The Circular Economy Concept
In a true circular economy, all by-products recirculate back into the economy. The intent is to keep resources in productive use for as long as possible by recovering and regenerating new products and materials. One critical component of the circular economy is “by-product synergy” or “industrial symbiosis”, matching wastes and under-valued resources at one facility with the needs of another facility. The result is the redesign of systems to establish circular flows of valuable materials.
As companies recognize the risks and costs of sustaining linear supply chains and the financial benefits of managing materials in a more sustainable way, they have helped accelerate international interest in transforming the circular economy from theory to practice. Zero-waste regulations have hastened this trend. Though the private sector is often the driving force, governments at all levels are beginning to embrace applications of the circular economy model that enhance their broad and complex objectives.
The US BCSD has a 20-year history of achieving tangible results on regional projects based on this principle, which it called by-product synergy. The benefits of the approach to materials management include reductions in operating costs, generation of new revenues, improved environmental performance, reductions in CO2 emissions, lowered health risks, and job creation and retention.
By-product synergy (BPS) is the matching of under-valued waste or by-product streams from one facility with potential users at another facility to create new revenues or savings with potential social and environmental benefits. The process may involve the physical exchange of materials, energy, water and/or by-products. By-product synergy represents a crucial business opportunity to innovate across industrial processes and organizations by exercising best practices in waste reduction and environmental mitigation. Turning waste output from one company into a product stream for another company reduces waste, greenhouse gas emissions, and the need for virgin-stream materials. Concurrently, it creates great opportunities for innovating new products and processes.
Several terms describe similar concepts to BPS. A waste exchange refers to a static process. Whereas BPS is a proactive and facilitated process that may lead to process changes that allow synergies that would otherwise not be feasible. Unlike eco-industrial parks, BPS networks do not depend upon establishing co-located industries, but rather take advantage of existing heavily industrialized areas. The US BCSD has cultivated and facilitated BPS networks throughout the United States, including Chicago, Houston, Columbus, Kansas City, Austin and the Pacific Northwest.
The project team established a replicable process to get companies working together to discuss opportunities and tackle obstacles. It also created new tools to make those tasks easier for companies and cities to participate. This led to development of an initial software solution and then to the more advanced Materials Marketplace. The US BCSD first deployed the marketplace in Austin, Texas, in 2014. To this day, 120 companies use it daily. In June 2015, the US BCSD, in collaboration with the WBCSD and CEF, launched the United States Marketplace pilot. This report documents the first three months of the pilot period.
The Climate for Change
In the town of Midlothian, Texas, near the metropolitan area of Dallas-Fort Worth, a Ph.D. metallurgist named Gordon Forward was recognized by peers as one of the top United States steelmakers in the 20th century. In the late 1970s, he became CEO of a pioneering company that utilized the “mini-mill,” in which used steel is the raw material, eliminating the logistics and costs of relying on mining, smelting, purchase, and transport of iron ore processed into steel. Junked vehicles, the major resource, became coin-sized pieces in nine seconds. Within the same corporation and location, the partner cement manufacturer tapped Forward to serve as CEO.
Under his leadership, engineers and business tacticians from both companies discovered and tested with objective results that the slag from the steel mill contained quantities of dicalcium silicate, an essential ingredient in the manufacture of cement. Consequently, the steelmaking company increased production output by 10 percent and decreased nitrogen oxide emissions by nearly 40 percent. Meanwhile, the cement company saved energy by reducing the temperatures of its kiln. The cement company that had been producing a million tons per year increased its productivity by 10 percent, to 1.1 million tons. By using pre-calcined lime, cement manufacturers could skip an energy- and CO2-intensive step in their process. The value of slag increased 20 times over its previous use as road construction fill.
In 1989 two members of the research and development staff of General Motors, R.A. Frosch and N.E. Gallopoulos, published a seminal article in Scientific American titled “Strategies for Manufacturing.” They laid out the conceptual groundwork for “industrial ecosystems” in which “the consumption of energy and material is optimized, waste generation is minimized, and the effluents from one process serve as the raw material for another.”
Expanding on that article’s premise, Marian Chertow and Jooyoung Park wrote in their book “Scholarship and Practice in Industrial Symbiosis: 1989 to 2014” that industries intent on sharing water, energy, and material by-products should study the catalytic role first played in the 1970s by the cross-industries synergy in Kalundborg, Denmark,. A coal-fired power plant manager in Kalundborg and his wife, a pharmacist, applied the term “industrial symbiosis” to achievements that had been driven by the city’s industrial leaders who were social friends, which facilitated their creative inter-action. The power plant’s scrubbers accumulated gypsum, which required periodic replacement. This material had traditionally gone to a landfill. A peer observed that gypsum wallboard and excess butane from a local refinery enabled the creation of a wallboard manufacturing company. This brought a new enterprise to the city and created new jobs. The Kalundborg symbiosis continues to evolve, with several new organizations today, including two biomass power plants. A total 33 demonstrations of inter-firm resource sharing have occurred.
In July 2014, the European Commission issued proposals to increase recycling and phase out landfills. Aimed at moving the European Union toward a lean circular economy, the legally binding targets include a 70 percent reduction in municipal waste by 2030; an 80 percent recycling target for glass, paper, metal, and plastic packaging waste by 2030; and a ban on landfilling of all recyclable and biodegradable waste by 2025. In addition, the Commission laid out “aspirational” goals that include phasing out the landfilling of all recoverable waste by 2030. Janez Potočnik, European commissioner for the environment, said in announcing those targets:
A Practical Carbon Reduction Strategy
According to climate change estimates, global resource extraction rose nearly 125 percent between 1980 and 2011. A framework to identify enhanced materials reuse and recycling practices represents one carbon reduction strategy that may contribute to the U.N. Climate Change Agreement approaching in Paris in December 2015.
In 2013, the United States emitted 6,673 million metric tons of carbon dioxide equivalent (MMTCO2-eq) from a multitude of sources. Estimates by the US EPA of system-based GHG emissions in the United States indicate that approximately 42 percent of greenhouse gas emissions originate from the provision of food and goods, with the rest resulting from infrastructure, transport, building heating and cooling, and use of appliances and devices.
Attaining a substantial portion of the GHG emissions reduction requires creative implementation. Fortunately, existing emissions inventory and offset crediting schemes, such as the Clean Development Mechanism, can provide guidance for potential directions that a materials reuse and recycling carbon-crediting approach could take. Research indicates that as much as 85 to 90 percent of early-adoption technologies and innovative approaches to carbon emission reduction is attributable to the presence of incentives such as offset schemes. Incentives for new or enhanced materials management approaches under the U.N. Climate Change Agreement have the potential to spur further activity and innovation.
The Materials Marketplace pilot project and software can help enhance the transactions and trading of credits that are the foundation of that approach. To realize the potential of incentive programs for materials reuse, firms must be aware of and positioned to shift data collection procedures. Firms will collect appropriate baseline and future data as part of implementing new material reuse practices.
The Birth & Growth of the Materials Marketplace
The first by-product synergy project launched in 1997 in Tampico, Mexico. Heavily industrialized, Tampico had a large Pemex oil refinery, a General Electric manufacturing plant, a large Coca-Cola plant, and other major facilities. Mangan says in looking back:
In a dozen successive projects across North America and the United Kingdom, the by-product synergy process continued to produce similar results and turn up opportunities to reuse materials across industries and cities.
The US BCSD BPS methodology involves establishing a forum where companies, regulators and municipalities explore reuse opportunities through collected information and facilitated interactions. Participants sign an agreement that spells out deliverables, confidentiality issues and intellectual property rights. Rather than simply declaring potential exchanges, the BPS process fosters relationships among companies and municipalities. The process is about information gathering and facilitation, but also about trust and bridge building.
Implementation requires broad based support from local, state and federal government agencies as well as network participants. The government’s role in developing synergy networks has been to provide technical expertise, fund grants, coordinate learning and resource sharing , and ensure the appropriate regulations. However, there are limits to what the government can enforce; by-product synergy networks need to evolve synergistically, with the support of agencies.
The BPS process provides many opportunities for businesses and municipalities; however, in order for networks to be implemented successfully, participants must overcome substantial challenges and barriers. These include regulatory, technical, economic, organizational, or communicative hurdles.
In the fall of 2005, the Department of Environment for the City of Chicago was looking for a proven, exciting process for developing eco-industrial activities in the Chicago region. Coincidentally, the Chicago Manufacturing Center (CMC) had begun collaborating with the US BCSD to create a by-product synergy process. Through this relationship, support from the US EPA, and leadership of Mayor Richard M. Daley, the City of Chicago established the Chicago Waste to Profit network the following year. As many as 80 companies became part of this network and pursued more than 100 synergies. The program saw the implementation of 50 synergy opportunities.
Building upon these and other successes at the regional level, the US BCSD, WBCSD, and CEF launched the United States Materials Marketplace pilot project in the spring of 2015. With General Motors and Nike as its corporate co-champions, the marketplace project provides participants with cloud-based software that enables them to collaborate on solutions for materials reuse opportunities. The United States Materials Marketplace pilot project is a key step toward establishing a national network of materials efficiency.