How to design a commercially viable recycling business model in the construction industry

One of the world’s leading insulation manufacturers aims to introduce a full range of sustainable solutions with the goal to optimise the reuse and recycling of products and effectively decrease their ecological footprint.

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To stay ahead of the competition and remain at the forefront of sustainability, the client's main objective was to design and implement a common business model for recycling across 30 markets.

This recycling business model sets out to provide a holistic and sustainable service, transporting material from the building site all the way to the factory using new and innovative green technology as a means to future-proof the business.

Recycling services as a competitive advantage

The construction industry is changing. Following new market and legal requirements to minimize environmental impact, contractors and suppliers are required to provide circular services that limit material extraction, carbon emissions, and waste. Ramboll was tasked to develop a sustainable service to enable an efficient recycling process for construction products. The goal of the project was to secure the clients' competitive advantage and maintaining their place as market leader. The work entailed developing a holistic and future proof model for recycling across Europe, North America, and Asia.

To meet client expectations, Ramboll addressed five key challenges in the design of the circular business model for recycling in the construction industry:

1. Optimize transport routes to maximize the range of service in a cost-efficient and effective way

One major challenge tied to managing construction waste is the cost of transportation. This is so as pick-up location waste varies, and often consists of a mix containing multiple materials. The waste itself tends to be both heavy and difficult to transport, alternatively it has a low density, in this case the issue becomes the ability to optimize the weight load of the truck.

Ramboll assessed various options for the mode and design of reverse logistics to ensure the final recommendation was both cost-efficient and realistic. The guiding principles of the model included sorting waste at the source along with establishing an infrastructure depot for handling, compression, and quality inspection. Cost assessments confirmed that a shorter distance between the pick-up location and the depot equals a further stretch covered to reach the end destination. This implies the need to establish depots to handle waste within close adjunctions to construction sites.

2. Leverage partner's capability in transportation and waste management

Establishing and running a depot for waste requires a minimum volume to be financially viable. This can be especially challenging for suppliers in the construction industry where the location of construction sites varies over time. Managing transportation schedules is equally challenging as trucks need to carry heavy amounts both ways to remain financially sustainable. Because of this, it may be beneficial to seek support from partners in logistics and waste management.

Ramboll defined the roles and responsibilities of partners in logistics and waste management as well as requirements at the operational and tactical level to establish a common model for recycling. A common model will allow a more standardized interface with partners and thereby simplify the exchange of information and enable benchmarking between markets and partners.

3. Standardize terms and conditions to ensure operational excellence

One major difference when comparing linear and circular business models is that terms and conditions applied at the beginning of the product cycle (i.e., sales of a product) will come back when closing the loop (return of waste to the factory) and may lead to cause for concern if unsuccessfully applied.

International companies operating across multiple markets usually give the local business unit free range to adjust terms and conditions according to its individual needs. Our client was no exception. Different terms and conditions for the recycling service e.g., in sales or citing waste product quality, creates a lot of administrative burdens and complicates the implementation of digital solutions. Ramboll identified critical areas where standardization was required in terms, conditions, and product quality and provided recommendations for where these standards ought to apply.

4. Adjust local implementation plans to the market demand through using a maturity model

The market demand across Europe for recycling services varies with a high demand across the Nordics as well as northern Europe, and decreased interest across the south and eastern Europe. Establishing a recycling service with limited demand from the market can be a financial risk. Therefore, it is recommended to adjust the rollout according to market demand. However, in this project, it was the clients wish to apply recycling efforts across each and every market.

To adhere to the various market conditions and provide advice for each market on how to implement the circular business model, a maturity model was developed. The purpose of the maturity model was to provide a helpful tool and guide to assess and map a market and its operations according to the maturity of the selected internal and external elements. The model provided guidance of key focus areas to establish and grow the recycling service. This tool ensured all markets could continue developing an individual roadmap subject to local conditions and objectives, while still providing guidance of how each market will, over time, adhere to the common business model for recycling.

5. Provide a good customer experience and well-managed service through the use of digital tools

A determining factor in recycling service’s success is ensuring cost efficiency. Digitalizing marketing and sales of the service provides a good baseline for planning and following up on tasks, and help contractors easily procure the service. Contractors are required to procure a wide range of services and all efforts to aid or streamline the procurement process are favorable in supplier selection.

Ramboll assessed the client’s IT infrastructure and provided guidance alongside a plan of how to digitalize the recycling service end-to-end. Critical conditions to enable a digital service are standardized terms and conditions as well as a harmonised interface with external partners (where data needs to be exchanged). Any deviation from the group standard will add an extra cost to the implementation and maintenance of IT. Thus, it is fundamental to establish conditions to digitize the service since no tool alone will ‘solve a problem’.

Harnessing the power of a circular business model

To successfully implement a new business model, multiple business functions need to integrate to drive change. Ramboll recommended setting up the implementation of the business model for recycling as a transformation program i.e., a program with multiple streams addressing different areas and elements of the business model. Some initiatives are managed locally, while some are managed at a management level, all coordinated and managed by the transformation program.

Another key ingredient in the transformation program is change management. Transforming from a linear business model to a circular will require e.g., change in governance, ways of working, and behavior. Thus, well planned and directed efforts in communicating and engaging stakeholders, both internally and externally, are time and money well spent.

How can Ramboll support you?

At Ramboll, we provide integrated solutions and guidance to our clients, enabling them to navigate an often-times complex circular transition. The transition to a circular economy requires technical and commercial insight across multiple sectors. At Ramboll Management Consulting, our circular proposition draws upon 18,000 technical experts and colleagues from seven global divisions in over 35 countries to drive circular innovation - through and across value chains.

Our multi-sector expertise provides us with the necessary vision and skillset to guide our clients on a successful transition to a circular economy - from strategy to integration, from business planning to business model innovation.

Contact our experts

Peter Önnby
Local Industry Lead, Industry & Manufacturing
+46 76 767 10 82