, cross functional collaboration and culture change

GOOD PRACTICES AND EXAMPLES

Organizations should start addressing two key elements:
I) Envision and plan and II) Deliver and adapt