Circular Economy, Sustainability

Business Models for a Circular Economy: Pure Waste Textiles

Name: Pure Waste Textiles
Founded: 2013
Founders: Hannes Bengs, Anders Bengs, Lauri Köngäs-Eskandari, Jukka Pesola and Maela Mandelli
Industry: Sustainable fabrics and clothing
Main products: Recycled fabrics and clothes
Sustainability: Pure Waste Textiles provides recycled fabrics and clothes to consumers, other clothing labels, and retailers

Company history

One of the most important issues related to the circular economy is making sure that we use existing resources as efficiently as possible. In fact, waste should be completely designed out of our products and production systems. This is where a company like Pure Waste Textiles can help.

Pure Waste Textiles is a clothing company that produces 100% recycled fabrics and clothes. This is how Pure Waste Textiles works: the company buys leftover materials and fabrics that would normally go to waste from textile manufacturers, sorts the waste by color, tears the fabric apart into raw cotton, spins the cotton into yarns and finally turn the yarns into usable textiles. The end product is a 100% recycled and high quality textile that would have normally been disposed as waste. Furthermore, because the company sorts the waste by color, no extra dyeing is required during the process.

Pure Waste Textiles was founded after the owners of the Finnish ecological clothing label, Costo, began searching the markets for cotton that would be 100% recycled. The Costo label had previously been using surplus materials from other clothing manufacturers in its products, but in 2010 the company wanted to take things up a notch by creating a clothing line out of completely recycled fabrics. Using recycled fabrics would not only be a more ethical choice, but it would also make more business sense, as it would allow the company to provide a steadier stream of supply for its retailer clients. However, according to one of the founders, Hannes Bengs, the task of finding 100% recycled fabrics proved difficult:

“Back then we started thinking about using completely recycled textiles and so we began looking for fabrics that would be 100% recycled. To our surprise, we couldn’t find any suppliers for recycled fabrics. We then got excited and realized that we could start supplying recycled textiles ourselves.”

The company set to work straight away and began creating prototypes and test batches, which finally lead to the founding of Pure Waste Textiles in 2013. Potential suppliers were found from China and India, and after long negotiations, the company was able to form partnerships with local manufacturers.

“We had Jukka Pesola working with us, who had 15 years of experience from doing trade in Asia. He knew about the local manufacturers, factories and recycling centers. The technology for producing recycled textiles was actually in place, it just hadn’t been used for creating 100% recycled fabrics before”, says Bengs.

Although the company had the benefit of using existing contacts, finding a partner wasn’t easy. The company needed to prove that producing completely recycled textiles would actually work. Bengs elaborates:

“The biggest challenge was that no one wanted to produce anything for us at the beginning. They were mostly afraid that using recycled fabrics would break their machines. After wrestling with this issue for some time, we were able to produce a few working test batches and then things finally took off.”

Pure Waste Textiles wants to create a positive change in the clothing industry by making ecologically produced clothes and textiles more available to consumers. According to Bengs, the biggest sustainability issues in the clothing industry are related to quality and time.

“If a company is selling a t-shirt with a 5 or 10 euro price tag, it is cutting costs in either quality, materials or labor. It just isn’t possible to produce a quality shirt for 5 euros. Another major issue is the existence of fast fashion. Having a product go out of fashion in six months is simply not sustainable.”

The main problem behind both issues is that the externalities, such as carbon emissions, destruction of habitat, or social issues that are caused by cheap manufacturing are not paid by the companies themselves, but by local communities, national governments, or by future generations. If the full cost of producing a t-shirt or a pair of jeans was paid by the companies, we would most likely have very different clothes prices.

In the future, Pure Waste Textiles wants to form partnerships with big clothing manufacturers and labels, where Pure Waste would provide the fabrics and the manufacturer would do the rest. The company’s vision is that when people think of recycled, high quality, and ethical clothing, they will think of Pure Waste Textiles, similar to how people think of Gore-Tex when it comes to dry and water-proof clothes.

Today Pure Waste Textiles already has competition in the recycled fabrics markets. For example, Eco-fi, a US company, sells polyester fiber made from post-consumer plastic bottles, while Brentano, also from the US, offers post-consumer recycled polyester fabrics.

Business Model: Recovery and Recycling

Value proposition: We make 100% recycled, premium quality, and sustainably produced yarns and fabrics.
Main customers: Clothing brands and manufacturers.
Revenue generation logic: The business model is based on selling fabrics and yarns to clothing manufacturers and brands. However, in 2015 the company’s main cash flow still came from selling t-shirts to companies and individual consumers.

 

According to Accenture’s business model framework, Pure Waste Textiles has a Recovery and Recycling business model. According to Accenture (2014), the model enables companies to eliminate material leakage and is a good fit for companies or industries that produce large volumes of by-product. In this case, Pure Waste Textiles helps clothing manufacturers to eliminate waste from the clothing manufacturing process by turning by-product into usable fabrics.

Accenture’s (2014) 5 Business Models for a Circular Economy.

While the manufacturing processes and technologies used to create fabrics might be complex and sophisticated, the business model of Pure Waste Textiles is relatively simple. The company buys by-products from manufacturers, turns them into usable fabrics or clothes and sells them forward.

What’s particularly interesting about Pure Waste Textiles and its business model is the scale of the unused resources that the company is trying to tap into. According to Pure Waste Textiles, 10-15% of the produce from clothing manufacturing is usually wasted, which only a few companies have so far been able to take advantage of. If that 10-15% could be turned into a profitable business, we could see a great rise in material use efficiency in the clothing industry.

The Pure Waste Textiles manufacturing process.

Moreover, while reducing the waste and by-products from industrial processes is an important issue in itself, there are other even bigger opportunities for improvement to explore. What if we were able to recycle all clothes – not just the pre-consumer fabrics? What industries, what companies and how many circular economy jobs could we see emerge when we start exploring such opportunities? Pioneering companies like Pure Waste Textiles often pave the way to finding other places where innovative business models and technologies could be used to create circular economy businesses.

And most importantly, while advanced technologies will be needed in the future to create a circular economy, Pure Waste was able to rely on existing technologies in creating its circular business model. Sometimes it’s not better technology that we need, but better purposes for using our technologies.

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Circular Economy, Sustainability

Business Models for a Circular Economy: PiggyBaggy

Company profile

Name: Coreorient Oy / PiggyBaggy (beta)
Founded: 2011
Founders: Harri Paloheimo and Heikki Waris
Industry: Multiple industries / ICT-enabled services
Main services: PiggyBaggy crowdsourced ride-sharing for goods; Smart service system development and consulting
Sustainability: PiggyBaggy lowers emissions and resource consumption by providing access to already existing mobility, similar to car sharing

Company history

Have you ever needed a particular tool to do some small task, such as drilling a hole in a wall or tightening a loose screw in a bike, but didn’t have that tool available? And then had to either spend a lot of money to buy that tool or a lot of time finding someone who could lend it to you? Or have you ever spent half a day trying to get some mundane task done, such as delivering a book to a library or returning a broken MP3 player back to the store?

I’m sure you have. And I bet you have some tool that you’ve only used a few times in your life, such as a power drill, lying around in your basement.

What if instead of owning expensive equipment, you could rent or borrow the tool you need, or pay someone else in your neighborhood to drill the hole for you? And how about if you didn’t always have to go to the library to borrow books, but could instead pay someone else to deliver the book, or use a library access point near your house?

What if you could live in a world with less stuff to take care of, less hassle over mundane things, and more time to do the things you really care for?

Moreover, what if in this world you could get things done by using fewer resources, less or no gasoline, and less energy. You would pay for services, instead of goods, and would have access to functionality and results, instead of having ownership of the damned power drill.

And even if you do want to own your power drill, the rest of it sounds pretty good, right?

A Finnish company called Coreorient, is trying to build that world.

Founded in 2011 by several ex-Nokia experts, Coreorient is a company that has been involved in developing services and technologies that help people get everyday things done more efficiently and using less time.

The company’s flagship service, PiggyBaggy, is a crowdsourced ride-sharing service for goods. The idea of PiggyBaggy is simple: let’s say you need to deliver a broken laptop to an electronics store for a fix-up. Instead of going yourself, you can use PiggBaggy to get someone in the PiggyBaggy community to deliver the laptop for you in return for a small payment. For example, someone might be commuting past your house and the electronics store and could, therefore, take your laptop on her way to work, giving you more time to do other things.

According to the CEO of Coreorient, Harri Paloheimo, the idea for crowdsourcing goods-delivery came to him when he was returning a broken microwave back to the store. As Paloheimo didn’t own a car, the journey to return the microwave involved taking several buses and a subway.

“When I spent half a day returning a broken microwave back to store, I remember thinking at one point that this doesn’t make any sense and that there has to be a more efficient way to get this done.”

Paloheimo began tinkering with an idea of a crowdsourced ride-sharing service for goods and even tried to get Nokia to do a collaboration with several existing ride-sharing companies. In the end, however, Paloheimo didn’t get the required support from Nokia headquarters and finally, he left Nokia in 2012 to lead Coreorient. The company had already been founded on paper in 2011 by his college, Heikki Waris. Although the men were taking a leap from a big corporation to run a small startup, being an entrepreneur felt oddly familiar to Paloheimo:

“I had been acting as an intrapreneur at Nokia for years before starting my own business. I had imagined that things would work in a more rational way outside big corporations, but I soon realized that the same pitching theater and powerpoint circus that I was used to continuing in the real world.”

Moreover, power points and pitching weren’t the only things familiar to Paloheimo. He was also very used to facing failure:

“They say that you can’t have success before going bankrupt a few times. Well, I hadn’t gone bankrupt, but I had experienced some big failures in Nokia. For example, having to disband a team you’ve lead feels a lot like going bankrupt to me.”

After initial difficulties, PiggyBaggy began gaining momentum and by the end of 2015 the service had over 1500 users and between 700-800 items delivered.

Aside from PiggyBaggy, Coreorient is also constantly experimenting with new concepts and service development and wants to take part in developing a Sharing Economy. However, Paloheimo makes clear that the company wants to avoid becoming similar to Uber:

“We want to frame ourselves as a second wave Sharing Economy startup. The first wave consisted of companies like Uber, which maximized value solely for their end-users. We, however, think about the Sharing Economy and our business from a broader perspective. We want to maximize value for all stakeholders and interest groups involved in our business, not just for ourselves or our customers.”

Paloheimo emphasizes that Coreorient wants to take part in developing business models and win-win-win structures that maximize value for both consumers, the company, and the society at large. As an example of this, Paloheimo talks about Coreorient’s collaboration with the city of Tampere:

“We got funding from the European Social Fund to find ways to activate youngsters that are in danger of becoming marginalized. We are now trying to find ways to use crowdsourcing as a medium for involving young people in society and to help them find a job. Although we use crowdsourcing as our main tool, it doesn’t necessarily involve PiggyBaggy or ride-sharing”, says Paloheimo.

According to Paloheimo, Coreorient has been involved in many similar projects all around Finland. The different experiments have also enabled Coreorient to test different assumptions about the markets and their customers, which helps the company to refine its ideas and services. Armed with this experience, Coreorient is now looking outside Finland to Europe and beyond.

“The experiments we’ve conducted in Lahti, Jyväskylä, Helsinki, and Tampere have confirmed us that our systems and main concepts work. However, now the time for experiments is over and we need to make decisions about where and with whom we want to go on with this. Finland is getting small for us, and we’re potentially looking to expand to Denmark, or maybe India.”

At the moment Coreorient is looking for partners and collaborators to make this expansion happen, while also continuing to develop their core service concepts.

PiggyBaggy Business Model: Sharing Platform

Value proposition:  “Ride-sharing for goods. Convenient. Sustainable. Secure.”
Main customers: 1) People who need help in getting items delivered. 2) Businesses that need low-cost options for purchase delivery.
Revenue generation logic: Two options: 1) Subvention-based: online businesses will pay PiggyBaggy for using it in purchase delivery, 2) Transaction-based: end customers of second-hand online marketplaces will pay PiggyBaggy for using it in purchase delivery.

According to Accenture’s business model framework, PiggyBaggy has a sharing platform business model. A sharing platform is either an online or physical platform that facilitates the sharing of resources and decreases the overcapacity of assets. In PiggyBaggy’s case, excess capacity is people’s time and mobility. PiggyBaggy enables individuals and businesses to tap into the existing mobility in order to get items delivered.

Accenture’s (2014) 5 Business Models for a Circular Economy.

PiggyBaggy is an excellent example of the power of IT and the internet to create new ways of organizing human activity. What PiggyBaggy actually does is that it uses the internet to provide access for tapping into excess mobility and time – something that would have been near impossible to do 20 or 30 years ago. By creating the PiggyBaggy platform, Coreorient has essentially created a new marketplace where the supply and demand of mobility and time can meet.

For example, I might need a book delivered to the library, but I don’t have enough time or I’m otherwise unable to go to the library myself (lack of time and mobility). However, there are hundreds of people going past my house and the library every day, many of whom could pick up my book and return it without making a major detour (overcapacity of time and mobility). PiggyBaggy allows me to delegate my tasks to these people, therefore putting the overcapacity of time and mobility into good use.

According to Harri Paloheimo, Coreorient has at least two potential revenue models for PiggyBaggy. One is based on a subvention model, where PiggyBaggy would essentially enable businesses that do home delivery to lower their costs by using the PiggyBaggy community to deliver customer purchases. Paloheimo elaborates:

“In EU and in Finland it costs approximately 15 euros to deliver a product to a customer. At the same time customers are on average only willing to pay 5 euros for the delivery. This means that businesses lose 10 euros on average per every packet delivered to consumers. Our idea is that we could lower these costs and get paid for doing so.”

The other option would be to use a transaction fee based revenue model, where the customers would be individuals shopping at second-hand marketplaces. Usually in second-hand shops the end-users arrange the delivery of items themselves, but by using PiggyBaggy they could use crowdsourcing to get their items delivered. PiggyBaggy would charge the transporter around 15-20 percent of the fee he or she received from the customer.

In both revenue models PiggyBaggy lowers the costs of transportation while also reducing emissions and pollutions from cars by decreasing the overall number of car trips.

But PiggyBaggy is not the only service that Coreorient has been developing. The company has been experimenting with a concept called smart containers. A smart container is essentially a shipping container that is used as an access point for different services and resources. For example, smart containers in Kalasatama, Helsinki have been equipped with library services, organic food services, recycling services and electric car charge points. Furthermore, the containers can be used as PiggyBaggy delivery points.

How are PiggyBaggy and the Smart Containers connected? Paloheimo shares a vision of a global network of community-run smart service points, connected by crowdsourced goods delivery. According to Paloheimo, this kind of network of services and crowdsourced transportation represents a viable alternative for today’s centralized mass manufacturing and transportation.

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Sustainability

Wicked opportunities in sustainability

While our world has become more dynamic and more complex, so have our problems. Wicked problems, such as climate change, terrorism, social inequality and destruction of natural habitat are extraordinarily difficult to deal with because they are almost impossible to define accurately. However, if we change our perspectives and reframe the issue in a new way we can overcome the wickedness of the challenge.

Wicked problems

“[Wicked problems are a] class of social system problems which are ill-formulated, where the information is confusing, where there are many clients and decision makers with conflicting values, and where the ramifications in the whole system are thoroughly confusing”- Horst Rittel

The definition of wicked problems is as complex as the problems themselves. Wicked problems have been a topic of discussion since the 1970s when Horst Rittel and Melvin Webber published their article, Dilemmas in a General Theory of Planning. The authors explained how wicked problems differ from engineering problems in that they are almost impossible to define.

To illustrate, let’s imagine that you have a rising drug problem in your city. The root problem appears to be a new gang that is importing large amounts of drugs to the city from overseas. After identifying the gang leaders, the city police finally apprehends the gang leadership in a large raid and confiscates all the drugs. For a while it seems that the amount of drug offences is decreasing. Surely the problem has been solved, right?

In reality the opposite is the case. In the following months a violent gang war ensues and the amount of people detained for drug abuse is actually increasing! The reason? By eliminating the dominant gang, the police created instability in the hierarchy between other rival gangs in the city and in the drug markets. This instability was then corrected by a violent power struggle between the gangs that remained.

The police had therefore introduced only a temporary solution to the drug problem. In fact, the real problem is not the use of drugs, which is only a symptom of the underlying cause. The use of drugs and other criminal activity were the result of a variety of other societal problems, such as poverty, racial issues and bad city planning. These underlying, systemic issues were not addressed by getting rid of one gang, which is why the drug problem only got worse.

Here are some other examples of wicked problems:

  • Climate change
  • Global terrorism
  • Nation-wide obesity
  • Acidification of the oceans
  • Deteriorating biodiversity
  • Poverty

All of the above problems consist of several interconnected parts. For example, climate change cannot be reduced to one problem definition with simple cause-effect relationships, because the climate itself is very complex and hard to understand. The climate is not a singular thing, like a mountain is, but the cumulative effect of all the streams of air, water and heat in our planet.

Understanding the nature of wicked problems is absolutely necessary for today’s problem solvers and decision makers because most problems worth thinking about are essentially wicked. It is easy to become paralyzed after realizing how challenging it is to solve wicked problems. However, I believe that by reframing the issue we can unleash our creative thinking and turn the problems into an opportunity

Wicked opportunities

What if I told you that climate change, inequality and other similar issues are only problems if we choose to define them so? In fact, I like to think of wicked problems as signals telling us that change is necessary – that we need to start doing something fundamentally different from what we’re doing now. It means that we need to design new and better economic, social, governmental and physical systems than the ones that are now in place. Therefore, our biggest challenge is in fact overcoming our unwillingness to change.

Change is sometimes very difficult, but whenever there’s fundamental change involved, there are also great opportunities. Furthermore, we humans are experts in change! Just think of how different our world is from a hundred years ago – or fifty, or even twenty years ago. The automobile, the airplane and the advent of ICT have all changed our lives and the society so fundamentally that our forefathers would think they’re in a different planet if they saw our world today. So there’s nothing new to systemic change – it is already happening all around us.

Therefore, what we need to do is reframe wicked problems as opportunities. They are opportunities for creating new value, new business and new, more sustainable ways of living. I am happy and inspired to see many companies, such as Demos Effect, Plantagon, MBA Polymers, Ecovative Design, Piggybaggy, RePack and thousands others, adopting this attitude.

There’s a lot to do, so let’s not waste time trying to solve problems because it leads nowhere. Let’s instead choose to change our perspective and begin creating the world we want to live in.

Here are some suggestions how you can reframe wicked problems:

  • If you or your organization are faced with a difficult challenge, ask yourself whether it’s really an opportunity disguised as a problem.
  • When dealing with a wicked problem in your own life, instead of trying to solve the problem, try to think of ways you can re-design your life.
  • If you hear someone talking about a difficult challenge, try to identify the social systems that are involved in the issue. Then try to think of how we could go around the problem by designing the systems better.

References:

Rittel, H. & Webber, M. (1073). Dilemmas in a general theory of planning. Policy Sciences. vol. 4. pp. 155-169.

Buchanan, R. (1992). Wicked problems in design thinking. Design Issues, vol. 8. no. 2. pp. 5-21.

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