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Abstract and Figures

As a conceptual extension of the established life cycle approach, the objectives of the CE are aimed at keeping products, components and materials in cycles of usage that are stable, closed and as permanent as possible. In this way their quality is maintained or even improved. Therefore, the CE does not represent a “recycling economy” in the narrow sense. The resulting system perspective requires a stronger focus on life-cycle services including maintenance, repair, remanufacturing and high-quality recycling. The basic logic of the CE thus promises the replacement of resource-depleting, energy-intensive and environmentally harmful production of new goods/materials with more service-intensive and regionalized value creation aimed at circulating existing products/materials. At the same time, this also ensures the stable availability of critical raw materials. Six steps to a circular economy: The experiences from the qualityaustria Institute for Integrated Quality Design (IQD) show that six central approaches are required for the successful implementation of a circular economy: 1. Create holistic quality via circular strategies 2. Adapt product designs 3. Make use of new product and process certifications 4. Develop circular service operations through vertical integration and partnerships 5. Transform business models for higher levels of service 6. Harness digitalization as an enabler for intelligent cycling
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Sustainability & climate protection
The role of innovation, quality standards & digitalization
Accredited by the BMDW
© unspash/Jason Leung
Successfully implementing
a circular economy
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Authors
C2C Project Manager, Institute for
Integrated Quality Design (IQD),
Johannes Kepler University
Dr. Julia Schmitt
Head of the Institute for
Integrated Quality Design (IQD),
Johannes Kepler University
Univ.-Prof. Dr. Erik Hansen
Electronics Project Manager, Institute
for Integrated Quality Design (IQD),
Johannes Kepler University
Dr. Ferdinand Revellio
*For citing this publication: Hansen, E. G., Revellio, F., Schmitt, J., Schrack, D., Alcayaga,
A, Dick, A., (2021). Successfully implementing a circular economy: the role of innovation,
quality standards & digitalization. White paper. Quality Austria - Trainings, Zertifizierungs
und Begutachtungs GmbH, Vienna, Austria.
Executive Vice President Business
Development Environment and Ener-
gy, CSR, Quality Austria
DI Axel Dick, MSc
Policy Project Manager, Institute
for Integrated Quality Design (IQD),
Johannes Kepler University
Dr. Daniela Schrack
Digitalization Project Manager,
Institute for Integrated Quality Design
(IQD), Johannes Kepler University
Andres Alcayaga, MSc
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Background:
a dynamic organizational context
Circular economy (CE) in the Sustainable
Development Goals (SDGs)
Since the UN’s 2030 Agenda resolution on sustain-
able development1, governments and companies
have increasingly been addressing the 17 Sustainable
Development Goals (SDGs). Specifically, SDG 12 “En-
sure sustainable consumption and production patterns”
with its targets of (1) reducing the generation of waste
through prevention, recycling and reuse and (2) an en-
vironmentally sound handling of chemicals throughout
their entire lifecycle, represents the foundation of a cir-
cular economy.
Circular economy at a regulatory level
The shift towards a circular economy (CE) can be seen
at various levels:
Self-regulation via standards: new norms
and standards such as ISO/TC 323 “Circular
economy”
Existing legal framework conditions: e.g.
Ecodesign Directive, REACH Chemicals Regu-
lation, Taxonomy Regulation
Political programs: Circular economy pro-
grams for changes in the legal framework condi-
tions (see Table 1, page 4)
Political consultation processes: national
and European multi-stakeholder processes with
the objective of consulting on policies regarding
a circular economy (see box on right-hand side)
Figure 1: 2030 Agenda and SDG 12
In Austria, a
multi-stake-
holder process
known as the
UniNEtZ7 project is currently taking place,
with the objective of creating a so-called op-
tions report by the end of 2021 that elaborates
political options for action for the federal
government to implement the 2030 Agenda.
Similarly, a policy
development pro-
cess is also taking
place in the form of the Circular Economy
Initiative Deutschland, which has the mis-
sion of devising a roadmap for a sustainable
circular economy.
Ongoing political consultation pro-
cesses in which the Quality Austria
endowed Institute for Integrated
Quality Design is currently partici-
pating
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Table 1: Political programs for a circular economy (selection) – own diagram
Program Vision and objectives Selected topics (focus)
European Green Deal (2019)2
EU with a resource-efficient market &
without greenhouse gas emissions
CE strategy for resource-intensive sectors
Reliable sustainability information for
consumers
Increased recycling of waste
Promotion of return and collection systems
New Circular Economy Action Plan (2020)3
Expansion of the CE to achieve climate
neutrality
Future-oriented agenda for a cleaner and
competitive Europe
Product design: improvement of durability,
reparability and reusability
“Right to repair”
Increasing percentage of recycled material in
products
Substitution of hazardous substances
Austrian Government Program (2020)4
Combating climate change & creation
of a sustainable location for business
CE strategy for energy-intensive sectors
and waste management
Promotion of repair and reutilization
Program to avoid the creation of waste &
food waste
Model regions for CE
Expansion of returnable systems
Action Plan: Financing Sustainable Growth
(2018)5
Promotion of sustainable investments
Legal framework for an environmentally
friendly CE
In the Taxonomy Regulation6, the
transition to a CE, waste prevention
and recycling is one of six objectives that
defines a sustainable investment.
Political programs for a circular economy
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The necessity of sustainable develop-
ment
From a natural scientific perspective, several plane-
tary boundaries – the emission of greenhouse gas-
es, the nitrogen inputs to soils and the global loss of
biodiversity – have already been exceeded. Gob-
ally, 50% of greenhouse gas emissions can be traced
back to the extraction and processing of primary raw
materials. As a result, climate neutrality in the EU by
2050 will not be possible without the implementa-
tion of the circular economy (CE)3. ISO standardiza-
tion also sets the course in this direction with the ISO
14001 as well as the guideline ISO CD 14009.
One thing is clear: the cost of inaction is consid-
erable. This is why appropriate concepts are now
necessary for a swift transition to sustainable devel-
opment. The management of this transformation will
require new key competences in companies (see the
white paper on sustainability management in German
by Quality Austria).
From conformity to an opportunity and
driver for innovation
In the traditional view of management, an envi-
ronmentally friendly approach is often seen primarily
as a cost driver, which is why the optimum extent of
environmental and social actions seldom goes be-
yond regulatory compliance.
The circular economy as a motor
for innovation and quality
The circular economy (CE) approach goes well
beyond this, and views sustainability challenges as
innovation opportunities for the development
of new products, processes and business
models8. This allows for an embedded perspective
on the economy, environmental protection and re-
gional employment.
Maintaining or even increasing quality
through cycling
As a conceptual extension of the established life
cycle approach, the objectives of the CE are
aimed at keeping products, components and ma-
terials in cycles of usage that are stable, closed and
as permanent as possible. In this way their qual-
ity is maintained or even improved. Therefore,
the CE does not represent a “recycling economy” in
the narrow sense. The resulting system perspective
requires a stronger focus on life-cycle services
including maintenance, repair, remanufacturing and
high-quality recycling. The basic logic of the CE
thus promises the replacement of resource-deplet-
ing, energy-intensive and environmentally harmful
production of new goods/materials with more ser-
vice-intensive and regionalized value creation aimed
at circulating existing products/materials. At the
same time, this also ensures the stable availability of
critical raw materials.
Six steps to a circular economy
The experiences from the qualityaustria In-
stitute for Integrated Quality Design (IQD) show
that six central approaches are required for
the successful implementation of a circular
economy:
1. Create holistic quality via circular strat-
egies
2. Adapt product designs
3. Make use of new product and process
certifications
4. Develop circular service operations
through vertical integration and partner-
ships
5. Transform business models for higher
levels of service
6. Harness digitalization as an enabler for
intelligent cycling
In what follows, these approaches will be ex-
panded upon in detail.
© shutterstock.com/Butterfly Hunter
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Two types of circular strategies
The new reference framework for a circular economy
differentiates between technical and biological cy-
cles, and thus goes well beyond classic waste man-
agement concepts. Figure 2: The butterfly diagram by the Ellen MacArthur Foundation has become established as a central framework – based on EMF9
Quality
comes
full circle
Biological cycles for products of consumption
Circular strategies: products / components that enter the environment
via compost streams, due to abrasion or uncontrolled disposal should
be designed for complete biodegradability throughout their life cycle
(e.g. biogenic raw materials).
An extension of the life cycle also applies to products in the biological
cycle. Regardless of the objective of recirculation back into the biological
cycle, technical cycles should be made use of before.
Technical cycles for products of service
Circular strategies: maintenance / repair (incl. upgrading), reuse, remanufacture/
refurbish and recycling – these are prioritized in descending order with regard to
the preservation of the product integrity and the associated ecological benefit
(from inside to outside in Fig. 2).
The majority of products are being “used” instead of consumed: users, rather
than consumers, are at the centre of focus
The value proposition to the users is at the forefront and thus requires a stronger
focus on life cycle-oriented services
In both types of cycle, the elimination of pollutants from products and materials (so-called substances of concern) takes on a pivotal role, since these lead to a reduction
in quality (e.g. toxic recycled material), risks to customers and to occupational health and safety issues (e.g. toxic exposure during product teardown).
Source: based on Ellen MacArthur Foundation, 2012,
p. 24: Braungart & McDonough, 2009
Photo: Native shoes
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New competences
... from linear thinking towards a circular way of thinking
In order to implement these thoroughly complex and cross-organizational processes, new competences in companies are
required. These predominantly social and cooperative skills are difficult to imitate and are thus well-suited for generating
long-lasting competitive advantages in the market:
Close coordination between the departments for product design and (after-sales) services.
Development of cyclical infrastructures and processes that are integrated into the corporate procedures in a
cross-functional manner.
The narrow focus on sales transactions at the point of sale needs to be expanded to suitable service business
models with continuous user contact.
Collaboration that spans multiple value chains and sectors is required.
Digital technologies are enablers for cross-department and cross-organizational processes.
© pixabay.com/geralt
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Verpack ung r
Reinigungs-
mittel
Abgefülltes
Reinigungsm ittel
Produkt Bestandteil Kompone nten Materialien/Substanzen
Verbindlicher
Umfang der
Produkt -
zerti fizierung
(Abgefülltes
Reinigungs-
mittel)
Verbindlicher
Umfang der
freiwilligen
Verpack ungs-
zerti fizierung
Sodium l aureth sulfat e
80-100 Inhaltst offe
Lebensmit telfarbe E 104
Gereinigtes Was ser
Zitronensäure
Laminat
Klebs toff
Feder
Druckfarben
Poly mer (Gru nds toff)
Pigment e / Farbstoffe (grün)
PET Rezyklat (Leichtstoffsammlung)
PET Rezyklat (Flaschens ammlung)
Addit ive
Poly mere
Etikett
13 Inhalts stoffe
>100 Inhalt sst offe
9 Inhaltss toffe
14 Inhalts stoffe
14 Inhalts stoffe
8 Inhalts stoffe
24 Inhalts stoffe
9 Inhalts stoffe
1 Inhalts stoffe
1 Inhalts stoffe
Flasc he
Kappe /
Spray A ufsatz
Reinigungs-
mittel Farbstoff
Tensid
Duft
Lösungsm ittel
Säure
Designing products for circularity
In a circular economy, materials should be designed in
a way allowing their continuous cycling in closed loops
without a loss of quality. When transferred to practice,
this means that companies need to be familiar with
all the components of their products and optimize
these for a circular economy.
The challenge here is covering the entire value chain
including the subcontractors.
Material transparency enables compre-
hensive quality statements
According to a recent study, three quarters of every-
day products made of plastic do not fulfil these crite-
ria. They contain harmful chemicals which, due to an
intransparent mix, are usually not even identifiable10.
Product design as a foundation
for circularity
To profitably implement a true circularity throughout
multiple loops without a loss of quality, companies
must first create transparency on the composition
of their products. Based on this, statements can
then also be made with regard to the product quality.
Figure 3: Example of product composition: detergent – source Hansen & Schmitt11
A “simple” product such as a cleaning agent – conceived of as a product of consumption for
the biological cycle – already racks up around 100 ingredients. If one then looks at the signifi-
cantly more complex packaging, which is geared toward technical cycles, this quickly becomes
300 elements that have to be tested as to their suitability and potentially also optimized for
closed-loop cycles.
© Werner & Mertz
THE CRADLE TO CRADLE © PRINCIPLE
Take – make – regenerate
Product
Bottled
detergent
Cleaning
agent
Surfactant Sodium laureth sulfate
80-100 ingredients
Food dye E 104
Purified water
Citric acid
PET Recyclate (household collection)
PET Recyclate (bottle-to-bottle collection) 14 ingredients
9 ingredients
14 ingredients
8 ingredients
9 ingredients
>100 ingredients
24 ingredients
13 ingredients
1 ingredient
1 ingredient
Pigments / dyes (green)
Additives
Polymers
Spring
Polymer (raw material)
Printing inks
Laminate
Adhesives
Fragrance
Colorant
Solvent
Acid
Bottle
Cap /
Spray applicator
Label
Packaging for
detergent
Parts Components Materials / Substances
mandatory
scope of
product
certification
(bottled clea-
ning agent)
mandatory
scope of the
voluntary
packaging
certification
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Kriterium Beschreibung
Material Health Die Verwendung von human-und
ökotoxikologisch unbedenklichen Materialen
Material Reutilization Die tatsächliche Kreislaufführung der
verwendeten Materialien (z.B. Rezyklateins atz)
Renewable Energy and
Carbon Management
Produktspezifis che Firmenleistung in Bezug auf
die Verwendung erneue rbarer Energien
Water Stewardship Produktspezifis che Firmenleistung in Bezug auf
den verantwortliche n Umgang m it Wasser
Social Fairness Produktspezifis che Firmenleistung in Bezug auf
Sozialstandards in der Produktion
Figure 4: Cradle to Cradle innovation process – source Schmitt14
Cradle to
Cradle®
certified products
standard
Five certification criteria for a comprehensive assessment
Cradle to Cradle Certified™ is the first comprehensive certification standard
for a circular economy. It provides certification for innovative product perfor-
mance under consideration of five criteria (see Table 2).
Extern unterstützter Lernprozess
C2C Wissen
und
Ze rt if izi er ungs -
standard
Firmenwissen auf eine Kreislaufwirtschaft anpassen
Wertschöpfungskette für
eine Kreislaufwirtschaft
anpassen
C2C zertifiziertes
Produkt
Wissen identifizieren Wissen verarbeiten Wissen anwenden
Promotoren als
treibende Kraft im
Innovationsprozess
Legende: Innovationsprozess gemeinsames Schöpfen von Wissen und Innovation
C2C Zertifizierungsstandard als Kommunikationsunterstützung C2C Promotor Promotoren Gruppe
Mate rialanalyse
Prozessunt ers tüt zung und
Wissenstreuhanddienstleistungen
Extern unterstützter Lernprozess
C2C Wissen
und
Ze rt if izi er ungs -
standard
Firmenwissen auf eine Kreislaufwirtschaft anpassen
Wertschöpfungskette für
eine Kreislaufwirtschaft
anpassen
C2C zertifiziertes
Produkt
Wissen identifizieren Wissen verarbeiten Wissen anwenden
Promotoren als
treibende Kraft im
Innovationsprozess
Legende: Innovationsprozess gemeinsames Schöpfen von Wissen und Innovation
C2C Zertifizierungsstandard als Kommunikationsunterstützung C2C Promotor Promotoren Gruppe
Mate rialanalyse
Prozessunt ers tüt zung und
Wissenstreuhanddienstleistungen
Extern unterstützter Lernprozess
C2C Wissen
und
Ze rt if izi er ungs -
standard
Firmenwissen auf eine Kreislaufwirtschaft anpassen
Wertschöpfungskette für
eine Kreislaufwirtschaft
anpassen
C2C zertifiziertes
Produkt
Wissen identifizieren Wissen verarbeiten Wissen anwenden
Promotoren als
treibende Kraft im
Innovationsprozess
Legende: Innovationsprozess gemeinsames Schöpfen von Wissen und Innovation
C2C Zertifizierungsstandard als Kommunikationsunterstützung C2C Promotor Promotoren Gruppe
Mate rialanalyse
Prozessunt ers tüt zung und
Wissenstreuhanddienstleistungen
Extern unterstützter Lernprozess
C2C Wissen
und
Ze rt if izi er ungs -
standard
Firmenwissen auf eine Kreislaufwirtschaft anpassen
Wertschöpfungskette für
eine Kreislaufwirtschaft
anpassen
C2C zertifiziertes
Produkt
Wissen identifizieren Wissen verarbeiten Wissen anwenden
Promotoren als
treibende Kraft im
Innovationsprozess
Legende: Innovationsprozess gemeinsames Schöpfen von Wissen und Innovation
C2C Zertifizierungsstandard als Kommunikationsunterstützung C2C Promotor Promotoren Gruppe
Mate rialanalyse
Prozessunt ers tüt zung und
Wissenstreuhanddienstleistungen
Further certification and system approaches for a circular
economy
Beyond this, there are additional certification and system-oriented approaches
with regard to specific cycles that can support quality and environmental man-
agement. A selection of these is depicted on the following page.
The C2C innovation process (see Fig. 4):
The requirements of the Cradle to Cradle standard can be used by companies as
direct incentives for innovation13. With this in mind, the standard can support com-
panies in obtaining a profound understanding of a circular economy and can be used
to develop a shared understanding of the innovation objective with suppliers and
other partners11.
The core factors for success include:
Identifying employees with interest in Cradle to Cradle as promoters in all de-
partments, networking them and equipping them with the freedom to innovate.
Developing suppliers and partners in order to close material loops.
Providing resources for external support in building up a circular value network.
Aligning the corporate and innovation strategy with a circular economy in the
long run.
Table 2: Cradle to Cradle certification criteria – source c2ccertified.org12
Quality Austria has offered training and certification products in the area of
Cradle to Cradle since 2019: Cradle to Cradle® training and ISO concepts for
the promotion of a circular economy
Criteria
use of human and ecotoxicologically safe
materials
product-specific company performance in relation
to the use of renewable energies
actual cycling of the materials used (e.g. use of
recycled materials)
product-specific company performance in terms of
responsible handling of water
Product-specific company performance with
regard to social standards in production
Material Health
Renewable Energy and
Carbon Management
Material reutilization
Water Stewardship
Social Fairness
Description
C2C knowledge
and certification
standard
Adapt company knowledge to a circular economy
Adapt the value chain for a
circular economy
Identify knowledge Process knowledge
Promoters as the
driving force in the
innovation process
Apply knowledge C2C certified
product
Process support and
knowledge trusteeing services
Material
health assessment
Externally supported
learning process
Legend:
Innovation process
C2C certification standard
as communication support
joint creation of knowledge
and innovation
C2C promoter Promoter group
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Zirkuläres Produkt-und Dienstleistungsdesign
Basierend auf definierten Materialien, Schadstoffeleminierung und reduzierter Material/Teile-Vielfalt
1. Produktintegrität
(Produkte & Komponenten)
Lange Nutzung
Technische
Haltbarkeit
Emotionale
Haltbarkeit
Verlängerte Lebensdauer
Wartbarkeit &
Wartung
Upgrade-
fähigkeit &
Upgrades
Wiederherstellung
Reparatur-
higkeit &
Reparatur
Refurbishment/
Remanufacture
2. Recycling
(Materialien)
r
Recycling
schadstofffrei,
Monomaterialien
von Recycling
Recyclat-
einsatz
3. Biologische Kreisläufe
(Materialien)
r
natürliche
Kreisläufe
Biologisch
abbaubar
von natürlichen
Kreisläufen
Biobasierte
Materialien
Prozess/
Organisa-
tions
Standards
EN4555x
Standardization activities & certifications
Figure 5: Standardization activities and possible certifications – own diagram
Circular product and service design
based on defined materials, the elimination of harmful substances and a reduced variety of materials / parts
1. product integrity
(products & components)
Long use
Technical dura-
bility
Emotional dura-
bility
Serviceability &
maintenance
Upgradeability &
upgrades
Repairability &
repair
Refurbishment/
remanufacture
Biodegradable
Bio-based
materials
Extended use
Recovery
3. biological cycles
(materials)
2. recycling
(materials)
for
recycling
for natural
cycles
of
recycling
Recyclate
use
Pollutant-free,
monomaterials
of natural
cycles
circular
strategy
in product
design
process /
organizati-
onal stan-
dards
product
labels
(certifiable)
EN45550-45559 (CEN/CLC/JTC 10 Material Efficiency Aspects for Ecodesign)
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Circular
value
creation
Linear
value
creation
TYPOLOGY OF CIRCULAR VALUE CR E AT I O N ARCHITECTURES
Vertically integrated
architecture
Network
architecture
Outsourcing
architecture
Laissez-faire
architecture
Leave
circularity
to others
Drive
circularity
internally
Circularity
as strategy
Circularity
as compliance
Coordinated Uncoordinated
Circular
coordination
Holistic
Closed-loop system with
interlinked loops and
circular product design
Broad
Multiple strategic loops
partially interlinked, with
indirect learning for design
Narrow
Single, isolated loops
covered by open systems
with low strategic learning
Diverse
Autonomous loop operators
exploit high value loops,
learning from publ. sources
Loop
configuration
Lead the industry
Strong slowing loops and
service business models
Strategic
Fast scaling with state-of-
the-art partner solutions
Compliance plus
Incremental improvements
of end-of-pipe solutions
Reactive
None, but creative solutions
by autonomous actors
Ambition
level
Make
Vertical integration for
highly specific products &
as source of innovation
Ally
Strategic partnerships with
loop operators through
networks/ecosystems
Buy
Arm’s length outsourcing of
standardized reverse loops
as end-of-pipe
Do nothing
No own loop coordination,
amorphous relationships to
autonomous loop operators
Simplified model by Hansen & Revell io (2020)
Illustration
(simplified)
Circular value creation architectures
In the operative implementation of a circular economy, companies need to
establish new processes and infrastructures for circular services. Against
this backdrop, organizations face the classic question of “make or buy?”
(Fig. 6). The posing of this strategic question leads to four new value cre-
ation architectures (and associated changes in position in the value cre-
ation cycle) that make it possible to free up the opportunities and potentials
of a CE:
Make: Companies can establish proprietary systems and can thus
develop their own circular competences, e.g. in repair or collection
processes. This enables holistic cycling and provides competitive ad-
vantages.
Ally: Strategic partnerships or equity investments in specialized ser-
vice providers are conducive to individual cycles. For example, inde-
pendent repairers can be certified.
Buy: Classic outsourcing is particularly well-suited to standardized
recycling processes. In certain cases, recourse can also be made to
public systems (e.g. public collection points for packaging).
Do nothing: The absence of a strategic integration of circular pro-
cesses can lead to a laissez-faire architecture, in which autonomous
third parties exploit the remaining market potential (e.g. in secondary
markets).
Vertical integration increases for higher-quality circular strategies
Companies that aim for higher-quality circular strategies (i.e. repair, reuse and remanufac-
turing) and their associated competitive advantages usually strive for greater vertical inte-
gration.
This is particularly due to the higher level of specificity and strategic relevance of these ac-
tivities for the core business. Accordingly, repair offers have to be closely coordinated not
only with product designers, but also with the distribution, whereas by contrast, recycling
at the end of the life cycle requires less coordination amongst departments and partners.
This means that vertical integration enables higher degrees of loop closing (therefore also
higher-quality reuse) and better feedback into the product design.
Strategic
integration of
circular services
Figure 6: Circular value creation architectures as a strategic guideline – source Hansen & Revellio11
Circular
value
creation
Linear
value
creation
TYPOLOGY OF CIRCULAR VALUE CR E AT I O N ARCHITECTURES
Vertically integrated
architecture
Network
architecture
Outsourcing
architecture
Laissez-faire
architecture
Leave
circularity
to others
Drive
circularity
internally
Circularity
as strategy
Circularity
as compliance
Coordinated Uncoordinated
Circular
coordination
Holistic
Closed-loop system with
interlinked loops and
circular product design
Broad
Multiple strategic loops
partially interlinked, with
indirect learning for design
Narrow
Single, isolated loops
covered by open systems
with low strategic learning
Diverse
Autonomous loop operators
exploit high value loops,
learning from publ. sources
Loop
configuration
Lead the industry
Strong slowing loops and
service business models
Strategic
Fast scaling with state-of-
the-art partner solutions
Compliance plus
Incremental improvements
of end-of-pipe solutions
Reactive
None, but creative solutions
by autonomous actors
Ambition
level
Make
Vertical integration for
highly specific products &
as source of innovation
Ally
Strategic partnerships with
loop operators through
networks/ecosystems
Buy
Arms length outsourcing of
standardized reverse loops
as end-of-pipe
Do nothing
No own loop coordination,
amorphous relationships to
autonomous loop operators
Simplified model by Hansen & Revell io (2020)
Illustration
(simplified)
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Business model innovation
From product vendor to service provider
Product designs and circular services (e.g. maintenance, repair) necessary for the circular economy
can only be successful when manufacturers (and retailers) develop their business models more
strongly in the direction of services. This can take place to varying degrees:
Product-oriented: Products continue to be sold, but are coupled with comprehensive af-
ter-sales offers (e.g. repair).
Use-oriented: Products are now only made available, e.g. via rental, leasing or sharing op-
tions.
Results-oriented: Instead of the product, a result i.e. a “performance” is sold (e.g. 10% sav-
ings on the total cost of ownership); the provider performs the service with the best possible
technology.
Depending on the actor and their position in the value creation cycle, this can lead to different
types of business models (see Figure 7)16. For example, with the business model of “maximizing
product uptime”, manufacturers can link circular services to the product based on a fee or can
provide products to the customer through leasing or “total care”. The case study of the Hilti fleet
management (see info box) shows how manufacturers can become quality leaders in their industry
in this way.
Alongside this producer business model, the study by the German National Academy of Science
and Engineering (acatech), in cooperation with the Institute for Integrated Quality Design (IQD),
distinguishes between 21 further actor-specific business models for the circular economy16.
Business model patterns overview
Actor‘s
main role
Circular
strategy
Id Business model pattern Service Level (sub-patter n)
Product-
oriented
Use-
oriented
Result-
oriented
Supplier
(molecules/
mater ials)
A1 Circular raw mater ials
supplier
Molecule & material
recycling
Materials bank
A2 Process molecule
service provider
Molecule & material
leasing
Molecule & material
performance
Supplier
(mechanical
engineering)
B1 Machines
/
components
‘as new’
Machines/components
‘as new’
Rental machines
/
components ‘as new’
Pay per reman
machine performance
B2 Machine
/
component
remarketing
Used machines/
component sales
Rental machines
/
components
see B1 Pay per reman
machine performance
Producer C1 Propriet ary
material cycles
Waste cherry p icking Materials bank
partnership
C2 Product ‘as new’ Selling Products
‘as new’
Product leasing
‘as new’
see C6 Total care
producer
C3 Used product
remarketing
Used product sa le
C4 Out-of-warranty
repair serv ice
On-demand repair see C6 ‘Leasing
producer’
see C6 Total care
producer
C5 Upgrades, spares
& accessories
Modules & accessories
shop
Upgrade subscription
C6 Maximising product
uptime
Fee-based
maintenance
Leasing producer Total care p roducer
Retailer &
service points D1 Retailer as cycle
manager
Retailer as cycle
manager
see C1 Materials
bank partnership
D2 Retail remarketin g
& reman
Used goods
on sale
Rent-a-wreck fleet
manager
D3 One-stop shop (ret ail) Integrated service
point
Rental retail Total care r etail
Repair provider E1 Repair gap exploiter Repair transaction Repair-based rental
Prosumer
F1 Prosumer support
system
Do-it-yourself repair Peer-to-peer sharing
Logistics
provider G1 Material rever se
logistics
––Pay per recycling
logistics perfor mance
G2 Refurb logistics se rvices ––Pay per ref urb
performance
G3 Spare parts management ––Pay p er spare part
performance
Recover y
manager H1 Revitalised produc ts Us ed goods bargain
H2 Coordinator of
informal collection
Fair-trade recyclates
Intermediary I1 Re cycling platform Recycling platform
I2 Used goods &
sharing platform
Used good platf orm Sharing platform
Emerging
actors All J1...x ????
Table 3: Overview of circular business model patterns and sub-patterns (Source: based on Hansen et al. 2020a, p.13)
30
Figure 7: Actor-specific CE business model types – source acatech CEID16
Case study: Hilti Fleet Management, Liechtenstein
Hilti is a leading direct marketer for premium tools in the business-to-business
market. The products are designed with longevity in mind and are marketed together with
comprehensive services. The Hilti fleet management service is a total care business model that
provides customers with tools as a service in return for a monthly rate. The service includes
the use, maintenance, repair and upgrades. Thanks to an innovative Internet of Things-based
approach, the tools are increasingly monitored digitally in order to optimize the service (e.g.
preventive maintenance)16.
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Daten unterstützen Kreislaufstrategien
Herste ller / Anbieter
(und Wertschöpfungspartner)
S
M AR T
Product
... digitale Zustandsüberwachung, Vorhersage
von Ausfällen und vorbeugende Wartung
... Analyse von Produktzustand und Nutzungshi storie (Komponenten)
für optimal en Wiederaufbereitungszei tpunkt und -planung
... Hinweise für Produktzerlegung und Identifi zierung von Materialien
und M aterialeigenschaften (z.B. Toxidi tät) für hochwertiges Recycling
... Anal yse des Produktzustands und der Nutzungshistorie
für Vorberei tung und Ausgestaltung des Remarketings
... erweiterte Benutzererfahrung durch Nutzungs-
auswertung, Überwachung und Standortdienste
Feedback in F&E für verbessertes zirkuläres Produktdesign
Häufigkeit von
Transaktionen /
Datenabfragen
häufig
selten
SMART Reman
Zustand Produkt/
Bauteile
SMART Reuse
Digitale Nutzungshistorie
SMART Maintenance / Repair
Zustandsüberwachung, Fernwartung
SMART Use
Nutzungsdaten, Remote Zugriff, Lokalisierung
SMART
Recycling
Material-
pass
Smart circular strategies
The increasing intelligence of products and the networking thereof
in the Internet of Things allows quality managers to have a broader
scope of action than before, enabling them to shape quality across
entire value chains16-18:
Digital technologies allow the actors within the value chain
(manufacturers, service providers and further partners) to ex-
change data and use this data in collaboration.
For example, digital technologies can be used to gain insight
into the status, location and performance of products
(“smart use”) – even if they are built in as components. This in-
sight improves the understanding of the customer’s busi-
ness.
If data is used beyond the scope of the use phase and for the
improvement of the product life cycle as a whole, this is re-
ferred to as a smart circular strategy17: Smart maintenance
& repair, smart reuse, smart remanufacturing, and smart recy-
cling (see Figure 8).
Companies with service business models will find it easier
to offer services for these intelligent cycles.
Better feedback into product design as a competitive advantage
The insight gained and made digitally available in the maintenance, repair, remanufacturing and
recycling processes can help to identify possibilities for improvement in the product, component
and material design, and thus serves as a basis for valuable feedback to the research and devel-
opment department (R&D) – the continuous improvement process is therefore accelerated.
Figure 8: Smart circular strategies – own diagram
Digitalizing the cycles: quality 4.0
Smart products provide companies with direct information on their
use, material flows and customer requirements.
Based on this information, quality managers can apply advanced
quality methods for the designing of smart circular strategies, and thus
enable lower costs or greater customer benefit.
SMART product
SMART use
SMART maintenance / repair
SMART reuse
SMART reman
SMART
recycling
usage data, remote access, location tracking
condition monitoring,
remote maintenance
digital usage history
condition of product /
components
material
passport
manufacturer / service provider
(and value chain partners)
frequency of
transactions / data
queries
frequently
rarely
data supports circular strategies
feedback into R&D for improved circular product (re)design
...extended user experience through usage
analysis, monitoring and location services
... digital condition monitoring and prediction of
failures for preventive maintenance
... analysis of the product condition and usage history
for preparation and execution of the remarketing
... analysis of product condition and usage history
(components) for optimal remanufacturing time and planning
... instructions on product disassembly and identification of materials
and material properties (e.g. toxicity) for high-quality recycling
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Figure 10: Product exchange with “like-new quality” guarantee – own diagram
Best practice:
smart remanufac-
turing at SKF
Performance business model “rotation for life”
The company AB SKF is a leading manufacturer of rolling bearings.
SKF has developed the performance business model “rotation for
life”, in which the products are made available to the customers for a
monthly fee.
The service package consists of training, lubrication system manage-
ment, condition monitoring, root cause analysis, routine checks and
maintenance, as well as the remanufacturing of rolling bearings. This
regular remanufacturing replaces the new production, lowers costs
and enables an attractive pricing structure for the customers. Then,
the all-in-one package results in long-term customer relations and
additional sources of income.19,20
Quality 4.0 as a driving force
By using smart components and condition monitoring, SKF is able to detect
disturbances in advance in order to replace the rolling bearings and remanu-
facture them long before severe failures occur.
This enables costs reductions and increases the likelihood that a remanufac-
turing of the bearings is technically possible (Figure 9).
Bearings can be remanufactured multiple times and are thus considerably cheap-
er. This facilitates an attractive pricing structure.
The product exchange, with its “quality as new” guarantee, and the associated
remanufacturing become a pivotal competitive advantage for the company
(Figure 10).
Figure 9: Smart remanufacturing at SKF – own diagram based on SKF19,20
A performance business model with digital technologies enables the exchange of
the bearing with a “quality as new” guarantee, as well as the remanufacturing of old
bearings at the optimum point in time.
Vibration level
Reman
costs
Operating time
Condition monitoring
Lubrication analysis
Traditional
vibration monitoring
Watch, listen
and feel
Bearing
damage
Damage
begins
Reman
probability
Early detection of damage increases the intervention time and
extends the service life of the rolling bearings
Operating time
Without
Reman
With
Reman
(Smart maintenance & repair)
Smart maintenance & repair
Business model type
Smart maintenance & repair Smart maintenance & repair
Product (exchange) with
"Quality as New" guarantee
Product (exchange) with
"Quality as New" guarantee
Damage and new
acquisition in the market
Custo mer loyalty
New or st eady earnings
© IQD
Time in service
Time in service
failure
Listen
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Conclusion
Circular economy as an opportunity – the bottom line in 6 points
1. National, European and global framework conditions show a very dynamic develop-
ment in the direction of a circular economy. We are seeing the rise of a new urgency for
companies to adjust to this shifting organizational context. They must do so both in order to
remain legally compliant as well as to be one step ahead of the changed framework condi-
tions and reinforce their competitiveness by differentiating themselves in the market.
2. New quality challenges and potential for value creation arise in the circular economy,
on the one hand through technical cycles for products of service (maintenance, repair, reuse,
remanufacturing and recycling), and on the other through biological cycles for products of
consumption (biodegradability based on biogenic raw materials).
3. Product design is the basis of quality in the circular economy: materials, components
and products have to be designed specifically for recirculation. New product quality char-
acteristics can be distinguished in the market using certifications such as Cradle to Cradle.
4. Based on product designs that are fit for circulation, circular services (e.g. repair) are made
possible and can then be offered by the providers via vertical integration (make) or part-
nerships (ally). As a consequence, the position of the providers in the value creation cycle is
also altered. In this way, experiences gained from the circular services can be incorporated
back into the product design.
5. In order to offer the necessary circular services in the circular economy, product, usage and
performance-oriented services are required, as are corresponding adjustments to the
business models.
6. Digital technologies – especially smart products and the networking thereof – are an en-
abler when it comes to optimizing or even enabling circular services such as maintenance,
repair, reuse and remanufacturing.
© pixabay.com/Quique
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The endowed Institute for Integrated Quality Design (IQD) at the Johannes Kepler University Linz (JKU) is financed by Quality Austria, the State of Upper
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This publication is based on the results of the following IQD research projects:
Cradle to Cradle Innovation Processes (CCIP), Business models for extending industry 4.0 towards the entire product life cycle (I4L),
Innovation Network aiming at Sustainable Smartphones (INaS) and Universities and Sustainable Development Goals (UniNEtZ).
More about the IQD here: https://www.qualityaustria.com/en/company/institute-for-integrated-quality-design/
Sustainability from the perspective of the circular economy was also picked up as a trend in the “Quality 2030 Future Radar” (Quality 2030 project) - background information on
the study can be found here: https://www.qualityaustria.com/news/qualitaet-2030-was-steckt-dahinter (in German language)
ResearchGate has not been able to resolve any citations for this publication.
Thesis
Full-text available
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The European Green Deal
European Commission. (2019). The European Green Deal. Retrieved from: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52019DC0640.
Circular Economy Action Plan. For a cleaner and more competitive Europe
European Commission. (2020). Circular Economy Action Plan. For a cleaner and more competitive Europe. Retrieved from: https://eur-lex.europa.eu/legal-content/EN/ TXT/?qid=1583933814386&uri=COM:2020:98:FIN.
Aus Verantwortung für Österreich
  • Bundeskanzleramt Österreich
Bundeskanzleramt Österreich. (2020). Aus Verantwortung für Österreich. Regierungsprogramm 2020-2024. Retrieved from: https://www.bundeskanzleramt.gv.at/ bundeskanzleramt/die-bundesregierung/regierungsdokumente.html.