Circularity by Design

The electrification of infrastructure and industrial processes is vital for decarbonisation. Some sectors are more advanced in their electrification journeys, with e-mobility and building efficiency far ahead of hard-to-abate sectors such as steel. However, electrification often requires new equipment, and so reducing our reliance on fossil fuels increases our demand for raw materials, a point emphasised by Xavier Denoly, senior vice president of sustainable development at Schneider Electric, who says that “demand for… copper, aluminium, zinc and many more is skyrocketing”. Accessing raw materials is not easy. These resources are finite and, after decades of underinvestment, their supply chains are increasingly strained.

Mr Denoly explains that recycling is now critical. “We need alternative ways to access raw materials. There is a large amount of material already in use. We need to find ways of activating take-back loops, so that we can drastically reduce what we send to landfill compared to ten or 20 years ago.”

Poor product design hampers recycling efforts, as it uses many unrecyclable materials and makes it hard to unpick the parts that are recyclable. Recycling specialists are often either small, local companies that cannot operate at scale, or are thousands of miles away in low-cost countries. Shipping recyclable materials long distances makes little sense, financially or environmentally. The result is that we only recycle the highest-value items, such as copper. The rest go to landfill.

Mr Denoly believes these factors are driving interest in circularity. His definition of circularity is relatively broad. He describes it as a process that “designs out waste and pollution, extends products’ lifespan and regenerates natural systems”. He adds, “It’s an important tool for companies to minimise their environmental impact, improve resource efficiency and to create a bedrock for innovation.”

As a large, global manufacturer, Schneider Electric must take circularity seriously. As Mr Denoly explains, “More than 99% of our carbon footprint is in scope 3, split 15-85 between suppliers and customers.”

Its customers are under pressure from increasing legislation to reduce embedded carbon. “The best way to do this is to work with suppliers to reduce their carbon footprints. For example, Schneider’s Sustainability Impact programme committed us to increase the volume of recycled material we buy. In 2021, only 13% of our packaging was recycled cardboard. By Q2 2024, this rose to 70%. By 2025, 100% of our primary packaging will be recycled.”

But circularity extends well beyond recycled packaging. It is changing Schneider Electric’s manufacturing ethos. As Mr Denoly explains, in the 1990s, most of its products were analogue. “The key selling point was longevity. Our customers would buy something that lasts a very long time.” 

In the late 2000s and 2010s, digitisation changed this model, introducing a software element. The falling cost of monitoring and control technology spawned a boom in the application of Internet of Things (IoT) technologies and digital twins that improved companies’ process efficiency. Asset data enabled better decision-making, asset simulations, preventive maintenance, process efficiency improvements and increased traceability across entire plants.

However, Mr Denoly highlights a downside to digitisation. “Electronic equipment has a much shorter lifespan and needs replacing more often. Older IoT technology was not designed with circularity principles in mind.”

Schneider Electric has developed its EcoDesign approach, to improve circularity in its manufacturing process. Its four principles – design and innovate, use better, use longer, and use again – support the efficient use of raw materials, reduce embedded carbon, extend the lifespan of equipment, and make it easier to repair and recycle.

Innovation is a central element, both in the adoption of new sustainable materials and in the development of business models that embrace circularity. 

Mr Denoly provides an example of how Schneider Electric is reinventing equipment ownership. “For decades, if not centuries, product supply has been transactional. You buy a product; you own it. Because EcoDesign makes it easier to swap out equipment, it also becomes easier to create an as-a-service approach to equipment ownership. Rather than own an asset, customers just pay to access equipment for as long as they get value from it.”

Mr Denoly stresses that Schneider Electric has been an early adopter of circularity principles. “As we say in France, Schneider Electric drinks its own champagne. When we develop a new system, we often implement it into one of our industrial sites. First, it helps us test the system before customers use it. But we also use fewer raw materials, emit less, and improve worker safety.

“After we retrofitted a factory in Hyderabad, the World Economic Forum designated it a ‘Sustainability Lighthouse’, a reference site for manufacturing best practices that other companies can follow.” Data from the factory’s IoT devices enable real-time insights and predictive analytics that have helped to reduce energy consumption by 59%, improve waste optimisation by 64%, decrease CO₂ emissions by 61% and reduce water consumption by 57%.

Once Schneider Electric has drunk its own champagne, it invites its customers to take a glass. The steel industry builds assets that last for decades. These assets are reliant on fossil fuels, making the industry hard to abate. 

Mr Denoly explains how Schneider Electric helped steel giant ArcelorMittal to modernise its ageing electrical installation “through retrofits, replacements and upgrades to more efficient materials. Additionally, IoT-based digital monitoring reduces risks and improves worker safety. It has resulted in 15-20% cost savings on a new medium-voltage power line, reduced CO₂-equivalent emissions by 170 tonnes, cut downtime by up to 10%, and reduced demand for new materials by extending the life of the plants.”

Schneider Electric has worked in a similar way with food and beverage company Danone, deploying industrial automation solutions in its water bottling plants. “We digitised Danone’s bottling plants and replaced weak links in the system. By identifying leaks and other waste, we have educed energy consumption by 34% and saved 700 cu metres of water.”

Although the benefits of circularity are clear, adapting to the model will take a while. As Mr Denoly points out, “It will take some time – maybe ten years – to complete a virtuous loop and implement the systems that will enable this business model. This virtuous loop starts with products that are designed for circularity and working collectively across the ecosystem to build the skills we need.”

Mr Denoly goes on to emphasise how circularity helps to “reduce our customers’ carbon footprint because if they consume less, they emit less”. Scope 3 reporting could accelerate circularity’s adoption across entire supply chains. There is a shared responsibility to reduce emissions, so collaboration will be key. “Circularity reinforces our supplier and customer relationships. It is a team sport. You cannot do it alone.”