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Circular Value Chains
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Circular Economy

How to deal with residual flows?

An underlying principle of the circular economy is to convert waste products into value. To achieve this, it is essential to first inventory the residual streams, eliminate them wherever possible, and make the remaining substances valuable. Creating mono-flows and collaborating with chain partners are crucial for this process.

Valorizing residual streams

Most companies have deeply ingrained waste management practices; hence, changing these practices is often complex, expensive, and time-consuming. Waste management follows a widely recognized hierarchy, with a preference for source reduction: solutions that eliminate the generation of waste. When waste generation cannot be avoided, recycling or composting is the second-best strategy, followed by energy recovery. Landfilling waste is by far the least preferred option for waste disposal, as it makes it impossible to reintegrate materials into a different stream. A well-known representation of the waste hierarchy is the Ladder of Lansink, named after Dutch politician Ad Lansink, who introduced it in 1979.

This framework is crucial for minimizing environmental damage. Research by Romero-Hernández & Romero (2018) has shown that the best corporate waste management initiatives not only embrace this framework but also use it to create value for the organization. This is the underlying principle of the circular economy: turning waste products into value. The best waste management initiatives typically focus on three key themes: (a) inventory, (b) elimination, and (c) selling. To achieve this, it often requires creating mono-flows—pure material flows—and collaborating with chain partners.

Inventory

An essential element in the production process is conducting a life cycle analysis (LCA) of a product. The results of the LCA can then influence the design process. Unilever is a good example of a company that has used LCAs to reduce environmental impact and costs. By conducting an LCA of their purchased tomatoes, Unilever could map the variability of CO2 emissions and production, enabling more effective procurement (Clavreul, Butnar, Rubio & King, 2017).

Elimination

By applying circular economy principles, companies can streamline their processes and minimize the volume of used raw materials, resulting in improved profit opportunities. A striking example is Walmart’s reuse of shoeboxes. Boxes and product packaging are ubiquitous in consumer goods and are often used only once or twice in their lives before being discarded. These items have only a temporary function and generate large amounts of waste. For example, Walmart sells some footwear without individual boxes but as individual items. Previously, these shoes were transported from distribution centers to stores in large cardboard boxes for stock replenishment. Walmart redesigned the boxes to make them sturdier and now reuses the new boxes for multiple shipments. These simple adjustments reduced Walmart’s paper consumption by 43% and costs by 28% (Walmart, 2017).

Sales

As natural resources become scarcer, and the demand for raw materials increases, companies are increasingly seeking buyers who can turn their waste into new revenue streams. An example is the unsold flowers at Royal FloraHolland auctions. Each year, 12 billion flowers and plants are sold at these auctions, generating significant waste streams, including cardboard, plastics, foils, and green waste, including unsold flowers and plants. Previously, waste was collected and incinerated without separation. Currently, buyers process cardboard, plastics, foils, plants, and flowers separately as mono-flows. By processing unsold flowers separately, buyers can extract natural pigments (colorants) from them. Various markets, such as the cosmetics industry, are increasingly demanding natural instead of synthetic colorants. In this way, they turn a cost item into a revenue model (Milgro, 2019).