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@AuManufacturing’s occasional editorial series on the real issues of the 2022 federal election turns to a circular economy. In this excerpt from an article by Professor Göran Roos, he outlines the challenges ahead as we take the desirable step towards a more sustainable future.

The desirable move towards a more sustainable future has recently gained stronger momentum, as exemplified by the willingness, primarily of Millennials and Gen Z, to pay a premium for more sustainable products and services.

Some companies are changing their products and production processes, including changing and minimizing inputs (materials and energy) as well as reducing waste.

This frequently requires redesigning the product and production processes to allow both reuse and simpler recycling, for example by bolting together rather than welding together.

The changes also frequently extend to packaging and inbound and outbound logistics, while requiring similar changes from suppliers.

In such changes, businesses are currently moving faster than policy makers in many countries, although it is likely that some countries (e.g. Germany and Norway) will use the introduction and subsidization of mandatory recycling, with the associated development of new product and service offerings, as a tool for economic recovery from the COVID-19 pandemic.

Minimizing life cycle environmental impact often goes hand in hand with minimizing costs and maximizing revenue.

Therefore, a well-founded and thoughtful move towards a more sustainable future leads to increased profitability for businesses and, therefore, greater prosperity for nations.

Challenges to this outcome stem from:

  • Policy makers track the steps taken by companies to adopt appropriate regulations
  • Policy makers lag behind in directional decisions and associated public strategic investments that avoid undesirable temporary outcomes in complex systems (e.g. lack of charging infrastructure delaying EV adoption, lack of investments in power generation and transmission infrastructure to avoid local power deficit, regulate to ensure grid stability when power generation mix changes, lack of policies around management of stranded assets like power plants coal-fired power plants leading to perverse market behavior, policy decisions driven by emotion rather than facts with undesirable results, etc.)
  • The absence of regulations requiring disclosure of climate impact (e.g. there is no requirement for the packaging used for Norwegian pollack or Norwegian prawn to declare that they are respectively transported to China for the filleting and shelling in Africa before being sent back, packaged and sold to Norwegian consumers at domestic outlets)
  • And “green” stakeholders frequently advocate models and solutions that lack comprehensiveness (e.g., looking at material flows in isolation rather than also including associated energy flows) or that neglect critical laws of nature (often the second law of thermodynamics which, in practice, states that the usable energy available in a closed system decreases over time) and therefore can lead to discussions and decisions that end up having undesirable results.

Conclusion

The challenges of transitioning to a more sustainable economy can be summarized as geopolitical; scarcity of critical materials; the limitations of current product recycling technologies; the lack of an integrated material and energy flow lens for life cycle assessment; the absence of an emerging complex systems view of the economy or any subsystem thereof; an erroneous view of the functioning of the biosphere73; a misunderstanding of the implications of the second law of thermodynamics.

All of these challenges provide opportunities for individuals, companies, sectors and nations. Indeed, the simultaneous evolution towards a digital and sustainable future offers the entrepreneurial opportunity of a lifetime.

Over the next few decades, we will witness a recomposition of the landscape at all scales in terms of the capacity to create value. Some of these changes will be gradual and peaceful, and some will be less so.

It is worth recalling the words of Louis Pasteur: “…chance favors only the prepared mind.

Here is an excerpt from the log: OnlineRoos, G. (2020). Some issues around the transition to a more sustainable economy. In the B+I strategy. (ed.), Estrategia. Flight 9 pp. 66-74 Bilbao. Spain.

Goran Roos is an internationally known watcher of the manufacturing sector, C/V is as long as he is impressive, including several years spent working in Australia. Göran Roos, board member of the Global Center for Modern Aging; Visiting Professor in Business Performance and Intangible Asset Management, Center for Business Performance, Cranfield School of Management, Cranfield University and Australian Industrial Transformation Institute, Flinders University.

Photo: Goran Roos

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