A license to operate
In a recent Capgemini survey, one in two consumers criticized companies for doing too little to support the circular economy. What’s your stand as a product designer?
Karel Golta: That makes me smile. Because most people probably don’t even know what the circular economy is. Or even worse, they confuse the Kreislaufwirtschaftsgesetz with what we call circularity. The world is about eight to nine percent circular. And that figure, unfortunately, has been going down, not up, in recent years.
Lately, corporate social responsibility has been a hygiene factor, a marketing story, or a claim to get money in the financial markets. But now, circularity is playing a vital role.
The Circular Economy Manager of a large German company recently said: “It’s a license to operate, a necessity.” We can observe very well in the construction or the automotive industry what happens when there is no longer enough material available. Either because a tanker is stuck or because there isn’t enough available. And I heard the other day that, globally, waste management will trump the sales of the entire global pharmaceutical industry in less than five years. You don’t have to be green anymore. You want to become green to stay economically successful.
My children would buy many cheap clothes rather than a few expensive ones. They would have the latest iPhone model or order from Shein. Have I failed in parenting, or does the media convey a false image of the supposedly sustainable GenZ?
Karel: We live in a bubble with a lot of wishful thinking. What we need is a renaissance of mathematics and measurement. Only a few companies know what impact and emissions they will generate before production. In most cases, CSR departments are busy collecting data, but they rarely give feedback to the development department. A grocery shop in Berlin called Penny once spent a day in a supermarket labeling prices as they would be – everything included. The meat suddenly was three to four times as expensive. Unfortunately, that was just a campaign. And the connections are not so simple.
For example, I am from Switzerland. And in my childhood days, the Suisse waste management authorities realized that the amount of waste was increasing dramatically. To cope with the large amount, they eliminated the garbage cans. As each garbage bag cost 1.50 francs, the Swiss got their scissors out and painstakingly cut the garbage into small pieces. And suddenly, the garbage incinerators got into trouble. They didn’t have enough household waste. And that was bad because they were making money from burning garbage to produce energy.
You say we need a renaissance of math and measurement. Otto (a German e-commerce giant) shows a carbon footprint for selected products in its online store. Is that just window dressing?
Karel: You have to differentiate. There are scope 1, 2, and 3 emissions. And more recent trends even go as far as scope 4 and 5. So we are becoming more and more granular. Otto can measure how much energy the company consumes and how much energy was used to procure the material. But to put it more pointedly: The company probably does not yet consider the emissions in the supplier’s canteen. But we need this granularity. We need to consider what kind of electricity or energy was used in the third manufacturing stage to produce the product. You have to have these subtleties secured. That’s where maybe a private blockchain or a public blockchain comes in. And then you have to start modulating: What could I change about the system. And that’s where AI comes into play because you can make much better predictions about where you need to or could change something to have a much better impact in a positive sense.
D2C brands are the ones who are currently peddling the topic of sustainability. How credible are their statements? And why do the big corporates have such a hard time with it?
Karel: It often has to do with sales and procurement structures. A large corporation has sophisticated systems – upstream and downstream of its entire supply chain and value chains. It may be able to buy more cheaply in parts, but it also depends on mass and delivery capability because it serves large groups. If we were to expect all food to be organic and sustainable from one day to the next, which would make sense and be a good thing, that would not be possible. And yes, I believe that D2C brands have more chances to be more sustainable, local, and even more circular. But you also must be extremely careful and look at the overall calculation.
Some say that an apple from New Zealand is more ecological than an apple from the rural area around Hamburg. Because the apple from New Zealand came on a super modern container ship and the apple from the Old Country came by an ancient tractor. I would put a question mark behind this thesis.
You also have to consider the social implications: What happens to the soil if local apples are no longer sold? It’s just hard to generalize. Or take a detergent manufacturer somewhere in Europe who operates a central filling warehouse and sends the bottles from Poland to Germany for sale. If the consumer wants to return them for refilling, he will have more trouble than at the nearby health food store. On the other hand, if I throw the PE bottle in the garbage, it will be burned, and the material will be lost. Like petroleum was pumped once, used for a one-time action, and then burned. In the Circular Economy, it is essential to strengthening reuse. Recycling is only the last point because recycling costs enormous energy and logistics.
Do you think we are reducing consumption?
Karel: That’s a tricky question because it’s doubting my profession. But look at what’s happening in the fashion sector. The second-hand sector is currently revitalized. In the US, there is a company called Trove. They work in the background of big brands like Levi’s. Customers who shop in Levi’s online store can sell back their products after three months. Not in exchange for a voucher, but for cash. Trove manages the deal for the brand and the consumer. They run the online second-hand store without appearing as a company themselves. And they do that with quite a few brands, including non-fashion items. That’s economically beneficial because consumption remains. Not everything you buy always has to be new. That brings us back to the topic of behavioral change. If second-hand become more popular, handicrafts might come back as well.
Do brands have an interest in the second-hand business?
Karel: It’s a strategic step that companies have to take. And they don’t do it out of love for nature, but because it’s systemically embedded in their business. Patagonia tells customers to repair products rather than buy them new all the time. Their business is designed that way from the ground up. And sooner or later, it won’t be a differentiator, but the License to Operate mentioned above. And then we’ll manage the circularity issue.
But somehow, the brand has to earn money from circularity and sell a product not just once but several times.
Karel: That depends very much on what I’m doing. A garment wears out, and I can’t mend it several times at the knee. But maybe at some point, I’ll take the material back and reuse it. Because in a realistic overall assessment, it’s cheaper to use a material designed from the start to be taken back than to use a new one.
Extracting ores, iron, or aluminum is much more costly than second use – assuming I don’t have mining done under criminal, slavish systems. Or take an engine. If it doesn’t run right after a few years, the automaker could remanufacture it. Renault and the big engine manufacturers are already doing some of that today. With 80 percent less energy and 90 percent less material, you can remanufacture an engine with the same life expectancy as a new one. That’s an evident business model.
The full interview was published in German by Internet World (Daniela Zimmer).
Andrea vorm Walde