Circular Economy

Collaboration is at the center of circular business models

A shift in the status quo: traditionally built on secrecy, businesses are increasingly collaborating to tackle sustainability challenges. Read More

By Ana Birliga Sutherland July 9, 2021

One Amsterdam project construction was suspended due to a lack of specific circular knowledge

This article originally was published on Circle Economy.

Arguably, the terms “business” and “collaboration” may appear contradictory — even oxymoronic — placed in the same sentence.

Traditionally, business has been based on competitive self-interest, driven by disparate purposes: “The pursuit of competitive advantage is ingrained in the managerial psyche.” But while collaboration seems to work against the core principles of “doing business,” the last decade has seen a revolution of sorts:

As sustainability concerns are increasingly given a platform on global corporate agendas, collaboration has emerged as both an enabler and a necessity. And in the business-to-business arena, working together is slowly becoming more prominent. Collaboration is a key factor in the transition to a resilient, just and circular economy, according to previous Circle Economy research. Yet the processes behind collaboration formation — and the factors that spur successes and failures — have not been so clear-cut. Recent research, contributed by Circle Economy colleague Caspar von Daniels, has tackled this gap, developing a process model for collaboration in circular innovation.

Their findings? Innovation isn’t born in isolation, and to maximize collaborative advantage all involved parties need to align on goals — detailing core ambitions, risks that may arise from new circular processes and other outcomes that may be desirable but not prioritized. Successful collaboration can be encouraged through shared interpretations of the problem, potential approaches and ideal solutions. This is because environmental issues are multifaceted and various stakeholders may hold different economic, ecological and social opinions and motives, which may give way to conflict — necessitating processes that facilitate discourse and deal with differences of opinion.

Heathrow Airport’s sustainability partnership, for example, brought together 15 companies from various sectors, ranging from airlines to retailers to food to construction — representing more than three-quarters of the airport’s whopping 76,000 staff members. The result? A skills academy for construction and aviation, the eventual creation of the world’s largest employee car-sharing scheme and measures to tackle airline food waste; all born out of collaboration, notes Heathrow Director of Sustainability Matt Gorman.

As mindsets for “doing business” shift away from hoarding value and towards collectively growing value — circular business models, for example, create additional value to be shared among stakeholders — collaboration plays a valuable role. So what can lead to a successful — or failed — collaboration? Strong leadership, a focus on collective gains (for all involved) and full transparency in circular ambitions and information sharing. Strong leadership and shared visions are needed to tackle early challenges, which can range from not knowing how to first formulate a proposition, involve the right people or align on issues to struggles developing circular governance or decision-making processes. Interestingly, a desire to make money that eclipsed other, more environmental motivations was flagged as a negative in partnership formation: “If they [a partner] say, ‘I want to make money,’ you’re out. Because the first thing you need is to want to do it.”

Collaboration in practice: Insights from a circular construction project in Amsterdam

A recent collaborative construction project cited in the research tackled some common issues that can arise in circular collaboration. Initially linear in design, the project leaders decided to integrate circular principles and had to consult a range of other actors on energy efficiency, the use of secondary materials, component reuse, the use of biological materials, grey water circulation and pay-per-use services; and the collaborators chosen were those described as “forward thinkers” or “circular economy frontrunners.” At one point, construction was suspended due to a lack of specific circular knowledge — highlighting the importance of actors knowing their stuff and committing to a shared vision. And as noted: money shouldn’t be the priority, but rather the right mindset:

“If the other partners don’t have that same mindset, you’re dead,” the project owner quipped. “We learned a very expensive lesson by throwing away a complete design of a building … not taking the time at the starting point really introduced a chance for error.”

What’s more, a focus on money alone or money as a priority can curb experimentation with circular strategies, whether they’re new technologies, designs or business models. Yet in the case illustrated above, this circular innovation is precisely what brought value to the building — making it both a magnet for visitors and what created an image boost for its owner. Circular innovation is its own new form of currency, bringing benefits beyond the financial.

B2B sustainability collaboration is on the rise — but what are its roots?

While this recent research dove into the exact processes and nitty-gritty details around B2B circular collaboration, observations on its existence have been around for more than a decade. Collaboration in the U.S. dairy industry, for example, was driven out of necessity. Sustainability concerns around animal farming coming to the fore, and increasing pressure from NGOs, retailers and consumers, dairy’s significant footprint was threatening the whole industry. Thus collaboration was born: A joint effort to pinpoint systemic inefficiencies and facilitate innovation along the value chain. While at the time it may not have been framed as such, circular economy-style interventions were launched: Recognizing that manure, a huge source of emissions, was really an valuable resource that could generate new income for farmers while reducing the need for carbon-intensive synthetic fertilizers, for example.

But things didn’t progress as neatly as they began: Dairy farmers began to interpret “sustainability” as a euphemism for “government regulation” and often struggled with openly interacting with competitors — the industry had no history of voluntary cooperation. Technical knowledge also presented a challenge, as the industry lacked skills in both measuring and tackling its environmental footprint. Soon enough, farmers, processors and retailers were seeing each other as rivals once again.

The solution: the formation of Dairy Management Inc., an industry group funded by farmers, which attracted the attention of the CEOs of companies accounting for three-quarters of U.S. milk sales. By reframing the challenges at hand and noting that waste avoidance had long been a core value of the industry — and, notably, promising farmers that only actions good for business would be put in place — future collaboration was successful. And with it, motivation and commitment has increased among farmers and retailers.

Collaboration is catching: Where we are now

The dairy industry is still far from sustainable: Dairy Management Inc. continues to push for increased milk and cheese consumption and funds research on its health benefits. Yet things have improved, primarily due to advances in efficiency and genetics: Getting more from less. And the case above presents valuable learnings for collaboration, in line with the findings of the new process model research: motivation to collaborate has to come from the right place.

These days, circular strategies in farming are increasing in popularity: A recent initiative, launched in January 2020, will see global collaboration between dairy farms in the EU, U.S. and Russia in an effort to widely adopt regenerative farming practices, identify and share best practices and discover new approaches in the industry — prioritizing sustainability and animal welfare. While the pilot will focus on just 25 pioneers, the Farming for Generations project will expand to 2,500 farms in 2022 — a crucial action if the industry, which represents 12 percent of agricultural output in the EU, wishes to address its significant footprint.

Farming for Generations “brings together expertise along the whole agricultural value chain with the collective know-how of farmers to ensure any solutions and innovations are tried and tested on the group, capable of delivering real impact at scale, and helping to build the sustainable food systems of tomorrow” (Yann Gael Rio, vice president of milk and farming at Danone). And that’s what collaboration is about: Bringing together expertise from a range of niche arenas that can be leveraged to benefit life on earth.

This is why developing a process model that gives a holistic view of collaboration in the context of circularity — highlighting which collaborations are necessary and the type of governance needed — is so crucial. By giving structure to the actions businesses carry out — from formulating an initial circular proposition, involving the right people and aligning on a shared purpose, to developing circular-oriented governance and decision-making and circular-oriented value capture models — companies can be inspired and encouraged in their circular journeys.

Moving forward, businesses have both a responsibility and an opportunity

A responsibility to do better for people and planet, and an opportunity to make money while doing so — while working with unexpected partners and even competitors. Recent research has shown that circular businesses perform better than linear ones — and if it’s no secret that collaboration is key to circularity, the path is clear: Business as usual is no longer an option.

The UN and OECD have both called for businesses to bring their practices in line with global climate targets; doing so inherently means collaboration will need to increase. The new research covered in this article took the necessary first steps to demystify collaborative processes — but more research in this realm is needed, as is increased sharing of knowledge and best practices. In such uncharted territory, where multiple partners with unique visions, motivations and challenges team up to drive circular innovation, a deeper understanding of the processes making this venture possible is necessary. After all, only with understanding can we progress and truly stimulate the circular transition.