Searching for approaches enabling circular economy

Novel business models that leverage the largely untapped potential of circular economy are gradually emerging in several industries including metals and engineering industry, chemical and biotechnical industry, and pulp and paper industry. While most existing academic research and development activities in firms have focused on the crucial role of material flows in developing new business models, the Data to Wisdom -project focuses on information flows in the circular economy. The goal is the systematic identification and creation of relevant data in radically new value constellations, and the conversion of this data into wisdom that is used to pilot and implement new circular business models.

CE

Circular economy can be defined as a system which creates value by minimizing waste, energy and the use of natural resources. It also utilises solutions that aim at slowing, closing and narrowing loops of material and energy. (Geissdoerfer et al., 2017[i]). These solutions include, for instance, long-lasting design, design for easy disassembly and maintainability, maintenance actions such as repair and refurbishing, reuse, remanufacturing and recycling. In the “Data to Wisdom” project, we at VTT focus especially on what is the impact of asset management and maintenance on circular economy and how this impact could be increased through advanced information management.

For instance, digitalization enables better management of life cycle information and better availability of sensor, equipment and process information for the various stakeholders. Therefore, the potential new value could be in real-time optimisation and predictive maintenance. These opportunities may positively affect asset management.

On the other hand, the lifetime of digitalized products and services is often much shorter than the physical assets. This can be seen as a challenge for asset management, since companies have to prepare for new kinds of maintenance, replacements and modernisations.

Jyri Hanski and Pasi Valkokari

“Data to Wisdom” project is funded by the Finnish Funding Agency for Innovation (Tekes). Research partners are LUT and TUT, and co-operating industrial firms are BMH Technology, Fortum, Solita and UPM (Link: http://www.vtt.fi/sites/datatowisdom)

[i]Geissdoerfer, M., Savaget, P., Bocken N. M.P. & Hultink, E. J. (2017) The Circular Economy – A new sustainability paradigm? Journal of cleaner production, 143, 757-768.

Delivering sustainable value in manufacturing industry

Individual businesses cannot deliver the system changes required for sustainable value creation and novel solutions for circular economy.
social-media-1635571_1920
Economic, environmental and social impacts occur throughout the value network. Developing attractive and common approaches for sustainable products and services will assist in enabling collaboration among partners and stakeholders in manufacturing industry.  This requires management of internal activities and operations of the producing organization and getting all the value network partners to follow the same principles and performance standards that have influence on the sustainable product and service delivery.

The existing business models in manufacturing industry are often based on delivering and capturing economic value for customers and shareholders, with limited or no attention to environmental and social value and to a broader range of stakeholders. These traditional business models are linear and externalise environmental and social impacts. They cannot support the sustainable value co-creation that is required to meet the future needs of the planet and of increasingly discerning customers wanting features other than economic value or product ownership. Therefore, the need for a circular economy is evident given that a significant proportion of non-renewable resources is diminishing and natural resource price volatility is increasing (Ellen MacArthur Foundation, 2012).

New dynamics and uncertainties call for novel sustainable solutions in the global manufacturing industry.  It is important to provide tools and methodologies for companies to fully embrace sustainability. It also is important to do this at the level of the network, as the impacts do not mainly occur inside one company. Sustainability mega-trend is becoming a central factor in companies’ long-term competitiveness and when doing this it will affect their value networks. The business partners and stakeholders within these networks make planning, coordination and management a challenging task.

Traditionally, the manufacturing industry has been driven by technologies, but future competitiveness requires new managerial capabilities and development tools in terms of:

  • network governance model that addresses the rules, processes, metrics and organisational structures needed for effective planning, decision making, steering and control,
  • business models and sustainable solutions over life-cycle perspectives, which considers a wide set of stakeholders across the business network to deliver sustainable value,
  • key performance indicators that consists of three interlinked principal components: network conditions, internal structural elements, and outcomes.

The above key findings of the SustainValue project, coordinated by VTT, are presented in a new book published by the Springer International Publishing.

Value Networks in ManufacturingThe book: “Value Networks in Manufacturing. Sustainability and Performance Excellence” highlights innovative solutions together with methods and tools that can help manufacturing companies to excel in economic, social and environmental terms in networked business environment. The book is available from https://doi.org/10.1007/978-3-319-27799-8

Recently, research and development work that started in SustainValue, continues e.g. in “From Data to wisdom – Approaches enabling circular economy” project (also known as D2W). The main goal of D2W is the systematic identification of relevant data, creation of radically new value constellations, and the conversion of this data into wisdom that is used to pilot and implement new circular operational and business models. More information about the D2W project: http://www.vtt.fi/sites/datatowisdom.

Katri Valkokari, Teuvo Uusitalo, Pasi Valkokari