Circularity at Micro Level: A Business Perspective

Abstract

Circularity assessment at the micro-level (for businesses) is critical for a systemic transition towards a CE as businesses are an integral part of the economy. There are wide-ranging indicators and varying practices and tools for measuring the circularity of businesses due to lack of a standard to monitor and report progress towards the implementation of the CE. Besides, most small and medium businesses lack the know-how or resources to measure their circularity. To cater to such needs, we present a generic methodology and a comprehensive set of indicators for assessing circularity at the micro-level that aligns well with the CE principles and goals. Further, a real-world case study is discussed based on publicly available data (reported by the company), as an example of how companies are trying to become circular in practice. At the end of the chapter, major strategies (along with examples) are recommended that can aid businesses in chartering towards circularity.

1 Introduction

Businesses, inclusive of small-medium enterprises (SMEs) and large corporations contribute directly to the growth of the local economies (specifically, improving the gross domestic product (GDP)) by bringing in investments and providing employment opportunities, and thereby collectively impacting global economic development. However, alongside the benefits, businesses generate large quantities of waste and consume enormous amounts of resources such as raw materials, water, and energy which has resulted in complex environmental issues [1]. Therefore, businesses play a vital role in realizing the systemic transition to a CE from the conventional linear economy. Such a transition also provides businesses with opportunities to enhance value besides reducing their environmental impact [2] by adopting the following strategies in their operations and management.

• 1. Improving supply-chain and resources management.

• 2. Eliminating/minimizing waste through better design.

• 3. Keeping the products, components, and materials in use for as long as possible.

These strategies not only aid the businesses to become circular but also provide a platform to pursue the financial benefits of this profound shift [3, 4].

In recent years, many global companies have initiated the transition towards circularity to achieve sustainability and also improve their ESG ratings to attract investors. In the case of SMEs, this change is less focused due to the lack of economic resources and technical know-how to transform the business into a circular one [5]. Contrastingly, in the past decade, many start-ups with innovative eco-friendly products/services and circular business models are springing up globally as a result of growing ecological awareness and support of accelerators for sustainable businesses. Therefore, there is an imminent need for a standard circularity assessment tool that can facilitate uniform measurements of businesses of various sizes and applicable across all industrial sectors.

For the sake of clarity in understanding the assessment methodologies and various indicators for each level in the hierarchy of an economic system, we have considered businesses at the micro-level as outlined in the ISO/TC 323 explanatory note. This is unlike most literature that has been including products and components in the micro-segment [2, 6, 7] and such a definition has neither been consistently used nor clearly represented in the prior art [8]. This chapter begins with a discussion on the need for circularity assessment at the micro-level. Then, we present a generic methodology for individual businesses to measure their circularity with a general list of indicators. The self-assessment method enables the businesses to view their operations and management through the circularity lens, indirectly aiding them to enhance their environmental, social, and economic sustainability. With this background, Apple Inc.’s case study is provided to discuss how companies are trying to become circular in practice. As a logical conclusion, the chapter recommends practices and strategies that businesses can follow in their pursuit of circularity.

2 The Need for Circularity Assessment at Micro-level

As the CE is gaining momentum, businesses (SMEs and large corporations) belonging to various industrial sectors need to prepare and involve in the transition to sustain the competition and understand the associated risks and opportunities. To do so, it is necessary for businesses to

• 1. initially know how circular they are,

• 2. identify the various aspects of operation and management where there is scope for achieving circularity,

• 3. set achievable targets towards becoming circular, and

• 4. monitor progress/improvements resulting from circular activities.

To implement the aforementioned points there is a need for a self-assessment methodology/tool for measuring the circularity of businesses that includes a comprehensive list of indicators.

In recent times, many micro-level circularity indicators have been proposed by researchers through academic publications [9, 10]. Most of them are either based on materials-flow or environmental impact. Some of them focus more on economic factors, biasing the measurement towards monetary benefits. A majority of them being single-dimensional indicators (such as recycling, remanufacturing, reusing), researchers emphasize that there is a need for combining such indicators to formulate better ways of measuring the circularity of businesses in practice. To complement this line of thought, lately, some organizations promoting the transition of traditional businesses to circular ones have come up with their proprietary comprehensive tools for measuring business-level circularity such as the Ellen MacArthur Foundation’s Circulytics,¹ and the WBCSD’s CTIs.² The purpose of such tools is to facilitate resource stewardship and decision-making in operational management to engage businesses in transiting towards circularity.

Currently, there is a lack of a global standard for micro-level circularity assessment which results in non-uniform measurements across all business sectors. However, the emerging circularity assessment standard, ISO 59020 framework can be implemented initially by considering the data published by businesses according to the existing sustainability reporting standards such as the Global Reporting Standard—Environmental (300 series)³ and the IIRC’s guidelines for natural capital reporting.⁴

3 Circularity Assessment Approach at Micro-level

The key circularity indicators vary from business to business depending on which industry sector it belongs to. For example, the key circularity indicators of a dairy products company are different from those of a telecommunication company. A dairy product company mainly depends on milk supply and resources such as water and energy for processing, packaging materials, and storage facilities. On the other hand, a telecommunication company is dependent on network infrastructure, electronic and electrical equipment, and energy for its operation. Hence, key indicators for ‘resource use’ in the case of the dairy products company will be the volume of milk and water consumed/wasted, which is not applicable for a telecommunication company. Furthermore, for a telecommunication company, the environmental impact resulting from network radiation and the e-waste generated is a key indicator that is completely irrelevant to the dairy products company. This diversity poses a challenge to form a common framework for the circularity assessment of the micro-level. However, a generic methodology can be followed by selecting a subset of circularity indicators from a comprehensive set, that is relevant to the business in consideration.

Two major factors influence the circularity of businesses, namely, the internal factors (including operations and waste management) and the external factors (supply-chain). Therefore, for a comprehensive circularity assessment of a business, it is necessary to take into consideration the supply-chain circularity along with the business’s circularity performance. However, care should be taken to avoid the overlap of the supply-chain indicators with the business’s internal circularity indicators in the assessment process.

Fig. 5.1

Flow chart showing the stages required for businesses to charter towards circularity. The first stage involves the circularity assessment of internal operations and management and the related implementation of various measures (such as innovative technologies and business models) for enhancing the circularity credentials. The second stage involves assessing and enhancing supply-chain circularity

To begin with, a company/business can assess its circularity internally that includes operations and waste management (Stage I; Fig. 5.1). This initial assessment provides insight into the consumption and wastage of resources such as water, energy, and raw materials in various processes and their resulting environmental impact. It also gives an idea of how the business can reduce its environmental footprint through waste management strategies. Once this internal assessment is completed, various aspects of operation and management where there is scope for improvement can be identified and necessary changes can be embraced. For instance, in a manufacturing company, the consumption of water and energy could be significantly reduced by adopting smart manufacturing techniques that make use of digital technologies in place of conventional manufacturing methods. Once such necessary changes are implemented, the circularity evaluation should be reiterated to track the progress.

After achieving notable progress (of around 50%) in the circularity of internal operations and management, the supply chain circularity can be addressed (Stage II; Fig. 5.1). As business is dependent on its supply-chain for resources, the circularity of the latter becomes critical in achieving the overall circularity at the micro-level. Hence, it is important to have a supply-chain which provides renewable/recycled resources and reduces its carbon footprint in the process [11].

4 Indicators for Micro-level Circularity

For a multi-dimensional circularity assessment of a business, it is necessary to measure the circularity of various aspects of the business. Each aspect of business management involves multiple circularity indicators and such quantifiable data expressed in standard form collectively provide the required information for the overall circularity assessment of the business. In this section, we have presented a comprehensive list of indicators categorized based on different aspects of business management as shown in Fig. 5.2. As mentioned earlier, a relevant subset of these indicators can be selected for any business under consideration.

Fig. 5.2

Schematic representation of a comprehensive list of categories of circularity indicators belonging to various aspects of internal operations and management of businesses, and their supply-chains. For a business being considered for circularity assessment, the set of relevant circularity indicators can be chosen from this list

4.1 Operations Management

This represents the administrative part of a business that strives to improve the efficiency of the business processes as well as maximize profits. For a business transiting towards circularity, alongside these responsibilities, the operations management should also emphasize on (i) resource efficiency and (ii) eco-design of products/services and processes. These strategies will not only reduce the environmental impact but also aid in achieving economic growth as well as a positive impact on the society.

• 1. Resource efficiency: This strategy aims to use fewer resources for products/services and processes without affecting the quality and quantity of products/services and/or speed of processes. It can be implemented by reducing the resource input and improving resource utilization through redesign, reuse, and remanufacture [12,13,14,15]. The following indicators can facilitate enhanced resource efficiency:

  • The ratio of amount of raw materials consumed to that of materials wasted,

  • The ratio of the volume of freshwater consumed to the volume of wastewater let out, and

  • The ratio of the total energy consumption to energy wastage

• 2. Ecodesign of products/services and processes: Linear businesses have always been about increasing the production rate and profits and so the design philosophy. Contrastingly, in a CE, the design philosophy follows its core principles. Products/processes need to be designed to be reused/remanufactured/recycled (emphasizing ease in disassembly, in terms of process and time required) and to eliminate the use of hazardous materials by finding eco-friendly alternatives [16,17,18]. The following indicators can provide pointers to adapt changes in redesigning products/services and processes for circularity.

  • Feasibility of disassembly and a quick disassembly rate (preferably in minutes) of products for reuse/remanufacture/recycle

  • Number and quantities of rare earth and hazardous materials used

  • Energy efficiency of products/services and processes

• 3. Investing in green projects: To achieve 100% circularity through becoming carbon-neutral, businesses must invest in green projects such as the generation of renewable energy, afforestation, freshwater replenishment/harvesting programs, and restoring wildlife habitats. These projects help in decreasing the carbon footprint resulting from various business activities [19, 20], and the following indicators need to be evaluated to ensure such a pursuit.

  • Investment in green projects (say, in terms of dollars or euros) and

  • the reduction in the total carbon footprint of the business value chain (measured in terms of $\text {CO}_2$ eq.).

4.2 Waste Management

Although waste management has always been a part of traditional linear businesses, it is mostly in place to abide by rules and regulations and not majorly for reducing or treating waste and environmental protection. Hence, most waste management strategies are not well developed or implemented. CE promotes designing out waste as a principle. So, in the context of CE, the main purpose of waste management is to minimize waste by following various strategies [21, 22]. Such strategies and their corresponding indicators are discussed below.

• 1. Wastewater: Hazardous wastewater generated by businesses pollute the water resources and subsequently affects the biome depending on the water bodies. Therefore, the wastewater has to be treated to remove the toxins before being released into the environment. However, businesses transiting towards circularity also need to recycle and reuse the spent water to reduce water wastage and further exploitation of freshwater resources [23, 24]. Hence, measuring the following indicators can aid in reducing freshwater consumption and pollution of water resources:

  • Percentage of treated water reused and

  • Pollution/depletion of water resources

• 2. Emissions: It is common knowledge that there is an emission of greenhouse gases from manufacturing industries even after the gaseous emissions undergo treatment. But, the fact that every business is responsible for some kind of emission (either due to fossil fuel-based energy usage or consumption of resources with a high carbon footprint) goes unnoticed. Hence, every business should measure

  • the total emissions (due to processes, materials consumption, and energy consumption), measured in terms of tons of $\text {CO}_2$ eq. [14, 25] and

  • the emission of individual hazardous gases.

• 3. Solid waste: Many industries generate different types of solid waste in their general operations or in manufacturing. The primary motive of CE is to reduce waste generation and convert waste matter into resources [26]. Therefore, the following measurements become important in adopting circularity-

  • Tons of organic and inorganic waste generated,

  • Percentage of organic waste decomposed, and

  • Percentage of inorganic waste upcycled/recycled.

• 4. Recycling of waste: Materials recycling has been a well-known and key strategy in waste management for years, even before the advent of CE. However, from a CE perspective, it is considered as the least sustainable option compared to other strategies such as reduction and reuse of raw materials and hence, it represents the outermost loop in the Ellen MacArthur Foundation’s butterfly model of CE [3]. The CE related recycling indicators [27] should measure two aspects namely,

  • the recycling and valorization efficiency (in percentage or ratio) and

  • the environmental impact of recycling (measured as $\text {CO}_2$ eq. emissions).

• 5. Remanufacturing: Although this is a matured strategy in a few industries, remanufacturing is comparatively new and predominantly CE-driven since its purpose is to extend the useful life of products/components. Remanufacturing includes refurbishment, reconditioning, and repurposing used products into new ones (either the same or different) by using components or parts from the older products. Hence, this approach is both environmentally friendly and economically beneficial. However, the economic feasibility of remanufacturing needs to be pre-calculated considering the buyback and process costs, and market value. The remanufacturing indicators [28, 29] should measure two aspects namely,

  • the percentage of parts/components used for remanufacturing and

  • the reduction in the environmental impact due to remanufacturing (measured in terms of $\text {CO}_2$ eq. emissions).

• 6. End-of-life (EoL) management: It is another CE strategy which aims at taking back products at the end of their life, to recover and reuse components and materials. This is becoming popular in recent years as a result of extended producer responsibility legislation being introduced in many countries across the world. Measuring the following indicators can aid in EoL management:

  • amount of waste diverted from landfills (measured in tons), and

  • the environmental and economic impacts of the collection, disassembly, and recovery of products.

4.3 Supply-Chain Management

The supply-chain of a business includes the entire network of producers, manufactures, wholesalers, and logistics that provide the necessary resources such as raw materials and other manufacturing components/equipment, water, and energy for the smooth business operations. Managing the supply chain and planning to drive the suppliers towards circularity is critical in achieving the circular goals of a business. For this, it is essential to measure a few supply-chain indicators yearly and urge the suppliers to enhance their circular performance by gradually modifying the procurement and production processes [30,31,32]. The following are a few general indicators to be measured for any supplier.

• Ratio of renewable to non-renewable material resources supplied

• Ratio of renewable to non-renewable energy supplied

• Percentage of recycled material resources supplied

• Emissions due to extraction/production and processing

• Environmental degradation/pollution due to resource extraction/production

• Emissions due to transportation.

5 Case Study: Apple Inc.

Apple Inc., a trillion-dollar company with a global presence, is a designer, manufacturer, and retailer of mobile communication and media devices, personal computers, portable digital music players, and their products related software, services, accessories, networking solutions, and third-party digital content and applications. Such a company is responsible for a significant impact on the environment. Therefore, they have been putting in efforts to improve their environmental performance for more than a decade, and in doing so, they have adopted the CE intending to become environmentally sustainable. Recently, Apple announced its commitment to become carbon neutral across its entire business, inclusive of the supply-chain.

The intriguing question to be considered here is- ‘What’s Apple doing to become more circular?’ The environmental sustainability team at Apple Inc. is working on becoming circular on various fronts as outlined in Table 5.1, and these efforts towards circularity are as discussed below.

Table 5.1 Environmental performance indicators relating to Apple’s global facilities [33]

Fig. 5.3

Schematic representation of strategies that can be adopted by businesses transiting towards circularity. The strategies are in alignment with the three principles of the CE (design out waste and pollution, keep products and materials in use, and regenerate natural systems)

• 1. Energy: With continuous efforts, all of Apple’s corporate facilities (inclusive of offices, stores, and data centers worldwide) are powered by renewable energy since 2018. This was made possible through investments in renewable energy projects, such as solar arrays, wind farms, and bio-gas fuel cells (created and owned by Apple), that provide over 80% of the electricity required for its corporate facilities. Other renovation efforts such as LED lighting and upgraded heating and air-conditioning systems have led to further improvements in energy efficiency. These efforts have resulted in lowering electricity needs by nearly one-fifth and saving the company 27 M$ in 2019. The emissions from the facilities has reduced to <1% of the total carbon footprint (>50% decrease in the past decade), preventing more than 2 million metric tons of greenhouse gases from entering the atmosphere in the past decade.     Manufacturing processes contribute to more than three-quarters of the company’s total carbon footprint and most of it is due to electricity consumption. So, Apple is liaising with the parts suppliers in reducing their energy usage and transiting to renewable energy. Audits and assessment of suppliers’ facilities worldwide with a cost-benefit analysis have resulted in significant energy efficiency improvements. Also, Apple has urged its parts suppliers to invest in renewable energy projects and opt for clean energy from utility providers instead of energy from fossil fuels. These endeavors makeup to 4 GW from renewable energy sources and have reduced approximately one-third of its manufacturing carbon footprint. Apple now has commitments from all of its 73 suppliers to use 100% renewable energy for the production of parts by 2030 which is equivalent to nearly 8 GW of power required for manufacturing. Once this target is reached, it will cut down over 14.3 million metric tons of $\text {CO}_2$e emission annually.     Apple has also been working on improving the energy efficiency of its devices. Over the past 11 years, it has reduced the average energy needed for a product’s functioning by 73%.     Another way in which Apple is trying to reduce fossil fuel consumption is by reducing commuting. The total transportation emissions from business fleet vehicles, employee commute, and business travel are reduced by enabling telecommuting (working from home), offering mass transport facilities, and providing electric vehicle charging ports (powered by renewable energy sources)/ bicycles on campus.

• 2. Resources: In 2017, Apple announced its commitment to a closed-loop supply chain in which recycled and renewable materials are sourced, used efficiently for a long time, and replenished back into the supply chain. They have identified a set of materials (such as aluminum, cobalt, copper, glass, paper, plastics, stainless steel, tin, tungsten, and rare earth elements) used in the manufacturing and packaging of Apple products, to minimize their usage (by redesigning processes and products) and recover them back at the products’ end-of-life. They have also strived to eliminate harmful materials such as lead, mercury, beryllium from their processes. To improve the recovery rate of materials and components from used devices, they have employed robotic systems that disassemble the devices efficiently. This is complemented by encouraging consumers with incentives to give back end-of-life devices for recycling. Apple also takes back its devices and refurbishes them like new. Such Apple Certified Refurbished products are recirculated in the secondary market until they reach end-of-life. When it comes to packaging, the company uses responsibly sourced virgin fiber and recycled paper for product packaging as an initiative to protect forests.

• 3. Water: Apple has come up with the Clean Water Program to help its suppliers (components manufacturers) to conserve water and prevent water pollution. They are working together to reduce water usage, especially for the water-intensive manufacturing processes and in water-stressed regions. Besides the reduction in water consumption at corporate facilities, Apple is opting for alternatives to freshwater such as recycled water, reclaimed water, and harvested rainwater. They are also investing in projects to restore natural water resources inclusive of the groundwater table.

By implementing the aforementioned strategies, Apple Inc. is not only reducing its environmental footprint but also making a positive impact on society as well as reaping the financial benefits of becoming environmentally sustainable. Nevertheless, there is a long way ahead towards achieving a circular and sustainable business.

6 Concluding Opinion: Key Strategies and Examples for Practitioners of Business Circularity

The Ellen MacArthur Foundation’s Circular Economy System Diagram [3] popularly known as the butterfly model illustrates the 6R strategy for achieving circularity. In this section, we discuss the key strategies [34] shown in Fig. 5.3 with relevant examples that both emerging and established businesses can adopt to become circular. These strategies are in alignment with the core principles of the CE.

• 1. REthink and REdesign the way businesses are created: Businesses need to become circular from the conception stage. Whether it is an established business or a start-up, implementing innovative ideas and new business models will aid this purpose.

      For example, Lehigh Technologies,⁵ an SME, introduced an unconventional novel idea to address rubber wastage. The company produces an engineered material called micronized rubber powder from end-of-life tires and post-industrial rubber (that are generally disposed of in landfills) using a proprietary cryogenic turbo mill technology. The rubber powder has been a suitable material for several consumer and industrial applications, including tires, plastics, asphalt, and construction materials serving as an alternative to virgin rubber and fossil fuel-based materials. Such a creative business idea enables closing the loop of highly consumed products such as tires.

• 2. REduce material consumption and eliminate wastage: This is the most important strategy that every business belonging to any industrial sector should adopt. It can be implemented by embracing smart industrial technologies such as artificial intelligence, robotics, internet-of-things (IoT), along with innovative industrial processes, minimal design philosophy and packaging to reduce energy, water, and raw material consumption.

      For example, DyeCoo⁶ has come up with new industrial technology to dye fabrics without using water, thereby eliminating water wastage and wastewater treatment (a huge drawback of the conventional textile industry). Compared to the conventional dyeing process, the DyeCoo process is energy efficient and does not require any process chemicals except for pure dyes. Also, the technology uses reclaimed $\text {CO}_2$ in a highly pressurized supercritical state as the dyeing medium, in a closed-loop process (without emitting $\text {CO}_2$ into the environment) and is highly resource-efficient.

• 3. REfurbishing and REmanufacturing: Every business should consider taking back its products for refurbishing/remanufacturing and building a secondary product market. This requires designing products for remanufacturing, establishing collection channels, accumulating know-how to establish remanufacturing processes, and controlling product quality to stimulate demand for remanufactured products. This strategy not only increases the longevity of products’ life but also improves the overall circularity of the business.

      For example, Fuji Xerox, Ricoh, and Canon, which collectively hold nearly 90% of Japan’s photocopier market, remanufacture their photocopiers. In the case of Fuji Xerox, there is no distinction between completely new and remanufactured photocopiers, and any machine may contain used components. Contrastingly, Ricoh and Canon separate their completely new photocopiers from remanufactured ones.

      Another example of the implementation of this strategy is IKEA that recently opened new stores in Sweden for exclusively refurbished furniture as a part of their CE initiative.

• 4. REdistribute for REuse: This includes resale or donation of used products in good condition from the first owner (who may no longer need the item) to someone who may use it. Such secondary usage of products facilitates extending the life of the products.

      For example, many e-commerce retailers allow users to sell preowned goods in a usable condition aiding in extending products’ life. This new concept is becoming popular among consumers, especially for expensive products.

• 5. REcycle: CE provides opportunities for new businesses/products, with innovative methods for recycling industrial and post-consumer wastes. Such businesses are essential to increase the recycling rate and efficiencies. This will consequently lead to an improved secondary material market that has the potential to be the supply-chain for businesses.

      For example, Adidas partnered with Parley,⁷ has come up with a new collection of products that include high-performance sportswear shoes and jerseys made from upcycling the polyethylene terephthalate (PET) bottles polluting the oceans. Each product contains at least 75% of polyester from recycled marine trash and utilizes less water and fewer chemicals for production. This also has the potential to decouple the business from fossil-fuel based raw materials.

• 6. Investing in green projects: When renewable energy or sustainably sourced water is scarce, investing in green projects (such as the generation of renewable energy and rainwater harvesting) which match the resource needs of the business makes it more circular. If circularity is viewed at the molecular level (in the context of carbon emissions), any business activity that is material-wise circular produces greenhouse gases. Hence, investing in projects such as afforestation or restoring natural habitats will aid in businesses becoming carbon neutral or circular at a molecular level. Recently, many global corporations have begun investing in green projects.

      For example, the Coca-Cola company,⁸ a huge consumer of water, replenishes 100% of water consumed in the entire range of its bottled products and their production processes, by increasing water usage efficiency in its plants and returning water to the sources through wastewater treatment. The company also engages in diverse, locally focused community water projects with objectives such as providing or improving access to safe water and sanitation and conserving natural water resources.

The other two strategies namely, IS and repair to prolong the products’ life (especially technological ones), have been discussed in detail along with relevant case studies in Chaps. 44 and 77 respectively.