CIRCULAR ECONOMY

Main concept: Decoupling (separare) economic growth from the consumption

of finite resources by leveraging on the regenerative power of the supply chain.

The use of resources and the economic development of a country are highly
coupled.
Until now the use of resources grows (almost linearly) with the economic
development of a country (examples: Bangladesh both low, Australia both
high).
This linear economic model (not sustainable anymore) relies on large quantities
of cheap, easily accessible materials and energy. Also, this model is planned
obsolescence, the product is designed to have a limited lifespan to encourage
the consumer to buy it again.
EU parliament called for measures to tackle this practice.

The availability of many non-renewables (metals, fossil fuels…) cannot keep up

with demand, the regenerative capacity of renewables (forests, land, water) is
limited.

Global food waste is expected to grow up to 3.40 billion tons by 2050.

Definitions of circular economy:

‘Systemic approach to economic development designed to benefit businesses,
society and 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.’

‘Regenerative system in which resource inputs, waste, emissions and energy

leakages are minimized by slowing (increase product life cycle like reusing
smartphones to keep it more time), closing and narrowing the material and
energy loops’

Defined by EU: model of production and consumption, which involves sharing,

leasing, reusing, repairing and recycling existing materials and products as
long as possible. In this way, the life or products is extended.
It implies reducing waste to a minimum, when a product reaches the end of
its lifecycle its materials can be kept where possible to recycle them. These can
be productively reused, creating further value.

The rationale behind circular economy: (Helen McArthur)

 Price volatility of raw materials, for example increase in price of cocoa

beans, or purchasing of materials for automotive industry. In a circular
economy they rely on secondary raw materials, to avoid fluctuations on
price of virgin raw materials.
 Need to design the product so that it is easily reinserted in the
economy, like redesign a smartphone.
  CE: better value proposition (sometimes the customer does not even
know that’s CE), sell a service to the customer, for example, plan in
advance when to retire the old smartphone (2/3 years) give the customer
another one and retire the old smartphone (use the materials of the old
one to make another smartphone).

CIRCULAR ECONOMY applied to THE FOOD INDUSTRY

Focus on the content of FOOD (not packaging)

Definitions:

Food production:

 Food scraps: cannot be consumed, generated during production process

like shells, apple peals; mainly generated in agriculture.
 Sold production sold to the consumer
 Surplus food (it can be wealth or waste): edible food, produced and
distributed and ends up not being consumed as the original intention (ex.
Apple not consumed as fresh fruit, with some flaws, it is still edible, can
still be consumed, but after being transformed in apple chips for
example). It has high recoverability potential; its value can be recovered:
o donate it to people in need,
o transform it in a form still for human consumption (ex. Apple chips),
o recycling and recovery not for human consumption for energy
production for example. The same can be done for scraps.

Surplus food has recoverability potential, sometimes companies not always act
to recover it because of:

- not being able to quantify amount of surplus food they generate

- qualification of surplus food: not aware of the quality of surplus food the
produce, do not know how to treat it

Quantification:
1.3 billion tons of food are wasted every year, equal to 1/3 of food production
worldwide (1000 billion/year). In Italy 5.1 million tons (17% of consumption) of
food are wasted every year (12.6 billion euro/year). 31 pacco 8

Qualification:
 57% of surplus food is generated along the SC. Recoverability potential
depending on the food product it can be high (fruit/veg, highly storable),
medium, low (meat, issue with storage)
 43% generated by consumers

Causes of generation of surplus food:

Food transformation: 50% of causes depend on the exceeding of the sell-by-
date.
Sell-by-date: date by which a product must be sold to another company in the
supply chains so that the latter has the necessary time to resell or use the
product. It is at 30% of shelf life usually. (different from shelf life) The sell by
date can be reached if there is wrong planning, non-respect of standards, not
conforming packaging (promotions also, particular packaging).

Food distribution: similar to Food transformation

Food Waste Hierarchy is the key reference framework to translate the

circular economy paradigm into the agri-food industry. It is a set of strategies
to find a solution to food waste also in a sustainability point of view.

NEED TO OVERCOME THE LINEAR SYSTEM: economic sense why companies

should embark in CE

Continued dependence on scarce natural resources for growth exposes

companies to a set of challenges from the cost, revenues and intangible assets
point of view.

If a company chooses to remain in the linear system, it will be exposed to:

- cost increase: raw material cost (volatility of price), disposal
(smaltimento) cost, energy cost, emission control costs
- revenue reduction: increase in sensitivity of customers, this means
becoming a less attractive company for customers, due to increase in the
cost of energy, some companies might decide to close production plants
and better focus their selling effort to a limited set of customers.
- intangible assets erosion (like brand): attractiveness for young
talents, damage in the image and brand value, loss of trust

CE is a concept based on 3 principes (Ellen MacArthur foundation):

 eliminate waste and pollution: reducing the release of greenhouse
gases and hazardous substances considering waste as design flaw (waste
is built inside the linear model). For example, Apeel which conceived an
 edible product packaging made of the coating layer of avocado that can
also extend shelf life of a product; or DyeCo which developed a new
technology of dying using CO2 without using water, reducing pollution.
 keep products and materials in use: designing for durability and
recycling to keep the products and materials circulating in the economy;
encourage companies to extend the life cycle of a product and designing
products having in mind the butterfly model. For example, Resortects
which designed dissolvable threads.
 regenerate natural systems: returning valuable nutrients to the soil to
support regeneration for example through regenerative agriculture.

Different CE solutions: BUTTERFLY MODEL

Based on cycles, the inner cycles are the ones with highest priority, moving to
the external cycles there is an increase the environmental impact and cost (like
logistics).

Relies on two types of materials:

 technical materials: do not biodegrade, not consumed like metals,
plastic, wood
 food and biologically based materials: biodegrade, consumed during
their life cycle like cotton, wood

and they respectively undergo under different cycles according to the type:
 technical materials: the priority is to apply maintenance to extend
their life cycle, then reuse-redistribute (try to find a different
customer/market for that product, for example shared tools like power
drill), refurbish&remanufacture (act on the product, upgrading or
remanufacturing), recycle (reusing materials transforming them);
 biological materials: the priority is cascades (use it to produce
something else, redistribute, for feed), anaerobic digestion to produce
biogas and fertilizers, soil regeneration to preserve the soil, biochemical
feedstock, farming collection.

(avoid designing materials that mix these two typologies)

Regenerative agriculture: farming that focuses on soil health, since the soil has
been degraded using heavy machinery, fertilizers and pesticides in intensive
farming. Shift the focus from extraction to regeneration.

Any circular economy system is based on 2 Strategies for cycling of resources:

 slowing resource loops: through the design of long-life goods and

product-life extension (repair, reuse), the utilization period is extended,
resulting in slowdown of the flow resources.
 closing resource loops: through recycling, the loop between post-use
and production is closed, resulting in a circular flow of resources.

Distinct one:
  narrowing resource flows: using fewer resources per product.

CE product design deriving from the strategies:

design strategies to slow loops:

 designing long-life products:
o design for attachment and trust,
o design for reliability and durability
 design for product-life extension:
o design for ease of maintenance and repair,
o design for upgradability and adaptability
o design for standardization and compatibility
o design for dis- and reassembly

design strategies to close loops:

o design for a technological cycle
o design for a biological cycle
o design for dis- and reassembly

Definition of BUSINESS MODEL

Business model tells how business creates, delivers, and captures value.

Every new product development effort should be coupled with the development
of the business model, which defines its ‘go to market’ and ‘capturing value’
strategies, because technology or products by themselves do not guarantee
business success.

Business model patterns:

 Includes a set of explicit elements that can be recurrently observed in many
different business models.
 Strong communicative power related to the description of essential
dynamics of value creation, value delivery and value capture.
 Represents a systematization of the mechanisms that can inspire business
model innovation.

Different business models of circular economy:

 Circular input: business model that leverages on bio-based and

renewable materials as key inputs. Ex. Packtin uses food packaging made
from food waste
 Favouring Resource Recovery: designing the products including the
forward thinking of a new valorisation option(s) (remanufacturing,
repairing). Ex. Puzzelphone designing smartphones with self-reparation
features by design.
 Lifecycle extension: implementing actions to extend working lifecycle of
products and components by repairing, upgrading and reselling. Ex. Bella
 dentro markets for the food that have imperfect shape and editable and
Imperfect Food (online grocery store of imperfect products for aesthetic
flaws, excessive stock…).
 Sharing platform: enable increased utilization rate of products by making
possible shared use/access/ownership. Ex. Olio is a platform for
individuals to share leftover food
 Product as a service: the sold product provides an access to a service.
Ex. Feather is a company which allows customers to design their
furniture by providing also maintenance services.
 Technology for waste prevention: using different technology to solve
waste problems (wastes for examples could emerge from matching
demand and supply which may generate waste). Ex Freshforcast
providing services to connect upper stream with downstream to better
generate production plan by providing and analysing big data.

Closed loop SC management

When direct logistic flow and reverse logistic flows (repair and be reinserted,
reuse…) are combined in a SC, the result is a closed loop SC.
Closed loop SC management is the design, control, operation of a system to
maximise value creation over the entire life cycle of a product with recovery of
value from different types and volumes of returns over time in the same SC. It
improves environmental performance by bringing back goods and packaging
materials to the producer to recover value. It is environmentally friendly
because it reduces the pressure on the natural resources by combining the 2
flows. Also it could be beneficial in skipping some steps which could contribute
in reducing environmental impact. The closure of the loop can happen at
almost every level of the loop.

Looking at the flows, the pressure on the extraction of raw materials is reduced
by introducing also the reverse flow in the process from different stages.
Closing the loop limits the environmental impact thanks to the introduction of
reverse flow, since some parts of the product have been already produced.
Reduces pollution because less steps are performed by taking back the
product, this is true until the environmental impact of the steps is contained to
make the closed loop SC environmentally friendly.

They are considered closed loops when: return to the original producer or
return to the same product system (same SC).

Circular SC management: It systematically restores technical materials and

regenerates biological materials toward a zero-waste vision through system-
wide innovation. The flows are considered circular when:
- Closed loop circularity: returning after the use of products to their
original supply chains for value recovery
- Open loop circularity: recovery value from waste by collaborating with
other organizations creating new SC, in the same/different industrial
 sectors (also in another SC). ex. Orange Fiber which produces fabric
realized through orange peels, a new SC is created, or Banana chips.

Different types of products for reverse flow:

- Co-products or secondary products: necessarily result from the

production process of the main product and have high significant market
value. Their output can be put in the market and in food often they can
be consumed. Ex. Brewer’s spent grain, resulting from the brewing
process (trash of malt and barney when starch is extracted to make
beer), it can be reemployed in bakery in bread production, cookies
- Byproducts: result from the production process of the main product, but
have low market value, like products not for human consumption. Ex.
Whey from cheese production, more used in cosmetic, less market value;
or molasses (used in other industries like energy) or fruit juices pulps
- Intermediate products: products that didn’t complete one production
process which are applied to another product of process. They have
some value. Ex. tiers of a car, they are already complete products and
have a market. Canned tuna that is mixed with vegetables.
- Waste, emissions or effluents: undesirable products from production
processes that in most cases result in and require cost-mitigation actions.
in specific cases these can be avoided or turned in a source of revenue
for the production process if they can be sold.

Waste hierarchy framework which can suggest different practices by placing

highest priority on the top layers.

THE FOOD QUALITY HEPTAGON MODEL

Defining quality:

 Judgmental perspective: superiority or excellence

 Product based perspective: function of specific, measurable variables,
difference in quality reflect differences of some product attributes, the
higher level of characteristics supplied, the higher the product’s quality
 User-based perspective: based on the assumption that quality is
determined from what a customer wants
 Value based perspective: compares usefulness or satisfaction with price
 Manufacturing based perspective: desirable output of engineering and
manufacturing practices, or conformance to specifications important to
the customer

Kano’s model presents the customer needs as plots of the 3 types of needs on
a grid of customer satisfaction vs degree of achievement.
The model compares how much a company reaches an achievement vs how
much the customer is satisfied. It is possible to classify the needs of a customer
as:

- Unspoken basic needs: expectations that are given as granted, if these

are not present, there cannot be satisfaction
- Performance needs: customer requirements
- Excitement needs: unexpected innovations which can create new
features/surprises that can cause excitement, it is an achievement a
customer did not expect which increases the satisfaction (if there was
not, he wouldn’t even know)

Slide 10-11 pacco 9

Different aspects of quality can have different importance in terms of customer

perception and attractiveness.

The competition in the agri-food sector concerns both compliance with food
safety standards but also the ability to add value. The concept of added value
is consumer orientated: the effort to enhance a food product is aimed at
increasing consumer perception of product quality.

Quality classification:

 Threshold quality: minimum requirements to enter, to exist on the

market (food safety)
 Conformance quality: refers to what the customer expects from the
product. The expectations of the consumers regarding the product which
they are buying.
 Differential quality: additional features of the product that might be
connected with marketing actions.

Corresponding classifications of features:

 Product characterization: features that fit the intended function of the

product
 Response to customer demand: characteristics and product/service
attributes which bear upon its ability to satisfy customer’s need
 Market recognition: features or function for which the customer is
willing to pay

All of the characteristics of a food product, both referring to the product itself
and to the processes done to obtain it, that contribute to its ability to satisfy
final or intermediate customers’ implicit or explicit specific needs.

Tools that can be used by companies to assess and manage product quality:

1) Implementation of good practices throughout the production chain (ex.

GAP good agricultural practices)
 2) Application of HACCP system principles. This system is designed to
identify and prevent risks that are unique or specific to the food or
process. So it identifies critical points that reduce or eliminate these risks
(chemical, physical, microbiological hazards and allergens) for a
particular food.
3) Implementation of a management system at senior management level
(higher level) that incorporates commitment and responsibility,
monitoring and assessment of the entire system (company) and
application of the principles of continual improvement by senior
management. Ex. Improvements required by ISO 9001

Food safety matters are reported in legislation 178/2002, established in 2002,

following a series of food crises, reasons why traceability was born. The
legislation includes the creation of a new institution and related procedures:
EFSA

Tools to assess food quality:

 Regulation and rules: define standard requirements for food safety and
quality, products and SC sustainability and traceability. Ex. ISO 22005
traceability systems, ISO requirements for food safety management
system, HACCP
 Certifications: provides guarantees and represents a factor of
differentiations and value added for final consumers
 DOP-IGP-STG CERTIFICATIONS: to certify products’ origin and production
and processing methods, protect local production communities and
territories, voluntary for companies
 Technological and digital tools: Agriculture 4.0 solutions to improve
quality of fruit and vegetables and reduce variability, digital tools to
monitor production processes (industry 4.0)

Digital innovations for food quality, applications:

Agriculture:

- Agriculture 4.0 to improve quality and sustainability of raw materials

- Decision support systems to detect in advance pathogens reducing the
risk of defected products
- Equipment to analyse the degree of ripeness (maturità della frutta es)
without harvesting

Processing & quality inspection

- IoT to monitor transport and make it efficient and increase quality

- Spectrophotometry, X-rays, AI to control quality and plan actions like
sorting
- Mobile devices to carry out quality control
- IoT sensors to monitor product quality real time
Logistics:

- Satellite images
- IoT sensors to record transport conditions

Food tracking and tracing:

- IoT sensors to collect data

- Blockchain for immutable data
- Web platform for data management

CASES:
Ioppì: young producers’ organizations which embraced digital innovation with
the aim to monitor and support the work of farmers and to add value to the
products on the final market.
Needs:
- Support the management of certification processes
- Monitor the production status
- Remote technical support
Solution: digital register of treatments
Benefits:
- Better support and services to member companies
- Reduce timing
- Better food traceability
- Valorisation of products towards customers

Parmalat: sensors based on photonics for measuring milk quality parameters

directly in the barn.
Benefits:
- Better product quality
- Increasing food safety
- Reduction in costs of quality controls

Salumificio Bonazza: sensors on tracks to keep track of the locations and

conditions od products along the journey. Data are collected, processed real
time and shared.
Benefits:
- Better coordination with distributors
- Better product quality

Consorzio prosciutto S. Daniele: web platform with all the information from
the SC, including traceability data and position.
- Increase in the speed and accuracy in control and verification operations
- Improve visibility along the SC

The quality heptagon: model that includes all the dimensions about food
quality to understand the strategy of a company regarding food quality, so
where is their focus about food quality.
7 attributes:
4 related to the product:
- Food safety: assurance that food will not cause harm, limits imposed by
the law of residues of production (heavy metals, pharma residues…), a
company can decide to focus on this aspect by declaring 0 content of
heavy metals for example.
- Health and nutritional aspects: like rich in proteins or free from lactose
- Sensory: taste, aroma, texture, aesthetics
- Brand and economic factors: price (high or low, it depends), distribution
channels, additional services (evidence of cooking time on packaging),
promotions

3 related to the processes:

- Ethics: customers are becoming aware of the environmental
sustainability, reduction in emissions, waste, fair labour conditions,
cultural development, like no cow milk
- Production method: production method like trafilata al bronzo or
traditional/organic method, respect for seasonality
- Provenance: where was produced, traceability, link to tradition of the
recipe

The tool can be used with two different perspectives:

- Consumer perspective (perceived food quality)
- Company’s perspective (self-assessment)

The seven dimensions can be discussed on two levels:

- Weight: how important is the dimension
- Score: how does the dimension perform for the selected product