THE CIRCULAR ECONOMY 100 (CE100) IS AN ELLEN MACARTHUR FOUNDATION INITIATIVE GLOBAL PARTNERS OF THE ELLEN MACARTHUR FOUNDATION

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1 S A N F R A N C I S C O THE CIRCULAR ECONOMY 100 (CE100) IS AN ELLEN MACARTHUR FOUNDATION INITIATIVE GLOBAL PARTNERS OF THE ELLEN MACARTHUR FOUNDATION 1

2 Several disruptive trends are reshaping the global economy which, many argue, is entering a new era: as innovative business models emerge and information technologies come of age, value creation strategies get more diverse and opportunities arise. Dematerialisation and a new outlook on resources combine to hint at the fact that the linear take, make and dispose model is not the only way to fuel economic growth and development. There are considerable advantages associated with a circular, regenerative and restorative economy - not only when it comes to addressing losses due to structural waste and chronic asset underutilisation. The analytical work we have carried out with our knowledge partner McKinsey and Company has revealed huge cost savings for the European industry and, given their comparable structures, it is easy to see that this advantage could also apply to the USA s manufacturing sector. As a resource-constrained continent, Europe is at the forefront of the adoption of circular economy practices, and what early experiments reveal can help other markets navigate the opportunities offered by such a model: net material savings, business development, increased resilience, reduced negative impacts At the heart of this systemic shift lies innovation, an attribute which has always been associated with the US, and digital technologies are a key enabler of this transformation. As our Growth Within report has demonstrated, harnessing the power of pervasive IT can double the positive impact of upcoming business as usual efficiency gains - this translates into a 2 trillion USD annual benefit (1.8 trillion ) by 2030 at European level. As we are entering what the World Economic Forum referred to as the 4th industrial revolution, digital information exchange around the world more than doubled between 2013 and 2015 alone, to an estimated 290 terabytes per second 1. The rate at which technology is impacting our economy is clearly of an exponential nature. Notwithstanding some of its challenges, IT plays an instrumental role in developing new business models, manufacturing techniques, materials, and much more. 2 It makes things possible that were previously unimaginable. The powerful intersection of IT with local is enabling innovators in the US to develop key competitive advantages using speed to market, agility, and a high responsiveness to supply, demand, and resource availability. I m confident that the country will benefit from its natural predisposition to business opportunities to successfully move towards a circular economy. It is with great anticipation and enthusiasm that we look forward to embark with you on this journey and to our first Acceleration Workshop CE100 USA in September 2016 in New York. ANDREW MORLET CHIEF EXECUTIVE, ELLEN MACARTHUR FOUNDATION CE100 USA ACCELERATION WORKSHOP SAN FRANCISCO 31 MARCH Global Trade: Structural Shifts; (Financial Times), Shawn Donnan, Intelligent Assets: Unlocking the circular economy potential; Ellen MacArthur Foundation,

3 Contents Launch of the CE100 USA 4 The programme 4 Who can, and how to, get involved in the CE100 USA? 5 A circular economy 6 Leading Company Example 1: Tarkett - Anne-Christine Ayed & Diane Martel 7 Leading Company Example 2: Sunpower - Marty Neese 8 Breakout session What are some of the unique challenges and opportunities to scaling circular economy in the USA? 9 Exploring the opportunities of the circular economy in the USA 10 Role of Information Technology (IT) as an enabler of circular economy opportunities in the USA 10 Designing for a circular economy in urban areas 11 Disrupting innovation 12 Ellen MacArthur Foundation 13 3

4 Launch of the CE100 USA 31st March 2016 marked the launch of the Ellen MacArthur Foundation s CE100 USA programme. During the day we learned how important local is to a circular economy, how IT plays a crucial enabling role and how we can keep materials and products at their highest utility and value through knowing about asset availability, location, and status. We learned as well about the opportunities of reconnecting technical and biological nutrient streams in cities; how circular economy is disrupting from the ground up and how this drives innovation in the US. With 105 invitees from about 60 organisations, from across businesses, academias, governments and cities representatives, start-ups and venture capital firms, the workshop reflected the Ellen MacArthur Foundation s multi-stakeholder approach. The day s agenda contained an intense mix of learning, leading company examples, panel discussions, and a breakout. Around the sessions, participants had the opportunity to enjoy networking coffee breaks, lunch and a drinks reception stimulating new collaborations and relationships to help accelerate the transition to a circular economy. The innovation climate in the United States holds tremendous potential for organisations to develop circular economy activities. The CE100 USA will empower organisations to unlock those opportunities through thought leadership and a multi-stakeholder collaborative approach. CHRIS GUENTER, CE100 USA LEAD, ELLEN MACARTHUR FOUNDATION The programme As a US centric, pre-competitive collaboration and innovation programme the format is based on the successful international CE100 programme established just over 3 years ago. The US programme supports companies and governments to identify barriers, helps to capture opportunities and empowers organisations on every step of the circular economy journey. With a more granular perspective the CE100 USA is targeted at a US audience, bringing together key actors from companies operating in the domestic market, small and medium enterprises, US state and city governments, academia and emerging innovators. Walmart is pleased to join the Circular Economy 100 USA to share our learnings and learn more from other companies so that we can better engage suppliers and customers in these practices. LAURA PHILLIPS, SENIOR VICE PRESIDENT OF SUSTAINABILITY, WALMART 4

5 Over three years of membership, the programme supports and delivers value on every step of the journey, enabling organisations to capture cost savings, innovation and build new circular economy opportunities faster, through: Who can, and how to, get involved in the CE100 USA? CAPACITY BUILDING: Tools, templates and e-learning solutions for building circular economy capacity in organisations needed to accelerate implementation of new projects. NETWORKING: Various opportunities to connect with like-minded US organisations, suppliers and customers through events, workshops, online member directory and member book. INSIGHTS & ANALYSES: Research and case studies developed by the Foundation and local members addressing new opportunities and insights to overcoming barriers to implementation. COLLABORATION: Action-oriented projects to create cross-company, cross-sector, pre-competitive collaboration initiatives. Accelerating the transition towards a circular economy requires a multi-stakeholder approach with organisations that are committed to advance the theme of circular economy in their initiatives and actively participate in the network collaborative initiatives. The CE100 USA brings together key stakeholders: Businesses with a strong focus on the US market keen to learn and develop circular economy opportunities. US Government & Cities that wish to create an effective environment for the growth of the circular economy. US Universities providing insight and capacity through relevant circular economy teaching and/ or research programmes. Emerging Innovators (EI) such as Start-ups and SMEs with a unique technology, service or solution that disrupt the status quo and accelerate the transition. Existing members of the international CE100 programme keen to develop opportunities and engage with US like-minded organisations. If your organisation is interested in getting involved in the CE100 USA Programme, please contact: CE100USA@ellenmacarthurfoundation.org Download the CE100 USA introduction and overview pack here. 5

6 A circular economy The concept of a circular economy has attracted increasing attention in recent years. The concept is characterised as a restorative and regenerative economy and aims to maintain products, components and materials at their highest level of utility and value all the time, distinguishing between technical and biological cycles. The circular economy is conceived as a continuous cycle of positive development that preserves and enhances the natural capital, optimises resource productivity and minimises systemic risk by managing finite stocks and renewable flows. It works effectively at any scale. This new economic model seeks, ultimately, to separate the overall economic development of the consumption of finite resources. Principles of a circular economy: Preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows. Optimise resource yields by circulating products, components and materials in use at the highest utility at all times in both technical and biological cycles. Foster system effectiveness by revealing and designing out negative externalities. 6

7 Leading Company Example 1: Tarkett Anne-Christine Ayed & Diane Martel For the first leading company example we heard from AnneChristine Ayed, Director of Research Innovation & Environment, and Diane Martel, VP, Sustainable Strategies & Planning USA. Tarkett s vision and strategy is inspired by the circular economy through closed-loop circular design products, new business models such as leasing and the creation of an industry-wide value chain for the re-use of resources. The circular economy makes economic sense for Tarkett, economic sense for their partners and creates more value. This is not about cost but about creating value. - ANNE-CHRISTINE AYED, DIRECTOR OF RESEARCH INNOVATION & ENVIRONMENT As with any innovative approach, the implementation of Tarkett s circular economy strategy is not without its challenges. In the US, Tarkett has run into logistical challenges such as city hubs being spread across the country, legacy chemicals embedded in returned materials, and the resistance of market players, particularly in the building and demolition sector, to get products back. To overcome these challenges, Tarkett has installed a threshold for legacy chemicals on each and every product, and has put in place leasing programmes, such as Restart. So far, since 2010, Restart has already collected 60,000 tons of post-installation and post-use resilient vinyl flooring and 30,000 tons of post-use carpet. Tarkett is fully committed to the circular economy model and, as such, is proud to work with the Ellen MacArthur Foundation in Europe and now in North America. We hope to meet and network with likeminded companies in North America and fully engage in conversations around this new approach to business. - GLEN MORRISON, PRESIDENT, TARKETT NORTH AMERICA. 7

8 Leading Company Example 2: Sunpower Marty Neese The second leading company example was presented by Marty Neese, COO of Sunpower, a solar technology and services provider. Sunpower s journey towards circular economy was inspired by the Ellen MacArthur Foundation s reports that allowed the identification of a change trajectory in the company with the Cradle to Cradle principles as the design strategy for the circular economy. The circular economy butterfly diagram helped Sunpower to identify the opportunities in the technological and biological cycles, as follows: 1. Reliability making their solar panels last longer, from 25 to 40 years. 2. Quality with more robust products and simpler maintenance. 3. Reuse and Recycle enabled the reuse and recycling of all solar panels materials and components. 4. Triple certified factories aiming to have C2C, LEED and Zero Waste to Landfill certifications for all their factories. 5. Enable cascading with closed loops systems on waste at each factory 6. Upcycle and innovate until products are beneficial by design, driving by such a mind shift within the company. Solar innovations to be profitable while restoring and enhancing natural capital, for example through carbon positive panels and leveraging the characteristics of clean energy with farm and wildlife. 7. Transforming business and industry in order to generate growth while having a positive impact is becoming a priority, and shifting to a circular economy is a profitable, effective way of achieving that goal. We look forward to continuing our collaboration with influential organisations as a member of the international Circular Economy 100, and now here in the US as a member of the CE100 USA, to create a truly regenerative economy. Invest in renewable energy save money while reducing CO2/GHGs. Positive returns every day the sun shines! Sunpower is well on its way, through its development of new business models such as a Power Plant Asset Ownership in a new company (8point3) and Smart Energy as a Service for Residential and Commercial and Power Plant Customers. - MARTY NEESE, COO, SUNPOWER 8

9 Breakout session What are some of the unique challenges and opportunities to scaling circular economy in the USA? In working groups, the participants discussed the potential of a circular economy in the US, addressing the challenges and opportunities on various sectors, and identifying the relevant stakeholders to assist in the transition. Interestingly, most of the issues addressed in the working groups are very aligned to the work and objectives of the CE100 USA, involving members in precompetitive and multi-sectoral collaboration initiatives. Below is a snapshot of the main points discussed in the groups. Input will be used to help the programme to be more impactful and relevant. OPPORTUNITIES: Circular economy is a unique source of innovation, which is considered a key part of US business culture. Convenience for consumers has been a key driver in US economic growth, providing access over ownership can play into this. Federal [waste] policies provide a less restrictive internal market compared to Europe, business should take advantage of the internal market. While conserving and regenerating natural capital has gained momentum in the last two decades, circular economy provides an inspiring way of retelling the story for the next generation. US cities are a concentration of assets and nutrients, reconnecting these streams hold great potential for savings and new opportunities. More self-reliance and products connectedness in rural areas. Building the circular loops has the potential to create jobs in America. CHALLENGES The US adheres to a culture of endless growth and consumption, where ownership is closely linked to status. Changing the mindset to smarter growth and focus on access will require new innovative models and a change in culture already seen among some of the millennials. With a market so competitive, it may be challenging to define and identify specific spaces for collaboration in the market. The regulatory/policy system is still very fragmented across federal, state, and cities. While the opportunity is likely to be great, the immense size of the country could prove to be a challenge, for example, in the managing of reverse logistics. US corporations seems still more geared towards short-term profit orientation than to long-term return on investment. A framework so relatively new may struggle with a lack of metrics. 9

10 Exploring the opportunities of the circular economy in the USA ROLE OF INFORMATION TECHNOLOGY (IT) AS AN ENABLER OF CIRCULAR ECONOMY OPPORTUNITIES IN THE USA IT is playing a powerful role in enabling circular business models in manufacturing and remanufacturing, as well as the development of new business models leveraging the Cloud. IBM, Rochester Institute of Technology and HP discussed how intelligent assets are providing new opportunities and how IT is accelerating the transition in the US. Linda Demmler, Vice President, IBM global financing, explained how, as an IT company, IBM profited from implementing circular thinking into its business, and used this experience to develop new customer solutions. As the Internet of Things creates tremendous amounts of data, this needs to be turned into intelligence in order to be able to make valuable business decisions. The more companies know about their products and their demand ecosystem, the more value they can get out of reuse. IBM helped to dematerialise intelligence for customers through Cloud computing and by enabling circular economy through its Circularity insights as a service tool, working closely with GARS. The paradigm shift is not only visible on the customer experience front but also among employees who are willing to innovate and do something different. For instance, increasing the percentage of reusability of each product coming back via IBM reverse logistics. John Ortiz, Director, Product Stewardship at HP, explained how the Internet of Things and IT enabled the development of new business models and how it has affected HP s customers. He detailed how the company s Instant Ink for customers helped to change incentive at the product design level. By solving customer pain points with transactional print models, and intelligent assets informing when the cartridge will become empty, customer behaviour has begun to move in the direction of the circular economy with HP benefitting from a higher consumer retention rate. 3D Printing was discussed as another example of innovative business models. Several steps were necessary for HP to successfully adopt 3D printing (with plastics content as a first stage and looking to explore other materials in the near future). They had to address additive manufacturing barriers to adoption; create an ecosystem that enables designers to innovate, rethink manufacturing and the supply chain (to allow a perfect demand matching); and rethink repair, with potential infinite Cloud based spare parts inventories, on demand and local production of parts, Nabil Nasr, Associate Provost & Director, Academic Affairs, Golisano Institute for Sustainability at Rochester Institute of Technology, explained how assets in non-it companies are benefitting from this IT/IoT revolution, using intelligent assets in new ways to improve remanufacturing and asset utilisation. The reverse logistics and tracking enablement made the remanufacturing sector much more profitable, because remanufacturing needs to have a sufficient and steady supply to be able to survive and the product tracking technology plays a powerful role. It s also a key enabler and has impact for smart products, as it provides significant data that helps to know when the product will break and avoid value being lost. Xerox and Caterpillar are two examples that are excelling in the sector. For further information on the enabling role of IT, explore the latest report launched by the Ellen MacArthur Foundation: Intelligent Assets: Unlocking the circular economy potential. 10

11 Exploring the opportunities of the circular economy in the USA contd. DESIGNING FOR A CIRCULAR ECONOMY IN URBAN AREAS Cities are engines of economic growth and catalytic players in the transition to a circular economy. During this panel discussion we have heard from IDEO, the city of San Francisco, and Arup. We explored the potential of circular economy in cities, the importance of design thinking, and how to go about realising implementation. Tim Brown, CEO of innovation and design firm IDEO, explained how they work, taking a system level perspective to helping organisations in the public and private sectors. He shared his particular interest on the behaviour of designers as the starting point of a regenerative circular economy and how it influences customers behaviours. Cities are of particular interest as they re a place where thinking, customers behaviours and ideas, move/change faster, and where testing and experiencing can happen more easily. In relation to food, Tim foresees micro farming and urban farming enabling production to move closer to point of use, thus transforming the city as we know it. Their thinking pays attention to the upstream activities and how design is an important factor. Jack Macy shared his particular interest on how a product will work in a circular fashion where manufacturers and distributors will share responsibility and where public and private/multistakeholders collaboration approach will happen in the whole supply chain. Jordan O Brien, Senior Manager at engineering company Arup, highlighted that cities are already constrained on how much they can do/change as so much has already been built. However, there is a lot that can be done to leverage the existing infrastructure and use it better and more efficiently. An opportunity increasingly acted upon through a significant rise in public and private partnerships. For further information on circular economy in the context of mobility, built environment, and food, check out Growth Within: a circular economy vision for a competitive Europe. Jack Macy, Commercial Zero Waste Senior Coordinator at City and County of San Francisco, explained how his city develops policy programme to move San Francisco towards sustainability and their SF goals: 0 waste to landfill or incineration by 2020 Make 50% of all trips outside of personal vehicles by 2017 Source 100% of residential and 80% of commercial electricity from renewable sources, coupled with energy efficiency improvements to reduce usage by

12 Exploring the opportunities of the circular economy in the USA contd. DISRUPTING INNOVATION Though there are certainly examples of large, established organisations introducing innovative products and ideas (e.g. Apple s ipod, Philips lightingas-a-service model, etc.), truly disruptive innovation is typically driven by start-up companies that have no legacy products or business models to contend with. This is particularly true in the US, where the start-up culture of Silicon Valley has spawned most of the industry-changing innovations of the past several decades. Disruptive innovations start with fearless entrepreneurs who have a strong vision, but to scale disruptive innovation, entrepreneurs need both funding and partnerships. Venture capitalists typically bring the funding, and can often be helpful in opening doors for important partnerships as well. Our panel today represents two sets of entrepreneurs and their venture capital funders - Julie Wainwright, Founder/CEO of The RealReal, with Cynthia Ringo, Senior Partner at DBL Ventures; and Sam Zaid, Co-Founder/CEO of Getaround, with Noah Yago, Venture Partner at Triangle Peak Partners. Cynthia Ringo, Managing Partner, DBL Partners an impact investment capital firm shared her thoughts on how emerging innovators are able to scale in the US. DBL Partners looks at the triple bottom line on every investment; environmental, social and economical. They invest only in startups that intend to disrupt the status quo such as The RealReal. A particular role was identified for regulation and policy, since these need to change in order to accommodate businesses to scale across the country. In many cases it s very complicated to expand into new states due to different laws and policies. Julie Wainwright, CEO & Founder of online luxury reseller The RealReal, explained how she managed to cause major disruption within the luxury market ($60 billion of luxury goods are sold every year in the US), going from a start-up business to $400 million in revenue in only five years. She shared two main challenges for every start-up: find investment and money to scale, then find the right people to keep going. Creating a new model is hard because you can t plug and play a solution. Sam Zaid, CEO & Founder of online car sharing service GetAround, listed some of the benefits of using GetAround: financial benefits (owners usually earn between $ per month, going directly back into the local economy), as well as environmental benefits (sharing a car replaces 10 cars on the road). Car sharing is also beneficial for cities as it helps to reduce congestion. As part of its challenges GetAround had to create a new insurance model, as the latter needed to be linked to the driver, not the car. They have been able to scale their model to different cities in the US and most interestingly to create partnerships with brands such as Ford to set up leasing models using the GetAround software solution. Noah Yago, Partner at Triangle Peak Partners, is one of the first GetAround investors and specialised in helping emerging innovators to scale up their businesses. He explained how key it is to provide customers with a seamless experience, despite the level of technical complexity. Convenience can make or break the success of turning a disruptive idea into a successful company. As we have seen during the session, disruptive innovation is at the forefront of the new economy and is changing the way we live. Many barriers need to be overcome with innovation playing a key role, and the focus should be on how we can speed up that process and create exponential impact. 12

13 Ellen MacArthur Foundation The Ellen MacArthur Foundation was established in 2010 with the objective to accelerate the transition to the circular economy. Since its inception, the non-profit organisation has become an important lead in global thinking by inserting the circular economy firmly on the agenda of decision makers in business, government and academia. The organisation s work focuses on four interconnected areas: 1. Education: inspire learners to rethink the future through the circular economy framework. 2. Businesses and governments: to catalyse circular activities across the global economy and create the enabling conditions. 3. Insight and analysis: to provide robust evidence of the benefits of the transition. 4. Communication: spread the circular economy to a global audience. For more information, visit the website here: ellenmacarthurfoundation.org 13