Q – What will jump-start the circular economy? 

A – The active of engagement of the three key actors – consumers (users), suppliers (producers) and the processors (those that provide the logistics and operations required to process waste / materials / products after use to maintain their optimum value).

You might think that is just a trite statement of the obvious, but I feel that it’s something that needs a little more thought and much, much more action. 

In my previous post – Jump on and hold tight – I shared a MICMAC+ analysis of my systems map for the challenges that face us in the transition to a circular economy. 

MICMAC’s great virtue is that forces our focus on what must be addressed first to achieve systemic change. Like an Agile development approach, it dramatically shortens perspective to highlight what must be achieved in the short-term to deliver longer term goals.

So, looking at the upper boxes on the matrix, we see that engagement is the driver that will lead to growing the means of value realisation.

Greater value realisation will drive the need for more and better data on those – now valuable – material streams.

Then, and only then, will the sexy tech of the Fourth Industrial Revolution will play their vital role in enabling this to happen quickly and at scale.

The question that tech companies should be asking themselves NOW is how 4IR can give those circular economy actors the incentive to engage, not just the means to scale?

Again, this might appear obvious but the issues around how we begin to raise engagement open up another level of challenges. We must remind ourselves firstly WHY engagement is vital to kick-starting the circular and thinking about HOW engagement can be raised.

What does ‘engagement’ look like?

When defining nodes in the system map, I made a distinction between consumer, producer and processor engagement and consumer, producer and processor incentive. Engagement refers to the degree to which actors actively participate in circular value chains.

The level of engagement is the direct result of the level of incentive; that is the degree to which there is a compelling reason for an actor to behave in a way that promotes circular value chains. Awareness, benefits and sanctions can all play a role in this, as can the removal of disincentives (like costs and data security concerns).

In the initial stages of the circular economy, the single most important thing that defines active participation in circular value chains is sharing data. Without shared data, it is impossible to break the challenge of ‘linear lock-in’.

Linear lock-in

Designing viable circular models within existing linear systems is challenging due to linear product design and a lack of asset management infrastructure required to ascertain the condition and value of used products.

WEF – “Harnessing the Fourth Industrial Revolution for the Circular Economy” 2018

Unless it is possible to have visibility of material streams: the condition, availability, provenance and amount of a material, then it is not possible to value it and so there can be no means to realise that value. New circular products cannot be designed, unless designers know what materials are available in the value chain. No new business models can be developed if there is no data to assure its viability. No processor can make an informed investment decision about the enhanced pre-processing and sorting systems required to scale recoverability without information on the waste streams that they should anticipate.

So, data must follow the same loop as the physical products and materials that it relates to and at these early stages of the circular economy, data is more valuable than the physical products and materials that it relates to.

As a new paper from GS1 in Europe puts it:

“At GS1 in Europe we are convinced that “shared data is the new oil”. To allow all actors of the value chain to take advantage of the potential of data and enable circular economy, open standards must be a given.”

GS1 Europe – “Circular Data for a Circular Economy” 2020

Oil is a great analogy. Shared data’s role in the new economy will be as great as oil was in the 20th Century and coal was in the 19th Century. Despite this, those that have vast reserves of un tapped data are not motivated to share it. The incentives – those compelling reasons for an actor to behave in a way that promotes circular value chains – are not yet there.

Without stretching the analogy too far, we could also say that unshared data is like oil that is still in the ground: it’s difficult and expensive to find it, drill down to it and, until you can bring it to the surface, refine it and deliver it has relatively little value.

Another bloody loop – incentivised circles

In my previous post I wrote that my initial reaction to my MICMAC+ chart was surprise, followed by doubt. What gave me most pause for thought was that, whilst consumer, supplier / producer and processor engagement levels were all in the ‘Drivers’ box, the incentives for every set was not. Surely, if engagement is the direct result of an incentive, then this was an anomaly?

Having looked again, I think not. What it reflects is the different types of incentive and the causal interplay between the engagement level of each set of actors.

Only producers (suppliers) have levels of incentive and engagement that can be directly acted upon. The level of a producer’s incentive is determined directly by the means of value realisation and, even if this is still low and seen as potential rather than actual, the incentive is still there. Indeed, this is why we are talking about the circular economy at all. A small group of producers like those that make up the Ellen MacArthur Foundation’s CE 100 are incentivised enough to brought us to where we are today.

Processors engagement, whilst vital, is incentivised solely by the ‘Viability – Reprocessing’ node. Given that reprocessing comes at the end of a product’s use phase, the number of dependencies and the delayed timescales mean that significant incentives for the re-processors are long-term prospects.

Like processors, consumer engagement and consumer incentive levels are found in different boxes. Significantly, consumer incentive is a ‘Linkage node’, being both driving and dependent, it is one of the most significant variables in the circular economy. However, the incentive for consumers to actively engage and begin sharing data is even less clear than for other actors.

This is a real problem because, if we are going to achieve true visibility of material streams, then we cannot ignore the fact that the vast bulk of that material is not what currently sits with producers. Nor is it in the waste stream or even in nature, it’s the stuff that’s just ‘out there’. It is in the billions of products that are used every day and we have very little knowledge of this vast reserve of latent resources.

Only their owners and users can supply that, so there would have to be a very good reason for them to do so.

As I wrote in my previous post, lack of technology isn’t the issue. The tech community’s focus should be to find ways to use technology to incentivise data sharing rather than simply capture it. Even the least obtrusive IoT sensor requires the active consent of a consumer for it to work its magic.

In my next post, the imaginatively titled ‘The cold start, part 2’, I’ll explore what these incentives for data sharing might be and suggest ways that we can fill the gap until the flow of pristine, crowdsourced primary consumer data begins.