Circular Economy in Project Management

Abstract

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 . 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 . 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 . For that reason there are both positive application of this for P/P/P managers, as they can include this in their design of new projects or to reinvent their current products so that they can create circular systems that makes it possible for already sold products to be more sustainable. 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

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. 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 saves a lot of money 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 of 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 , which is one of the things that circular economy can help accomplish.

What is circular economy?

Generally, a circular system is the process of bringing products back into the system to limit the need of new virgin materials. We can differentiate Circular Economy 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 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 to the producers, 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. One of the key challenges that we currently are facing is that we 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 companies 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. 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 :

• Leasing
  • Leasing is the option for a user to use something without owning it. This is ideal for customers who do not need the product for a long period of time.
  • Leasing could increase the amount of users, as some might not have the finances to own the product, but can instead rent it.

• Sharing
  • Sharing is the collaboration between users. By sharing products the usage of the products increases and thereby maximising the utilisation and life span of the product.
  • Sharing is mainly focusing on the consumption phase rather than the manufacturing.
  • Sharing makes it possible for companies to make money on fewer produced products.

• Repairing/Prolong
  • Repairing is the process of fixing minor issues in order to prolong a products life cycle.
  • Repairing is the cheapest option for manufacturers to resell already sold products.
  • Having repaired products could open up second hand markets, which could increase profits.

• Reusing/Redistribute
  • Reusing is the option of reusing a material or component in a new product. This could be products containing high-quality material.
    • Examples of these products could be electronics that contains components that lasts for many years, which makes them ideal in the production of newer products.
  • Redistributing is similar to reusing, but instead it focuses on going to a new market with the products.
    • This could be driftshops for used clothing, used autoparts, etc.

• Refurbishing/Remanufacturing
  • Refurbishing is the option of remanufacturing the component.
  • Refurbishing is more expensive than reusing, as more manufacturing processes are needed. However, the process will ensure a much more similar result as a new product.
  • It is primarily done when a component or product cannot remain in the circulation in its current state. For that reason it is re-engineered to have the same specifications as a newly manufactured one.

• Recycling
  • With this process the raw-material is treated and reused for the production of a new component.
  • Everything is broken down until only the basic materials remains, which then can be used to produce newly manufactured ones.
  • This proces is most demanding as you have to go through all manufacturing processes again to produce the product.

It could be easy to think that it would make sense to directly recycle. 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 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 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.

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

Implementing Circular Economy can be a difficult process, especially if you have limited resources. However, there are some general guidelines of how to approach the subject. We can make the strategy of implementation as a 3 step plan:

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.

Innovate, Select and Engage

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. . 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.

• 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.

References

Other key materials:

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

2. Portfolio Management: ISO 21504 (2015 Edition)