Finding Value in Discarded Materials: Innovative Business Opportunities
For corporate leaders who view the carbon reduction goals of the Paris Agreement as an opportunity rather than a mandate, a new materials marketplace offers the chance to shrink environmental footprints while bolstering bottom lines.
Participants in the United States Materials Marketplace work with materials experts to comb through an online database seeking ways to reuse or exchange unwanted materials, from textile scraps to hydrochloric acid to off-spec wood flooring. Not only do they save money as they acquire cheaper raw materials and dispose of less waste, but they use significantly less energy and emit lower levels of greenhouse gases.
The cloud-based Materials Marketplace, which has been likened to an online dating site for unwanted materials, is a joint project of three business organizations that together represent thousands of companies worldwide: the U.S. Business Council for Sustainable Development (US BCSD), the Corporate Eco Forum (CEF) and the World Business Council for Sustainable Development (WBCSD). While materials matching has been tried many times before, several developments make now a good time for tipping it toward normal business practices. These include the growing corporate buy-in (demonstrated by these three global business organizations), the evolving sophistication of intelligent software and the momentum for climate change solutions coming out of the Paris Agreement.
As the materials marketplace expands globally, it will offer access to a growing database of reuse possibilities. Organizations interested in establishing circular supply chains or those with material solutions can use it to connect with colleagues and customers, explore new supply chains and test new markets. Like Airbnb and Uber, development of a materials trading center is an example of the transformative possibilities of the shared economy.
The U.S. Materials Marketplace pilot project, the culmination of 20 years of materials management efforts in the U. S., China and the UK by the US BCSD, has been recognized by the World Economic Forum as a finalist for its 2016 global “Circular Economy Digital Disruptor Award.” Its approach is an important step in the shift to circular supply chains, where waste is drastically reduced, if not eliminated.
Reuse Marketplace Gaining Momentum
The need for more efficient material flows gained greater urgency with the December 2015 Paris Agreement limiting average global warming to 2 degrees Celsius, compared to pre-industrial levels. Material reuse and recycling offer additional carbon-reduction strategies, in part, by reducing the emissions involved in extracting and transporting virgin raw materials. Measuring these reductions is possible using life cycle methodologies. If the UN Framework on Climate Change were to adopt material reuse as a carbon reduction strategy, it would greatly accelerate interest from all sectors in establishing the circular economy/industrial ecology approach.
But moving from rhetoric to reality isn’t easy. It requires a change in thinking for those accustomed to a linear path of taking materials, using them to make products and scrapping whatever is leftover. Forms of the circular economy have been kicking around for decades, under varying names, including by-product synergy and industrial symbiosis, typically at the local or regional level. Businesses have more incentive today to squeeze every gram of potential out of the materials they use. The marketplace helps them do that.
One market leader, General Motors, has generated nearly $1 billion in annual revenue by reusing and recycling its by-products, from scrap steel to worn tires. In the process, it avoided releasing more than 10 million metric tons of CO2-equivalent emissions in 2014.
Socially beneficial reuse discoveries can also enhance a company’s reputation. Applying its mantra that “waste is a resource out of place,” GM donated leftover materials from the production of Chevrolet and Buick sedans to an entrepreneur to create insulated coats that transform into sleeping bags for homeless people. Could material reuse help architects and designers establish shelters for the world’s surging refugee flows?
Another marketplace champion known for its creative reuse strategies, Nike grinds down worn athletic shoes to create sports courts and playground surfaces. GM and Nike are among the 23 multi-national companies that participated in a U.S. pilot project that began in summer 2015 to test the feasibility of establishing a U.S. materials marketplace. These companies, with 78 facilities, uploaded 150 materials—2.4 million tons—to the marketplace in six weeks. Sixty-eight matches were recommended by US BCSD expert staff, 19 of which were being developed when the first phase of the pilot ended on Aug. 31.
A second phase of the project launched Jan. 1, 2016, and we hope to have more than 100 companies involved by the end of 2016. Among those already participating are Alcoa, Armstrong World Industries, BASF, CH2M, Dow Chemical, Essroc, Fairmount Santrol, Goodyear, Greif, LafargeHolcim, Novelis, Procter & Gamble, Starbucks, Swisstrax, Tetra Pak, Veolia and Waste Management.
Advances in the Matching Process
The matching process has come a long way from the days when we were literally standing over spreadsheets analyzing how we could pair companies with materials they either needed or wanted to unload. Those trades are now taking place on the cloud-based marketplace platform in places such as Austin, Texas, where the US BCSD won a six-year city contract in 2014 to set up and run a materials marketplace. Because the database is confidential and secure, corporations and entrepreneurs are more confident sharing information about their material flows with city departments and other participants. Government agencies in Ohio and Tennessee are considering establishing similar state-level marketplaces.
In each case, a project team helps participants, from microbreweries to multi-national companies, tackle the technical demands of uploading materials and finding matches. Finding ways to include smaller players in a national effort has been a challenge. As a former editor and reporter for The Associated Press, a cooperative network that is owned and used by thousands of U.S. news organizations, I thought a similar cooperative approach could work for materials marketplaces.
When the AP began, newspapers accustomed to guarding their information and competing to get the news out first discovered the advantages of pooling their resources and sharing information. Just as small-town newspaper readers gained access to a world of news, companies participating in a co-op-style materials marketplace could tap into a tremendous data set of reuse opportunities.
To help make that happen, we are working on establishing a tiered cooperative model that would allow for big and small marketplaces to share their outcomes. As other countries implement their own marketplace programs, this co-op structure would connect them while allowing participants to retain control and ownership of their country’s data and activities. The WBCSD global network of 70 national business councils would help facilitate the expansion.
One challenge in identifying reuse opportunities has been that different people within a company have pieces of information they may not have had a reason to share. The marketplace allows companies to add multiple users so that creative material reuse becomes a company-wide effort. In a regional market, companies trying to avoid the expense of transporting unwanted materials over long distances are more likely to find a match nearby. Marketplace experts are also exploring the possibility of making longer-distance shipments more affordable by tapping into empty cargo spaces transporters move daily.
Looking ahead, as we seek to expand the materials marketplace, we’re encouraged by the interest we’ve received from numerous organizations, including the European Bank for Reconstruction and Development, the Group of Seven (G7) countries, the U.S. Environmental Protection Agency and Departments of Energy and State and the Ellen MacArthur Foundation.
Reimagining industrial systems in ways that mimic nature’s material flows creates opportunities to expand business approaches that are economically, environmentally and socially beneficial, paving the way to a more sustainable future.