Public speaking is a very effective approach in conducting field research. Through interactions with the audience, one can understand what people are truly thinking. When I deliver a speech, I often ask my listeners the following question: “What is the first thing you think of when you hear the term of environmental protection?” Probably 9 out of 10 individuals will instinctively mention trash sorting or recycling.
This is probably why the “innovation in circular economy” series attracted near 300,000 viewings within 3 days after hitting the shelf. The articles are so popular that numerous online and Internet media jumped on the bandwagon, generating follow-up reports which adopted the perspective presented in our columns. This is because everyone found out that they have been completely duped!
The truth is quite unsettling. When we find out what is really going on with waste recycling, our natural reflex was to blame the government. However, circular economy is not something that everyone can just fall in line after the government sound the trumpet and take the charge. It requires a complete overturn and transformation of industries; it also involves the entire supply chain. Before we can adjust our thinking to adjust to the new trend, we should not be too quick at pointing fingers though.
Just like the energy industry, the objective of the circular economy industry is not to come up with a single cure-all solution. Rather, it is the devising of innovative solution to the system and the driving of innovation, which requires a chemical reaction made possible only when there is a sufficient concentration of “thinking” interacting with a sufficient intensity of “experts.”
To understand circular economy, one will have to construct a key knowledge framework from building blocks chosen from among a sea of principles spanning a wide variety of subjects. In the previous 2 articles, we have talked about the garbage we create in our daily life, which belongs to the group of general waste. General waste takes up roughly 30% of the total waste generated by the entire nation. Well, these are just small potatoes. The one accounting for the lion’s share is business waste, which takes up 70% of the total volume. Just like the energy sector, we can also adopt the principle of “grasp the big and let loose the small” by starting with the management of business waste to identify the hidden challenges and opportunities.
Among the pool of business waste, industrial waste accounts for roughly 90% of the total. That is why we will discuss the topic of industrial waste recycling. The main focus of implementing environmental protection measures in industry is whether one can increase efficiency of energy or resources during the manufacturing process. Translated into laymen’s term: we can help protect our environment by saving energy and reducing waste generation. If we take things a little bit further, we might as well come up with ways to recycle and reuse the energy and resources required for manufacturing.
The line of thought forming the basis of traditional industrial design tend to be linear, from cradle to grave. A product is made in a factory and becomes trash after being purchased and used. It enters the landfill at the end of its life. Many years ago, Michael Braungart and William McDonough began advocating a more circular concept, cradle to cradle. This approach replaces the one-way design with a more closed loop design. They propose that the product design, manufacturing, and recycle should mimic the highly efficient mechanism of metabolism in the natural world. The concept of waste does not exist under this system. All existing waste are considered as resources which we have yet to devise a way to resolve.
There is nothing special about this paradigm. Our government has already introduced cradle-to-cradle design to industries over two decades ago. The only difference is that another name was used – we call it “energy-resource integration.” The whole concept focuses on the industrial park level, where involves parties exchange the energy and resources created from the manufacturing process. For example, the waste thermal heat one company generated may serve as the energy needed for some other company’s assembly line. This continues to go around in loops within the supply chain, thereby forming a closed system. Some of Taiwan’s more successful examples include Linhai Industrial Park in Kaohsiung and Dayuan Circular Industrial Park. Water resources are also considered a type of resource. However, due to the difference in the manner these resources are processed, we group water resources into another category in practice. When we talk about energy-resource integration, we usually refer to energy or material resources.
In addition to categorization based on industrial parks, for industry people, we also subdivide the circular economy industry which implements the cradle-to-cradle mindset in production into arterial industry and venous industry.
What is arterial industry? Just like the arteries in the human body which supply us with important supplies of oxygenated blood to the whole body, during the design and production process, if an industry is able to improve the energy or resource utilization rate – such as using green energy instead of fossil energy, or using recycled material, when manufacturing cell phones, such industry would be considered arterial industry.
What is venous industry? Just like the numerous veins which carry blood with high concentration of carbon dioxide (oxygen-depleted) back to the heart, a part of the company’s manufacturing process involves the recycling of waste materials, transforming them into resources which can be reutilized through conversion or processing. Take the recycling of old smart phones as an example: each mobile device is carefully taken apart, retrieving the precious metal components which can be resold. This is venous industry.
The relationship between arterial industry and venous industry is a dynamic one. The arterial industry relies on the venous industry to provide good products, while venous industry depends on arterial industry to incorporate the recycling requirements at the design end in order to create good products.
Now we will take a look at the three-stage process of a company that adopts the circular economy scheme. For the sake of clarity, the company in the spotlight will go by the name of Company A.
At the beginning, Company A entrusts an outside recycling company to deal with the waste materials produced during the manufacturing process. At this point, Company A has implemented circular economy mechanism version 1.0. The assumption here is that the operator in charge of recycling will process the waste product when it collects them. It does not matter whether the waste has been downcycled or not.
Unfortunately, the 1.0 version is seen as a flash point where circular economy can often spin out of control. Out of mistrust of businesses, the government of Taiwan adopts a strict strategy on controlling and managing industrial waste. To save itself trouble, Company A proactively seeks out recycling firms to handle the waste products produced by its factories. As for whether the contractor gets their recycling job done, Company A does not give a damn as long as the waste materials have been removed from their premise, so the environmental protection agencies would not trouble them anymore.
So why should recycling contractors remove the waste for Company A? They get paid for their trouble, of course! As long as the contractors receive cash, they consider their job done when they pick up the industrial waste. As for whether the trash really gets recycled, that is another story.
Since recycled precious metals still commands good market prices, the recycling companies will recycle and reuse these materials without the need of the government telling them to do so. However, non-metal waste recycling rarely yields profit – even after being recycled and reused. At this point, the government will intervene and provide subsidies. However, there is a finite amount of cash that can be offered as subsidies. Something that is unprofitable will still not generate any profit even after considering the subsidies. Under this scenario, the government usually ends up spending a lot of money for nothing. At this point, the thing that is being circulated under the circular economy arrangement is cash, while the waste material – which is supposed to be take the center spotlight – is nothing more than a bench-warmer.
That is why we suggest adopting version 3.0. In other words, companies should not be thinking of only tossing the garbage away to someone else; instead, they should be proactively involved with the recycling process – by transforming the waste material they themselves created into a recycled merchandise to implement circular economy. AMIA Corporation is a company in Taiwan which has successfully implemented circular economy 3.0. They produce and sell etchants to PCB companies which is used for etching copper. After the PCB companies use up the solutions, AMIA buys back the used liquid back and recycle it. The recycled etchant can be sold again to PCB companies, thereby achieving a closed loop. Furthermore, the recycle and reuse process also generates byproducts with high added-values such as copper salts and tin compounds, which can be sold for additional income.
There are many overlapping stages among the three phases of the circular economy model which often makes the boundary lines really fuzzy. However, having already read so much of this article, I believe you have become interested in what kinds of innovative circular economy business models and technologies exist in the industry. Starting in June this year (2018), there will be a series of international conferences on circular economy. You can join me in exploring the details of what challenges the industry is facing and learn more about the huge underlying potentials the business model of circular economy promises.