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Megatrends for this decade – XXI

    A circular economy representation having in the central part the value adding chain (component production, final product manufacturing/assembling and service creation, on the right end side the usage part including all life extending activity and eventually the parts recycling. On the left hand side the use of waste and its reprocessing by nature to feedback the production chain. Image credit: Ellen Macarthur Foundation

g) recycling/circular economy

We have been talking about recycling for a few decades, and we have been taking action to implement at least in part recycling (differentiated waste collection and processing is surely part of it) and more recently we have been discussing the possibility of a circular economy where cost of managing end of cycle life of products can actually be turned into value generation. This Megatrend on instant things availability is deeply intertwined with both recycling and circular economy and it foresees a much broader uptake of these paradigm throughout this decade.

From a physical-mathematical point of view a circular economy would be impossible, since it would go against the second law of thermodynamics, however from an engineering point of view (approximation) it can be done. Besides, there is a trick: we look at circular economy on our planet but this is not a closed system, we get “input” from the Sun, energy and we can use that energy satisfying the second law.

Anyhow, when we talk about recycling and circular economy we take an engineering standpoint and an economist standpoint, that is let’s do what is possible and make the most out of it!

As shown in the diagram, production of value – products and services – (interesting the representation of the steps where you see services following the product: this is in line with the trend of flanking a product with services and enriching the product functionality and user experience through services) leads to use (user) and consumption (consumer).

Usage is addressed by a number of actions that maximize the use of that value and more specifically:

  • sharing economy: using the value by several users, maximizing its benefit AND reducing the need for duplication. An obvious example is car sharing. Rather than having several cars, one per user, we can share the use of a single car across several users under the (true) assumption that a user is using a car for only a fraction of the time (on average our cars are sitting idle for over 90% of the time, parked somewhere). By using software and platforms we can make a car available to several users. Several studies have been made modeling different usage scenarios (a very nice one can be found here) and they all show that there is not a single solution fitting all use cases, but all car sharing approaches lead to a significant decrease in the number of cars required (this is good if you look at it from the point of view of raw material usage -producing fewer cars requires less raw materials- it is good in terms of economic efficiency from the point of you,  as user, you spend less to move from A to B, it is good in terms of urban space occupied by cars, fewer cars being parked around, BUT it is bad for car manufacturers that would see their market volume squeezed to the point that present manufacturing processes and competition environment would collapse astray have been finely tuned for a market buying some 70+ million vehicles per year, difficult to sustain when market will shrink to less than 40 million per year);
  • proactive maintenance and continuous improvement/extension of functionalities: think about the new features you get as a new OS becomes available you still have the same computer but it gets better with the new OS. This extends the life of products and again it si good for the environment and for the user but it decreases the substitution market, leading to decreased sales. In software this has become a major issue that has led several software company to shift to a subscription model, since the sale of a perpetual license would result in a continuously shrinking market;
  • reuse and redistribution: we have seen this happening in areas like wedding dresses, with companies that are offering customized rentals (they take care of modifying a wedding gown to fit the bride).  A bride to be can rent a perfectly fitting dress out of a very large selection for as little as 150$ (compare this to the 2,000+ $ needed to buy one). That dress will be used only once by the bride and upon return to the renting company it will be cleaned and restored to pristine condition waiting for another bride to be. Notice that this is different from car-sharing. Here after each use the dress is reconditioned and before being used again it will likely be modified to fit the new bride. Obviously the bride that uses such wedding gown is a bride that does not “buy” a wedding gown, thus shrinking the potential market;
  • refurbishing/remanufacturing: the refurbishing of products is nothing new, the big department stores have been doing that for decades. It just happens that it will be further extended. Several companies are now advertising a service like contract, you buy a smartphone and every year you can return it and get the new model for a minimal yearly fee. The old (one year old actually, so still young) smartphone will be refurbished and place on the market once more (at a lower price). I have got several refurbished items, like Nikon lenses, tablets… and they all work flawlessly at a fraction of the original cost. Here again we are basically extending the life cycle of a product, hence decreasing the total market;
  • component and raw materials reuse: for certain products it is possible to procede to a disassembling once they are returned and in some cases to extract the basic raw materials (like copper, gold…) for their reuse in the manufacturing of other products. In this case we are not seeing a decrease in the potential users’ market but of course we are decreasing the market of same part of the supply chain.

By the end of this decade the Megatrend predicts a significant increase in all of the above aspects of recycling and, as pointed out, this is good in many aspect BUT it is bad in terms of market space (fewer products will be sold). However, it is also true that all processes involved result in value creation and thus in revenues opportunities, although these opportunities are not -usually- harvested by the original producers.

On the consumer side (left part of the graphic) we see products that are transformed by use into “waste”. In this case the challenge is how to make use of the waste to feed different value chains like using waste as fuel (or to create fuel). We already have a variety of thermo-valorization plants and you can expect to see many more of them and with a higher efficiency in this decade. The trick is to exploit waste in such a way to on one side one generates value (like heating of city’s buildings or electricity) and on the other side the residual material can be regenerated by natural processes (using Sun light) to return to a state of natural materials that are present in the environment.  All os this is feasible, from a technical point of view, the real challenge is to make it affordable from an economic point of view (that is, it should be cheaper to dispose waste through thermo-valorization than dumping it into a landfill).

This Megatrend promises that by the end of this decade we will be able to do this, and that would be an amazing result!

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the New Initiative Committee and co-chairs the Digital Reality Initiative. He is a member of the IEEE in 2050 Ad Hoc Committee. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.