The 2021 World Manufacturing Report Digitally Enabled Circular .

Project MethodologyThe World Manufacturing Report is a yearly whitepaper discussing key trends in the manufacturing sector.To develop the Report, the World Manufacturing Report Editorial Team worked alongside an Advisory Boardcomposed of individuals from universities and other organisations from more than ten countries. During theprocess, an extensive review of existing literature on the topic of circular manufacturing was undertaken; thisincludes scientific journals, policy papers, and other materials published within the last five years. These materialsare complemented by expert interviews, which were also used to develop the Ten Key Recommendationsoutlined this report.Experts come from multinational companies and SMEs, industry and trade associations, renowned universitiesand research associations, international organisations and governmental and non-governmental organisations.Experts were asked to provide their personal views on the main topics covered in the Report, focusing on theirarea of expertise.This year’s Report also features case studies written by Young Manufacturing Leaders. The Young ManufacturingLeaders initiative, co-funded by the European Union under the EIT Manufacturing Initiative, aims to create aglobal network of students and young workers interested in a career in the manufacturing sector. The YMLNetwork issued an Open Call for case studies that highlight the use of digital technologies to support circularmanufacturing and the winning contributions are included in this Report.World Manufacturing Report 20217

1CircularManufacturingState of Play8World Manufacturing Report 2021

Circular Manufacturing - State of PlayAs an emerging paradigm in the context of zerowaste,Circular Manufacturing perpetuates the reuse ofresources in the form of materials and energy viaan ingenious design of socio-technical systems andeffective use of information to deal with challengessuch as resource scarcity, waste generation, pollution,biodiversity loss, and climate change by managingthe whole life cycle of a manufactured productfrom inception, through engineering design andmanufacturing, to service and recovery, thus sustainingfuture businesses.To date, there is no precise, comprehensive, anduniversally accepted definition of the circular economy,with many countries using their own interpretations orconcepts developed by relevant organisations. This maypotentially affect coherent international action, consistentapplication of guidelines and policies, and synergiesbetween actions of different stakeholders. Nevertheless,the circular economy is fast becoming an active and rapidlyexpanding mainstream trend as ever more companiesrealise the real value and profits of this new, moresustainable way of doing business. A regenerative model inwhich manufacturers find ways to use materials and goodsfor a much longer time period, creating more than oneproduct life cycle, fuelled by new digital technologies andnew financing models (as well as technologies in generaland entire business models), is driving forward this greatinnovation: the circular economy for manufacturers. Thiskind of innovation constitutes the core of what it means tobe human: enabling wealth creation and success but withrespect for the planet, supporting its survival for futuregenerations. Manufacturers are really at the core of thisnew revolution and their efforts to shift to circular models,as some are starting to do, represent one of the greatestinnovative challenges of our times. Besides, manufacturerscan influence consumers’ consumption attitudes throughtheir value propositions to customers.The circular economy relies on several strategies thatextend the lifespan of products and eliminate wastethrough reusing, recycling, remanufacturing, andredesigning circular products and materials.1 This shift inthinking impacts every part of the value chain and createsFigure 1Circular Economy Diagram(Source: Closed Loop Partners)2ExtractionRaw MaterialsMaterialSupply ChainReduce material inputsDesign &ManufactureDesign for quality, durability andlongevityReplace with renewable materialsUse safe chemistry and healthymaterialsDistribution& UseReuseRepairRent & resellEnd offirst fileRemanufactureDisposalWaste to landfillRecycleWorld Manufacturing Report 20219

a framework (Figure 1) for manufacturing companies.The future of manufacturing will see a gradual developmenttowards a high-quality circular manufacturing industry,in which the demand for scarce raw materials is met byraw materials from the value chain wherever possible,considering the following five strategic goals3 (Figure 2).Figure 2Five Strategic Goals of Circular Manufacturing(Source: World Manufacturing Foundation)Redesign Products &Materials SelectionConserve & RecoverResourcesDevelop New Ways ofProduction- Redesign products and materials selection suitablefor reuse4: The shift towards a circular economy startswith rethinking the initial design and manufacturing of theproduct, considering the product’s second life reutilisationor the recyclability of materials. An example of this couldbe shifting from critical raw materials such as metalsand minerals to generally available raw materials forincreasingly complex products.- Conserve and recover resources from the usedproducts, and use them in the manufacturing of newproducts5: Increasingly, manufacturers are seizing newopportunities offered by the Internet of Things and insome cases, shifting to a more service-based model inthe process. In this regard, manufacturing companiesshould develop processes and systems for taking backand refurbishing goods for a second life cycle. Here, thetracking technology could revolutionise manufacturers’ability to do this. They need to understand the materialflows of their products, so that they can plan and facilitatethe next cycle. This new capability is driving revolutionarychange among manufacturers, many of whom are alreadykeen to use it to optimise production processes andimprove customer service.- Develop new ways of production 6: The demandsof Circular Manufacturing imply change to materials,machines, products, and processes, all of which impactjob design. The future global economy of products andservices calls for large volumes of primary raw materialsand energy. To that end, there is a genuine need for newproduction systems that use sophisticated printingtechnologies and includes products made of selfhealing and shape-shifting materials that can prolongtheir shelf life.10World Manufacturing Report 2021Implement Service-basedModelShift to Renewable RawMaterials- Implement a service-based model for circularproducts7: Along with the supply side, the demand forcircular products and services will need to increase inorder to complete the circular business cases. Companiesand governments play a key role in this by adopting sociallyresponsible procurement. In the past, manufacturers havesold assets to customers. However, in a world where youwant to minimise waste, it is far better for the producersto retain ownership, instead selling a service to thecustomer. For customers, this tends to mean they get abetter service overall with maintenance and quality at theheart. Manufacturers in turn can ensure they service andmaintain the product and keep it in a good condition, priorto its next cycle.- Shift from fossil to renewable raw materials andeliminate use of toxic chemicals8: The circular economyis an industrial system that is restorative or regenerativeby intention and design. It replaces the end-of-life conceptwith restoration, shifts towards the use of renewableenergy, eliminates the use of toxic chemicals, which impairreuse, and aims for the elimination of waste through thesuperior design of materials, products, systems, andbusiness models. For instance, it will soon be possiblelargely to replace fossil carbons by short-cycle carbons.This has already been achieved on a small scale with heavychemicals such as ethanol, methanol, butanol, and aceticacid. When properly used, this contributes to reducingCO2 and reduces dependency on scarce or volatile rawmaterials.

Drivers of the Circular Shiftin ManufacturingFigure 3Drivers of the circular economy(Source: OECD)Very relevantRelevantClimate changeGlobal agendasEconomic changeJob creationPrivate sector initiativesNew business modelTechnical developmentR&DNatural resources availability changeNational legal frameworksCivil society’s initiativesSupranational legal frameworksUrbanisationDemographic change0%10%20%30%According to the results of the OECD Survey on theCircular Economy in Cities and Regions9 (Figure 3),major drivers for transitioning to a circular economy areenvironmental (climate change, 73%), institutional (globalagendas, 52%) and socio-economic (changing economicconditions, 51%). Besides, as highlighted in Figure 3, thiscircular shift is driven by job creation (47%), private sectorinitiatives (46%), new business models (43%), technicaldevelopments (43%), and research and development(R&D) (41%).In this Report, we consider and classify the most importantdrivers as follows: sustainable development goals,innovation, policy, collaboration across stakeholders, andbusiness drivers.Sustainable Development GoalsThe circular economy contributes to the achievementof the Sustainable Development Goals adopted byUnited Nations Member States.The 2030 Agenda for Sustainable Development, adoptedin 2015 by UN member states, includes 17 SDGs10.40%50%60%70%80%90%100%The circular economy appears to be a promising approachfor achieving various goals. While it is strictly linked toSDG 12 on sustainable and responsible consumptionand production patterns, other SDGs (i.e., 6, 7, 8, 9, 13,15) are also relevant to the circular shift. Besides, it is keyto supporting the global framework set out in the ParisAgreement.11 Circular Manufacturing in the context of theUN 2030 Agenda and the Paris Agreement is discussedin Chapter 3: Policy Developments and Enablers for CircularManufacturing.InnovationNew technologies, materials, and delivery modelssupport and enhance circular manufacturing systems.New technologies offer vast opportunities fortransforming the way we do business. In a circular economy,these technologies are driving new ways of creating valuefor both emerging and established businesses alike.12These new technologies offer unprecedent opportunitiesto implement a circular economy. Examples of theseimplementations could be AI for managing a product’s lifecycle, collaborative robotics and automation for sorting,World Manufacturing Report 202111

Figure 4Sustainable Development Goals(Source: United Nations)disassembly, and remanufacturing in safe and competitiveconditions as well as new processes and biomaterials.One of the key factors to determine the life cycle of aproduct is its materials and place of origin. Thus, forcircularity there is now a significant focus on materialscience innovation to re-evaluate what goes into productsfor a carbon-free future. 13Compared to traditional purchasing models, the innovativeside of circular manufacturing regarding the businessmodel is transferring ownership back to the manufacturersand producers in the form of leasing and subscriptionmodels.14 In such models, companies sell their productsas services and consider their products as valuable assetsworth investing in.Business DriversCompanies need to change business models, regulatoryenvironments should provide appropriate frameworks,and consumers need to shift their behaviour andmindset.For a circular economy, all stakeholders should be engagedand have an important role to play. Through stakeholderengagement and an update of traditional business models,the circular economy can contribute to transforming thecorporate culture to ensure the concurrent enhancementof economic, social, and environmental dimensions.15 Asuccessful transition to the circular economy depends12World Manufacturing Report 2021largely on consumers, as they are the ones to demandsustainable change, and in turn create businessopportunity. Few consumers make that step on theirown, but new initiatives to help them are emerging.Services such as repairing, and refurbishing are gainingmomentum and provide an alternative to replacingbroken or outdated consumer goods. The option ofsharing is also growing. This shift in consumer mindsetmotivates companies to distinguish themselves byoffering products that can easily be repaired, instead ofthose made from components that are no longer available.One other example of this could be offering appliances(e.g., a washing machine) for which the consumer pays forthe use instead of for the ownership. These products canthen be replaced or refurbished when their end of life isnear, or when the consumer’s situation changes and theyrequire a different product.16Besides, market forces are important for advancing thetransition to circularity. Investment is the necessary driverhere in accelerating this advancement by encouraginginnovation and enabling transformative companies tobring their solutions to scale.Collaboration across StakeholdersPartnerships align interest among multiple stakeholdersand lead to a system-wide change.In a complex global system, the circular economy includes

every part of the value chain. The shift toward circularityis a collaborative effort and is not possible to be achievedby any one actor, company, or industry alone. Therefore,unprecedented collaboration across multiple stakeholdersis required to align the interests of all manufacturing actorsincluding customers, shareholders, business partners, andlocal communities as well as protecting the environment.In this regard, collaboration among multinationalcorporations is extraordinarily powerful. Besides, publicprivate partnerships and global commitments are ofgreat importance for accelerating the circular economy.Las but not least, data sharing for manufacturing is animportant enabler of collaboration among stakeholders. 17Furthermore, manufacturers have a special role in circulartransition. Since they can decide on product design, theycontrol the manufacturing chain and can be focal actors inthe reverse chain.PolicyLegislation fosters circularity, resilience, and inclusivityacross cities and countries.Circular economy requires a holistic view to be effective.Policies make this happen from the very top. The roleof policymakers is to create a suitable legal frameworkto enable circular economy businesses and set a visionfor providing incentives to get diverse stakeholders onboard. Hence, for achieving a successful circular economy,policies should be designed to support affordable andinclusive business models, and to consider all the risks newsystems could pose. The importance of education, role oflegislations, and allocation of investments are key factorsthat should be considered for designing effective policiesto shift towards circular manufacturing.Challenges Towards Building a CircularEconomyThe transition to a circular economy presents a numberof challenges.Such challenges are, for example, linked to the uptake of newbusiness models, adequate standards and laws, financialincentives, innovation, behavioural change, improvedwaste management, knowhow, and administrativecapacity, among others. Major challenges towards buildinga circular economy are not related to the lack of technicalsolutions. Instead, lack of critical scale, cultural barriers,inadequate regulatory frameworks, and a lack of financialresources have been signalled as “major” obstacles bymore than a third of the governments interviewed in theOECD Survey (Figure 5).9Figure 5Obstacles to the circular economyMajor obstacleImportant obstacle(Source: OECD)Cultural barriersInadequate regulatory frameworkInsufficient financial resourcesLack of holistic visionInadequate informationIncoherent regulations across levels of governmentFinancial risksLack of awarenessLack of critical scaleInsufficient human resourcesLack of private sector engagementLack of political willLack of technical solutions0%10%20%30%40%50%60%70%World Manufacturing Report 202180%13

From the perspective of developing countries, some ofthe main challenges they face are as follows: insufficientunderstanding of potential benefits by key stakeholders;inadequate incentives for the private sector and lackingenabling environments for investment; lack of consumerawareness; a gap between respective policies andtheir implementation on the ground; and insufficientcoordination between government agencies dealingFigure 6The global resource footprint(Source: Circle Economy)14World Manufacturing Report 2021with industry, economic, environment, waste and naturalresources management issues.There are also several business-related and technicalchallenges towards building a circular economy. The majorchallenges of such are as follows18 Quality issues in recycled materials Supply chain complexities Coordination problems between companies

High start-up/investment costs Increasing complexity in design and production of theproduct Poorly developed markets of secondary materials The issue of re-using and remanufacturing parts andcomponents, which needs the establishment of crosssectoral reuse chains Disassembly of products Insufficient monitoring approaches to follow thedevelopment of the circular economyFurthermore, the circularity gap is widening. The latestCircularity Gap Report19 from Circle Economy shows that,faced with the dual challenges of increased CO2 emissionsand increased resource extraction, the global economy isonly 8.6% circular (Figure 6).World Manufacturing Report 202115

Benefits of Adopting Circular StrategyCircular Manufacturing keeps valuable materials out oflandfills and in manufacturing supply chains, leading tosignificant economic opportunities.Figure 7 illustrates the materials landfilled in the UnitedStates in 2018.Figure 7Materials Landfilled in the U.S. in 2018(Source: Closed Loop Partners)77 M43 M40 M38 M24 M13 M12 NICSHence, there is a significant economic opportunity andbenefit of circular manufacturing for keeping thesevaluable materials out of landfills and in manufacturingsupply chains.The circular economy is a new socio-economic paradigmwhereby resources and products are used for as long aspossib

a circular mindset and instilling responsibility among consumers, enacting policies that address challenges related to a digitally enabled circular transition, building a proficient workforce with the right skillsets and competencies relevant in the changing paradigm, and promoting collaboration to build circular value chains.