The Circular Economy Podcast
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There are significant material, energy, labour and carbon savings to be made by reusing, rather than remaking, a product. How does this work in business? And how does it fit into a circular economy? In this episode, Colin Webster from the Ellen MacArthur Foundation speaks to José Manuel Moller from Algramo about the role of reuse in household shopping, and to architect Nitesh Magdani about reuse in the built environment.
Welcome to the Circular Economy Show Podcast. In this new series we're going to explore individual elements of the circular economy, building a more complete view of what the system would actually look like. In this episode, we'll explore the circular economy and reuse. My name is Colin and in the course of this episode, I'll be joined by two reuse experts who will talk us through the benefits and practicalities of reuse in the circular economy.
Everything we make comes at a cost in terms of material and energy extraction and use, and there's labour and there's transportation between the different stages of production. When we discard that item, all of that is lost. Therefore, it stands to reason to say there are savings associated with reuse, compared to making something new from scratch. As such, reuse-based business models not only require less material input, but also emit fewer greenhouse gases to achieve the same benefit for society. As an example, a Splosh shampoo container, that can be reused more than 20 times, lowers material usage by more than 95%. And as a direct consequence, significantly reduces the energy required for packaging production. For garments, doubling the amount of time items are worn has the potential to avoid 44% of greenhouse gas emissions by not letting those valuable garments go to waste. Now, I could go on with examples. But first, let's hear from a company who's put reuse at the heart of their operations. Starting life in Santiago, Chile, Algramo's influence in creating reusable models for packaging is now evident in several continents. I caught up with José Manuel Moller, who told us all about their story.
José Manuel, could you tell us what's the story behind Algramo? Where does the idea come from?
José Manuel 1:54
So I started Algramo while I was studying in Chile. My study, my background is Business and Economics and while studying there with three other classmates, we decided to move from our house to live in a low income community. Because we didn't, we realised that they were teaching us that the companies is only focused on improving profit for the shareholders. And the value that the company adds to the country was just creating jobs. And we disagree with that. And we moved from our places to live like a common Chilean and see from a different perspective. In doing that I was in charge of cooking and buying everyday stuff. And because we had a really low income, I was forced to buy on demand pop stores in the smallest format. So a sachet for shampoo, a small bottle for cooking oil, for example, and doing that after a couple of months, I realised I was paying up to 40 or 50% more than my family, which was getting the supersize cooking oil bottle, detergent etc. And that difference, I put the name of the poverty tax, because it acts like a tax. Today all the low income consumers, they're paying around 40 to 50% more than the high income consumers because they don't have the liquidity. So I started studying the supply chain, trying to realise why this was happening. And I figured out that the packaging was one of the key factors that was adding cost, but not value, to the consumer. So I tried to remove the packaging from the equation and I created Algramo, which means by the gram, because I started selling powdered detergent.
So tell us more. I've seen your electric tricycle. What role does that play in part of the solution?
José Manuel 3:35
So we have been testing and doing many type of solutions. We start first with our own white label products, selling in reusable formats with prefilled solution. So people was getting a bottle already prefilled. And they were returning an empty one, which was the first model. The second one is the home delivery solution that will launch with Unilever and Nestle, doing home filled with electric tricycles. So the user calls us through the app, and we visit them with the tricycle, which has the dispenser and people refill at home. But it was the second one. And the third one that we launched one year ago is in partnership with retailers, that we launched first with Walmart in Chile, and now we're about to launch here in the UK and in Mexico as well.
So the tricycle's a bit like the ice cream van we have in the UK, but you would... do you play some music as you appear to make the crowds come flocking?
José Manuel 4:27
To be honest, the idea for the tricycle wasn't to be doing home delivery. The idea was to be more like a pop up stores for fresh markets in Santiago. But because of COVID, everyone was at home, we decided to shift from fresh market to home delivery, and now people are used to it so stick to it and now it's scaling up that modelling in Santiago, and exactly as you were saying, so it's like this ice cream truck that visit you, but now with homecare product. Maybe it's not as exciting as the ice cream, but we are saving tonnes of plastic waste.
Tell us about some of the advantages, then, that you've brought to those lower income communities.
José Manuel 5:02
So part of our pitch or central value that we're adding with our solution is sustainably must be cheaper. So we are designing this not only for the high income millennials, vegetarians like me, we are designing this for everyone which makes the decision based on price. So first of all, we are cheaper, we're cheaper than single use. That's the first value proposition. The second one we are flexible. So especially with the dispensing machine, you can purchase as much as you want, like in a gas station. So if you need one litre, you can purchase one litre. But if you want half a litre, that's fine as well. So flexibility is the second one. The third one is zero plastic at the end. So we use plastic for the reusable packaging, but it's zero single use plastic at the end. So that's the third value proposition. And the fourth is all the engagement and traceability and quality that we offer, because from one side we could tell to the consumer, what is the production, expiry date, how much plastic we have been saving, we gave them a deposit in money each time another purchase for the next purchase. So there is like a loyalty club through packaging. And from the brand perspective as well, we have all the traceability for the quality assurance. So all the food safety, batch production is provided as well for them. So that's the fourth element.
And of course, you've gone beyond the tricycles, you said you're using machines now in places like New York, and WalMart Stores, are all the same savings and benefits applicable there too?
José Manuel 6:36
Yeah, so it's exactly the same model, we work with what we call the packaging as a wallet, because all of our packaging has a chip. And each time that you purchase through our machine, we tell you how much plastic you're saving through that purchase. And based on that will give you a deposit into a packaging for your next purchase. So you have an economic incentive to reuse that specific bottle each time. And we're using the same concept in retail in Chile, in the US, and we're about to launch now here in the UK, and in Mexico.
Do you have any figures off the top of your head in terms of how much plastic waste Algramo has helped to avoid?
José Manuel 7:11
Last year we know in numbers of packaging, so we avoided about 250,000 packaging last year through the white level brand and with Unilever and Nestle, so we're expecting to double that number this year.
So is that [250,000] kilogrammes?
José Manuel 7:29
No sorry, no, no, that's that's units, packaging, units of packaging, different types of packaging. So was 250,000 bottles.
I understand. Okay, well that's wonderful, cheaper for the customer, more convenient, and better for the planet, quite obviously. What would you say you've achieved so far, and where have the turning points been to get you here?
José Manuel 7:52
So I'd say that, first of all, was to prove that people is willing to bring back a package. This is a huge concern around circular economy and reuse in general. So if you have the right value proposition, people is willing to bring back a bottle. So today with our own white level product, we have a returnability rate that is around 85%. So most of our consumer, they're bringing it back a bottle. In the retail, we're already over 50% after a year. So that's that's the first goal. I think it's quite relevant in this space. The second one is to show as well that if the price point is the right one, people is going to come and we're going to purchase and repurchase. So this must be for everyone, not just for a niche, that I would say is the second lesson. And the third one is you need the big players in this space. Because we started first with our own white level brand in the mom and pop stores market which is quite small. So in Chile is 20% of the market. And Chile as a whole produces 0.25% of the global emissions. So it's a really small country. So I realise that it's impossible to tackle this problem without the big players. So collaboration is a key factor. And we need the Unilevers, Nestle and Coke of the world doing this really aggressively. Otherwise, we're going to be late or it's going to be quite small.
But you already work with Unilever, and did you say Nestle as well?
José Manuel 9:16
Exactly. We're working with Unilever, Nestle, and we're about to launch with Coke as well. So it took us some time to convince them. But now we're on track to move from pilot to a scale up, which at the end is going to make the difference because today it's great to tell the story, to have some five or 10 locations doing this, but we need 1000s of locations doing this. So that's what we're preparing for the next years.
And is this how we shift the system towards reuse at speed and scale? Is it working with these big corporates?
José Manuel 9:44
Totally, because they already have the volume. So if you could change 30% of Unilever's volume globally, that's million times what we're doing with Algramo in Chile, so the possibility of impact is much greater. And also it's much faster to reach different regions. So totally, that's the path. And the thing is how we could do that in the coming years, before 2025.
It's clear that you're... there's already an environmental benefit to what you do. I just wonder if a sceptic might say, there's only so many people willing to change their behaviours, to take the bottles back to one of these vending machines. What's your response to that?
José Manuel 10:23
I think that in this space, there is not going to be a silver bullet to solve this problem. So there's going to be many solutions at play at the same time. So we see that some part is going to be through refill, some of them, they were going to be with pre fill. So you're gonna just return an empty packaging, and some other users that want to use compostable packaging. So I would say that this would be a mix. Except that today, we have evidence with real customers, with real products, that people is bringing back their packaging if the proposition that you're adding is interesting for them, so today is between 10 to 20%, cheaper than single use, and that's good enough for them to have an incentive to bring back a bottle, especially in this day that inflation and the price of the products are going to be increasing. All savings are gonna count. And this could be an extra incentive for this.
Okay, okay. Seems quite ironic -the garbage truck has just appeared next to me.
I just think it's a tremendous story, Jose Manuel, that you started out asking that question about how to make lives easier for for people in lower income communities in Chile. And now you've got vending machines in Walmart, and you've got contracts with Unilever and Nestle. That's a hell of a journey you've been on.
José Manuel 11:37
And the other thing is this has been quite long. So it's not like the American Dream that they sell you today about startups that in two years, you're a unicorn. I've been doing this for 10 years. And we're just starting to have some scale up. So this takes time. Also in nature and in packaging and behaviour, the things that takes time. So we're just progressing in last two or three years, and now we have been seeing the results of the hard work that we have been pushing for for many, many years.
There's much to admire about Algramo's work, especially their desire to make refill the cheaper alternative, and taking the goods to consumers in poor communities. While Jose is clear, there's no silver bullet, what Algramo has demonstrated here is that there's an appetite for refill solutions if you can get the offer, the experience and the location right. Reuse models are sometimes considered burdensome or a thing of the past. However, as we've heard, innovative reuse models can unlock significant benefits, enabled by digital technologies and shifting user preferences. Such models can help deliver a superior user experience, customised products to individual needs, gather user insights, build brand loyalty, optimise operations, and yes, save costs as well. But can and does reuse work and a business to business context? Reuse in the built environment is still in its infancy. But there are pioneers who can see the opportunities to bring about change.
My next guest is Nitesh Magdani. As an architect, Nitesh has worked across design, construction and operation of the built environment for more than 20 years. He is now the founder of Net Positive Solutions, where among other things, he helps clients to understand the value of reuse. I started this conversation by asking Nitesh what value reuse has in the built environment?
Currently, not that much. I'd say that business as usual for a lot of clients is based around getting the quickest value. So short term gains. And often when we're working with clients, we can see that anything other than what the current process is, is difficult because we've got to then evaluate that based on a longer term agenda. So you know, we're working with with clients at the moment let's say, Enfield Council for Meridian Water, a really interesting set of clients, because they have really strong ambitions about reuse. So we're trying to change the mentality all the way through the design, construction, procurement construction process to factor in how can we get more value by reusing components, rather than just sending materials to landfill for recycling rather, which is the business as usual. And we're having to quantify that in a way that they understand. And it is all about, you know, the current rate of certain materials, if it goes to scrap will be x. How can we give you more value by upgrading that reuse hierarchy? To say, actually, that those materials can be reused again, and you'll get a better rate of return.
Why might they have reservations about reuse as things stand?
Probably because it's slower. Generally, you're having to take a stance on not just what you're doing with the materials now, but actually think about in two years time, we might be able to use those materials again. And unless you have that direct match in terms of supply and demand, we do tend to find that people don't really have the foresight to think ahead, think ahead, actually, the value of steel, let's say, today might be x. But in two years time, it might be x plus 20%. Whereas we don't normally think that way. And then there's the whole certification, warranties, and all the other things that you generally don't have to think about, that we're having to now sort of tick all these boxes to say, Okay, I know you've got concerns about the reuse of this material, because we don't have the certification. But we can test it, we can test those products, and it's just not business as usual. So we are finding that we're having to go through all of these hoops to ensure that designers feel comfortable using those materials again, that they're fit for purpose, because otherwise, they'll just take a material off the shelf, knowing that it has that certification. So it's just additional work that we're sort of filling the gap with all of these parties.
So it sounds like there needs to be regulation that goes hand in hand with a mindset shift from your clients.
Yeah, and I suppose the problem currently is that there isn't regulation. So we're not, we're not bound to use products or, you know, there's no, there's no manufacturer responsibility currently in the UK for reusing materials. So if that were to change, I think that would be a major step change in the way that we come across different proposals, different methodologies for viewing materials, current materials as an asset, which we don't now.
So you've talked about the value for your clients, what you haven't mentioned so far, are the environmental benefits of reuse. Is that ever a part of your argument?
It is. And it's fair to say that if you only talk about the environmental benefits, from my experience, you don't get very far. So clients generally, they like the idea of saving embodied carbon, or lowering whole life carbon, whole life costs. But when you take that, as a financial argument, it tends to go further. Because if you can say I've increased the asset value of this building or these buildings, because we've done X, Y and Z, and it's reduced, you know, so many tonnes of carbon, great, but on its own, I don't think it really stacks up. You know, for the ABN AMRO project, reuse certain elements from other buildings, so Philips headquarters in Eindhoven, their facade was reused as internal partitions, they also managed to use fire hose reels, sports hall flooring, you know, for the flooring in the, in the sort of the main office space. And apart from that, there's, you know, on a on a wider scale, there's reuse of a whole building. So using an old VW showroom, in the outskirts of Amsterdam, again, by Royal BAM Group, to become an office building. So sort of repurposing, you know, when you think of that value, retention hierarchy, you know, you want to ideally keep materials in the same form that they're in, rather than dismantling it. And then using some of the products it's much better, financially, environmentally, and socially, to, to maintain that, the whole ecosystem, the whole structure, the whole building fabric, but then to put a different use in it. And that's, that's what the team did there.
Of course, it's no surprise that businesses love making savings. But sometimes those savings or opportunities are not immediately apparent to clients, or the number of additional actors involved and time delay a much more significant influence. What I take away from the conversation with Nitesh is how much more complicated reuse in the built environment tends to be compared to, say, packaging reuse setups.
Now I want you all to picture what we call the butterfly diagram. Reuse sits proudly on the diagram in one of the inner loops and the closer the loop is to the user, the more value the loop tends to hold. That's certainly the case with reuse. By avoiding remaking a product there are significant material, energy, labour and carbon savings to be made. Now if you want examples and more research into the matter, you can download our reuse booklet from the link in the show notes. It's clear that reuse has a role to play in the application of a circular economy. With more and more business models and products being geared towards reuse, I cannot help but wonder what the world of reuse will look like in the years to come.
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The upstream innovation mindset can be used to achieve three key circular economy innovation...
Everyday products without single-use packaging, which have a detrimental effect on biodiversity.
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