Presentation by professor Walter Stahel about the Circular Economy and the Performance Economy

1. Circular Economy and Performance Economy
Plan C Community day
Antwerpen, 29 November 2013
Dr h.c. Walter R. Stahel
Visiting Professor, University of Surrey
Founder-Director, The Product-Life Institute, Geneva
www.product-life.org, wrstahel2014@gmail.com
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2. Four topics
• The Circular Economy
– closed loops of a regional economy
• The Performance Economy
– selling goods as services, retained ownership of
goods and embodied resources
• Drivers of the Circular Economy
• Creating sustainable framework conditions
– do not tax renewable resources including human
labour,
– do not levy VAT on value preserving activities

3. Reminder: today’s linear industrial economy is driven by
the bigger-better-faster-safer syndrome of fashion, growth
means more throughput
zero-life products
resources
materials manufacturing distrib. P.O.S.
micro-economic profit optimisation
use
waste
P.O.S. CONSUMER STATE
At the P.O.S., property and liability
are transferred to the CONSUMER
and the STATE

4. 1
The Circular Economy
Business models: reuse and service-life extension of
goods and components, recovery of molecules,
•Tool to build stronger regional economies and more
resilient communities (with reduced disaster risk),
•Drivers are waste legislation, mining legislation;
economic autonomy, cooperation and partnerships,
•Impacts are local job creation, reductions in GHG
emissions and in waste volumes,
•Result is the decoupling of wealth creation and
resource consumption.

5. A Circular Economy is managing
manufactured stock (capital)
All infrastructure, buildings, equipment, many
durable goods and catalytic goods, through
•Reuse and remarketing (2nd hand), including
waste heat and water,
•Repair, operation & maintenance,
remanufacturing and re-refining
including lubrication oils,
•Technologic upgrading and fashion upgrading
of goods and components,
•Material recycling.

6. The economics of loops local is beautiful in a Circular Economy
A Circular Economy has it own rules:
• the smaller the loops the more profitable and
resource efficient they are,
• loops have no beginning and no end,
• the low speed of the circular flow is crucial, the
law of reverse compound interests applies,
• it substitutes manpower for energy and material
resources,
• It manages manufactured stocks, not flows,
it thrives on preserving existing values.
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7. The main impacts of the C.E.
less energyintensive
activities
X
less
environmental
impairment
resource
conservation
security
job creation
X
less
regional economy environmental
Source: Stahel, Walter (EU report) 1976
impairment
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8. Main impact job creation: product-life exten-sion is a
strategy to substitute manpower for energy
10 years
20 years
labour
factory
factory
30 years
labour
labour
parts
parts
parts
Source: Stahel, Walter 1976
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9. The main environmental impacts of the C.E.
A 2004 sectoral study on restoring used automotive engines
compared to a like-new condition showed, compared to
manufacturing new engines:
•
•
•
•
•
Lower economic costs (30-53%),
Lower raw material consumption (26-90%),
Lower waste generation (65-88%),
Lower energy consumption (68-83%),
Lower emissions (50-88%)
•
•
•
•
•
73-78% less carbon dioxide (CO2),
48-88% less CO,
72-85% less NOx,
71-84% less SOx,
50-61% less non-methane hydrocarbons emissions.
Source: Smith, VM and Keolian, GA (2004) The value of remanufactured engines, life-cycle
environmental and economic perspectives, Journal of Industrial Ecology, 8(1-2) 193-222
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10. Another main impact - GHG reduction
mio t GHG emissions
800 mio t
550 mio t
100 mio t
Source: WRAP
(2009)
Lifetime
optimisation
Circular
Economy
Performance
Economy
German EEG
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11. The quality angle of the C.E.
The circular economy is
• regional, meaning less transport volumes and
shorter distances in the processing chain,
• more labour-intensive than manufacturing because
economies of scale are limited,
• a high-quality world: Stradivari instruments and
expensive watches do not live forever by design, but
through periodic remanufacturing,
• the knowledge and know-how of past technologies
are necessary for retrofitting infrastructure, goods
and equipment (i.e. jobs for silver workers),
• foster a caring attitude (stock optimisation is
based on preserving existing values).
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12. Think $$ not waste - remarketing used seats
for reuse is the challenge,
not finding the cheapest recycler!
05/12/13
The Performance Economy
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13. CARING,
sociocultural
innovations
a new stewardship relationship
with goods
NEW ?
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15. 2
The Performance Economy
Business models: selling performance, selling goods
as services:
•Tools are systems innovation and retained
ownership of goods and their embodied resources,
•Drivers are corporate strategy, changes in attitude
from fashion to function, from toys to tools,
•Impacts are an internalisation of the costs of risk and
of waste; and a performance guarantee for customers,
•Results are a higher future resource security; a
transition from supply chains to supply circles.

16. Systems
innovation, not
product
innovation!
Lighthouses have
done more for the
safety of shipping
than any technical
improvement to
ships.
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17. The Performance Economy selling goods as services
• is the most profitable and competitive business
model of the Circular Economy,
• is sustainable and preventive as economic actors
(fleet managers) internalise the cost of risk and of
waste,
• leads to radical and rapid new product design for
take-back and reuse of goods and components,
• achieves the highest resource efficiency and
security as it maintains ownership of goods and
embodied resources,
• achieves higher profits as sufficiency and efficiency
solutions can both be exploited profitably.
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18. libraries
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19. B2B: where do corporate customers buy
goods as services - pay-per-use
• Rolls Royce sells power-by-the-hour for jet
engines and gas turbines,
• Michelin sells tyre use-by-the-mile to haulage
companies and armed forces,
• Textile leasing for hotel textiles and uniforms /
professional apparel,
• Operational leasing: Xerox and Ricoh sell
customer satisfaction for a fixed price per copy,
• IT: Software-as-a-service, cloud computing, payfor-capacity (HP)

20. Example:
Private Finance
Initiatives (PFI)
Le Viaduc de Millau,
a 2001 78-year
contract to
design, finance,
build and operate
the bridge till
2079, with a
maintenance
contract until
2121
Le pont de Millau, France

21. Reuse needs a Corporate Reuse Strategy:
learing from pioneers, XEROX Corp., 1993
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23. 3 Drivers for change to the C.E.
• People: persistent unemployment, ageing
populations, shift of working population,
• Scientific and technological progress,
• Commercial innovation in saturated markets,
• Social innovation – caring as a quality, keeping
(teddy bear) goods for life,
• Legislation on resource efficiency, waste,
• Resource security - regarding stocks of goods
as giant regional stockpile to reduce disaster risk
(pandemics, volcanoes, solar storms, etc.),
• Rising commodity prices.

24. Why now? A circular economy is a
sustainable alternative to production in
saturated markets (cars, Germany)
new car registrations
number of scrapped cars
new registrations
cars scrapped
21st C
1960
1995
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25. The (EU) drivers of a Circular Economy
less energyintensive
activities and
environmental
impairment
Resource
security
EU Resource
Tax Proposal
2011
U.S. SEC rules
Source: Stahel, Walter (EU report) 1976
less waste
UN mercury
Agreement
EU waste
directive
2008
EU Marshall
plan for REE
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26. Why now? The small loops of a circular
economy (C.E.) will become law in the EU
EU Waste Directive 2008, to be transformed into
national legislation by 31 Dec 2013, stipulates:
Re-using goods and extending the service-life
of goods are the two strategies listed to fulfil the
priority of waste prevention.
PS REE in nanotechnology applications might only
be recoverable by reusing the components.

27. Drivers for change toward the P.E. are:
• Public procurement buying service, not
hardware – NASA, Pentagon,
• Commercial innovation give your customers the
function, utility, performance of the goods,
• Scientific and technological progress,
• Economic innovation – stock as societal wealth,
• Cultural changes – from ownership to use, from
fashion to function (e.g. car sharing),
• Corporate resource autonomy:
The goods of today are the resources of
tomorrow at yesterday’s prices.

28. The shift from sinking to rising resource prices
21st C

29. Economic innovation:
stock as societal wealth
The wealth of societies is based on stocks (quantity
and quality), not flows:
•Natural capital and environment (global commons,
water, soil, biodiversity, fish, forests),
•Cultural capital (material and immaterial goods),
•Human capital (including health, education),
•Acquired capital (knowledge, capabilities, skills),
•Manufactured capital (infrastructure, buildings,
goods),
•Financial capital (incl. investments, savings).

30. The governing principle of
stock management is caring
Caring activities
•are labour intensive and decentralised,
•have to be done where the clients are,
•cannot easily achieve economies of scale.
Examples are education & health services,
organic farming,
Stock management enables to redefine
growth (and wealth) as increase in the Q&Q
of stock.

31. Some of my teddy
bears:
Toyota Corona 1800, MkII, 1969
Jaguar XJ6, 1969
What are your
teddy bears?

33. 4
Creating sustainable framework
conditions
Sustainable taxation promotes all caring
activities including a Circular Economy :
•Do not tax renewable resources, including
labour/work, tax non-renewable resources
instead,
•Do not levy VAT on the value preservation
activities of the Circular Economy,
•Give carbon credits to carbon emission
prevention (preservation of embodied carbon)

34. Sustainable taxation promotes a Circular
Economy and the use of human labour,
work,
Human labour is the most versatile, creative and
adaptable resource, able to be educated but
perishable if unused,
• Continuity of work and continued learning are
essential to maintain and upgrade the acquired
capital of knowledge, skills and capabilities
embodied in people,
• Human labour is a low-carbon energy (and has the
same resource consumption if working or idle),
The Circular Economy enables a better use of the
stocks of human, acquired and manufactured
capital of all technologies and skills, including silver
workers.
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35. Sustainable
taxation is a
booster to
increase:
resource
security,
and jobs
prevent
GHG
emissions
Copyright/author:
Walter R. Stahel
2011
RESOURCE SECURITY
SUSTAINABLE
JOB
TAXATION
CREATION
GHG EMISSION REDUCTION

36. Sustainable
taxation is a
booster for:
REGIONAL
CARING
ACTIVITIES
HUMAN
CAPITAL
SUSTAINABLE
and the use TAXATION
of human,
cultural,
natural and
manufactured
capital
Copyright/author:
Walter R. Stahel
2013
MANUFACTURED
CAPITAL
CULTURAL
CAPITAL
NATURAL
CAPITAL
EMBODIED
RESSOURCES

37. 5
Conclusions
• The Circular Economy is a supplement to the industrial
production economy,
• The Performance economy is a substitute of the
industrial economy in regions with saturated markets,
• A regional Circular Economy creates a more resilient
society, less vulnerable to uninterrupted global supply
chains,
• Sustainable taxation is a booster for all caring
activities, including the Circular Economy.
• Obstacles include missing university curricula in e.g.
operation and maintenance engineering (O&M E).

38. Where to find more
information:
The Performance Economy
Walter R. Stahel
published by
Palgrave Macmillan London
March 2010
ISBN 978-0-230-58466-2
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39. Thank you for your attention
Dr h.c. Walter R. Stahel
Visiting Professor, University of Surrey
Founder-Director, The Product-Life Institute, Geneva
www.product-life.org,
wrstahel2014@gmail.com
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