Circular Economy in Project Management

Revision as of 19:58, 5 May 2023

In recent years sustainability and waste reduction have been some of the main focuses in the application of new projects, programs and design of portfolios in manufacturing industries. This is due to the need of decreasing current environmental impacts and securing minimal future impacts, as project management is mainly being considered sustainable if it achieves long-terms benefits ^[1]. This can be problematic for large-scale companies, as they are more difficult to change structurally. However, the long-term benefits can be achieved using circular economy. Circular economy is a method used to mitigate the environmental impacts by using materials much more efficiently ^[2]. It works alongside the corporate strategy and business development, which is used in project and portfolio management to reduce waste by introducing new methods of reusing, refurbishing, repairing, recycling, leasing, and sharing existing resources that prolongs the products life cycle ^[3]. For that reason there are many positive application of circular economy for P/P/P managers, as they can include it in both the design of new projects or to reinvent their current products to make them part of circular systems. This wiki will describe why a P/P/P manager should use circular economy and the decisions needed to be considered in application of implementing it. However, as with all other systems, there are limitations to circular systems such as the energy needed for new systems to be implemented.

Circular economy definition

Butterfly Diagram, Ellen MacArthur Foundation ^[4]

Circular economy is an approach that moves away from the linear system of producing and consuming, and instead goes towards a circular system of reuse and recycling ^[3]. Linear systems are the most common to use, as they do not have to make any logistics in getting the materials back. This will simplify a program or project for a P/P/P manager, as it decreases costs and trouble with setting up more complex manufacturing systems. However, this results in the materials going lost after the use of the consumer, which keeps the need of new virgin materials. With a circular system it is instead possible to reuse the materials that are already consumed and are in the system, which creates many opportunities to make money and end the overconsumption and extraction of new material. This supports portfolio management, as one of the key principles in portfolio management is to ensure the strategic objectives are fulfilled, which is important due to organizations often undergo strategy redefinition as a result of pressure for greater profitability, changing market conditions, balancing the needs for change with the needs of ongoing operations, and so forth ^[5]. Circular economy can help accomplish these things as it creates new market opportunities, whilst still aligning with the corporate strategies.

Biological cycle and Technical cycle

Generally, a circular system is the process of bringing products back into the system to limit the need of new virgin materials. Circular economy can be differentiated in two systems, one being the biological cycle and the other being the technical cycle. This differentiation is important due to the types of circular system that could be implemented in a project or portfolio. In the biological cycle we engage with the consumer, whereas the technical cycle we engage with the user. A biological cycle consists of products such as food, chemicals or biological products that are not possible to become a new product by its own. However, they can become soil and be used as a biological material for the production of new products. A techical cycle consists of products that are made of extracted materials and do not biodegrade. This could be electronics, plastics, and everyday products. The materials in the technical cycle are those that are most attractive to recover, as they most often are very valuable, due to the price of acquiring new materials. The biocentric cycle products are however also valuable in another sense. Essentially we have broken the cycle of bio-products regenerating as soil, as we no longer focus of putting materials back to earth to ensure sustainability. In the investigation of products, one of the key challenges for some P/P/P managers is that they currently are facing a mix the biological products with the technical products, which makes the biodegradability useless. This is for instance the case with textiles. This problem decreases the ability of recycles and decreases the sustainability of manufactures. Due to this differentiation it is important to analyse the products in a portfolio in order to identify what their products include and which type of cycle is implementable. Having this overview makes it easier to understand how to move towards a greener profile and a system that makes better use of reusing and recycling. One way of doing so is having a focus on the Portfolio Life Cycle, which is a method of processes used to collect, identify, categorize, evaluate, select, prioritize, balance, authorize, and review components within the project portfolio to ensure that they are performing compared to the key indicators and the strategic plan ^{[6] [5]}.

As seen on the picture of circular systems, there are in each cycle many different options of circularity. These options are on different levels and are more expensive the more complex they are. This is due to the labor an manufacturing costs being added to the processes. Directly linked to the technical cycle we have the following options, which is a table describing the different circular systems and the benefits of using them ^[7]:

Which type of option to use?

It could be easy to think that directly recycle is the most optimal solution. However, having a finished product is of most value. That is due to the product having the original costs of manufacturing as a value. If we would to recycle, then we would strip apart the product and be left with the raw materials. These are in most cases of less worth than materials that have been processed. For that reason, it is critical to analyse the products in the portfolio and create a project management that ensure the value of the products are as high as possible. It is also important to know the capabilities of your company or project and to know if you have the possibilities to implement complex systems or if you only can create more simple systems. Other methods of doing things are through co-operations and contracts with other companies who have the expertise to recycle or reuse. Working with other companies and outsourcing processes makes it less problematic for the company to reinvent their processes and integrate new systems.

So for a P/P/P manager going into circular economy, then you first need to know if your products belong to the biological cycle or the technical cycle. Then you need to know which type of product you are working with in regard to which type of need there are in the market for a circular system. Lastly, the manager should choose which type of circular system to be implemented.

Why is circular economy important?

Creating a circular system is very costly, both due to the labor and ressource cost of setting up the system, but also all logistics and data needed for the system to work most effective. So why would you invest in such a system, if it is that expensive?

Essentially there a many great advantages of creating a circular system. With circular systems it is possible for the company to reach new market opportunities. This is done by having either a greater variety of product services, but also the possibilities for customers with less resources to buy the products that may have been refurbished for less money than buying a new product itself. This may result in attracting new types of customers, which will increase profits. Other than the economic advantages, there will be many environmental benefits. You may reduce environmental pressure and stimulate innovations in eco-designs. This will help the brand of the company, which may attract more customers and make the company more competitive. Introducing more options for the customer and providing better services for already sold products improves the overall image of the company and circular systems help integrating a society that relies less on consumption and more on innovation.

Circular economy implementation in PPPM

MSP 5th edition, O'Reilley ^[8]

Implementing circular economy can be a difficult process, especially if you as a manager have limited resources. However, there are some general guidelines of how to approach the subject. These guidelines are very much oversimplified, as all projects are different and for that reason a project manager needs to first understand which project type they are working with before trying to use the frameworks presented. Knowing which type of project a P/P/P manager works with, then the MSP framework ^[9] can be used to implement circular systems, as it gives a P/P/P managers clear overview of the different elements that needs to be taken into account when doing a project ^[10]. The way it works is to analyse each circle mowing from outwards and inwards. These are requirements in order to fulfil the needs of the inner circle.

As the framework can be comprehensive to use, we can make the strategy of implementation as a 3 step plan:^[11]

1. Create plans and goals
2. Provide knowledge to educate your staff
3. Innovate, Select and Engage

Create plans and goals

Whenever a company have to change structurally an action plan and setting goals are important. When creating a plan for implementing Circular Economy in a project management perspective, then the following questions might help:

• What is it you are trying to achieve with a circular system?
• Which type of circular system do you want?
• How will the logistics work?
• How will you change the internal manufacturing processes to support the system?
• How will the implementation affect the company financially?
• What are the risks of implementing the system?
• Who will be in charge of the implementation?

Having answered these questions should help the company to reflect on the method of approach. The goals that need to be set should be smaller milestones that makes it easier to see the changes overtime and not risk overseeing any potential issues or problems. For setting the goals and analyzing the changes it could also be helpful to make use of the PDCA: Plan, Do, Check, Act. This is a contentious process of improving and in a circular system, there will always be something to improve.

Provide knowledge to educate your staff

As in every project the employees affected by the changes needs to be involved and understand how and why the changes are happening. To do so, it is important that some key personal of the company are in charge of the implementation process and educate the staff properly in the changes. In this process it is important to understand what type of employee you are dealing with and how to approach them. In this process personality tools can be used, such as the Nine Enneagram Types.

Having all employees on board and sharing knowledge between departments helps decrease the risks of failure and helps improve the process as more inputs for success will be included.

It is important to start the education of the staff in the beginning of the project.

Innovating, selection and engagement

When establishing a circular economy, it is important that it supports the business strategy. There are three pillars of Circular Economy for business purposes: Innovation, Selection, and Engagement.

1. Innovating is super important in a circular system. It can both be in regard to products developed in the company, but it can also be the organisation structure that innovates and changes. Innovation is important to keep developing as a company and to motivate the employees in the company. Without innovation the productivity will decline and it will impact market share, revenue and customer satisfaction.
2. Selection is the process choosing how and what can be part of a circular system. The products and ressources in the company needs to be assessed in order to understand how they can be part of a circular system. In the selection process it is also important for the company to evaluate which capabilities they have and the complexity of a system they can implement. Some questions that needs to be answered are:
   1. How will logistics work?
   2. How will the internal processes look like?
   3. Which departments needs to be involved?
   4. What is the cost?
3. Engagement is the process of getting all relevant stakeholders and processes included in the implementation of the circular system. Everyone needs to be on board and understand what their responsibilities are. To engage stakeholders many different tools can be used. A clear vision is important.

Difficulties companies could face when implementing circular economy

In the implementation of circular economy, it has been pointet out that one of the main issues and barriers is the lack of awareness, which is needed before starting planning the strategy and processes. ^[12]. For that reason, it is important for the people responsible for the implementation of the Circular Economy to start by making all the correct assessments and analysis of the current state of the company, before trying to implement any changes.

Circular economy is not something many departments are very familiar with, so giving them the understanding of the process can be difficult. These barriers can be overcome, but that requires for the planning and education of the staff to be well executed. Overlooking any aspect of a major change such as a circular system will lead to flaws of the system and potential failure.

Circular economy limitations

No system is perfect, not even a circular system. Some of the main concerns about circular economy are rebound effects in regard to climate impact. ^[13]

• Rebound effects: When creating a circular system, there will be a lot of added processes to the complete system. An we know that in order for a business to grow, consumption must grow. These new processes all require energy, due to the laws of thermodynamics. This means that even processes trying to reduce the waste of resources needs to consume other resources to do so. This will create environmental impacts, as there will be an increase of emissions. For that reason it is important to make a comparative analysis of the current system and a circular system. If the circular system has too many disadvantages compared to benefits, then it is not feasible to invest in.

Final remarks

Circular economy is a difficult transition into a more sustainable management approach. It requires for a P/P/P manager to understand the current state of company and the portfolio. However, using circular systems instead of the current method of using linear systems creates many opportunities for a manager, as it is possible to reach new markets, gain more profits and minimise waste. So the status quo of consumption and manufacturing will be improved drastically.

Annotated bibliography

• Ellen MacArthur Foundation. Circular Economy Introduction. Organization

The Ellen MacArthur Foundation is an organization dedicated to implementing circular economy and promoting the positive benefits. They create evidence-based original research and work with businesses, international institutions, governments, cities, universities, non-governmental organisations, innovators, and many others to learn and understand the opportunities. They have created the well know Butterfly Diagram, which is popular to use in understanding circular systems. Their websites includes much information to better understand circular economy, including a video of two members who describe the butterfly diagram and the application of it.

• Circular Innovation Lab. The Technical Cycle. Organization

Circular Innovation Lab is a danish think tank that is trying to transition the world into based on more circular economy. They collaborate with governments, agencies and international organizations trying to create more circular solutions. They mainly focus on four areas, those being textiles, electronics, food, and plastics. The reference was used to understand the technical cycle and the biological cycle, which are the core foundation of the butterfly diagram developed by the Ellen MacArthur Foundation.

• Project Management Institute Inc.. Standard for Portfolio Management (4th edition) and Standard for Project Management (7th edition)

The books present two aspects of management, those being the portfolio and project management. The books were use to get more insight to how P/P/P managers have to react in regard to project and structural changes. With circular economy the companies have to make drastic changes to the logistics whilst sill aligning with the companies purpose. From the books it was acknowledged the methods a manager can make use of in order to analyse their products. Additionally, the books describe the differences between project and portfolio management, which was used to understand how circular economy fits within their scopes.

References

1. ↑ Circular economy in Project Management, Prosense Consulting, https://www.prosense-consulting.com/en/sustainable-project-management-brings-circular-economy-to-life/
2. ↑ What is a circular economy?, United States Environmental Protection Agency, https://www.epa.gov/recyclingstrategy/what-circular-economy
3. ↑ ^{3.0 3.1} Circular economy Introduction, Ellen MacArthur Foundation, https://ellenmacarthurfoundation.org/topics/circular-economy-introduction/overview
4. ↑ Butterfly Diagram, Ellen MacArthur Foundation, https://ellenmacarthurfoundation.org/circular-economy-diagram
5. ↑ ^{5.0 5.1} Standard for Portfolio Management (4th edition), Project Management Institute Inc., https://app-knovel-com.proxy.findit.cvt.dk/web/view/khtml/show.v/rcid:kpSPME0033/cid:kt012S0XL2/viewerType:khtml/root_slug:standard-portfolio-management/url_slug:title-page?&b-toc-cid=kpSPME0033&b-toc-root-slug=standard-portfolio-management&b-toc-title=Standard%20for%20Portfolio%20Management%20%284th%20Edition%29&b-toc-url-slug=introduction&kpromoter=federation&view=collapsed&zoom=1&page=1
6. ↑ Project portfolio management techniques, Project Management Institute, Inc., https://www.pmi.org/learning/library/project-portfolio-management-techniques-7624
7. ↑ The Technical Cycle, Circular Innovation Lab, https://www.circularinnovationlab.com/post/the-circular-economy-basics-series-the-technical-cycle
8. ↑ MSP (5th edition), O'Reilley, https://www.oreilly.com/library/view/managing-successful-programmes/9780113316786/bm01.xhtml
9. ↑ Management of Portfolios, OGC, https://ebookcentral.proquest.com/lib/dtudk/reader.action?docID=4462746&ppg=1
10. ↑ MSP Framework, O'Reilley, https://www.oreilly.com/library/view/managing-successful-programmes/9780113316786/chap07.xhtml
11. ↑ 3 ways of implementing Circular Economy, Impacx, https://impacx.io/blog/circular-economy-business/
12. ↑ Applicability and Limitations of Change Management for Circular Economy in Manufacturing Companies, Niclas-Alexander Mauss, Dominik Bühner, Johannes Fottner, https://reader.elsevier.com/reader/sd/pii/S1877050922023766?token=B3873F9B40A3CA286032A7D07C2020AE044EB37A1AB555C37F4BDB5F8E4AF25C5D4DFCB1D37D5C38115001EF4ADEAB56&originRegion=eu-west-1&originCreation=20230505145325
13. ↑ Circular Economy Disadvantages, Jouni Korhonen, Antero Honkasalo, Jyri Seppälä, https://www.sciencedirect.com/science/article/pii/S0921800916300325

Key materials used through the wiki:

• Project Management. The standard for project management, 7th Edition (2021)

• Portfolio Management: The standard for portfolio management, 4th Edition (2018)

• Portfolio Management: Management of Portfolios (2011 Edition)