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Circular Economy

What is collaboration in the value chain?

Circular economics calls for systems thinking: companies should no longer focus on personal financial gain but on optimising the entire system. This requires cooperation between and within organizations. This article briefly explains why this is so important, and what is needed for this. Reciprocity, formal and informal trust and transparency are important success factors for cooperation between companies. Support from top management and demonstrating a viable business case are important for collaboration within a company.

Importance of collaboration

Collaboration between and within companies is even more important in a circular economy, because actors are more dependent on each other on the one hand and on the other hand can benefit more from streamlined collaboration. If the cycle of a chain with several companies is closed, this means that the companies are dependent on each other for their raw materials. If materials lose their value in one chain step, the entire chain suffers as a result, so that costs, benefits and risks are properly discussed. Within a company, too, business units need to work better together to ensure that the origin and value of raw materials remain traceable. A good example is the waste processing company Van Werven, which specialises in the acceptance, processing and resale of plastic. If Van Werven wants to be able to supply plastic to its customers, it depends on the companies that supply it with the plastic for recycling, for example a producer of plastic packaging with residual flows. If the quantity or quality of these residual flows is not in order, Van Werven in turn cannot fulfil its delivery agreements. In order to do this, the raw material flows must also be kept up to date within the companies.

Cooperation between organisations

Industrial symbiosis is one concept that represents the opportunities for cooperation between companies within the circular economy. Industrial symbiosis is a partnership in which company A exchanges waste streams with company B that can use the stream in its own processes. Good cooperation is necessary to realise the necessary infrastructure, for example in the form of a physical pipeline, but also virtual databases to map material flows. Examples of such databases are Madaster and the Harvest Map (in Dutch). The advantage of this cooperation is a reduction in waste flows and an additional source of income. A successful example of Industrial Symbiosis can be found in an industrial eco-park in Kalundborg in Denmark. The success of the many material exchanges in this industrial park lies in the trust between the various companies and the open, flexible way of communicating (Kraaijenhagen, Van Oppen & Bocken, 2016).

Reciprocity

Collaboration can only succeed if parties commit themselves in a meaningful process that takes all interests into account. The various interests in the value chain should therefore not be ‘swept under the carpet’. Instead, partners must empathize with the interests of their partners, with respect and sincerity, and arrive at solutions that are in the interests of all parties. That is why reciprocity is such an important concept in cooperation processes. This can be achieved if the chain partners are, in a way, interdependent (Jordans, 2016). As an example, Cofa, together with Circular Clockworks, has designed a watch whose casing is made of ABS plastic from old helmets. The joint design makes Cofa dependent on Circular Clockworks to sell enough watches, while Circular Clockworks relies on Cofa to collect enough helmets to supply the necessary plastic. As a result, it is unlikely that either party will not meet its commitments.

Formal and informal trust

In any partnership, there is the possibility of failure and opportunistic behaviour, with one partner taking advantage of the weaknesses that other partners may have. In order to minimise the risk of failure and opportunistic behaviour, special safeguards must be put in place. In general, two types of safeguards can be distinguished. The first type is based on formal agreements, often called “contracts”, while the second type of guarantees is based on trust. Trust increases when parties communicate with each other, communicate with each other and share past experiences, thus getting to know each other better (Jordans, 2016). Today, blockchain technology provides a solution for complex contracts and the traceability of raw materials (Casado-Vara et al., 2018).

Transparency

Transparency is seen as openness or a willingness to share information. Transparency and information sharing are two sides of the same coin, but there is a small difference. Unlike information sharing, which is an active process, transparency can be seen as a passive component embedded in the organizational culture. Transparency thus allows for the exchange of information and is vital for the overall functioning of a circular value chain. Transparency and the sharing of information builds trust because it shows that partners have nothing to hide and reduces information asymmetry (Jordans, 2016).

Collaboration within a company

In addition to the involvement of the partner, intra-organisational support is also required. In the first place, more cooperation is needed between technical and financial departments for integrated innovation in product development. This allows the payback period and investment costs to be taken into account in the development of the product. Cooperation between designers, waste processors and producers is also essential in the design for disassembly (Kraaijenhagen, Van Oppen & Bocken, 2016).

Intra-organisational support consists of two different forms: the initial and permanent support of top management and the support of other parts of the organisation. Demonstrating a viable business case is the most important thing to get support from senior management, while showing the results is the most important thing to get support from the rest of the organisation (Jordans, 2016).

Nine ways to scale up sustainable initiatives within a company are described in the Dutch publication “Breaking Barriers” by, among others, Het Groene Brein (2017). Methods that are described include the later involvement of management in setting up projects or motivating employees through training courses to set up innovative projects themselves. Read the report (in Dutch) for more methods: