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The Circular Economy
Commissarissen bijeenkomst Bio-economy, May 30th
Fred van Beuningen
Fred van Beuningen l AkzoNobel
1. The limits of linear consumption
2. From linear to circular
3. Case studies
4. Related sustainable framework at AkzoNobel
Today’s contents
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01 The limits of linear consumption
Fred van Beuningen l AkzoNobel
The linear model of resource consumption follows the ‘take-make-dispose’
pattern.
→ This model creates imbalances that weigh on economic growth
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01 The limits of linear consumption
• Drives innovation
• Today we use replenishment capacity
of 1.5 planets
* Sources: UN World Population prospects, OECD, IPCC, World resources institute, WBCSD
Population growth / quality of life
• 7 billion people → 9 billion in 2050
• 2030, 3 billion new middle-class
consumers are expected
Climate change
• Increase the need for energy
• efficiency and low carbon & renewable
energy sources
Scarcity of natural resources
• Higher resource prices
• Supply disruptions
• Price volatility
Increasing risks
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Fred van Beuningen l AkzoNobel
→ Call for a new economic model to decouple revenues from
material input
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02 From linear to circular
Fred van Beuningen l AkzoNobel
A circular economy is
• An industrial system that entails a continuous movement of
production, income and resources between producers and consumers
→ Replaces the ‘end-of-life’ concept
Principles
• Aims to ‘design out’ waste
• Introduces a differentiation between
biological – and technical nutrients
• Renewable energy
• Thinking in systems
• No waste
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02 From linear to circular: value creation
Fred van Beuningen l AkzoNobel
Value creation in the circular economy
1. Reduce inputs
2. (Cascaded) reuse products and material
3. Recycle
Many companies have reached maximum efficiency but are struggling to
move towards value creation
“Currently 94% of are product launches are maximally eco efficient. How
can our company shift to more eco effectiveness and make a paradigm
shift?”
Head Corporate Social Responsibility Multinational
← Maturity of
sustainability
thinking
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02 From linear to circular: opportunities
Fred van Beuningen l AkzoNobel
Economic opportunity worth billions*
Economies;
•
Substantial material savings (USD 340-630 billion for the EU)
•
Mitigation of price volatility and supply risks
•
Increasing services sector
•
Reduced externalities
•
Lasting benefits for a more resilient economy
Companies;
•
Reduced material bills
•
Improved customer interaction and loyalty
•
Less product complexity & more manageable life cycles
Consumers;
•
Lower ownership costs
•
Increased choice and convenience
•
Increased functionality
→ How to accelerate the circular economy?
* Source: ‘Towards the circular economy’, Ellen MacArthur Foundation
Estimated EU cost savings USD billions
Source: Eurostat input/output tables; Ellen
MacArthur with analysis McKinsey, January 2012
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02 From linear to circular: roadmap
Fred van Beuningen l AkzoNobel
Roadmap towards 2025
Pioneering phase
• Companies will build core competencies in circular design
• Companies will drive business innovation
• Create capacities for reversed logistics
Mainstreaming phase
• Organizing re-markets (fighting leakage)
• Rethinking incentives
• Igniting innovation
• Setting up international set of environmental rules
• Leading by example → scale up fast
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03 Case studies: building blocks
Fred van Beuningen l AkzoNobel
Building blocks for all industries
A) Improve circular product
design and production
B)
New innovative business models
C) Improve building reverse cycles and cascades
D) Enabling factors to improve cross-cycle & cross-sector performance
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03 Case studies: 1
Fred van Beuningen l AkzoNobel
Actions & benefits
•
Collection rate up to 50% → new (joint industry) collection systems
•
Second-hand: selling it ‘as-is’ → 6 USD profit per device
•
Design changes for reuse and manufacturing → move to 38%
reused, 41% remanufactured (save up material costs up to 50%),
21% recycled (save up 20% of materials)
→
Save up between USD 1 -2 billion manufacturing material
costs (30 - 60% total industry material input costs)
→
Save up to USD 60 – 160 million manufacturing energy costs
(16 - 43% of total industry energy input costs)
Mobile phone market
•
1.6 billion phones produced in 2010 (more than there are consumers)
•
Average usage less than 2.5 years in mature markets
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Material waste in the EU: 160 million devices a year→ USD 500 million
annually
•
Low collection rate of 15%
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03 Case studies: 2
Fred van Beuningen l AkzoNobel
Light commercial vehicles market
•
Largest sector in the medium-lifetime products industry is the automotive
industry with global annual sales of USD 1,880 billion
•
Light commercial vehicles (LCV) account for USD 240 billion
•
The LCV’s average product life time is 8 years (EU)
Actions & benefits
•
Improving vehicle design → focusing on weakest links, life cycle ↑
•
Professional refurbishing systems → capturing economies of scale in the
reverse supply chain. Current 71% collection rates has to move from
recycling to refurbishing
→ Save material inputs by USD 8.8 - 16 billion (15 - 27% of material
budget) annually
→ Save USD 192 million in energy costs
→ Reduce greenhouse gas emissions of the linear supply chain by 6.3
million tonnes
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04 Related sustainable framework at
AkzoNobel: medium term strategic goals
Fred van Beuningen l AkzoNobel 11
• Grow to €20 billion revenues
• Increase EBITDA each year,
maintaining 13-15% margin
• Reduce OWC/revenues by
0.5 p.a. towards a 12% level
• Pay a stable to rising dividend
• Top quartile safety
performance
• Top 3 position in SAM benchmark
• Top quartile performance in
diversity, employee engagement,
and talent development
• Top quartile eco-efficiency
improvement rate
Sustainable growth is a prerequisite for future profitability
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04 Related sustainable framework at
AkzoNobel: sustainability framework
Fred van Beuningen l AkzoNobel
Invent
Integrate
sustainable value
propositions
Manage
Include
sustainability
in all aspects
of the value
chain
Improve
Continue to
comply and
ensure a license
to operate
R&D
Manu-
facturing
Sourcing
Sales and
marketing
Market
research
Investment
decisions
Level of
development
Environmental Economic
Social
Required
eco-analysis
Supportive
supplier visits
Carbon and
water policies
Eco-premium
solutions
Code of
Conduct
Stretched
safety targets
Aspect of sustainability (linked to SAM)
Examples
Leadership
training
Eco-premium
Zero VOC
Operational
eco-efficiency
Market
propositions
Environmental
/ product
stewardship
Question:
“Where in the coatings supply chain is the most carbon dioxide
emission?”
A. Suppliers
B. Coatings industry
C. End users
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Fred van Beuningen l AkzoNobel
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Carbon intensity in our own scope is
low ...
Million tons CO2 equivalents, 2010
0
5
10
15
20
25
Suppliers
AkzoNobel
Use / end of life
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Fred van Beuningen l AkzoNobel
Carbon intensity in our own scope is
low ...
... But the picture changes when we take a supply chain view…
Million tons CO2 equivalents, 2010
0
5
10
15
Suppliers
AkzoNobel
Use / end of life*
... Making it necessary to work collaboratively
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Fred van Beuningen l AkzoNobel
* estimate
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Eco-premium solutions have a superior
growth rate and profitability
Fred van Beuningen l AkzoNobel 16
18%
20%
25%
30%
2008
2009
2010
2015
ambition
Eco-premium solutions*
• Are products that have a higher
eco-efficiency than the main
competitive product
• Give us a competitive edge, are
more profitable and have a
superior growth rate compared
to other products
• The 30% ambition is “a moving
target”, requires a significant
RD&I investment
Eco-premium solutions
In % of revenue
* An eco-premium solution is measured using a quantitative analysis or a qualitative assessment focusing on six categories: toxicity, energy
efficiency, use of natural resources/raw materials, emissions and waste, land use and risks (eg accidents). The eco-premium solution must be
significantly better than currently available solutions in at least one criterion, and not significantly worse in any.
Example
Specialty Chemicals – High Filler Concept
Fred van Beuningen l AkzoNobel 17
Growth potential
• Sales to customer higher than
standard papermaking
additives
• Growth potential in both high-
growth and mature markets
• Of interest to all fine paper
producers
Replaces tree fiber with non-
wood filler
• De-watering/retention system
using novel on-line treatment of
fillers
• Cost of filler up to 10x lower
than fiber
Helping customers save costs
• ~10% less tree fiber to
purchase
• up to 50% lower energy for
drying
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Institutional change required
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Fred van Beuningen l AkzoNobel
Institutional change required
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Fred van Beuningen l AkzoNobel
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Institutional change required
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Fred van Beuningen l AkzoNobel
Thank you