NEWSLETTER by Alessia Falsarone. The author acknowledges the team at The University of Chicago Circular Economy and Sustainable Business Management Program and all participants of the innovation knowledge hub for their insights and collaboration.
By their very nature, digital systems generate a vast amount of data, including signals that pertain to security. However, sifting through this data can be quite a daunting and time-consuming task. Circular economy practitioners know well how to devise methods that segregate various types of inputs right at the source, making it easier to collect, recycle, and repurpose more efficiently. When this segregation exercise is setup from the start, it helps generate dependable and precise information that can be utilized in decision making. Nevertheless, as Industry 4.0 populate many circularity use cases, smarter systems, factories and supply chains require a higher level of cyber awareness and readiness. In the meantime, the insurance and re-insurance industry is at work to grow the insurability of circularity businesses and offer adequate risk management and mitigation tools.
| The science of impact
No question, the world around us continues to undergo technological updates with or without evidence of circularity adoption. Machines are now required to understand and interpret the physical world and to perform tasks flawlessly for better service. For that to happen, there are systems that obtain information from the physical world and translate it in a way that can be understood by machines in their cyber world. Fortunately, these types of systems exist and are called cyber-physical systems (CPSs).
In general, Industry 4.0 tools, such as CPSs, IoT, augmented reality, big data, simulation, autonomous robots, cloud computing, additive manufacturing, cyber-security, and artificial intelligence can be key enablers for CE. CPSs enhance the potential of physical systems by interacting with physical processes using deeply embedded computations and communications that control and monitor physical processes through feedback loops. In other words, CPSs provide a real time linkage between humans and physical or production systems. This linkage is created using sensors, actuators, and computers through a network.
The use of CPSs could solve many critical challenges in manufacturing, such as quality control, defect prediction, energy consumption, machine health monitoring, and the increasing need for direct human–machine collaboration and most importantly the making of smart factories.
| Circularity roadmaps explained
The circular economy goes hand in hand with the adoption of sound technology infrastructure as it relies on bringing together a large number of operational resources both within a business and its supply chain. Advances in circular product and process design rely on scalable connectivity, end-to-end security/privacy, dependability and interoperability, whether or not they involve sensors and devices for a system-level use or at the individual product/component- level. As the domains of business operations, supply chain management, telecommunications and cloud services come together, so are circularity uses cases.
One example is that of ITELYUM, a group of 600+ people involved in transforming industrial waste of various types into new resources for the Italian economy. Founded in April 2019 from the merger of 16 operating entities, it is considered the benchmark player of circular economy in Italy.
Present in 50 countries, Itelyum’s production plants present complex security situations to be dealt with: they are large industrial plants handling sensitive materials, so all the necessary precautions must be implemented, to ensure the plants’ maximum safety. By partnering with physical and cyber security provider AXITEA SPA, the company has been able to back its circularity processes with security-critical tools that mitigate infrastructural blocks that would have severe implications on industrial plants, to instances of data loss and enhanced compliance.
| Investing in the Circular Economy
The insurance industry is closely following the introduction of circular business models and its implications. Several companies – from CNA Hardy to Zurich Insurance, and Swiss Re – have emphasized the global need for achieving a higher recycling rate by 2040, meaning that up to 90% of all consumed resources will need to be recycled.
This is also driving insurers to prioritize advances in recycled materials in their own risk management and mitigation assessments. In fact, limited property insurability for recyclers has been a distinct challenge, with high fire losses being a major concern. The growth of recycling in the next 20 years is expected but could be hindered by limited insurance capacity.
The growth in recycling capacity, which is crucial for protecting investors and operating companies, requires adequate insurance coverage. This includes property insurance, business interruption coverage, and other types of liability insurance not covered in this analysis. Historically, obtaining such insurance in the sector has been challenging due to high premiums. However, this situation is starting to change.
According to France Assureurs, the waste industry accounted for about 0.5% of insurance premiums from 2010 to 2015. However, it was responsible for as much as 5% of industrial claims, with recycling companies bearing a significant portion of these losses.
Despite not having experienced major losses themselves, insured recyclers may still have to pay high premiums due to a few large incidents that drive overall loss ratios. This is particularly challenging for smaller recycling companies with only one or two plants, as they may perceive the premiums as too high or unfair. Although the overall risk quality of recycling facilities remains low at an aggregate level, changing the perception of “high premiums” will be difficult.
Have you already read?
〉Ep. 31 | A Week of Circularity: Embodied Carbon by Alessia Falsarone
| You don’t want to miss this week
From Bogotá to Stockholm, this week offers new opportunities to connect with fellow circularity practitioners both in person and in hybrid mode.
Discover, grow and leave your mark!
〉September 24th-28th: Circularity Trade Mission to Colombia (Bogotá, Medellín, Cartagena)*. The Netherlands Enterprise Agency (RVO), Holland Circular Hotspot, the Ministry of Foreign Affairs, in collaboration with the Dutch economic network in Colombia, have joined forces to arrange a trade mission to Colombia, where the momentum for the circular economy is growing fast (from Extended Producer Responsibility, to packaging materials and plastics innovation)
Note (*): in Dutch only.
〉September 27th: LIFEBIOBEST: How to Best Collect Biowaste in High-Density Areas? (Virtual). The EU’s Waste Framework Directive requires member states to collect bio-waste separately by the end of 2023, significantly increasing the availability of biowaste for composting and anaerobic digestion. This webinar will share key evidence on how to set up high-performance biowaste systems in a range of urban contexts across Europe, and why door-to-door collection systems perform much better than other models; how to secure the support and participation of all your community members through innovative communication campaigns and engagement practices; and the importance of prioritizing food waste over garden waste in such locations. Registration is available here.
〉September 28th: Accelerating the Transition to a Circular Economy(Stockholm). The Embassy of the Netherlands in Stockholm is hosting an event on how to accelerate the transition to a circular economy in the Nordics. Join for insightful speakers, discussions, and networking opportunities, exploring Dutch and Swedish circularity approaches by registering (STO-EVENTS@minbuza.nl). Speakers will include Freek van Eijk | Holland Circular Hotspot on Netherlands’ best practices; Sandra Kolodzinskyi | Netherlands Enterprise Agency (RVO)on the local ecosystem support for SMEs; Sofia Sundström Cradlenet on use cases for accelerating circularity adoption.
Off to another impactful week!
| about
Alessia Falsarone is executive in residence, practitioner faculty at the University of Chicago, where she leads the Circular Economy and Sustainable Business program. The article is based on the author’s newsletter A Week of Circularity from the innovation knowledge hub.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.
