Overcoming the challenges of a circular economy

• Jean Miyeli

Jean has worked for the past 10 years in the energy management industry. He started his career with sales and key account management responsibilities in Europe, before taking over the management of the Schneider Electric Solar subsidiary in Japan, where he lived for 3 years.

He then joined Schneider's strategy and sustainability teams in France before joining Eaton in 2022 to take care of segment and customer facing sustainability strategy within electrical sector EMEA.

• Delphine Clement

Delphine is Energy Transition Sales Director, Middle East, and Africa for Eaton’s Electrical sector. She has more than 20 years of experience in the power management industry with positions held in France, China and Switzerland in supply chain, operations, sales and marketing.

Delphine joined the Eaton team in 2007 and is currently responsible for leading Energy Transition sales in the EMEA region through development of strategic key accounts and new channel to support energy transition in commercial building segment. Prior to this, she had several roles leading the Commercial and Industrial Building segment strategy, Rail segment strategy and Heinemann business and operation at Eaton.

Prior to joining Eaton handled various roles in Supply Chain at Schneider Electric and received her master’s in Industrial Engineering from Grenoble Institute of Technology in France.

PRESENTER: Welcome to Eaton's "10 in 10" podcast, where we focus on industry trends shaping the future of power management. In this series, our expert answers 10 questions about one of today's most talked about industry topics, in 10 minutes or less, from the energy transition, to digital transformation, and beyond. We explore trends and discuss strategies for delivering safer, more efficient, and reliable power. 

INTERVIEWER: The circular economy model has evolved quite significantly in the last five years, but the reality is a bit more challenging, and the speed at which our economy is evolving isn't moving fast enough. Today, we'll be speaking with Jean Miyeli, EMEA's, Segment and Sustainability Strategy Director, and Delphine Clement, Energy Transition Sales Director, about how we can unlock these challenges and, ultimately, shift our mindsets from an economic model that is linear to one that is infinite and circular. We have 10 questions in 10 minutes. Let's get started. Jean, let's begin with what is the circular economy? 

JEAN MIYELI: According to one of the leading organizations in the field of circular economy, the foundation Ellen MacArthur, a circular economy is a systemic approach to economic development designed to benefit businesses but also society and the environment. In contrast, to the take make waste linear model, a circular economy is regenerative by design and aims to gradually decouple growth from the consumption of finite resources. I think it's also important to highlight that circular economy principles are meant to be applied across the full product value chain, from its design to the end of life and not only to repair or use product-- sourcing circular raw materials, such plastic and specific metals, increasing circular attributes at the design stage, using circular packaging, and then all the reuse, repair, refurbish, remanufacture, repurpose, and recycle model that we are more used to. 

INTERVIEWER: Delphine, can you talk about what we are seeing as the market drivers and regulations that are ultimately creating the urgency for this model?

DELPHINE CLEMENT: Sustainability is high on the agenda of companies globally, and companies commit to decarbonization roadmap. They define ESG goals for their stakeholders, but it's also a request from employees. And we see growing employee engagement and the need to work for purpose-driven companies. It's then critical to attract and retain employees. 

But also, with COVID, companies decided to build or rebuild more regional or local supply chains to reduce dependency from foreign manufacturers and increase resiliency of their operations. And then circular economy is an opportunity to bring more residents with shorter and local supply chain. Finally, new regulations, and especially in Europe, require business change. For instance, in France, the anti-waste and circular economy law, entered in force in 2021, provides ban of restriction of new non-food products.

INTERVIEWER: It seems that some areas might be strongly requesting circular products and paving the way for that transformation. Jean, digging into that a little bit more, what are the different dynamics we are seeing across segments?

JEAN MIYELI: Yes. There are very different dynamics within the segment and also by country. For example, in France, in the building segment, there is a very strong regulation to oblige a project owner to provide lifecycle assessment on the entire project, and for that assessment, all circular products are considered having a carbon footprint of 0. So this is a very strong incentive to push that kind of product into the market and really scale the volume. Another example on data center, all the large data center operator are challenged and attacked by society with regard to their consumption of energy but also on water, and they have to be using the best practice when it comes to environmental impact. Circular product is one of the way for them to achieve this kind of superior, sustainable performance, and they are strongly looking at refurbished UPS but also power distribution, server, and this is driving a lot of new demand on the market. A last example maybe in the field of electrical wholesaler. That is very close to our core business. They have a lot of physical shop to sell product, and this gives them a unique position to have a central role in the product take back So they are really looking at it as a big business opportunity. 

INTERVIEWER: Are we seeing challenges present themselves, Delphine? 

DELPHINE CLEMENT: There are indeed a couple of challenges. First, circular economy is impacting the entire value chain of the product lifecycle. The web products are designed, manufactured, remanufactured, collected, resell, recycled, are impacted, and it will change all processes and function, from manufacturing strategies, to supply chains and logistics, sales, channel, go to market and commercial policy. So in that context, companies are struggling to know how to begin and where to begin.

But there are also enablers supporting circular economy. If you look at the number of research working on the topic and the number of scientific publications, it has been exponentially growing in the past five years, and this proves the growing importance of these topics. Also digital technologies and digital platforms are enabling to connect buyer on one side, seller on the other side, track products, and optimize the supply chain. And finance, our new financing scheme moving the ownership and bringing new business models, for instance, as a service business model, also enabling development of new circular economy models by removing burden from the traditional assets' ownerships. 

INTERVIEWER: That's interesting. It sounds like we still have some challenges to overcome, but there are certainly those enabling factors that provide many new opportunities as well. Jean, maybe that can lead us into how do we quantify the business potential?

JEAN MIYELI: Well, it's always one of the key questions in order to get the attention from our leader and drive significant investment, and it's always a tricky question to address. The first important element to look at is our install base, and to better track it, it goes with an increased connectivity of our asset. If we have a connection, we know where the product is installed and what is its state?

The second step is to make the evaluation, product line by product line, of a potential business case, and here, you have four components-- the cost to collect and bring back the product, the cost to repair it, the cost to resell it, and lastly, the profitability that we want to make on the entire operation. So it's a detailed bottom-up evaluation that will allow you to evaluate the business potential for a given product line. What is more difficult to assess is what I call the peripheral consequences of introducing this kind of new offer to the marketplace, because circular economy will allow you to get closer to your end customer and its challenge, allowing a better stickiness with existing customer and, ultimately, drive much more business and profitability that goes much, much beyond the first intended transaction.

INTERVIEWER: And Delphine, what is the impact of the circular economy on the operations of a company?

DELPHINE CLEMENT: Well, the circular economy model will significantly change the ways companies are operating their business, transforming manufacturing sites into remanufacturing or repair centers, developing new supply chains for reverse or take-back logistics, extending the need for data management and traceability of products, or developing new channel and redefining the purpose and role of channel in the market or again developing new services to enable assets health monitoring and lifetime extension. 

INTERVIEWER: Jean, what role or how can we help enable our customers to adopt this model?

JEAN MIYELI: At Eaton, we believe that a circular mindset should be applied across the complete lifecycle of a product, as we discussed, from the way we design and manufacture it to our ability to extend its life, giving a second life or recycle it to re-enter the supply chain. Transforming the way we produce and use product creates new opportunity by enabling our customers to reach their sustainability goals faster, drive increased resource efficiency, maximize on economical benefits, and ensure a more resilient operation. Talking about what all we can do for our customers, the first obvious one is to answer the increasing demand of circular products.

It allows them to differentiate when bidding for a project and offer a more environmentally friendly proposal, but we can also help them to give a second life to assets reaching their end of life. Think about a medium voltage switchgear that stay two or three decades on the field. When it's time to renew the installation, our equipment life extension and modernisation offer is right to the point to avoid our customer buying a new one. 

INTERVIEWER: Delphine, can you talk a little bit about what we should expect to see in the years to come?

DELPHINE CLEMENT: This is just the beginning of a longer journey, and we could even make the parallel of what's happening on circular economy with energy transition. If you look at where we are with renewable deployment of EV charging deployment, it's already quite a major topic, which started a couple of years ago. So in circular economy, we should expect more regulations.

They will become more precise and will come with an acceleration of their requirements. More customer requests for circular economy, business are also accelerating their circular economy journey, and that will require support from their suppliers. So new partnerships and business models will be created.

It will change the way companies are doing business, through new business models and then new revenue models. It will also change paradigm. The biggest source of resources will come from our own product, which means that the larger suppliers of companies, having a circular economy approach, could become the company itself.

INTERVIEWER: Jean, the circular economy looks like a field where collaboration is needed across the value chain in order to collect, sort, repair, and resale products. How are we approaching this challenge? 

JEAN MIYELI: Firstly, inside Eaton, to be successful in the journey, we need to involve several functions that each play a key role in the transformation. Supply chain, from product collection and all material flow, procurement to qualify and validate new partner for product sorting and reparation. Manufacturing team with their engineering competency for product dismantle and software update, the IT team also for product traceability. And very important team to involve in the transformation are the sales team that are leading a new business model, structuration of the demand, partnership with ecosystem, et cetera.

Then, across our value chain, each player can play a specific role. The electrical wholesaler for product collection and sorting, the logistic partner for the reverse logistic, and we need a set of new partner for product audit and reparation. At the end, one element of the vision for our company is to create an ecosystem of partner that is as complex as the one we have to sell our product today to collect our product, repair, refurbish them, and provide them a second life. 

INTERVIEWER: And Delphine, for our last question, how do you get started on the circular journey?

DELPHINE CLEMENT: Well, we have discussed it. It's a complex topic, and it will require the investments of the entire organization. So the first thing to do is to understand company vision and objectives, when it comes to sustainability.

Understand the circular economy cycle, from design and build to extend, refresh, and recycle. Develop a run of communication to develop awareness on objectives and definition of circular economy to embark the entire organization, and then engage with all stakeholders and define what circular economy means for the company. Build work streams, test with pilots, start small, learn, deploy, and scale, and again, communicate, share results, and celebrate successes. 

INTERVIEWER: Thank you for sharing your insights today, Delphine and Jean. To learn more, visit us at eaton.com/circulareconomy.