Innovation in the Circular Economy and Impact on CBM #4 The impact of Circular Economy on Construction and Building Waste Business Model

a)     Platform as a Service (PaaS) : the Hilti Case Study in Construction

Hilti's transition from a linear to a circular business model, primarily through its Fleet Management service, involved significant changes across various dimensions:

From Product Sales to Service-Based Revenue:

·       Traditional Model: Selling power tools individually generated one-time sales revenue.

·       Change: Shifting to PaaS (Product-as-a-Service) with Fleet Management meant generating recurring revenue through subscription fees and service offerings.

Focus on Usage, not Ownership:

·       Traditional Model: Customers owned the tools, leading to potential underutilization, damage, and early disposal.

·       Change: Hilti retained ownership, incentivizing proper maintenance, repair, and refurbishment for extended lifecycles.

Value Chain Transformation:

·       Traditional Model: Production, sales, and limited after-sales services formed the value chain.

·       Change: Fleet Management involved additional activities like fleet maintenance, data analysis, and repair services, increasing value beyond the initial product.

Customer Relationships:

·       Traditional Model: Transactions primarily involved product sales with limited ongoing interaction.

·       Change: PaaS created deeper customer relationships through ongoing service interactions, data-driven insights, and potential tool upgrades.

Organizational Culture:

·       Traditional Model: The focus was on production and sales, with potentially limited emphasis on sustainability and resource efficiency.

·       Change: Embracing circularity required cultural shifts towards resource optimization, repair expertise, and service excellence.

Challenges and Enablers:

Challenges: User adoption of PaaS model, up-front investment in service infrastructure, potential resistance to change within the organization.

Enablers: Clear communication of benefits, data-driven insights for decision-making, strong internal buy-in and cultural shift towards circularity.

Overall, Hilti's business model shift required a multi-faceted approach encompassing revenue model, value chain, customer relationships, and organizational culture. By successfully navigating these changes, they paved the way for a more sustainable and resource-efficient construction industry.

b)    How circular economy will impact more globally the construction model?

Retain Hill has the potential to alter the construction and building waste business paradigm by emphasizing the maximization of product value throughout its lifecycle. Let's examine the potential effects on several facets.

The circular economy has the potential to revolutionize the global construction model through its diverse approaches:

Circular Design:

·      Modular & Demountable Design: Imagine buildings designed for easy disassembly and component reuse,minimizing waste and extending material lifecycles.

·      Bio-based and recycled materials: Replace traditional resources with rapidly renewable or recycled materials like bamboo, mycelium, and reclaimed steel reduces resource depletion and lowers embodied carbon.

·      Designing for deconstruction: Integrate disassembly considerations into initial design plans simplifies material recovery and minimizes waste during renovations or demolition.

Optimal Use:

·      Building life cycle extensions: Retrofitting, refurbishing, and extending existing structures minimizes the need for new construction, saving resources and embodied energy.

·      Shared spaces and co-living: Utilizing co-working spaces, community centers, and micro-living concepts optimizes space usage and reduces the overall built environment footprint.

·      Digital twins and predictive maintenance: Implementing data-driven building monitoring and maintenance extends structure lifespans and optimizes resource allocation.

·      Data-Driven Decisions: Real-time data on material availability and demand guides resource allocation and logistics optimization. Imagine eliminating mismatches and inefficiencies through data-driven insights.

Value Recovery:

·      Urban mining: Recovering valuable materials from demolished buildings through efficient dismantling and sorting creates a secondary resource pool, reducing virgin resource extraction.

·      Norms & Standardization: Standardized data empowers efficient matching and fosters trust. Imagine clear norms for recycled material quality and certifications boosting their adoption.

·      Advanced recycling technologies: Innovative techniques like chemical and biological recycling unlock valuable components from complex materials, closing the loop for previously unrecyclable waste.

·      Material marketplaces: Dedicated digital platforms for trading salvaged materials and components facilitate easy material reuse and reduce reliance on virgin resources.

Circular Support:

·      Policy and regulation: Governments can incentivize circular practices through tax breaks, green building standards, and legislation promoting material reuse and recycling.

·      Investment and financing: Increased funding for circular construction research, development, and infrastructure fosters innovation and market adoption.

·      Education and awareness: Building industry professionals and consumers need education on circular principles, design strategies, and the benefits of sustainable construction practices.

·      Balancing Supply & Demand: new start ups can connect geographically dispersed supply (demolition sites) with demand (new construction projects). Imagine a balanced market where waste becomes a valuable resource.

c)     Who are the actors of this new business? Challengers and Incumbents Embracing Circularity in Construction:

The construction industry is ripe for disruption through circular economy principles, and both established players and new entrants are making waves.

Here are some recent examples in Construction:

Challengers:

• LoopWorks: This UK-based company deconstructs existing buildings and recovers over 90% of materials for reuse in new projects, diverting waste from landfills and promoting resource efficiency.
• Madaster: This Dutch platform facilitates collaboration between stakeholders to design and build buildings with materials passports, allowing for disassembly and future reuse.

Incumbents:

• Skanska: This Swedish construction giant launched its "Green Pledge" initiative,aiming to halve material waste by 2030 and adopt circular principles in building design and procurement.
• Saint-Gobain: This French multinational is developing bio-based and recycled materials for construction, such as lightweight insulation made from recycled glass and plant fibers.
• VINCI: This French construction and concession group promotes "eco-design" principles in infrastructure projects, incorporating recycled materials and planning for future disassembly.

• Philips offers "pay-per-lux" lighting solutions to offices, taking ownership of the lights and ensuring their responsible maintenance and end-of-life management.
• Volvo Construction Equipment remanufactures used components, offering customers cost-effective, high-quality alternatives to new parts (Remanufacturing)