13.11.2020 BlogThe technology unlocking the potential of circular economy is already there

We need legislation that supports circularity and encourages the uptake of new technologies. Further, players in the consumer waste management ecosystem need to balance between competition and cooperation to create value to the whole ecosystem. These are some of the key findings from our Customer Relationship Development Manager Sarianna Heikkilä’s recent research as part of her Master’s Thesis for LUT University of Technology.

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A growing global population sets challenges for the environment and businesses alike as the demand for natural resources increases and prices of raw materials rise as a result of their reduced availability. In addition, the amount of waste generated keeps growing and increases demands on waste sorting and recycling. With rising pressure from governments, new policies and regulations are forcing companies to search for new solutions to improve the quality of sorted waste as well as the working conditions of employees exposed to this waste.

Industry 4.0 disrupts traditional business models

Industry 4.0 technologies are disrupting many traditional business models and offer new possibilities also in the field of waste management. With advanced technology and the help of artificial intelligence, smart robots provide more efficient ways to sort waste and help in the transition towards circularity and digitalization. Compared to traditional human-performed sorting, AI-guided robots reduce overall costs of recycling and help companies to standardize their processes. As municipal waste recycling is in many cases a hazardous practice, smart robots also make the work environment safer and healthier. 

Legislation – driver or bottleneck to circularity?

Legislators have an important role in speeding up circularity and encouraging the uptake of new technologies. However, due to a lack of clarity and uniformity, current laws and regulations do not always support circularity and can therefore cause a bottleneck in the current ecosystem. In some cases, it is still cheaper to produce new products out of virgin materials instead of producing new products out of recyclable ones. The lack of clarity and uniformity in legislation affects all ecosystem actors by creating uncertainty and affects the coherence of the ecosystem as a whole. The non-uniformity of regulations also causes uncertainty inside the ecosystem and makes companies’ risk management challenging.

Furthermore, laws and regulations can lead to forced value creation in the ecosystem. This is because circularity is currently heavily run by laws and regulations which makes the competition and pricing artificial, hindering organic ecosystem creation and growth. As a result, companies tend to see the circular economy as something they need to do, not as a real opportunity.

How to solve the paradox?

So, what can we do to fix the paradox of legislation and encourage circularity within the ecosystem? Below are some suggestions on how to move forward: 

  • Policies and incentives that support circularity should be strengthened
  • Further dialogue between the industries and policy-makers is needed in order to fully unlock the potential of a circular economy (for example different events and company visits where knowledge and information would be shared)
  • To improve the functionality and the coherency of the entire ecosystem, managers should do their best to improve coopetition, i.e. balance between cooperation and competition, within the whole ecosystem.
  • A successful digital transformation requires people with suitable skills to work with the new technologies. It is important to ensure the right people and knowledge are present in an organization.
  • Constant learning is essential. Cooperation with the universities, scientific research as well as knowledge sharing between other ecosystem actors are needed.

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This blog is based on findings from research done for a Master’s Thesis entitled “Circular value creation in DMR/MSW waste management ecosystem via smart robots” conducted in September 2020 for Lappeenranta-Lahti University of Technology LUT, one of the leading science universities in Finland. LUT School of Business and Management is listed among the global top 200 business schools in the 2020 Times Higher Education Ranking. Read more about her research and findings here.