Adding circularity to our economy

The World Circular Economy Forum 2019 took place in Finland this week. This same week, the new Finnish government announced its plans and not surprisingly, both the circular economy and climate change were featured in a big way. Finnish companies have been at the forefront of bio and circular economy investments, with the forestry products and chemicals companies leading. It’s only natural, given that our greatest natural resource is forests and a very skilled workforce able to add significant value compared to simple resource extraction.

Listening to many of the interventions at the WCEF2019 event, I was struck by how many established businesses commented something similar to: “this is nothing new, we’ve been doing this for decades if not longer”. And I could easily add Kemira’s voice to that same statement. A company that will celebrate its 100-year anniversary next year.

This has prompted me to think hard about what is actually new. Or is this just re-packaging around a new buzzword? Let’s start with the old.

A good example in Kemira is our site in Helsingborg, Sweden. We are co-located with several other companies in Industry Park of Sweden. This model of industrial symbiosis has naturally clustered around a harbor; critical infrastructure that has a clear business case for shared ownership and coordinated management of resources and logistics. The oil shocks of the 70’s were the catalyst to look at energy efficiency resulting in cross-company collaboration to manage energy security and cost drivers. But designing shared infrastructure and collaborating across companies - led by Kemira - only really took off beginning in 2006 with more companies establishing themselves in the area.

The results are impressive. In 2014, Kemira won the E-prize for the energy smartest large company in Sweden. The backbone for this is Kemira’s sulphuric acid plant that delivers energy created in an exothermic process. Today, Kemira’s operations provide 60% of the industrial park’s energy needs, transformed via an energy hub into steam, electricity, compressed air and cooling. 30% of the energy goes beyond the fence line and is delivered to the city’s district heating network. This district heating component has saved about 1.6 million tons CO2 cumulatively. And this kind of shared resource base makes financial sense, drawing more companies to the park, including more exotic ventures such as eel and mushroom farming (not together). The scale of integration and flows is visualized in the picture, with Kemira’s operations across the top row.

We have had brilliant staff across Kemira coming up with ways to improve efficiency and lower costs over many years, and much of what we have implemented fits under the umbrella of circular economy. For a few more examples of what Kemira is doing for the circular economy, check out our infographic released this week. But, what makes this circular economy as opposed to business-as-usual?

I would argue that the boundary conditions for business have changed relatively recently, giving us a new perspective and more ideas for innovation.

Business has always had to meet customer expectations with a limited amount of resources for investment. This scarcity of resources drives a behavior that tries to minimize costs while maximizing revenues. In the pre-industrial era, the dominant scarce resource was labor. This created endemic slavery across all our continents and lasted well into modern times. However, the industrial revolution shifted scarcity from labor to energy. This began with coal and whale oil, but the energy industry innovated to bring us several more energy vectors. As consumption grew, more and more energy was required to meet demand, and shocks such as the oil crises in the 70’s drove companies to innovate for energy efficiency.

The resource that is scare today is the environment.

The carrying capacity of our atmosphere for greenhouse gasses is running out, our fresh water cannot sustain critical ecosystem and societal services, the marine environment is saturated with plastic debris and the list goes on. As we have consumed, we have also wasted to the extent that this waste threatens us both directly and indirectly.

Business must now impose on itself or have new boundary conditions set for them by others, to deal with a new dominant type of scarcity. Circular economy thinking harnesses this new perspective to drive companies to innovate in different ways. The other boundary conditions have not disappeared, but the relative weights have changed. We will continue to plan for constrains in labor and energy, but we must add environmental constraints. Plastics are a great example of what has changed. Plastics are produced at incredibly low cost, large scale and energy efficiently. And we would continue to improve efficiency incrementally if it were not for the need to ensure that we do not saturate our planet with plastic waste. The new lens of circular economy prompts us to think about renewable feedstock alternatives, the recyclability of products, collection and reuse for instance. This would not happen without society and regulators recognizing the importance of our now scarce natural environment.

In the same way that other boundary conditions have shaped industries into what they are today, I am enthusiastic about seeing what kinds of new innovation in circular economy thinking we will unleash now. We have much to do if we are to rebalance materials and energy cycles, but based on my experience in Kemira, I am confident that we will succeed.