TRENDS - Nederland circulair · 2 TRENDS CIRCULAR ECONOMY DESIGN DOUWE AN OUSTRA AUTUMN 2015 TRENDS

DOUWE JAN JOUSTRAICE-Amsterdam

CIRCO is part of RACE: Realization of Acceleration towards a (Dutch) Circular Economy www.circulairondernemen.nl

TRENDSCIRCULAR ECONOMY & DESIGN

CIRCO

2 TRENDS CIRCULAR ECONOMY & DESIGN | DOUWE JAN JOUSTRA | AUTUMN 2015

TRENDS CIRCULAR ECONOMY & DESIGNThere are a number of trends visible which strengthen the development of a more circular economy. The common denominator is that these are signals of a change, specifically social change are develop-ing a circular economy.

The world is changing. Whether the signals are pointers towards a substantial transition in development is not always proven. Strong and weak signals are of importance to take into account, some very obvious and some along the external borders of what is now the circular economy. These are trends which are in development and can be difficult to find, analyse and decipher their impact.

This trend analysis describes a number of relevant trends from four angles: basic, societal trends, business- and consumer behavior.

TRENDS CIRCULAR ECONOMY & DESIGN | DOUWE JAN JOUSTRA | AUTUMN 20153

1 BASICCircular economy combines some strong trends that already have been visible for a number of years:

“...seeing products as a temporary storage of

materials “

VOLATILITY OF RAW MATERIAL PRICES

In the publications of the Ellen MacArthur Foundation, TNO, McKinsey, OPAi/CSR-Netherlands and others, the volatility (price) fluctuations in the price of the raw materials has been well researched. It is a factor, next to availability of raw materials, which is of direct impact on business and production continuity. Although outsiders often think that companies are particularly involved in turnover and profit, business continuity is often the most important factor. There are two primary reactions1 possible: the one is a better organization by ‘purchasing alliances’ to achieve for better flows of raw materials. The second strategy is the organization of the management of raw materials, by seeing products as a temporary storage of materials to subsequently be the basis for new production.

1 Anyone who wants to learn more about strategic and practical choices in response to the price-volatilty of raw materials see: https://www.atkearney.com/paper/-/asset_publisher/dVxv4Hz2h8bS/content/capitalizing-on-commodity-volatility/10192


FINITE AVAILABILITY RAW MATERIALS

Although there may be debate about the finite availability and physical presence of raw materials (minerals, ores, etc. ), it is clear that there are several phenomena in progress: (1) depletion of raw materials (in particular specifics such as the so-called Rare Earth Metals (REM’s)) and (2) the interventions in natural systems for mining of raw materials have an ever greater negative impact on ecosystems. There is also a third phenomena at hand, (3) some of the raw materials are only extractable in a limited number of places in the world (think of China’s impact on Phosphorous tariffs leading to world food prices rising in 2008). Furthermore, these are not entirely reliable partners (also economically) because they also have a self-interest in these raw materials.

However we look at it, dependency on raw materials and virgin materials is a risk to

resilience in long term economics. Assessing a longer scale, the expectation is that availability of raw materials will be one of the biggest security risks of this century. That also applies to the raw material Water2.

2 For anyone who wants to learn more: (dutch) http://www.strategyandchange.nl/projecten/grondstoffen-en-voorzieningszekerheid/5/

“dependency on raw materials and virgin materials, risk to

resilience in economics on the long term”

1 BASIC


FROM OWNERSHIP TO USE

For several years, the growth of the number of driving licenses in the city of Amsterdam has been steady. Although, simultaneously the Office of Statistics of the municipality shows that since 2008 the number of private cars in the city is decreasing. All the holders of licenses have not stopped driving, rather we see an increasing use and availability of car-sharing programs. Market initiatives like Car2Go, Greenwheels or Connectcar and peer-to-peer via carsharingsites as WeGo.nl, MyWheels.nl and Snappcar.nl. It is a signal that the change of ownership to use is already here and growing. Also, web sites such as Peerby.nl show that owning a drill, barbecue, battery charger or table is needed less and less. Now you can simply ask neighbors in a reasonable area to borrow the product that can be used. There is a lively and growing trade now with users also appreciating the

social dimension of connecting in a new way to their neighbors.

Now, companies see the access or performance over ownership as a good business model, one the photocopier industry has been using for years. Property does not count, but people and

businesses want to access or ‘performance’3: performance, service and pay for use. For the companies this is a chance for long-term relationships with the customer. The product remains the property of the producer and also as a ‘resource-bank’ for next stages in production. Design is a key.

3 See also: https://www.triodos.com/en/investment-management/who-we-are/news/newsletter-research/waste-not-want-not/

“ownership does not count, consumers and companies

want performance”

1 BASIC


PRODUCT-SERVICE DESIGN

Products are often more or less of equal quality and ‘do what they do’. Clearly it is that the associated service makes the distinction. The current consumer is accustomed to good quality but expects an ‘out-standing’ service. ‘Customer Experiences’ are often appointed as an important tool to strengthen customer satisfaction.

Newer thinking is linking into ‘Service design’ where the experience, the product and the right time are being combined. An example: a cities many coffeeshops all provide good coffee, pleasant seating and even working comfort. The distinction is in the manner in which the staff responds, anticipates and approaches the customer or in even smaller forms of service: open or closed wi-fi is an example of this. No

free wifi? The customer will search for the neighbor who also supplies good coffee etc. The service makes the distinction.

The supplier who4 combines product and services in a smart way, may count on loyal customers.4 Read more: https://en.wikipedia.org/wiki/Service_design#Characteristics_of_service_design

CUSTOMER EXPERIENCE

“No free wifi? The customer will search for

the neighbor who also supplies good coffee”

1 BASIC


1 BASICUPGRADING SOCIETY

The product-life-cycle is not determined anymore by technical life, but is determined by the usage life. This is easy to illustrate in the example of mobile phones: only a small percentage are replaced as a result of technical ‘decline’, the largest percentage are replaced because of other needs, desires and promises: new uses, increased processing power and or software updates. As a phone gets older more and more apps do not run at optimum for older ones. A part of these needs can be met by upgrading existing products (think of the self-steering Tesla by an automated upgrade), partly a higher velocity in production is the answer. From a circular perspective both options are good to meet, provided that the design takes it into account. The upgrading society is not asking for ‘extended durability’ but smarter design of products and services. A good example is modularity, the ability to add / change specific modules. “The largest percentage are replaced

because of other needs”


FLEXIBILITY AS NEW STANDARD

Flexibility seems to be the new way of organizing our economics. The labor market has a high degree of ‘flexibility’. In the healthcare, it refers to ‘flexible care’ and the professional worker of today is “flexible to be usable” (by companies). Flexibility of the labor market is strong, which is visible by the number of autonomous and portfolio workers: in the last ten years, the share of workers with flexible employment relationships in The Netherlands increased from 15 percent (2004) to 22 percent (2014).

Thus we are looking particularly at the rise of employment contracts which are flexible. But these trends to flexibility also

2 SOCIETAL TRENDS

take larger forms. Organizations leave their ‘old assets’ such as private office buildings, organizations are more and more organized as cooperatives and even sectors will see flexible working (think of Uber, Airbnb etc).

Flexibility in production plays a role: the customer wants increasingly ‘tailor-made’ solutions from the producer/manufacturer (think of the ‘Swatch-principle’: “the series of 1”).

There are a range of general societal trends identified that raises ‘questions’ for new economic approaches. Circular economy is a possible response. Here we outline the most striking trends, on further analysis fascinating details can provide information for companies and public authorities for their business models and economic policy.


2 SOCIETY

ENERGETIC SOCIETY

Also known as the ‘enterprising society’, in which citizens take initiatives as the government and institutions/companies do not offer an adequate service. The protest-society or the one-issue society, often in civil society organizations/ Non-governmental organizations (NGO’s), has seen its peak in the last few decades. Citizens now take matters into their own hands by the formation of energy-, care-, food- and other cooperatives. The creation of private cooperative working relationships makes it possible to work on the implementation of entrepreneurial social objectives envisaged as ‘taylored care’, ‘sustainable energy’ and ‘healthy and local food’ as recognizable examples. For a circular economy this is of interest because these companies are leaders in the transfer of ‘ownership to use’, from ‘product to services’ and of central and decentralized organizations.

All these examples provide resilience to the systems. reduces chances of a crash in production/operation.

“Citizens now take matters into their own hands“


RISK AWARENESS AND DENIAL

We seem to live in a risk-free society, as we experience from day to day. Of course, there is a risk of illness or accident, but we tend to ignore it. The large risks as flooding, climate change or resource-scarcity, we do recognize but, mainly our reflex is denial. The problems seem to big or we cannot impact them. If a bridge has a sign that says the headroom is 1.99 m, then we accept that without question. When in the same city an extremely heavy rain brings flooding, we tend to designate the water management authority or municipality as the authorities that have the responsibility for our safety. We hardly experience that there is a shortage in resources (or limited availability), especially because the increase of prices is still manageable currently.

Denial of risks is a powerful mechanism, individually but also as an organization and

as a society. To learn and acknowledge these risks makes us more resilient, especially if something unexpected appears to happen. Responding to risks with ‘smart’ and strong buffers, seems to be a reflex to this trend.

“Denial of risks is a powerful mechanism”

2 SOCIETY


DESIGN FOR CIRCULARITY

A key factor for use and re-use of products and components is a careful and appropriate design. More and more companies try to make their new products with ‘refurbishment’ of parts that are used in previous products. This requires a certain degree of standarisation for those parts where innovation does not play a major role. In addition, attention to design is necessary for recovery of high-quality raw materials, and small products (which are dispersed in the waste stream) through recycling operations. Re-use through eBay and other sites has a large market. These ‘second markets’ are becoming increasingly more of interest for entrepreneurs, which are not shy for recreating quality.

3 BUSINESSThe way we do business is changing. There is a number of clear trends visible:

Repairability of course also plays a major role. All this is summarized in the eight R’s: Rethink, Reduce, Re-use, Repair, Re-furbish/Remanufacturing, Recycling and Recover. For each producer and of course as design-options for each product designer to internalize.

“attention to design is necessary for recovery of high-quality raw

materials”


INDIVIDUAL AND PLURALISM

People are used to ‘owning’ and all people do it. It used to be the picture on the desk of men, women and children, they owned filling cabinets and their private telephone that gave each workspot the suggestion of ownership. The picture, the archive and the telephone are merged into a laptop and / or mobile phone creating the possiblity to feel ‘at home’ everywhere. The same token changes in form but not in terms of content. This pluralism is felt in the city, workplaces are everywhere and all are accessible. The combination of individuality and diversity offers opportunities for new entrepreneurship based on, again, a high quality of product-services. This asks for smart design, adaptive construction methods/assembly and appropriate contacts with those customer(s).

3 BUSINESS“The combination of individuality and diversity offers opportunities

for new entrepreneurship”


4 CONSUMER BEHAVIOR The consumer has a strong desire to choose his/her own lifestyle. This is a fundamental reasons why messages aimed at consumers and the change of their lifestyle, have little or no effect.

The consumer feels autonomous and attached to his/her freedom of choice. That is not to say that the consumer is held stationary. There are a number of trends to be seen that illustrate and strengthen the quest for more circular elements in the economy:

GUILT FREE CONSUMPTION

The website trendwatching.com signaled an important consumer trend: guilt free consumption5. This trend has been known for some time, but gets (too) little attention in my opinion. The consumer wants to consume and do so preferably without guilt. This is something else that is beyond the conscious consumer who repeatedly makes ‘private’ choices. The conscious, sustainable, consumers as a group is approximately

5 for a detailled description see: http://trendwatching.com/trends/guiltfreeconsumption/

Definition: guilt free consumption:

Fueled by a pervasive awareness of the conflicts between their consumerist impulses and their

aspirations to be ‘good’, experienced consumers are increasingly wracked with guilt. The result? A growing hunger for a new kind of consumption: one free from

worry (or at least with less worry) about its negative impact, yet that allows continued indulgence.

www.trendwatching.com


5-10% of all consumers. The guilt free consumer is now a group of about 70-80% of all consumers. This group does not feel directly capable to make sustainable choices and expects the producer or supplier to play an role to become responsible. Instead of searching in the supermarket for coffee that is the most sustainable variety, this consumer looks for the choice between ‘good and better’. So here the knowledge and responsibility is to a large extent placed on the producer and supplier. In specific cases, the consumer is still willing to use the old means of exercising power to intervene by refusing, think of the discussions around battery farmed chicken meat. However, consumers do not want to be faced with this discussion. They expect the supermarket, clothing store and all others, to deliver quality and the corresponding responsibility.

4 CONSUMER BEHAVIOR


BEHAVIOR BY PATTERNS AND NOT MORALITY

Consumers surrounded by themes such as sustainable development and social justice are often faced with moral issues. This is often a call to buy/not buy a product because of a positive or negative aspect. Recent economic theory states that paying attention to attitudes and behavioral routines helps to shape new behavior. In the Netherlands we can illustrate this on the basis of the collection of glass. There is a certain willingness to separate glass. It was only when glass-containers (special bins) were placed in the right places, and increasingly so, that the collection rate rose significantly. Now virtually all consumers internalized the behavior of collecting and recycling glass. Another example is the “fly-image” baked into the ceramic of urinals as an ‘aiming point’ at Schiphol Airport which made the cleaning significantly less necessary. The design of these mechanisms/patterns is an important aspect of circularity.

“paying attention to attitudes and behavioral routines helps to shape

new behavior”

4 CONSUMER BEHAVIOR


The trends described above are only a first exploration of relevant trends which are easily recognizable. The analysis of product- and service design and associated business models requires a sharp analysis, where attention to weak signals is necessary. Just like ruling, doing business requires ‘looking forward’ as an important characteristic. The weak signals are signals of larger movements in the consumermarket, individual and institutional.

Within the framework of project CIRCO we will update the signals and trends that appear every six months.

Douwe Jan Joustra

Senior expert circular economy Implement Circular Economy [email protected]

Thanks to Phil Brown, Research Engineer - Circular Value Chains at HSSMI for his support in translation.

Layout & illustration: Anabella Meijer - Kanai

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TRENDS - Nederland circulair · 2 TRENDS CIRCULAR ECONOMY DESIGN DOUWE AN OUSTRA AUTUMN 2015 TRENDS