Sparking the CircularEconomy
Amrik Sohal
Professor of Management
Department of Management
Monash Business School
Monash UniversityAustralia

Innovations in Manufacturing
1970s – MRP systems, CNC Machines
1980s – JIT, TQM, TPM

1990s – CIM, FMS, BPR, DfMA, Lean
2000s – ERP Systems, Six-Sigma, Servitization

2010s – Sustainability, Green Ops and SCs, Digitalisation
2020s – Industry 4.0, Circular Economy• Massive Improvements in Cost, Quality, Delivery & Flexibility• Mass customisation, Shortened product development times• Supply > DemandSource: https://www.euronews.com/next/2022/11/03/e-waste-recycling-how-much-electronic-waste-does-europegenerate-recycle-and-repair

Source: https://waster.com.au/inefficient-waste-management/

Source: https://tontoton.com/drowning-in-plastic/

Source: https://research.csiro.au/resourcesandsustainability/value-from-waste-materials/

Source: https://www.onkaparingacity.com/Services/Waste-and-recycling/Waste-and-recycling-drop-off-options

Source: https://www.pinterest.com.au/pin/174725660523091408/

Source: https://www.conformit.com/waste-material-management-3r-rd/

CIRCULAR ECONOMY:GLOBAL PERFORMANCE

8.6%
Of our world is circular

Source: Circularity Gap Report 2022

The urgency of circular economy: The overconsumption ofnatural resources and the scarcity of some natural resources

1 Earth1.75 Earths

3 Earths

1970

Today

2050

Prof. Jacqueline CramerCirculareconomy is theonly option

Source: https://tontoton.com/5-benefits-of-a-circular-economy/

What is thecirculareconomy?

THE CIRCULAR ECONOMY EXPLAINED• No waste• Closed loop

• Restore naturalsystems

We move from a linear economy…

… to a circular economy

Prof. J. Cramer

Source: The Ellen MacArthur Foundation

WHAT IS…

CIRCULAR ECONOMY (CE)• CE is an approach that requires a change in mindset and behaviours:

o “We see materials not products” – Andrew Egan
• CE is a transition from a linear business model to circular one across multiple industries• The primary objectives are efficiency in resource use and reduced waste in a closed-loop
supply chain rather than traditional make-use-dispose systems.
• Minimise resource inputs and emissions via stakeholder collaboration through supply networks
by slowing, narrowing, and closing resource loops via creating and sustaining of aregenerative system• Maximise efficiency in resource use and waste reduction in a closed-loop supply chain“An industrial economy that is restorative orregenerative by intention and design”(MacArthur, 2013, p. 14)

• The Economics of Coming Spaceship Earth(Founder of ecological economics: Boulding, 1966)• Industrial metabolism (Material flow analysis: Ayers,1989)

Theoreticalbackgroundof circulair
economy• Industrial ecology (Functioning of industrial systems
as natural systems: Frosch and Gallopoulos, 1989)• Service-life extension of goods (Reuse, repair,remanufacture, upgrade technologically: Stahel, 1982)• Ecodesign and Life Cycle Analysis (LCA) (Variousauthors: 1990s)• Cradle to Cradle product design (McDonough andBraungart, 2002)• Towards the Circular Economy (Ellen MacArthurfoundation, 2013)

Prof. Jacqueline Cramer

Source: Joan Prummel

CIRCULAR ECONOMY

CO2 REDUCTIONS NECESSARY TO REACH ZERO BY 2050

55%

of CO2 reduction can be realised by energy
transition and increasing efficiency

Source: Ellen MacArthur Foundation (2020) Financing the Circular Economy
Source: Ellen MacArthur Foundation (2020) Financing the Circular Economy

Creating and losing value
Value is added as the product isdeveloped (the left side uphillslope).
Once the product reaches the top ofthe hill, the product’s value is at itsmaximum.
After a relatively short lifecycle theproduct’s value is destroyed quickly
and value rapidly goes downhill.
Circular businesses allow products
to stay at their highest level of value
for as long as possible.

Value creation hill and cliff edge
post-consumer

Circular Economy Business Strategies: The Value Hill model

CIRCULAR ECONOMY LOOPS:
Short loops
RefuseReduceResellReuse

R0

R1

R2

Medium loops
RepairR3Long loops

RefurbishRemanufactu
reRepurpose

Recyclematerials

EnergyrecoveryRe-mine

R4R5R6R7R8R9Reike et al. (2018) The circular economy: New or Refurbished as CE 3.0?

Research done
Sparking the Circular
Economy in Melbourne's
Manufacturing Industry
SEE: theCEjourney.org.au

Sparking the Circular Economy in Melbourne's
Manufacturing Industry

Objectives
1. Establish the extent of relevant circular economy
practices implemented across four manufacturing subsectors in South-East Melbourne:
1. Textile
2. Plastics
3. Food and Agriculture
4. General engineering
2. Develop practical approaches for manufacturingbusinesses to adopt circular economy strategies andpractices

3. Identify how barriers and challenges can be overcome

PROJECT ACTIVITIES UNDERTAKEN
TO ACHIEVE THE OUTCOMES• Phase 1 of the project completed interviews with25 leading circular businesses.

• Phase 2 of the project was three co-design
workshops aimed to assist Phase 3 by developing
appropriate strategies and practices that can beadopted by each of the four industry sectors.
• Phases 3 was four seminars and four hands-on
workshops aimed at raising awareness andassisting businesses in implementing the identified
circular strategies and practices.

PHASE 1
INTERVIEWS WITH 25 LEADING CE BUSINESSES
We identified 25 celebrated CE businesses inVictoria and undertook in-depth interviews toexplore their experiences and outcomes.
Through the interviews we discovered:••••

Drivers for CE adoption
Benefits of adopting CE strategies and practices
Critical success factors for effective CE implementation
Barriers and challenges to the implementation andspread of CE• Key learnings for others’ adoption of CE strategies andpractices

LEADING CE BUSINESSES’…

DEMONSTRATION OF CE PRACTICESSHORT LOOPS

R0C1C2C3C4C5C6C7C8C9C10C11C12C13C14C15C16C17C18C19C20C21C22R1R2MEDIUM LOOPS

R3R4R5R6LONG LOOPS

R7R8R9LEADING BUSINESSES’…

DRIVERS FOR CE ADOPTIONInternal
Owners’ &managers'
valuesOpportunities
for newbusiness

Cost
reduction

External
Customerdemands

Competitive
distinction

Push fromgovernment

LEADING BUSINESSES’…

BENEFITS OF CE ADOPTIONInternalUpscale
themsleves

Economic
benefits

BettercultureExternal
Marketing& Branding

BetterproductImproved
local supply

LEADING BUSINESSES’…

CRITICAL SUCCESS FACTORS FOR CE ADOPTIONInternalTop level
leadership

ViablebusinesmodelDigitalisation

External
Collaboration
with suppliers

Knowledge
sharingChanging themindset of
suppliers andcustomers

LEADING BUSINESSES’…

BARRIERS TO CE ADOPTIONInternal

Competingpriorities

Investment
constraints

Operatingcosts

External
Capturingwaste
streams

SocialstigmaNo
centralised
information
platform

Policy level
Lack ofpolicysupportOutdated
legislation

Difficulty ingetting
grantsLEADING BUSINESSES’…

KEY LEARNINGS TO SHARE WITH OTHERS
1. Update Process Vision: Each business producing a product should build circularity, including
repurposing or recycling into the product.

2. Extend Circularity to the Supply Chain Level: Redesign the business model - Take a systems
approach and build circularity into the whole supply chain.
3. Be part of CE value chain: Ensure that there is financial viability to the business model. It iscrucial for businesses to be profitable to sustain the idea that will create a CE.
4. Ensure Visibility: Be transparent and genuine in what you do in the CE space. Demonstrate toothers what you do.
5. Communicate Your Understanding of CE Value Creation: Help people understand the valueof what they are contributing to as a part of CE space.
6. Be an Active Contributor to CE Ecosystem: Create networks of like-minded communities.
Engage with others in collaboration and knowledge mobilisation on best practices in CE.

PHASE 2

CO-DESIGN WORKSHOPS

Co-design workshops (that brought
together participants from the leading
circular businesses, council
representatives and academics) were
aimed to assist Phase 3 bydeveloping appropriate strategies
and practices that can be adopted byeach of the four industry sectors.

PHASE 3
SEMINARS• Use the models, and leading CE
business experiences to guidebusinesses starting their CE journey• Raise awareness of CE and adoption
opportunitieso Achieve level 2 or 3 of maturity• Facilitate adoption of CE strategies andpractices• Achieve short loop CE - R0 and R1

PHASE 3
SEMINARS

We held public online seminars to raise awarenessof the circular economy and its applicability to eachof the four targeted manufacturing sub-sectors:
1. Food sector
2. Textile sector
3. General manufacturing sector
4. Plastics sectorThe seminars were complemented by video casesof leading CE business’s experiences

PHASE 3
WORKSHOPS
We held four in-person workshops to identify,
prioritise, and plan for the adoption of circular
economy practices, and subsequently reducewastePHASE 3…

PRE-WORKSHOP TASKSWorkbook/Templates provided to be completed
before the workshop:
10R Practices and CE Maturity Assessment.
Basic self assessment of their top foursuppliers – for R0• What do they supply?
• Regularity? Quality issues? Credentials?

Basic self assessment of waste – for R1• What is it? How much? How regularly?
• What's done with it?

FILLING IN THE
GUIDED
WORKSHEETSUPPLIED.

TO CONDUCTAUDITS OF R0AND R1 IN THE
ORGANISATION& PROCUMENTFUNCTION

PHASE 3…

SECTOR SPECIFIC• Pre Workshop Basic Self Assessment (detailsprovided).

ACTION-OUTCOME
ORIENTATEDWORKSHOP OUTLINE• Welcome and Groups allocated.

• R0 (Refuse) and R1 (Reduce)• Using the assessment of their supply chain identified challenges and opportunities.
• Examples of SC ‘change management’• Developed plans for change (includingimplementation steps and how barriers may beovercome)

INTERACTIVE
BUSINESSSPECIFIC
ACTIVITIESCOLLABORATIVENETWORK OFSUPPORT

SPARKING THE CIRCULAR ECONOMY…

PROJECT OUTCOME
Through the workshops, practical approaches forparticipant businesses to improving circular
economy practices were identified in the areas of:
1. Organisational culture
2. Supplier collaboration and choice
3. Renewable resources
4. Changing manufacturing
5. Reuse/retained value opportunities
6. Recycle instead of landfill
7. Local collaboration
8. Communicating the journey

SPARKING THE CIRCULAR ECONOMY…

PROJECT SUCCESSES
A summary of the participant survey findings (n=15). Questions 1-6 were on a 1-5 scale, from 1 = nomore/greater/additional..., to 5 = a lot more/greater/additional.... Question 7 was asked as a percentage:Due to attending the workshop:
1. how much more aware are you of what CE is? = 4.13
2. should the CE be of greater strategic importance in your business? = 4.21
3. do you have greater capacity to implement circular economy practices? = 3.87

4. are you going to further investigate circular economy practices? = 4.40
5. are you going to implement further circular economy practices? = 4.13
6. do you have further circular economy connections? = 4.13

On average, estimated waste reduction of 29% by subsequent adoption of CEpractices.

SPARKING THE CIRCULAR ECONOMY…

Opportunities:
1. CE is a new approach for most businesses, hence
there is a tremendous potential to promote it acrossall sectors.
2. Leading businesses are very keen to share their
CE with others. They need support to establish
networks.

3. Businesses are keen to know about circular
economy and how they can adopt circular economypractices.

SPARKING THE CIRCULAR ECONOMY…

KEY CHALLENGE
Despite their keenness to learn about CE, SMEs
found it difficult to attend in-person workshops dueto their demanding day-to-day activities and timepoorness.

STARTING THE
JOURNEY……
ADOPTION OF CIRCULAR ECONOMYSTRATEGIES AND PRACTICESCE ADOPTION…

CALL FOR ACTION
1. Discuss CE with top management.

2. Identify supply chain partners who will take the CE
journey with you
3. Pick the low hanging fruit – select the processes that areeasily changeable
4. Think how potential change can harmonise with existingprocesses. How cohesive the new processes are with thevalues, experiences, and needs of the company.

IMPLEMENTING CE STRATEGIES AND PRACTICES…

MATURITY MODEL LEVELS

L3: DEFINEDL4:
QUANTIATIVELYMANAGED

L5: OPTIMISING

L2: MANAGED
L1: INITIAL

Brendzel-Skowera (2021) Circular economy business models in the SME sector

Organizational maturity levels in the area of implementing CE principles.

L1. Initial

L2. Managed

L3. Defined

L4. Quantitatively managed

L5. Optimizing•••••••••••••••••lack of knowledge about the assumptions of circular economy and business models dedicated to it
low environmental awarenessfailure to limit the negative impact on the environment
environmental activities undertaken for pragmatic reasons
low level of knowledge about circular economy and business models dedicated to it
most of the processes regarding the area of environmental activities are identified and definedenvironmental impact awarenesspragmatism in activities limiting negative impact on the environment
monitoring environmental indicators
awareness of the impact on the environment and awareness of the existence of circular economy
environmental management system (formal or not)defined processes for the area of environmental activities
pragmatic and altruistic reasons for limiting negative impact on the environment
qualified employees for environmental protection
familiarity with the rules of circular economy; work on redesigning the business model towards circular economy
formalized environmental management system process quality measures are built into the enterprise’s
decision-making system
the causes of process deviations are eliminated••••

circular business model implemented
improvement of the organization through process monitoring in terms of possible improvements
formalized environmental management system
raising awareness of the company’s stakeholders when it comes to ecology

Joan PrummelJoan PrummelJoan PrummelJoan PrummelCircular economy is the only option

Source: https://www.vic.gov.au/building-victorias-circular-economy▪ Thank you!

55