As part of the launch of the Business as Unusual book (click on badge on left to get to the Amazon page) by Thomas Saueressig and Peter Maier that we helped conduct interviews and research for, we will share excerpts from each of the 10 chapters/300 pages, and also give you a “behind the scenes” view by sharing snippets of some of the over 100 SAP, customer and partner video interviews that ended up in the book.
Here are some excerpts from the seventh Megatrend – Circular Economy
In the 2016 science fiction movie Arrival, linguist Dr. Louise Banks is recruited to help understand seven-legged aliens who communicate with inky circles. Once decoded, the circles communicate their cyclical worldview where the past, present, and future can all be seen at the same time, bending the linear flow of time, upsetting the principles of causality and breaking Ludwig Boltzmann’s unbreakable laws of thermodynamics.
Circles show up in many spiritual settings. In Christianity, three interconnected circles represent the Holy Trinity. In Islam, the circle is a symbol of the sky and infinity. Mandala is Sanskrit for “circle” and plays a major role in Hindu and Buddhist culture. The ouroboros—the snake eating its own tail—comes from Egyptian mythology.
Modern humanity has institutionalized circular thinking with the preface “re-.” Terms like return, recycle, refurbish, and re-commerce are increasingly common in today’s digital commerce. But they have been a long time in the making. The Japanese have been reusing their paper since the eleventh century…. In some ways, humanity has made significant progress. Aluminum recycling is a success story: Nearly 75% of all aluminum ever produced is still in use today. Recycling aluminum only requires around 5% of the energy needed to mine the bauxite and make new aluminum.
You may be shocked that, after millennia of our obsession with circles, only 9% of the 100 billion tons of material produced globally is recycled every year. Per Stephen Jamieson, global head of circular economy solutions at SAP: “This essentially means 91 billion tons a year of material is being left to a fate in the natural environment every year. And we continue to extract another 91 billion tons of materials every year to produce brand new versions of so much.”
Jamieson likes to use the expression “dark side of the moon” to explain how little we have focused on how much “stuff” we produce, consume, and waste on our small planet. “The challenge with the linear economy today,” he said, “is that the moment that something is sold, the lights go out and there is little visibility on the whole flow from point of sale through to plastic trash floating in the ocean.”
Jamieson said he believes we need to take a “vertical” approach (i.e., by industry and subindustry) to the type of major materials we use: “Each material has its own role in the circular economy and has its own challenges and dysfunctions. And, as you’d expect, each material needs to be treated with its own set of solutions. Take textiles: To produce cotton clothes, we use 250 billion tons of water annually.Yet, 85% of that fabric goes into landfills after only five or six wears.”
At least cotton decomposes in landfill, other than clothes that are made from synthetic fibers that can last for centuries. SAP has identified and catalogued other materials— plastic, food, building materials, electronic components, and batteries—that create a significant waste impact and an opportunity for SAP to work with customers on intelligent solutions for more circularity.
Anja Strothkämper, vice president for agribusiness and commodity management at SAP, agreed with the possibilities of more sustainable agriculture. “Crop rotation and variation is indeed a way of being more natural about the soil rather than applying tons of fertilizer or crop protection. The food industry knows that the same crop tastes the same and the consumers like the acquired taste. But I think the industry is getting more flexible and sees an opportunity with customers who don’t fancy crop protection chemicals. If we buy locally and accept or even seek variation in taste, then the industry can offer a compelling variety of fruits and vegetables. I think this is all changing. Paradigms are changing.”
Jamieson cited progress in SAP’s customer base:
- Clothing retailer H&M has been piloting clothing rental models in their stores in Stockholm, Sweden. While its business has historically been in product sales, the company is experimenting with a new business model.
- Queen of Raw is a marketplace that gives a new lease of life to sustainable materials, including organic cotton, peace silk, faux leather and fur, and quality deadstock fabrics.
- Consumer goods giant Procter & Gamble uses SAP’s asset management solutions to improve or reduce the wastage out of diapers. It is looking to make diapers with less plastic and to develop new ways to recycle a classical one-way product.
Matt Reymann, global vice president of the chemicals industry business unit at SAP, agreed with that materials-based approach, and noted that you’re more likely to find surprises where you don’t expect them. For starters, Reymann said, the chemicals industry gets a bad rap, which it doesn’t fully deserve: “In the past, chemicals have been considered a part of the problem. But they can also be a part of the solution moving forward. I look at the 2021 Nobel Prize in chemistry. It was given to two gentlemen who discovered a new type of catalyst. It took them two decades to be recognized, but we now have improved ways to make medicine and pharmaceuticals, or even solar cells.”
James Sullivan is vice president of sustainability management and strategy at SAP…Sullivan cited research on consumers’ willingness to spend as indicating mostly indifference to product sustainability in the past. Now, he said, a real shift has occurred, driven especially by the younger cohorts: “We now have data that shows that products marketed as sustainable are growing much faster than conventional products in about any category that you look at. What’s more, the margins for these products are higher. The data have been robust through COVID, and robust across generations. Generations Y, Z, and younger are pushing change, and they’re not even attheir full spending power yet.”
Sullivan (also) explained: “Consumer product companies are getting a handle on their scope 3 emissions and product carbon footprints especially for their upstream agriculture ingredients. Raw materials like palm oil from verified sustainable and non-verified sources often get mixed after the first stage of the supply chain; the origin information will be hidden or lost. Unilever ran a proof of concept for Green-Token by SAP in Indonesia. They sourced 188,000 tons of oil palm fruit from their suppliers, and our solution created tokens that mirror the material flow of the palm oil fruits through the supply chain to track unique attributes and link them to the oil’s origin”
The circular economy is not just about compliance—it’s also about opening up opportunities for new products and revenues. Examples come from Eastman, based in Kingsport, Tennessee, which is not only innovating at a fever pitch in its labs, but also deploying promising technologies at scale. One focus area is the mechanical recycling of plastic waste, retrieved from home recycling bins and sorted at a recycling center. Next, the material is shredded, melted, and re-formed as plastic pellets to make new products. Mechanical recycling works well for items that are marked with resin identification code (RIC) 1 or 2—products like clear, single-use water bottles. The system doesn’t work as well with RIC 3 to 7 products like plastic eyeglass frames, which often end up in landfills or incinerators. In 2023, Eastman will complete construction and begin operation of what will be one of the world's largest plastic-to-plastic molecular recycling facilities at its site in Kingsport, Tennessee. Through methanolysis, this world-scale facility will annually convert 100,000 tons of polyester waste that often ends up in landfills and waterways into durable products, creating an optimized circular economy.
Aldo Noseda is the chief information officer (CIO) at Eastman. While he oversees IT, he has a much broader mandate: to drive digital innovation at the century-old company, once part of the iconic Eastman Kodak family. Noseda has had a long career in the chemicals industry: He worked at Monsanto, now part of Bayer, for 27 years and can easily explain complex concepts like “mass balance.” Noseda then explained how Eastman is also transforming the world of fashion with its Naia™ Renew cellulosic fiber “It’s a pretty cool product. It’s very similar to silk, so it has a luxurious, cool touch which glides smoothly over the skin, even though it’s synthetic. Naia™ Renew is an innovative solution for the fashion industry’s sustainability— enabling circularity at scale. The fiber is produced from 60% sustainably sourced wood pulp and 40% certified (mass balance approach) recycled waste plastics. Naia™ Renew is a beautiful product, created from hard-to-recycle waste materials that would otherwise be going to landfills or waste incinerators.”
Beyond SAP’s vision and our broad portfolio of sustainability and circularity solutions, we tap into the creativity and innovation of a vibrant ecosystem of startups for whom circular thinking is foundational to their products and services. For example, we’ve worked with Edinburgh-based data analytics group Topolytics and its WasteMap platform that blends mapping with machine learning. This company is on a mission to make the “world’s waste visible, verifiable, and valuable.” We have jointly created Scotland’s Waste and Resources Map as a showcase that generates a live view of materialsthat flow into, within, and out of Scotland.
Several startups in the SAP.io Foundries program cohorts are focused on the circular economy. For instance, Algramo, whose name translates to “by the gram,” is based in Santiago, Chile. This company works with consumer packaged goods companies like Unilever to rethink the packaging and refilling of home and personal care products, pet food, and other products usually sold in plastic containers. Algramo is working on a system of vending machines that refill reusable smart containers using radiofrequency identification (RFID) and mobile apps to track consumption, usage patterns, and the container lifecycle.
Dame Ellen Patricia MacArthur is a highly decorated sailor. In early 2005, she broke the world record for the fastest solo nonstop circumnavigation. She completed her 27,000-mile journey in 71 days, overcoming an array of bad weather and other technical challenges. Long-distance sailing requires careful preparation and logistics: You must take everything you’ll need with you because you can’t just pull over at the next supermarket to pick up the things you’ve forgotten or run out of. She described how months of isolation on a self-contained boat made her see the parallels to our planet: Earth may be powered by the sun and not by the wind, but we equally need to make do with what we have “on board.” Take this perspective, and you can clearly see that our linear lifestyle of “take, make, use, dispose” can’t work in the long run.
Jamieson explained the vision that the foundation has initially developed for the fashion industry but that can be applied to other material cycles:
- Virgin resources are minimized by increasing the use of existing products and materials.
- By-products are minimized and treated as valuable materials.
- Recycled content is used to protect finite feedstocks and to stimulate recycling.
- Virgin input comes from renewable feedstocks using regenerative production practices.
- Renewable energy is used for manufacturing, distribution, sorting, and recycling of products.
A twin of this post will include video excerpts from conversations with many of these executives so you can put a face and voice to those in the book.
Other posts on the other chapters to come.
