Why is a circular economy for capital equipment important?
Capital equipment refers to a group of industries and a wide range of products that play a key role in materials usage and value creation like healthcare systems, renewable energy, mobility, semiconductors amongst others. A guiding definition of capital equipment are assets that are high value, are generally expensive to produce, and they are products that are designed, built and acquired to last, often staying in use for several decades.
A circular economy for capital equipment is important because its production uses 7.2 billion tons of raw materials annually, including large amounts of high value metal and mineral resources. Because of the higher value at stake, the capital equipment sector is leading the way in many aspects of the transition to a circular economy by focusing on maximizing value creation with minimal materials.
The capital equipment sector can offer important lessons to other industries linking circularity to achieving climate ambitions as the circular and low-carbon agendas are complementary and mutually supportive. 1) The carbon footprint of capital equipment itself – 3.2 billion tonnes of greenhouse gas emissions – is significant so building circular economy best practices that can help reduce GHG emissions is critical. 2) Scaling of climate technologies, such as solar, wind, EV, will bring significant input (critical minerals and harder-to-abate materials) and waste (decommissioned equipment) challenges. Circular strategies (e.g., reuse, refurbish, recycle etc.) are enablers for the sustainable scaling of climate technologies and enhance adaptation and resilience to climate change.
What could circularity for capital equipment look like?
In a circular economy for capital equipment
Products and their components follow circular and digitization principles for minimal resource consumption and increase reuse strategiesProducts are designed with circularity principles (reuse, refurbish and recycle), using fewer new resources in production — especially non-renewable resources. This means circular requirements (specification, design and procurement) are discussed across the value chain – from customers, suppliers, operators, and maintainers to recyclers.
Value retention is maximized by optimizing the product and component utilization rate and use life, with the help of servitization and digitalizationDigitally-enabled maintenance, shared access, and services that see beyond one-off sales to focus on functionality instead of material goods offer innovative ways to keep products in use efficiently and for longer periods.
End-of-use equipment and components are returned for reuse via efficient reverse logisticsProducts no longer suitable for use are fed back into efficient reverse logistics process for refurbishment, remanufacturing, repurposing or for parts and components harvesting — extending the lifetime of other products that are still in use.
Where is action most needed for a transition to a circular economy for capital equipment?
Companies, governments and civil society organizations all have a role to play in creating a circular economy for the capital equipment industry. These 10- calls-to-action can help us accelerate the transition, and make it as impactful as possible.
1. Provide Incentives and Guidance for Product Design for Circularity
More than 80% of a product’s ecological impact is decided in the design phase. Designing to reduce material inputs, as well as for longevity and reuse or refurbishment at end-of-life, significantly reduces the resources needed.
2. Transform Customer Perception and Procurement Models to Increase Demand for Circular Products and Services
Clauses in large tenders often state that only new systems can be bought, or that equipment must be destroyed at end-of-use. It is vital we change the system to embrace products made from reused or refurbished components.
3. Leveraging Servitization, Guide and Support Product Use Rates and Use Life Extension
Shifting from offering a product (such as a car) towards offering a service (such as car sharing, with payment per distance travelled) offers huge potential for extending the life of individual products and components. There are many similar new ‘as-a-service’ innovations that offer great promise for circularity.
4. Increase End-of-Use Product Return
Current barriers to returning end-of-use products and components to the manufacturer, such as data privacy and intellectual property concerns, must be addressed to increase return rates.
5. Enable Efficiency and Transparency in Compliant and Responsible Reverse Logistics
Governments, businesses, and authorities of the Basel Convention need to work together to create more efficient reverse supply chains, while ensuring environmental and socially sound management in compliance with the regulations.
6. Collaborate Across Value Chain and Sectors to Strategically Plan Reuse Operations
Refurbishing and remanufacturing facilities are long-term investments requiring specialist skills and knowledge. They need to be planned carefully, with attention paid to location, capacity, and specialization.
7. Increase Incentives for Investment in Reuse Technologies and Facilities
Governments have a vital role to play to increase the competitiveness of reused, refurbished, and remanufactured products/components, therefore stimulate private sector investment in these strategies.
8. Support Manufacturers to Increase Sourcing of Secondary Components
Putting secondary components in use can reduce demand for virgin materials. Innovations in both legislation and technology can help expand the secondary component market.
9. Leverage Digital Technologies for the Circular Transition
Digital technology can transform the way components and products are designed, made and managed, allowing for monitoring and optimization throughout the product’s lifetime, and sharing information across the value chain.
10. Evaluate the Contribution of Circular Capital Equipment to the Sustainable Development Goals
Stakeholders from public, private and civil society are invited to participate in the design and realization of a circular economy for capital equipment, for a better, just and faster transition that help us to achieve the Sustainable Development Goals together.