||HVM 2008 at Cambridge
A Conference on Closed Loops and Sale of Service, which the Circular Economy, as it later came to be known more widely. The foci were on efficient production, better materials and new business models.
Summary of HVM CLASS Conference Discussions
The conference began by stating that the overall aim was to increase prosperity of a net positive kind, while reducing net use of finite natural resources. This tends to equate to an improved quality of life.
We saw that the 'anthrosphere' was in a 'closed loop' with the 'ecosphere'. This is the statement that man is inexorably connected with nature, and that to all intents and purposes the 'natural world' is finite, as we are disconnected by great distances from other mineral resources in the universe. We are working in a closed system fed by the sun's energy. Delegates were shown a diagram showing resources taken out of the ground in one place, ending with a picture of a landfill site somewhere else. This system was patently based on 'open loop' principles, and in contrast to the obvious global 'closed loop' that had been shown immediately prior.
The concept that 'closed loops' could preserve the capital or value in materials and products was then laid before delegates. Two speakers separately made the point that the tighter and shorter those closed loops, the better, but with stipulations that we shall mention below. Clearly, if we tend to close loops at the level of finished products, this tends to be preferable to closing loops, for example, by mining landfill sites at the end of the usage chain.
It was noted that closed loops within plants and factories were highly desirable, such as in the use and reuse of water. Water flows within closed loops for decades within domestic central heating systems, for example, and this principle can be applied with great effect to industrial situations. The anecdote of Edward de Bono was given, where he suggested to an industrialist that if they sent water output from the plant into the river upstream of the plant, then this would ensure incentives for processes to clean up the water being used. In Austria, it is common for management and staff to live slightly downstream of their factory outputs on the river. It was noted that regulations tend to force more reuse of materials within plants.
In the packaging sector, re-use was described as working well in closed loop shipping, especially for bulky, high value items and when suppliers and customers are grouped near to each other. Similarly to the ideas presented in the automotive 'sale of service' talk, more costly packaging which lasts much longer was shown to be more economic, whilst clearly more sustainable.
A long list of benefits of reusable packaging were presented. But the speakers covering this suggested that savings and benefits must be carefully and 'holistically' assessed, case-by-case, ideally modelled for all estimable parameters and tested in practice.
The example of the decline in doorstep delivery in electric floats of milk and other goods was given. Bottles made of glass used to be taken back and multiply reused; now, we use and throw away polythene cartons whose production is resource costly. The price of delivered milk was shown to have diverged from supermarket carton milk in the years from 1995 to 2004.
Reverse logistic chains were discussed, and said to be made more difficult by variability which leads to high labour inputs, inventory, poor plant use and lower recovered value.
Many categories of ownership transfer models were discussed, which provide incentives for reducing net use of resource by recycling and reusing materials and products. Examples were 'mandatory take-backs', 'deposits', 'buy-back', 'lease' and 'service' models. In the service model, which was discussed at various stages of the conference, ownership remains with the supplier. The customer then tends to take more care of the used items, and the supplier will tend to provide the cheapest and longest lasting way to meet the service requirement (calculations for the supplier involve 'Total Cost of Ownership'). This way, interests are aligned so as to avoid use of resource.
The case of beer was discussed. Here, there are several ownership models extant for a single commodity: pub retained glass vs festival bought glass, kegs and bottles and so on.
Closed loops were said to be just one way to improve resource productivity. One can reduce or eliminate use, reuse, recycle or just reduce impact of disposal. Some methods had apparent tensions, such as investing more materials into products in order to extend product life. This was discussed further later in the context of plastics.
It was suggested that businesses should "systematically and persistently seek opportunities for savings". This might involve planning, trialling, monitoring and reviewing while searching for new opportunities. Not unnaturally, it was felt that independent advice could lead to great improvements that internal thinking might miss.
In a talk on lean thinking, 'work' and 'waste' were discussed. If customer needs were met better, value was being added. Processes that did not add value, but allowed the supplier to meet regulations were a necessary other aspect of 'work'. Any other activity is 'waste'. An example was given where a company performing an analysis of work and waste showed that about 60% of effort being put in was "non value-added work or plain waste".
Human factors in service-provision were seen as crucial: the interface between people, procedures, machines and the environment. With a persistent rational approach, great gains could be made.
A pivotal talk on sale of service with an example in automotive, suggested that: 'being less bad is no good'. This refers among other examples, to the continual improvements in efficiencies of petrol and diesel driven, steel-based vehicles (which are highly technologically mature). The obvious basis to this statement is that the number of vehicles shall continue to rise, and that resources used in this manner shall eventually run out. That is, technical resource productivity is necessary but not sufficient in solving global environmental problems. We do need closed loops too, and energy efficiency will be paramount in this, which was the subject of another, electronics sector talk.
It was also argued that vehicle technology is no longer fit for purpose, nor the process by which private transport is provided for society.
With sales of product, if one "makes more money from selling a car, one makes more
money from selling more cars. A company that sells a (private) transport service rather than vehicles has a financial interest in reducing cost and maintenance and increasing reliability, ownership cycle and product life, as well as
energy efficiency. Thus currently opposed interests of society and manufacturers are aligned by sale of service instead of product. Longevity becomes a competitive advantage and the market becomes self-regulating. Problems exist in switching, as this must involve the entire supply chain, and design becomes more crucial".
A talk on industrial symbiosis suggested that there were projects extant which greatly reduced waste. Relatedly, waste was seen as a business opportunity that is growing. If one can reduce the cost of recycling and improve the quality of recycled output, then the opportunity grows further. Recycling was said never to be 100% efficient, and pirating of products and materials was stated later to be a real problem for closing loops. The point that reprocessed materials often had reduced strength and uses was made; environmental benefits had to be in a compromise with mechanical properties.
There is no single approach that is right for every situation. Later speakers asked the audience to make sure that they were backing approaches that, all things considered, were having the desired effect. They challenged the audience to be wary of fogs of commercials making false claims that amount to "green-washing", the popular press offering misleading, out-of-context anecdotes, and to appealing but sometimes emotive rather than rational comments of certain other voices.
The organisers CIR hoped that the forum and future fora should provide a place for knowledge to be exchanged, that might enable us to more towards our stated goals. Please see the below link or call O12233O35OO for more information about 2008 Conferences, which we hope all past delegates will attend.
Past HVM Conferences - Programme Talks and Video Podcasts