Smart Cities and the Circular Economy

Vihra Andonova, Euro Perspectives Foundation

This article is based on a circular economy Status Quo Report developed by Euro-Perspectives Foundation, Bulgaria (a member of Cluster Sofia Knowledge City) in cooperation with partners from the INTERREG REDUCES project. The project covers six European cities and regions: Southwest Finland, Valencia (Spain), Manchester (UK), Utrecht (Netherlands), Maramures (Romania), and Bulgaria and contributes to the EU2020 strategy in the context of the vision of "Resource-efficient Europe".

REDUCES aims to identify the best business models in the partner regions and to research and critically assess their climate impacts and sustainability.

Circular Economy Business Models

The circular economy can mean many different things for different actors from different fields. Common denominators are designing out waste and pollution (waste reduction), keeping products and materials in use (upscaling and keeping the value), regenerate natural systems (loops, transition), and social aspects like creating well-being. (Ellen MacArthur Foundation, 2017)

Based on "Ellen MacArthur" Foundation, a circular economy aims to redefine growth, looking beyond the current take-make-waste extractive industrial model. The focus is on positive society-wide benefits and in gradually decoupling economic activity from the consumption of finite resources while reducing waste and eventually designing it out of the system. The circular model builds economic, natural, and social capital, underpinned by a transition to renewable energy sources.

The Finnish Innovation Fund Sitra defines a circular economy as an economic model of the future, in which natural resources are used within the Earth’s carrying capacity. (Sitra, 2019)

The themes for the circular business models examined in the REDUCES project are based on definitions by the Finnish Innovation Fund Sitra and they include renewability, sharing platforms, product as a service, product-life extension, and resource efficiency and recycling.

A circular business model is an economic model in which consumption is based on using services – sharing, renting, and recycling – instead of owning and producing more and more goods. Materials are not destroyed in the end but are used to make new products repeatedly.

Smart Cities and the Circular Economy

Cities can use their unique assets and capabilities to transform themselves from black holes sucking in food, energy, and other resources to engines of a regenerative food system and bio-economy. By taking an approach based on circular economy principles, cities can reimagine today’s food system and realize their potential to help shape a healthier, more diverse, and resilient future food system (Ellen MacArthur Foundation, 2017).

How can smart cities transform into a successful circular economy?

Through circular economy strategies, EU countries and cities are taking action in areas such as food waste, eco-design, organic fertilizers, extended guarantees for consumer goods, support for innovation and investments. The circular economy principles are also gradually being integrated into best industrial practices, green public procurement, the use of cohesion policy funds, and through new initiatives in the construction, water, and energy sectors.

To facilitate the transition to a circular economy, smart city strategies may include:

• Environmental policies for public procurement;
• Local initiatives for production, repair, and reuse;
• Principles of eco-design in construction;
• Bio-intensive urban agriculture;
• Biomass energy production;
• Innovations in water and waste management systems;
• Infrastructure solutions for electric mobility and low-energy districts.

Examples of Circular Economy Business Models for Smart Cities

Waste Logics, Manchester, UK – renewability business model

Waste Logics offers cloud-based waste management software, that can be used to manage waste operations and materials flows more effectively, providing ‘actionable insights in from real-time data’ that enable better control and evaluation of valuable waste streams. The software provides a simplified and intuitive CRM system that can be easily used by both customer/end-user and waste collector to offer transparency in how much waste is collected, where it goes, how it is utilized, and the implicit costs. It allows tracking of subcontracting, transportation, etc. through a paperless, secure app-based system that includes data-driven optimization tools, such a route planning for transportation to reduce costs and financial analysis that highlights areas of loss in relation to KPI’s landed costs (for international trade of materials), etc. Overall, the service provides not just data-driven efficiency, but combines and connects several disparate operational functions, usually difficult to manage, capturing critical information previously unavailable. The insights and visualization of the aggregated data enable much more effective decision making and efficiency, ultimately improving value capture and profitability in a complex and challenging waste recovery industry, where profits are often marginal.

Oldham Council, Greater Manchester, UK – renewability and community engagement

Oldham Council developed a model for community-owned renewable energy where the community provides the finance, and the financial benefits remain with the customers for the renewable energy generated and the wider community through the generation of a local community fund. This project seeks to provide affordable, sustainable, and low carbon energy by using both council-owned and community-based buildings for solar installations. The scheme is primarily funded through a community share scheme, with secondary support through grants and loans provided by the local council. The first phase has been focused on installing solar energy on local school buildings and making energy efficiency improvements. Set up as a social enterprise; the directors are volunteers, representing the community shareholders. Profits are used to repay investors and to support local development projects. A series of partnerships support the organization, including having a volunteer director from the local authority and appointed installers. Current volunteer directors have key experience in sustainable energy infrastructure to steer the project accordingly. Phase two of the project has won a grant to investigate how to engage low-income houses in sustainable energy production, as this is where it could have considerable community improvement impacts.

Bouwhub, Utrecht, The Netherlands

The Bouwhub is a logistical hub to minimize the environmental last mile for building projects in the inner-city projects. Currently, Utrecht and Amsterdam have a hub that provides materials for the outfitting phase of building projects. Utrecht was the pilot plot. The Bouwhub in Amsterdam has been designed as a full circular hub.

In 2015, Volker Wessels, one of the big builders in the Netherlands started a logistical hub for all the building projects in the region Utrecht. The aim was to limit the CO2 imprint in terms of logistics on the last mile for building projects, the hub is situated at the edge of town, in easy access of suppliers. The hub takes in materials in for the outfitting phase; like tiling, pipe fittings, drywall, for several projects, repackages the materials to fit the daily needs for each of the projects in the area it services.

The hub limits traffic into the projects by large trucks, and collating the deliveries lowers the number of deliveries of materials, as bulk orders get processed through the hub. Planning the daily work, subcontractors are provided with necessary materials and gain 1.5 hours on a working day, because they do not have to source their own material on the work. Every round of deliveries leads to the possibility of getting rid of waste and the possibility to collect materials for reuse, that otherwise would be thrown out.

In the current area, the hub uses an area that was underused, but that is linked to the main routes into the city center. Before the hub occupied an area that was going to be rezoned for housing. The hub requires space for loading and unloading, enough space for storage and security. The hub stores building materials, tools, and other materials like fences and security materials.

Circular Economy and Value Creation

The new EU circular economy framework could generate economic profits of € 1.8 trillion a year by 2030. The transition to a circular economy calls on companies not only to maximize recycling and minimize waste but to fundamentally re-engineer their products and services with the so-called "cradle to cradle" approach, says Dr. Emma Berntman, Hermes EOS.

The challenge for smart city strategy developers and designers is to inspire and promote an innovation-friendly ecosystem that facilitates new financing instruments, sustainable design, and business management practices and partnerships seeking to achieve the circular economy goals.