Can asset management help industries to become more circular?
These days, the news is buzzing with topics such as climate breakdown, biodiversity loss, plastic soups, and many other environmental challenges. In parallel, more and more sustainability targets are integrated into international and national action plans. The dedication to building a sustainable future is seen in the governmental agendas, while also embraced by industrial sectors.
Almost half of carbon emissions are product-related
What current climate pledges can deliver remains insufficient without the shift to the circular economy. Study shows that even when the Nationally Determined Contributions are realized, a global rise in temperatures will still hit 3.2-degrees this century (Circle Economy, 2022). More well-thought and tangible actions are therefore deemed necessary in order to prevent a climate breakdown and transform the society into a resilient state. When breaking down the global greenhouse gas emission, it pictures that 55% of the emission comes from the energy system and the other 45% is caused by product-related activity. Without a doubt, the energy transition and energy efficiency are resorts targeting the former share of emissions. Concurrently, transforming the way we make and use products can lead our outcomes to 45% closer to a net-zero emission target (The Ellen MacArthur Foundation, 2019).
Linear economy causes irreversible crises
Many environment-related challenges can be sourced back to the existing wasteful use of natural resources, commonly referred as “ the linear economy”. This linear pattern of “make – use – waste” has created a system where the rate of resource extraction from economic activities acutely exceeds the Earth’s capacity for regeneration. This situation is estimated to deteriorate due to the population and economic growth.
Circularity is essential for industries
In order to tackle the systemic problems that originated from the linear economy, the concept of the circular economy (CE) was born. The CE illustrates a system where economic activity is decoupled from the consumption of finite resources through reducing resource consumption and improving resource productivity.Underpinned by the energy transition, the circular economy entails three principles: 1. Design out waste and pollution 2. Keep products and material in use 3. Regenerate natural systems
The industry has a critical role in leading the transition as 21% of product-related emission directly comes from the industries (The Ellen MacArthur Foundation, 2019). In the Netherlands, Dutch government sets an ambition to halve the resource use by 2030 and eventually achieve a waste-free economy by 2050. Part of the roadmap includes the transition agendas targeting five industries: plastics, consumer goods, construction, manufacturing, and biomass and food (Government of Netherlands, n.d.). Industrial processes extract and convert natural resources into materials, such as plastics, steel, and concrete, and manufacture products, which are used by consumers and eventually end up in waste streams. The whole processes generate substantial amounts of carbon footprint, pollute air, water, and soil when managed poorly, and lead to loss of biodiversity due to nitrogen deposition, open mining and monoculture farming (IRP, 2019). The shift toward a CE would inevitably require the foundation of major changes in industrial sectors.
The need to recycle and replace critical metals
Simultaneously, the force is also driven by various industries with the estimated skyrocketing market demand and the geopolitical debate for the so-called “critical metals”. Critical metals, such as cobalt, tungsten, tantalum, tin, indium, and rare earth metals, are heavily used in machine parts, bringing high risks of supply chain disruption to certain sectors. This affects industries in equipment manufacturing, electronic and electrical appliances, and transportation industries. Besides, the shift toward a clean-energy future also requires large quantities of critical metals (CSIRO, 2021). Production of solar panels, electric vehicle batteries, and green hydrogen requires various critical metals such as nickel, rare earth metals, copper, cobalt, and lithium (PBL, 2021). Europe could face a severe shortfall in the supply of these critical metals by 2030. In fact, it will require 35 times more lithium and 7 to 26 times more rare earth metals to realize the EU Green Deal compare to the limited use today (Gregoir & Acker, 2022). The looming supply gap for the critical metals poses uncertainties in the supply chains and potentially geopolitical problems, and therefore brings the questions of how to sustainably manage these critical metals to the table.
Besides the risks that come from a vulnerable material dependency, other challenges such as the evolving compliances, increasing carbon prices and waste disposal fees, and objectives for higher ESG performances have all become the business drivers in achieving a more circular business.
But how do industrial asset owners navigate to the optimal solutions responding to these challenges? What strategies shall be incorporated to future-proof more resilient businesses and to harvest the benefits of the circular economy?
When circularity is integrated into Asset Management objectives
As circularity gradually becomes a core requirement for sustainable businesses, industrial asset owners face multifaceted challenges and opportunities. Even though the discipline of asset management has yet limited engagement with CE, the growing demands indicate the need to incorporate circular values across asset lifecycles and more innovative solutions for industrial asset owners (Hanski & Kivikytö-Reponen, 2020).
Asset management (AM) diagnoses the business needs and provides holistic approaches to enhance asset performance, helping companies integrate profitable circular strategies that realize more value from the assets throughout their lifecycle.
Common circular strategies revolve around recycling and reusing materials and products. From an AM point of view, it focuses on extracting more values from the existing assets: machinery shall be designed to be long-lasting, easy to upgrade, repair and disassemble, modularizing parts for replacement, and reducing raw material use. Other AM strategies such as improved efficiency, smart maintenance, and digitalization elevate resource productivity and keep assets in service longer.
Building upstream innovation instead of better waste management
Comparable to the waste hierarchy, R ladder (Figure 1: R Ladder) is used commonly as a framework to evaluate circular strategies from the most favorable to the least favorable action. Among these 10 strategies, the utmost actions start from smarter and more efficient use of materials, followed by extending the lifespan of products, to the final resort – resource recycling and recovery.
Stork provides comprehensive circular solutions
With proven records, Stork provides solid solutions covering most of the levels on the R-ladder. Whether it is from the design phase, the maintenance and operation, or the end-of-life treatment, we help identify the optimal ways of material management for our clients. The optimal design could save unnecessary material use, especially the use of critical metals, and avoid premature asset replacement. Besides, Stork conducts the day-to-day maintenance work and enhances the material use through Lean Maintenance, Asset Performance Management 4.0, and digitalization solutions. When the end disposal is the only option, we recirculate the resource through recycling and energy recovery.
On top of the circular solutions, Stork has also built the Circularity Toolbox used for assessing circularity performance at a project level. This toolbox gathers material and energy flow data and builds the reference point to drive actions. The results would help clients define their resource and energy performance and monitor them along the journey of improvement.
One example can be found in the Stork Thermeq seawater cooler tube design. In this heat exchanging design, we switch from the use of copper-nickel and copper-zinc brass to Titanium. The titanium design greatly extends the heat exchanger lifespan to double, shifts away from the needs of critical metals, and halves the total material use.
Securing a resilient business growth
In a transition toward a more circular and future-proof business, industrial actors must take the lead. Asset management has a critical role to enhance the circularity of asset while realizing more values with a consideration of asset performance, costs, and risk. Stork provides the knowledge and tools to facilitate the transition toward a circular economy, hand in hand with our clients to stay competitive in a greening world.
“Asset Management & Circularity” is the theme for this year’s annual Trends in Asset Management conference organized for the 14th time by Stork in Utrecht on June 15th. Questions that are answered are: what does circularity mean for industry, what is needed to go from linear to circular, what needs to change, what role does circularity play in a sustainable industry and what are the critical issues. If you are interested, more information can be found at www.stork.com/TiAM2022
The annual conference on June 15-16 of the Institute of Asset Management (IAM) is also about Circularity. Stork will discuss the topic “Future-proof industrial assets with circular strategies”. In this presentation explains how circular strategies can be adopted in asset management by application of the 10R Strategy Framework and using the Circularity Toolbox. Three cases will be highlighted to illustrate the benefits of circular strategies to the asset owner. More information please check out their websites: https://theiam.org/events/iam-global-conference-2022/
About the author:
Erika Ming Kuo is a Consultant at Stork Asset Management Technology. Having a background in environmental engineering, her work had been focused on developing pollution treatment and waste management, including waste data analysis, air pollution control process design, and waste-to-energy facility design. Ms. Kuo obtained her master’s degree in the energy transition with the multidisciplinary focus on solving hurdles in the sociotechnical regime shift. She gained experience in advising both top-down governmental projects and bottom-up energy initiatives. Currently, she is developing material management solutions under the Stork Clean Industrial Asset Management.
- Circle Economy. (2021). Circularity Gap Report 2021. https://assets.website-files.com/5d26d80e8836af2d12ed1269/60210bc3227314e1d952c6da_20210122%20-%20CGR%20Global%202021%20-%20Report%20-%20210x297mm.pdf
- Ellen MacArthur Foundation. (2019). Completing the picture: How the circular economy tackles climate change. https://ellenmacarthurfoundation.org/completing-the-picture?ref=refind
- Government of Netherlands. (n.d.) Circular Dutch economy by 2050. Retrieved 2022, April 26, from https://www.government.nl/topics/circular-economy/circular-dutch-economy-by-2050
- IRP. (2020). Mineral Resource Governance in the 21st Century: Gearing extractive industries towards sustainable development. https://www.resourcepanel.org/reports/mineral-resource-governance-21st-century
- CSIRO. (2021, Feburary 19). What is a critical metal anyway? Retrieved 2022, April 26, from https://www.csiro.au/en/work-with-us/industries/mining-resources/Resourceful-magazine/Issue-21/What-is-a-critical-metal
- PBL. (2021). Netherlands Integral Circular Economy Report. https://www.pbl.nl/sites/default/files/downloads/2021-pbl-icer2021_english_summary-4228.pdf
- Gregoir, L. Acker, K. (2022). Metals for Clean Energy: Pathways to solving Europe’s raw materials challenge. KU Leuven. https://eurometaux.eu/media/20ad5yza/2022-policymaker-summary-report-final.pdf
- Hanski, J., & Kivikytö-Reponen, P. (2020, August 14). Industrial circular economy: a paradigm for sustainable asset management? VTT. Retrieved 2022, April 26, from https://www.vttresearch.com/en/news-and-ideas/industrial-circular-economy-paradigm-sustainable-asset-management
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