The value-boosting power of the circular economy

The automobile industry could be considered the ultimate use-case for the circular economy, with EU law stipulating that 85% of a vehicle's weight must be recycled or reused.

Applying this principle to other industries could have significant financial and environmental benefits. Research by the Ellen MacArthur Foundation suggests that transforming the way goods are manufactured and used can tackle 45% of CO2 emissions.

Accenture estimates a $25 trillion market opportunity could emerge by 2050.

Circular manufacturing enables companies to retain and recapture the value of existing products, reduce demand for new materials by 50-98%, and decrease energy consumption over new manufacturing by 55-90%. Examples of companies embracing circular manufacturing include Apple, which incorporates recycled materials such as gold, tungsten, rare earth elements, and cobalt in its products, and Philips, which refurbishes and upgrades medical imaging equipment like CT scanners, allowing hospitals to trade-in old equipment for discounts on new systems.

There is no one-size-fits-all approach to circular manufacturing, but core principles involve retaining value through reuse, recycling, refurbishment, and remanufacturing, sometimes called value retention processes (VRPs). The quickest way to begin is by taking back existing products and remanufacturing them, which means extending a product's life either for an existing customer or selling to another customer.

“In the context of circular manufacturing, it means retaining maximum value inherent in products at every level through many cycles,” said an expert in circular economy solutions.

Today, a conservative estimate of the global remanufacturing market represents over $80 billion in revenue but accounts for less than 2% of products sold. As concerns about resource scarcity, public demand for producer responsibility, and governments enacting stronger environmental legislation all increase in parallel, the market potential for circular manufacturing and supporting infrastructure will expand rapidly.

Automotive and heavy-duty off-road industries are the most significant segments for remanufacturing, leading to sustainability and economic benefits, making up more than 77% of material savings and 81% of CO2-equivalent reductions.

Companies can utilise software solutions to model and predict the cost and potential benefits of adopting circular manufacturing. These solutions incorporate proven industry models to predict various material and service costs, the potential for reuse of products or components, and the related sustainability benefits of implementing remanufacturing at scale.

While the models and metrics used are established from industry and academic research, they only serve as a starting point. The solution should ultimately allow each customer to refine the models and add their own metrics to improve the efficacy of the outcomes for their specific industry and product opportunities.