H2020 project C-VoUCHER
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1 H2020 project C-VoUCHER Circularity Challenges Identification Methodology A part of Deliverable D3.1 Catalogue of Circularity Challenges (Summer 2018) H2020 GA n Page 1 out of 10
2 1 Introduction This report sums up the individual conclusions reports from Regional. In the Regional, Regional Innovation Hubs (RIHs) identified sectoral challenges, cross-sectoral challenges plus, to some degree, relations to Regional Smart Specialization Strategies. Details on each Regional Camp can be found in the respective camp conclusions report by the RIHs. (In Annex to final deliverable. This report works as input for the sectoral camp at EU level planned to be held in September 2018 in Denmark. The RIHs in C-Voucher are: - The Swedish Agency for Economic and Regional Growth (SAERG) Sweden - Agencja Rozwoju Mazowsza S.A. (ARMSA) Poland - Trekantsområdet (TRNGL) Denmark o Lifestyle and Design Cluster (LDC cluster under TRNGL) 1 - Systematic (SYS) France - Agentia de Dezvoltare Regionala Nord-Vest (ADRNV) Romania - Agencia Gallega de Innovación (GAIN) Spain About C-VoUCHER: The C-VoUCHER project aims to develop new circular value chains, disrupting traditional linear business models by means of cross-fertilization with Design Thinking approach and Circular Disruptors (technology providers) as core elements of the methodology. Through 4 open calls 66 SMEs will be selected. The project will run a 3 stage Circularity program aiming to enable the SMEs to develop circularity solutions that can be used by other SMEs who have similar challenges with circularity and sustainability. The solutions that C-VoUCHER promote include new and innovative approaches to business, business skills and technological competences, and knowledge on the innovative ways of producing and consuming that circular economy provides The support will have a value of 4.2 million. C-VoUCHER will focus on the following five so-called traditional industries/sectors : Agro-food, health, maritime, textile and manufacturing. 1 LDC was a cluster linked to TRNGL during the submission phase, later become the full partner in the consortium. LDC organized a camp on their own as a contribution beyond their role.. H2020 GA n Page 2 out of 10
3 INDUSTRIAL SECTORS C-VoUCHER 2 Conclusions report 2.1 List of camps By mid-july 2018, the below Regional had been held and reported Date RIH/location No. of external participants (incl. no. of C-Voucher project members) June 11, 2018 SAERG, Stockholm (Sweden) 6 (3) June 12, 2018 LDC, Herning (Denmark) 5 (2) June 14, 2018 TRNGL, Kolding (Denmark) 6 (1) June 22, 2018 ARMSA, Warsaw (Poland) 11 (5) July 5, 2018 SYS, Paris (France) 19 (3) Results from the following camps are not included in this report due to delivery timing, but are planned to be integrated in the European camp and the final deliverable. July 6, 2018 ADRNV, Cluj-Napoca (Romania) 29 (3) July 17, 2018 GAIN (Spain) 14(2) Identification of Circularity Challenges Below is a matrix that shows which industrial sectors were being discussed in the different camps arranged by RIHs and 1 cluster. REGIONAL INNOVATION HUBS (RIHs) and 1 cluster SAERG TRNGL ARMSA SYS LDC *None of the camps dealt specifically with health or maritime-related sectoral challenges but some of the mentioned challenges could also be related to these sectors or participants had mentioned a relation (See in Section A). ** Some IT companies were present at the camp at SYS, where related challenges were captured. *** The camp at ADRNV is not analysed in this report (yet, due to delivery timing) but sectors are mentioned. Sectors in parentheses (X) are mentioned in a camp but in lower depth than other sectors. cluster ADRNV Textile X X (tbd.) Agro-Food X X X X X (tbd.) Manufacturing X (X) X X X (tbd.) Health* (X) (tbd.) Maritime* (X) (tbd.) IT** X (tbd.) Water X (tbd.) GAIN 2 Based on invitations, actual attendance number to be included in final deliverable H2020 GA n Page 3 out of 10
4 A. Sectoral Challenges This section introduces the different sectoral challenges that were brought up during the regional camps and provides further explanations of some challenges as captured from the regional camps. 3 If a challenge during a camp was given a cross-sectoral character, this is indicated in brackets. Crosssectoral challenges are further structured in the subsequent Section B. Abbreviations used in the brackets are: Regulatory barriers = r, Technological barriers = t, Cultural barriers = c, Market failure = m. Textile The following circularity challenges in the textile sector were gathered in the camps by SAERG and LDC: Non-harmonized regulations regarding collection, storage and transport of used textiles (r) Lacking automated sorting solutions (with adequate capacity) (t) Lack of recycling solutions for fibres (t) Difficult to estimate quality of collected used textiles (t) Collection volumes of used textiles not sufficient (m) Management resistance against reusing uniforms (c) Lack of knowledge about recycling textiles besides clothes-to-clothes (t) Lack of general policy that underlines who wants to take products back after use (r) Certain discourses within the sector/community might work against the initiative to turn linear models into circular ones (c) Agro-Food The following circularity challenges in the agro-food sector were gathered in the camps by SAERG, TRNGL, ARMSA and SYS: Differences in regulations between countries constitute a barrier for greater resource efficiency (r) Lack of trust and transparency in food chain (c) Lack of system perspective (c) Food prices too low (m) Problems with legislation not allowing implementation of CE solutions (r) Lack of in-house expertise about strategic innovation processes Lack of collaboration throughout the value chain Validating the business case (m) Manufacturing The following circularity challenges in the manufacturing sector were gathered in the camps by SAERG, TRNGL and SYS: Quality of recycled materials, esp. from mixed materials (t) Lack of collaboration partners/suppliers 3 Some challenges may need furhter explanation to be fully understood. Also some challenges may be merged. This will be included in the EU camp. H2020 GA n Page 4 out of 10
5 Manufacturing (cont.) Lack of data from Life Cycle Assessments (LCAs), hindering design process (e.g. materials selection) (t) Regulations limiting the possibility to take back and refurbish materials and components for the production process (r) Lack of Design Thinking (c) Need to produce reusable products, not only recyclable products (c) Need to shift focus to see waste as a resource (c) Need for concrete examples showing the business opportunity (c, m) Health The following circularity challenges in the health sector were gathered in the camp by SAERG: Regulations on material contents (r) Conflict of interests (e.g. health vs. environment) Maritime There were no dedicated participants from the maritime sector in any of the regional camps, however a few circularity challenges were identified on regional camps. Also, general circularity challenges in the sector had been communicated by C-VoUCHER partner GSF. Low agility due to the rather conservative business Need for thorough in vivo tests to verify product claims Lack of pilot plant facilities (c, t) Need to understand link to product marketing (c) Information Technology - IT The camp at SYS had dedicated participants from the IT sector. Below sector-specific challenges are captured there. Leasing of hardware Lack of standards for components in mobile phones/computers (makes it difficult to replace, recycle) (r, t) In the water sector, one challenge is Lack of certified laboratories for waste water analysis in the region/ country mentioned in the not-yet analysed ADRNV camp. Other challenges in the Water sector will be integrated, once the last two camp results are submitted/ analysed (see Section 2.1). H2020 GA n Page 5 out of 10
6 B. Cross-sectoral Challenges C-VoUCHER Below is listed cross-sectoral circularity challenges structured according to areas, which they are rooted in, as identified in the regional camps. They are roughly ranked, so that the first ones are the ones mentioned most often (e.g. during several camps) or stated most relevant by participants of camps. In the end the challenges are summarized in a table. Regulatory barriers High focus on safety and hygiene, limiting ability to use taken-back waste and refurbished components as input into production. Some waste types are not allowed to be recycled at all. National legislation can be formed in a way that does not generate a need for new business models Problem of possession/responsibility with the ownership/sharing Lack of green procurement standards 4 Technological barriers Quality of recycled materials, esp. from mixed materials, due to difficulties in separating the materials during the recycling process Companies lack sufficient technological skills and knowledge about circular economy and its potential role in the company Sufficient amounts of renewable energy Difficulty to match the many existing solutions to the right one for a company Techno-geographical problem: sending back to the producer can mean huge carbon impact depending on transport means and distance The race to miniaturizing of IT components (in order to maximize performance) means extra difficulties to recycling Problem with sustainable materials (e.g. leather) which are less resistant than some artificial ones Cultural/Societal barriers Collaboration across sectors needed, and in networks, several arenas and meeting spaces Lack of understanding of the business opportunities, esp. at SME s Business oriented notion where short-term gains are often in focus Circularity generally not included in the product development phase, as Circularity has not been recognized as strategic matter A change of attitude in management/corporate boards needed (via e.g. good business [model] examples). Difficulty to manage such change Existing habits and behavioural patterns of linear economy, incl. overproduction of consumer goods Circular solutions are seen as being high-cost and high-risk which decreases the interest in implementing them 4 May not have been mentioned/phrased like this in camps, but is seldom explicit included in order standards H2020 GA n Page 6 out of 10
7 Green products are considered more expensive than traditional products which makes entrepreneurs worry about their ability to have a competitive product Low level of cross-sectoral cooperation and cooperation with science regarding circular solutions essentially, there s no environment for circular economy and known eco-system Current lobbying: very big companies influence people towards specific states of mind Employees and people in general are not educated/taught the benefits of circular economy, Lack of fines/charges on some wasteful value chains (This situation does not incentivise e.g. SMEs to change their habits) Market failures Lack of value networks, rather than value chains Non-integration of environmental costs (leading to virgin materials being cheaper than recycled ones. Some products are too cheap to be recycled) Asymmetric information and transaction costs in recycling & re-use markets vs. in classic markets Lack or low level of transparency towards customers Conflicting interests (e.g. health vs. environmental interests regarding recycled materials) Non-sufficient infrastructure solutions for collection, sorting and recycling of materials, thus lack of recycled materials available More refund systems (private and public), small- and large-scale -> specific in each sector Insufficient funding and investments in R&D, start-ups and business development More dedicated models of financial instruments (e.g. Green bonds) & public procurement The consumer is not enough environmentally aware and there is a lack of education and information on the subject One camp suggested five (partially other) cross-sectoral challenge areas and made a ranking of those areas themselves. This ranking was 1. Perception/Lack of overview over (or awareness of) cross-sectorial eco-systems & players and their offerings, at various scales: The problem according to the participants was that they might have an idea/solution, but they lack the awareness of the players that could help them or benefit from the solution they propose. 2. Legal environment & competitiveness: Although regulation can currently be deterrent to some activities, it should be an accelerator to circular economy in order to allow competitiveness. Indeed, the financial issue has been appointed as crucial for the development of new economic models. Having an incentive regulation could render circular economy more competitive and motivate other SMEs to join the club. 3. Geographic proximity: Participants from SMEs argued that there is a lack of partners, recycling facilities and recollection points in the areas surrounding the SME, and a resulting lack of available synergies at the local level. This is hindering their capacity to develop new circular value chains. 4. Mind-set: Even if some solutions are developed to promote circular economy, one major problem is the mentality of the players/ users/ consumers, which can hinder the adoption of H2020 GA n Page 7 out of 10
8 INDUSTRIAL SECTORS C-VoUCHER circular value chains. There is also a lack of long-term visions from the linear SME which jeopardizes the capacity to build long-term relationships based on the circular economy. There is indeed a need to educate people towards circular economy. 5. Communication: At the scale of the whole value chain with suppliers, clients, consumers, users, transports, etc. This communication is crucial in order to improve the design of products with a circular concept. Some barriers can remain between players who do not use the same vocabulary (for instance between various industrial sectors). It is necessary to establish a better communication to implement efficient solutions. Another Regional camp derived at additional areas, they refer to as follows, incl. examples; - Environmental culture, Lack of green education of customers. Low environmental culture of buyers. - Attitudinal, e.g. Perception of circular business model as high business risk. SMEs do not have time to look for new business model/ innovation. Concentration on today s business/ lack of strategic planning. - Operational, Lack of infrastructure for CE solution. Lack of virtual platforms for information/knowledge exchange between partners / cross-sector co-operations. All five above areas can be categorized under the previously mentioned four areas Regulatory, Technological, Cultural/Societal, Market failure and thus these are used for the following overview. The below table summarizes directly sector-related challenges captured in the Regional. They are selected from the comprehensive number of above bullet points. (For the EU Camp, the table may be populated with all above challenges.) 5 Textile Cross-sectoral circularity challenges, separated into areas Regulatory Technological Cultural/Societal Market failure Non-harmonized Lacking sorting Lack of Collection regulations and fibre collaboration and volumes of used regarding collection, recycling exchange of textiles not storage and solutions knowledge sufficient transport of used between different textiles actors Agro-Food Manufacturing Health Different regulation in countries hinders resource efficiency Regulations limiting the possibility to take back and refurbish materials and components for the production process Regulations on material contents (none mentioned/ Quality of recycled materials, esp. from mixed materials (none mentioned/ Lack of trust and transparency in food chain Lack of system perspective Lack of collaboration partners/suppliers Conflict of interests (e.g. Food prices too low Need for concrete examples showing the business opportunity (none mentioned/ 5 Will be explored during the EU camp H2020 GA n Page 8 out of 10
9 Maritime IT (none mentioned/ Lack of standards for components in mobile phones/ computers (makes it difficult to replace, recycle) Lack of pilot plant facilities (ditto as under Regulatory) Water (not analysed yet) Lack of certified laboratories for waste water analysis in the region/ country health vs. environment) Need to understand link to product marketing (none mentioned/ (not analysed yet) Low agility due to the rather conservative business (none mentioned/ (not analysed yet) C. Relation to the Region s Smart Specialization Strategy Overall, there was not much information on this in the analyzed regional camp reports. One RIH, SYS, reported on this by explaining that their region, Ile-de-France, focuses on health and well-being, transports and mobility and last environment and energetic efficiency in their smart specialization strategy. These focal points have then been the starting point for their selection of domains for strategic innovation in cross-sectorial development, where the region ended up with the following five domains: - Engineering of complex systems and software - Digital creation - Smart and decarbonized vehicles - Eco-construction high environmental value - Medical devices Another RIH, ARMSA, reports their Mazovia/Warsaw region s focus areas are: - Safe food i.e. measures to increase availability and development of high quality, sustainable food products that are safe for both the final consumer and the environment throughout the production and distribution chain - Quality of life i.e. technological and organisational solutions used to provide social services, in particular in the field of education, health, safety, work and leisure time and increase attractiveness of the region as a place to live. - Diversification understood as an extension of the offer of creating services synergistic relationships with various sectors of economic activity 2.3 Reflection points after the camp This section summarizes the reflections made by the camp organizers about the execution of the regional camps. Aspects of camp preparation and execution that went well: H2020 GA n Page 9 out of 10
10 The group workshops went especially well with cross-sectorial groups that have been able to list all of the challenges, from the more specific to the most cross sectorial. The organisation with a number of 12 SME with various players (designers, consultants) has allowed to study each case individually, allowing in depth analysis of the specific problems of each SME. Presentations were dynamic and opened to questions from the audience, allowing dialogue all along the camp. The fact that some SMEs that came are current partners of each other, allowed facilitating the dialogue and the assessment of the challenges. Allowing time after the workshop for the participants for networking activities at the end of the workshop in order to let them meet and discuss about potential collaboration. Good organization of camp Good cooperation with regional partners Aspects of camp preparation and execution that may be improved for the second round of camps: Better coaching at the beginning of the workshop to explain to the SMEs what kind of challenges they need to list (for example with followed-up preparatory work before the workshop). Pre-established listing of challenges in order to list them more efficiently. Regarding the presentations: it was unclear what exactly means the C-VoUCHER replication program: is-it scaling-up, copying, reusing a proven concept, resuming the development of an idea? Short recruitment time Low level of interest in the subject among entrepreneurs despite the recruitment action conducted directly or by our partners, such as clusters, we were able to gather a small number of entrepreneurs. The attempt to organize the second round of the camp in cooperation with the Foundation of Small and Medium-sized Enterprises resulted in even smaller number of applications. Our main challenge is to work with entrepreneurs to get them interested in the CE concept and the development of new forms of doing business. The manufacturers didn t show up for the camp/discussion, so the input above is from actors from the rest of the value chain. Right from designers, through textile collectors, to national NGO s. 2.4 Additional remarks (optional): Cost of experimentation was mentioned at one camp as a general challenge of SMEs Increased stress on energy systems calling for sufficient renewable energy can be considered a systemic background challenge, relevant for any circularity solution H2020 GA n Page 10 out of 10
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