Challenges and opportunities for circularity in the B2B segment

Published June 17, 2021, 10 a.m. by Lara McCoy

Circularity is becoming more and more important as companies seek to mitigate their impact on the environment, but implementing circular practices often involves thinking about business and the economy in new ways. Spoon Helsinki’s Lara McCoy spoke to Tamara Veldboer, a senior consultant at Circle Economy, about the importance of circularity for the B2B segment.

What role do B2B companies in particular have to play in the circular economy?

In the business-to-business environment, you have a number of value drivers that drive the business case for becoming more circular. It offers an opportunity to enter new markets, it's a good driver for innovation. It's also a driver to attract and retain talent, because for younger generations, it's more important to have meaningful jobs. The circular economy combines both business sense and this sense of contributing to something that is at least not harmful, and ideally even positive, for the natural environment.

Additionally, with high value equipment, the business case makes it easy to think circular. Sometimes the circular economy is even already common in these industries. Reuse, refurbishment and remanufacturing has been around already for quite a long time.

And, in business to business, you have a more limited set of customers and suppliers that you're working with, so it’s easier to create long-term supply agreements that can incorporate the ‘as a service’ model than if you had to negotiate with an end consumer.

In some ways, the B2B segment can be seen as an example for other sectors, because some of the practices that are being applied there can be an inspiration to, let's say, the retail sector.

What are some challenges B2B companies face in increasing their circularity?

A common challenge that I hear is the reverse logistics argument. If companies want to close the loop on their products, there's challenges with, for example, data privacy. Some customers might not be willing to return the equipment, because data might be stored on it. Or, if it's a multinational company, and they have their products spread out all over the world, sometimes there's a cross-border movement challenge, because of different rules and regulations. If something is deemed as waste in one country, there can be regulations saying that the material is not allowed to be refurbished or repurposed or remanufactured, or that it's not even allowed to leave the country.

Another challenge is that of customer perception. You want to get the customer to go from buying a product that they will get ownership over to a service model where you basically only gain access to the functional use of a product.

And then on the supplier side, one big challenge we see is that it's hard for suppliers to ensure there's enough supply of reused or recycled parts. There’s not always the recycling infrastructure or a strategy in place to assure that manufacturers will be guaranteed a supply of reused materials. So that is also a challenge that needs to be solved.

As long as we're in this throughput model, where in the end, it's all still about reaching your sales targets and pushing out as many products as we can, then extended-use models also will be very hard to adopt. B ecause it also requires a company to shift its complete business model from one where every time you sell a product, you get a certain chunk of revenue, to one where you have more continuous revenue streams, but spread out over time. This requires investment

What are some things that B2B companies can do to improve their circularity even in the face of all these challenges?

In January, PACE, the Platform for Accelerating the Circular Economy, launched the circular economy action agenda for capital equipment. There they propose a vision for circularity and capital equipment that focuses on three phases: the design phase, the use phase and the end-of-use phase.

So, already at the design phase, make sure that you create a product with reuse in mind. There's a statistic that says 80% of a product’s impact during its lifecycle is determined at the design stage. So, if you can do anything now, it's get on board with your design team to make sure that any new product that's going out there will be designed with circularity in mind.

Then, in the use phase, make sure that your products or components are used as long as possible. That can be through the use of digital technology, with these ‘as a service’ models and also by offering preventive maintenance or even predictive maintenance, so that you can extend the lifetime. This means that you don't need to put new products on the markets, which has a positive impact on material use. It may also be possible to take back the product and use the components in a newly designed product.

And then the third part, end-of-use. We want to prevent in all cases products ending up in landfills or being sent to incineration. So, make sure that your products are returned or explore options with potential recyclers or logistics companies to make sure your products that are on the market come back into your sphere of control. Even at the design phase, the design team could start speaking to recyclers to learn what challenges recyclers have or the materials they can recycle to make it easier to design for circularity.

What are some initiatives that are promoting circularity in the B2B sector?

One is PACE. It's an organization that drives the circularity agenda more broadly and puts it on the global stage. A business collaboration example is the Capital Equipment Coalition, where a group of nine companies in Europe and five in North America are coming together regularly to address their challenges and share best practices and develop their thinking on this topic.

There is also the Circular Electronics Partnership. It has mapped the full value chain with various stakeholders in the sector and developed a roadmap and workstreams to see how they can make their whole value chain circular. There's also a similar circular car initiative.

What I personally see these initiatives as being useful for is that you bring the players around a commonly defined sector or industry together, that then shape this new vision of what it means to be circular from the ground up, which can then drive the transformation of an entire industry. At least it develops a shared vision that gives guidance for targeted and collaborative action.

It sometimes feels like it's all going very slow, or like this vision is so far away. But at the same time, you do need it as a sort of starting point, that you at least have this dot on the horizon that you can work towards. These circular concepts have been around for a long time. We know what to do. It’s more about deciding where we take the first step. But let's not wait.