Axion Consulting and multinational corporation Philips have started a six-month research project, called ‘CircMed’, to investigate the potential for refurbishment and remanufacturing business models to benefit UK hospitals, in particular by being applied to medical imaging and ultrasound equipment.
The project, co-funded by Innovate UK, will explore how circular economy business models could work to provide significant economic advantages to the UK healthcare sector. The study is expected to look at a wide range of medical equipment including MRI scanners, CT scanners, interventional X-ray equipment and more.
Many of these pieces of equipment contain significant amounts of raw materials, where finiteness and price volatility threaten to be problems in the 21st century, including Gallium, Beryllium, Niobium and Helium.
“Many other countries, such as Germany, have already benefited from a shift away from the traditional value chain. We will be examining fresh ideas and alternative business models – similar to car leasing concepts – including the provision of fully-managed equipment services, pay-per-use and incentivised return and reuse.”
A circular economy isn’t just about materials; it’s about people too. In a circular economy, instead of resources extracted from the earth, people will become the most important driver for growth. Craftsmanship and ingenuity are abundantly deployed, and natural resources are saved. As taxes play a fundamental role in the economy, the first step is to shift taxes from labour to natural resource use and pollution.
When was the last time you had a piece of clothing repaired? It’s probably been a while, as, in our part of the world, repair costs are high. Upholstering a couch, for example, may cost up to 80% of the original purchasing price. Having your jeans mended may cost the same as buying a new pair at H&M. Most of us won’t give it a second thought and head out to shop.
Over the last few years, awareness has been growing about the need to use natural resources more wisely. In a circular economy, natural resources are brought in a closed loop. Businesses can then add value over and over again, through recycling (‘urban mining’), repair, refurbishment, and lease and maintenance services, which increase the lifespan of products.
But there’s a catch.
Circular business models are generally more labour-intensive than business models focused on simply selling products. Companies will need to employ people to recollect, repair and disassemble products and provide customer services. A circular economy also requires the redesign of products to make them suitable for repair and disassembly. Massive innovation efforts will be needed to develop biobased materials and renewable energy sources.
In short: circular activities require manpower, craftsmanship, creativity and ingenuity.
Unfortunately, at the moment, Western economies put a high tax burden on honest work, while leaving pollution and the use of natural resources tax-free and even subsidized. This is a major barrier to create more jobs and shift to sustainable resource use.
In the EU, only a fraction of tax revenues is based on natural resources (such as water, metals and minerals) and pollution (including carbon emissions). Aviation fuel, for example, is tax-free, which makes flying from Amsterdam to Paris cheaper than taking the train.
While environmental taxes are low and on a decreasing trend, the tax burden on labour is growing. Across the EU, labour taxes (including social contributions) provide 51% of total tax revenues.
Consequently, businesses are more concerned about reducing the number of employees than reducing their ecological footprint. Gaining efficiency generally means making people redundant, outsourcing to low-income countries and lowering service levels.
The effects are visible everywhere: fewer waiters in restaurants, fewer teachers to educate children, less personal attention for patients in hospitals. Anyone who has ever been put on hold when dialling a help desk has experienced the impact of services at the lowest possible costs.
An inclusive, circular economy starts with a tax shift
In Europe alone, more than 22 million people are unemployed. From a social perspective, unemployment is a disaster. It causes a range of problems including poverty, health problems and stress. It denies people the opportunity to take care of their families, to participate in society and develop their full potential.
From an economic perspective, unemployment means that human capital is underutilized. In other words: there is an abundance of untapped potential for prosperity, growth and wellbeing.
Wouldn’t it be smarter to actually deploy this goldmine of talents and capacities?
A circular economy isn’t just about materials; it’s about people too. In an inclusive, circular economy, growth will be based on human capital instead of the extraction of natural resources. As taxes play such a fundamental role in the economy, step one is to shift taxes from labour to natural resource use and pollution.
Putting a tax shift in practice
The Ex’tax Project Foundation has been exploring the potential of a tax shift from labour to natural resources and consumption, with the help of Deloitte, EY, KPMG Meijburg and PwC. The report New era. New plan provides an overview of the extensive literature on this topic, as institutions like the European Commission, European Parliament, the OECD and the IMF have published about the principles of a tax shift. The study also provides a Policy Toolkit to help identify potential government action.
The circular economy going mainstream
A tax shift will enable consumption patterns to shift from mass consumption to more (local) custom-made goods and personal services-delivery.
Creative and circular business models are already emerging at social enterprises like Elvis & Kresse (high-end products made of scrap fire hoses and leather), Kromkommer (upcycling food waste), Bundles (pay-per-wash washing machines), and the Repair Café (social hubs for repair services). Large businesses are also adopting innovative business models. Excellent examples are Philips (pay-per-lux), Royal DSM (turning agricultural waste into fuels) and Interface (using discarded fishing nets).
Just imagine what happens if the tax system is no longer a barrier for this type of businesses models to go mainstream. When inclusive and circular business models become the rule rather than the exception.
A tax shift will be key to unleash the social power of the circular economy.
Editor’s Note:
This piece gives a broad introduction to ideas that have been discussed over a relatively long period of time, in particular in the work of Walter Stahel since the 1960s. It is an interesting topic, and a critical one for the circular economy.
We highly recommend attending Femke’s Disruptive Innovation Festival session at 15:00 GMT on Friday, where you’ll have the opportunity to ask your questions and to learn more about the history of some of these ideas.
Australia’s climate ambassador Peter Woolcott says terror attacks in Paris “will only strengthen” France’s desire for a strong climate deal
You don’t get to hear from Peter Woolcott all that much in public, even though he is a pivotal character in Australia’s international climate change negotiations.
French government says demonstrations in closed spaces can go ahead but not those in public places
Major marches which had been planned to coincide with the COP21 international climate talks in Paris will not be authorised for security reasons, the French government has said.
Environmental activists – who had expected attract hundreds of thousands people on 29 November and 12 December – said that they accepted Wednesday’s decision with regret, but were now considering “new and imaginative” ways of making their voices heard.
As a plan to make brown coal briquettes for export to China fails to attract private cash, the state will assess whether past projects gave value for money
The Victorian government has announced an independent review of coal development projects after a demonstration plant in the Latrobe Valley which was set to receive federal and state funding failed to attract private investment.
The project to make brown coal briquettes for export to China was withdrawn less than 12 months after Shanghai Electric Australia Power and Energy Development Pty Ltd was awarded state and federal government funding.
‘High probability’ of a 30% decline in polar bear numbers by 2050 due to retreating sea ice, IUCN study finds
Global warming is now the single most important threat to the survival of the polar bear with retreating sea ice set to decimate populations, according to a new study by the International Union for the Conservation of Nature (IUCN).
It found a “high probability” that the planet’s 26,000 polar bears will suffer a 30% decline in population by 2050 due to the loss of their habitat, which is disappearing at a faster rate than predicted by climate models.
A more sustainable supply chain is needed, but will only emerge when the breakdown in trust between suppliers and buyers is resolved
Majestic Wine this week announced the removal of its chief buyer after its pre-tax profits dropped by almost half. Supply chain relations at the ailing retailer have been tense ever since it asked suppliers to stump up cash towards its new warehouse.
Regrettably, such practices are all too common. Global brewer Carlsberg is also facing animosity from suppliers after following the likes of Diageo, Halfords and Mars and extending its payment terms to 93 days.
House committee unanimously approves proposed legislation to phase out such personal care products, whose exfoliants can end up in rivers and lakes
US lawmakers are to decide whether to ban personal care products containing microbeads – minuscule pieces of plastic considered harmful to the environment – after proposed legislation was approved by a bipartisan committee.
Microbeads, typically under 5mm in size, are used as abrasive exfoliants in products such as toothpastes and facial cleaners. They often evade water filtration systems and flow into rivers, lakes and streams, where they can be mistaken for food by fish. Pollutants can bind to the plastic, causing toxic material to infect fish and, potentially, the humans that consume them.
It is hard for France’s capital to look beyond the terror attack, but the decisions taken at the UN climate change conference may in the end matter more
While Europe is on high alert against another murderous terrorist attack, it will be hard for Paris to look beyond the next 24 hours. But soon delegates start arriving in the French capital for preliminary meetings ahead of COP21, the United Nations climate change summit which will be launched on 30 November with all the grandeur attendant on a gathering of global leaders. There is a certain symmetry to the two events that goes beyond the nightmare task facing France’s overstretched security forces. As the UK foreign secretary Philip Hammond pointed out in an important speech in the US only days before the Paris attacks last Friday: “Unchecked climate change … could have catastrophic consequences – a rise in global temperatures … leading in turn to rising sea levels and huge movements of people fuelling conflict and instability.”
