Restorable and sustainable economy
0 likes258 views
The document discusses the urgent need for a transition from a disposable to a restorable economy as cities face resource scarcities due to rapid urbanization. It emphasizes a regenerative economic model that promotes the reuse and recycling of products, thereby redefining consumer roles and supporting sustainable practices among companies. Key examples include initiatives by firms like Ricoh, Renault, and H&M, showcasing the potential for resource savings and innovation in a sustainable economy.
Restorable and sustainable economy
- 1. From Disposable to Restorable Economy – Sustainable Economy Abstract Over the next few decades the number of people living in cities will nearly double. Yet even today many cities lack sufficient clean drinking water, electricity and other basic resources essentially needed to support the exploding populations and stable strengthen economy. These problems are created by rampant urbanization and are amongst the most important challenges of our times. These problems represent greatest responsibilities for the emerging business models by positioning them to shape the sustainable economic landscape of the future. Across the world addressing resource scarcity involves either government action or private- sector action and either increasing the resource base or managing the demand by reducing and reutilizing. A vast opportunity exists for the private sector to provide products and services that make the most efficient use of available resources. Article Increasingly our existing approach to industrialization has now been questioned like never before. Clearly, the era of largely ignoring resource costs is over as some three billion consumers from the developing world will enter the middle class by 2030. The unprecedented size and impact of this shift will certainly squeeze companies between rising and less predictable commodity prices, on the one hand, and blistering competition and unpredictable demand, on the other. The industrial economy as a massive system directs materials and energy from resource-rich countries to manufacturing powerhouses, and then spirits the resulting products to other destinations, where they are used, discarded, and replaced and that is the essence of the linear, one-way production model that has dominated global manufacturing since the onset of the Industrial Revolution. Volatile markets for resources, and their fast depletion has forced economist to think about a new sustainable economic model. Some companies are questioning the assumptions that how can they make and sell products that allows them to keep control over valuable natural resources. One possible way is to reuse products and components leading to questions like: Could economic growth be decoupled from resource constraints? Could an industrial system that is regenerative by design practically exist? A regenerative economic model can help companies create more value while reducing their dependence on scarce resources. Shifting from Disposable to Restoration and Sustainable Economy —Reusability and not Consumption based economy which restores, recycle and reuses material, energy, and labour input by shifting assumption of disposability with restoration. More precisely we are talking about moving away from the “Take, Make, and Dispose” economics to model that designs and optimize products for multiple cycles of disassembly and reuse.
- 2. Such model that designs and optimize products for multiple cycles of disassembly and reuse view materials as valuable stock that can be used again, and not as elements that flow through the economy once. To visualize about the scale involved, consider the fast-moving consumer-goods industry about 80 percent of the $3.2 trillion worth of materials it uses each year is not recovered. Restorable and Sustainable Economy aims to eradicate waste—not just from manufacturing processes, but systematically, throughout the various life cycles and uses of products and their components. Often, what might otherwise be called waste becomes valuable feedstock for successive steps. Easier said than done indeed, tight component and product cycles of use and reuse, will have to be aided by product design, that helps defining the concept of a sustainable economy and distinguish it from recycling, which loses large amounts of embedded energy and labour. Restorable and Sustainable Economy lays its foundation by strictly differentiating between a product’s consumable and durable components. Manufacturers in a traditional economy don’t distinguish between the two. In a sustainable economy, the goal for consumables is to use nontoxic and pure components, so they can eventually be returned to the biosphere, where they could have a replenishing effect. The goal for durable components (metals and most plastics, for instance) is to reuse for other productive applications through as many cycles as possible. Restoration is the default assumption in a Sustainable economy that completely changes the role of consumer by that of user. For companies, this change requires a different way of thinking about their implicit contract with customers. For example, in a buy-and-consume economy, the goal is to sell the product whereas in a sustainable and restorable economy, the aspiration might be to rent it out to ensure that its materials were returned for reuse. When products must be sold, companies should create incentives to guarantee their return and reuse. This might sound very hypothetical but quite a few companies have started working in this direction by mutually reinforcing to convert theory into hard-hitting practices. 1. The power of the tight well coordinated inner circle Remanufactured, Refurbished, or Upgraded Products Ricoh, a global maker of office machines, designed its Green Line brand of office copiers and printers to maximize the reusability of products and components, while minimizing the use of virgin materials. Products returning from their leasing contracts are inspected, dismantled, and taken through an extensive refurbishing process that includes replacing components and updating software before the machines re-enter the market. By designing the components to be reused
- 3. or recycled in Ricoh facilities, the company reduces the need for new materials in production and creates a tight “inner circle” of use that allows it to employ less material, labour, energy, and capital. Ricoh estimates it could save up to 30 percent on the cost of materials for these components. Overall, the company says, it’s on track to reduce the input of new resources in its products by 25 percent below their 2007 levels no later than 2020. www.ricoh.co.in 2. The power of circling longer Maximizing cycles of Reuse, Repair, or Remanufacture Renault leases batteries for electric cars to recover them more easily so they can be reengineered or recycled. Keeping close control over the process helps ensure the product’s quality and gives Renault a chance to strengthen its ties with customers. www.renault.co.in Michelin offers tire upgrades, maintenance, and replacement to optimize the performance of trucks fleeting across Europe. This helps them in lowering their total cost of ownership in more than 20 European countries. By maintaining control over the tires, Michelin can collect them when they wear out and can extend their technical utility by retreading them for resale. The company estimates that retreads require half of the raw materials in comparison to new tires and delivers up to 90 percent of the performance. www.michelin.in 3. The power of cascaded use Diversifying reuse of Products and Components across the value chain Global apparel retailer H&M launched an in-store collection program encouraging customers to bring in old clothes in exchange for discount vouchers on new H&M clothing. The majority of items collected are dispatched to the global second hand- apparel market. Clothes that are no longer suitable to wear are used as substitutes for virgin materials in other applications—for example, as cleaning cloths and textile yarns or as inputs for damping and insulation materials in the auto industry or for pipe insulation in the construction industry. 4. The power of pure inputs Designing products and components in a way that they can easily be separated into consumable and durable elements and components Greater ease of separation into consumables and durables increases the efficiency of collection and redistribution while maintaining the quality of the materials Companies should work with their supply partners to create system that support refurbishing product designs. In general, designing a product to use the purest
- 4. materials possible helps maintain their residual value and supports recycling and reuse. All the discussion so far leads us wondering that despite the potential of the Restorable and Sustainable Economy seems very promising to replace untapped value through resource arbitrage, then why isn’t it NOT HAPPENING? I have extensively read the subject and came to the conclusion that there are several barriers that have slowed the realization of full potential of such promising economic model. 1. The extensive supply and manufacturing network – Geographical dispersion A product such as a car is significantly more complex. Understandably, closing product and component loops for most products is difficult, despite attractive arbitrage opportunities. Lack of global standards for reusable materials poses a risk that an efficient and effective collection, reuse, and recycling process will break down. That is particularly true in developing countries, where the collection and recycling of valuable end-of- use materials frequently falls to the informal sector. Reverse-network activities (moving from products to components to materials) seems the most likely solution to this problem. Reverse-logistics skills (such as collection, sorting, remanufacturing, and refurbishment) becomes critical. One of the success factors in Ricoh’s GreenLine operations as discussed earlier is the company’s efficient “take-back” system, which optimizes supply and demand for remanufactured machines. This system requires sophisticated reverse-network- management capabilities, such as tracking the location and condition of used devices and components, as well as storing bill-of-materials (BOM) information. 2. Complexity in modern product formulations – Complex materials Modern product formulations are rarely labelled and are thus extremely difficult to identify. In the world of plastics, for example, companies have broadened the spectrum of materials used, in creative and complex ways and all this has exponentially increased the complexity of materials, while making it hard to classify and collect those on the scale required in creating arbitrage opportunities. Moreover, companies often have no cost-efficient way of using chemical or physical processes to extract embedded raw materials without degrading the product, so most of the original value is lost. 3. Difficulty in breaking ingrained habits - Status quo Leasing models are unheard of in many industries, though they benefit both customers and companies. Ingrained habits within companies such worrying about the higher levels of capital needed to change products, as well as the friction of moving from familiar sales- to usage-based approaches is a major issue.
- 5. The real payoff from Restorable and Sustainable Economy will come only when multiple players across the business and research communities, supported by policy makers and investors, come together to re-conceive key manufacturing processes and flows of materials and products. Restorable and Sustainable Economy offers tremendous opportunities and benefits Potential for Net materials savings on a global scale is enormous. The benefits could be highest in the automotive, machinery and equipment sector. Supply risks can be mitigated for instance if we take steel consumption in the automotive, machining, and transport sectors, a restorable transformation could achieve huge global net materials savings that shift could reduce demand-driven volatility across these industries. Potential for Creativity and Innovation will be high as redesigning materials, systems, and products for reuse is a fundamental requirement of a sustainable economy and therefore represents a giant opportunity for companies. More Job will be created by sustainable economy as it will increase local employment, especially in entry-level and semiskilled jobs, thus addressing a serious issue faced by many developed countries. Focusing a collective effort on the leverage points that would have a systemic impact is the key to unlocking the potential of Restorable and Sustainable Economy. The Restorable and Sustainable Economy encompasses more than the production and consumption of goods and services, including a shift from fossil fuels to the use of renewable energy, and the role of diversity as a characteristic of resilient and productive economy. A major outcome of this economic model is the notion of optimising systems rather than components. Diverse systems, with many connections and scales are more resilient in the face of external shocks, than systems built simply for efficiency About the Author CA Vinod.Kr Sharma Director Jagran Institute of Management 620, W Block Saket Nagar Kanpur [email protected]