Green Money Strategy in the Circular Economy

Green Money: A Strategic Way to Drive Profits in The Circular Economy

Champions of the circular economy (CE), of which there are many, often are quick to quantify the potential environmental benefits CE provides both companies and society through a more thoughtful repurposing of resources. However, the notion of embarking on the creation of a circular business model can often seem daunting, particularly for companies with a broad and complex supply chain.

Where first to focus? Let me suggest a rather capitalistic notion of looking first at how or where elements of a CE model can provide increased economic value to your business. Areas where the theory of “do good by doing right” is not just an invitation to better the environment, but a real means of generating additional profit.

True CE’s often-espoused “triple bottom line” theory of People, Planet & Profit seems to acknowledge the need for businesses to remain solvent by making money, but this is often premised on the concept that your environmental efforts will result in customers, investors, etc. simply liking or preferring you over your competition. This view may be somewhat accurate, but wouldn’t we all prefer a more definitive way of calibrating the impact that a CE approach can have on our bottom line and not rest on the hope that people will just like us better?

By using what we’ll term the Green Money strategy it can be done.

The Green Money strategy provides a lens to evaluate where to first focus your CE efforts by placing emphasis on retooling those areas of your current business model that today absorb the most cost (excluding people). Retooling under the Green Strategy approach means focusing first on those select components of your current product cost or supply chain that drive gross margin (typically referred to as cost of goods or COGS). What areas most impact your COGS? Raw materials? Transportation? Fixed
manufacturing costs?

By first prioritizing where the financial opportunity for improvement is likely greatest, then it’s far easier to see how or if a CE approach can be applied to your business to generate increased profitability. In our case, we recognized that diesel fuel costs were a substantial part of our current COG structure. Fuel is consumed throughout our pole manufacturing process. It’s used as a carrier for chemicals to impregnate the wood itself, in the operation of trucks to deliver poles, and for lifts to move poles around manufacturing facilities. Historically we’ve relied on fuel hedges and other financial instruments to hopefully lower our COGS in this area, but we are still subject to substantial fluctuations in the diesel market that ultimately impacts profitability.

A solution for us is to look at how we can repurpose our finished good, a wooden utility pole, once it reaches the end of its useful service life. Instead of paying to have it landfilled (another economic cost) we developed an approach that ultimately turns the wood into a diesel product—one that we could manufacture ourselves at a far lower cost per gallon than what we pay today. Yes, this approach helps reduce our environmental footprint, but equally important it helps lower COGS thereby improving bottom-line performance.

Applying a “Green Money” approach to evaluating how or where to focus the principles of CE may allow you to not only realize environmental benefits but also a financial upside. Learn more about how a circular economy approach might work within your company in my book, Transforming the Utility Pole: Using Innovation To Disrupt Commodity Markets And Fuel Sustainable Business.

Recycled Materials

Circular Economy: More Than Just a Fad

The concept of companies owning the life of their products from cradle to grave and cradle again sounds ideal in theory. Some might think that this notion of “sustainability” is only a trend— one that will lose its popularity eventually. The reality is, sustainability isn’t a fad or just the popular thing to do. For many utilities and other companies, it’s the only way forward.

When companies realize the necessity of “closing the loop” on their product’s lifecycle, they realize a circular economy approach is really just the convergence of thinking about manufacturing, design, logistics, and business models.

Waste Management is an example of a company that needed to close the loop of their business model due to challenges related to disposal. Specifically, their business model, which has historically relied heavily on landfills, has been under threat due to dwindling landfill space. In response, they have moved heavily into the circular economy, not only with recycling but also in offering sustainability consulting services to the businesses that contract with them, partnering to help develop longer-lasting and CE-friendly products and services.

This example, and others like it, show that CE is not just a fad, nor should it be seen as a cumbersome imposition on existing models that should only be taken on to satisfy environmental regulators. Instead, it is a value generator and a potential profit center, one that companies need to be more proactive about participating in if they are to meet the demands of the new economy that is developing.

Circular economy thinking can require a big shift. Sometimes innovation efforts that start with a targeted focus like disposal have unintended, broader strategic consequences down the road. For us, it was a rather simple step forward to enter the pole disposal market. What we didn’t anticipate was the potentially much bigger transformational journey that lies ahead for both our pole disposal efforts and, ultimately, our company business model.

This journey has enabled us to come full circle, so to speak, back to our primary aim: finding a method of disposing of wood waste that would maximize both environmental value and value for the utilities that are its customers. Learn more about how a circular economy approach might work within your company in my book, Transforming the Utility Pole: Using Innovation To Disrupt Commodity Markets And Fuel Sustainable Business. 

Innovation environmental footprint

The Long View of Innovation

Innovation is more than an idea to be talked about in the boardroom. It requires an investment of time, resources, and a willingness to change. The process is not immediate, but instead a long-term strategy. Leadership can’t expect a one-year return on their investment. In fact, it may take a few years before a business can break even, but the potential is huge.

For us, the goal was to go-to-market with a completely new, total life cycle solution for how utilities can deal with their waste stream. From a broader perspective, we hope to provide an exemplar of how companies should be thinking about their environmental footprint.

All business leaders could benefit from asking themselves about the environmental value they get from their product in the way it is developed, manufactured, and disposed of. In fact, given the new and increasingly circular economy that is developing all around us, business leaders can’t afford not to start implementing innovations in a directed way that aims to derive greater environmental value from products and production processes.

In commodity industries, innovation can serve as a brand differentiator and a market disruptor. Companies in these markets don’t have to participate in the race to the bottom on prices; positioning yourself as having the most cutting-edge business model in your sector can attract and attach buyers to you even more effectively.

Ultimately, the benefits of innovation efforts extend beyond the parties involved in the immediate business transaction. In implementing our innovation model, we have become more environmentally sensitive, at the same time providing a value proposition to end users (the utilities), the environment, and the general citizenry.

Companies interested in innovation need to start by examining the likely impact that cultural, economic, demographic, and industry-related issues and trends will have on their business model. In that way, they integrate their innovation efforts into the broader, long-term business strategy. Success won’t come from brainstorming big ideas in a standalone department whose goals are detached from those of the rest of the company. Success also won’t come from implementing measures in a reactive manner to meet specific demands here and now. Instead, successful innovation efforts need to be directed at the long-term aims of the company and reflect long-term trends in the industry.

Learn how your company can adopt an innovative approach to the future that will provide long-term success by grabbing a copy of my book, Transforming the Utility Pole: Using Innovation To Disrupt Commodity Markets And Fuel Sustainable Business. 

Product as a service

Product as Service: Rethinking Consumer Behavior and Ownership

I frequently refer to the concept of a circular economy when discussing the future of utility poles—and any industry looking to shift toward a more sustainable process. Instead of thinking of a product as being created to eventually be disposed of, products can instead be repurposed as a part of a more sustainable “disposal” solution. The truth is, many companies think of themselves as merely providing a product and just that. However, there is great opportunity in viewing a product as a service that can ultimately extend its useful life.

Take the carpentry industry, which is facing many of the same regulatory and market demands regarding waste reduction as waste wood. Landfills are filled with massive amounts of old nylon carpeting, and government mandates are starting to force carpet manufacturers to divert large portions—in some cases all—of their waste from the landfill. The companies that have been most successful in meeting this challenge have done so by developing systems for both retrieving old carpet from customers and converting the nylon in that material into usable new products.

The carpet company Desso, in particular, has been a pioneer in this area, adopting a cradle-to-cradle, circular approach, employing a combination of recyclable yarn and consumer take-back programs to use the same material again and again to make their product. The carpet industry has had to react in a broad-based way to the demands for waste reduction. There have certainly been challenges, but what is being done in this industry provides a useful example of how it can be done.

The electronics industry is yet another area where this new perspective has been applied.  Hewlett Packard has been a pioneer in this area, diverting millions of ink cartridges with its take-back and recycling program. The company started the program in 1995, and by 2000 they were closing the loop by manufacturing new ink cartridges out of this old plastic. Their “Instant Ink” subscription service automates this take-back process—when one ink cartridge starts running low, the company sends the user a new one along with a postage-paid envelope to send back the old one. Instant Ink represents the shift from selling products to selling services, as well.

This approach often involves a company shifting its perspective on how its products can become assets that become deployed as a service to consumers or end-users. It’s an important distinction for businesses and their customers to make: instead of the consumer purchasing the product and taking full ownership of it, the vendor simply provides the product for the time of its use and retains ownership, so that it can take the product back at the end of its life cycle and find a second use or second life for it.

There are several ways to help both the provider and the consumer make the shift to a “product as a service” approach that will benefit all stakeholders. Learn more about how to achieve this in my book, Transforming the Utility Pole: Using Innovation to Disrupt Commodity Markets and Fuel Sustainable Business.

Disposal Options in a Circular Economy

Looking at Disposal Options through the Lens of Innovation

Disposal is inevitable. At some point, a product will need to be disposed of. It’s what occurs at, during, and after that disposal that has led many utilities to believe there are only a few set and costly options.

However, that’s looking through the lens of traditional methods—an economic method where the product is discarded at the end of its life. This is also known as a “linear economy” approach.   For centuries, it was about the only model anyone knew, and it has left us with the problems we have today: what to do with all of this waste, much of which is damaging our atmosphere. While the problems with this model have been mitigated by improved production practices and by the rise of recycling, the business model of the vast majority of companies still takes the linear model for granted.

Breaking out of this thought process represents a hugely disruptive form of innovation. For many companies, it takes looking at the product’s life cycle, and how it applies to them, in a different way. I’ve mentioned before the concept of a circular economy, which in essence extends the life of the product by repurposing it at the end of one life into another useful life.

The circular economy is a relatively new trend, but many businesses are already taking on the model for purposes of both environmental sustainability and profitability—both achieved through the elimination of waste. Environmental constraints suggest that businesses ought to incorporate the idea of the circular economy into their business models.

And, believe it or not, seeking innovation in this area makes business sense. The elimination of waste is a cost-saving measure—landfills, for instance, are getting more and more expensive to use. This can be a brand differentiator and create deeper customer relationships, the kind of “stickiness” that makes customers or clients adhere to a particular vendor. Repurposing the disposed-of product in a way that it can somehow be led back to the customer is a powerful model. The investment community views the circular economy as a positive contributor to company profitability, primarily through a reduction in the cost of raw materials. As a result, many direct their dollars based on the ability of companies to perform well in this area.

Learn more about how your company can change its existing processes and methods to become a more sustainable—and profitable—operation by grabbing your copy of Transforming the Utility Pole: Using Innovation to Disrupt Commodity Markets and Fuel Sustainable Business.

Great Examples from Municipalities Making Sustainability Work - Waste to energy

Cities on a Hill: Great Examples from Municipalities Making Sustainability Work

For many years, Shenandoah Valley Electric Cooperative, a Virginia-based utility located inside the confines of Shenandoah National Park, disposed of their used poles by having a local waste hauler take them to a nearby landfill. But, one day we received what might best be termed an emergency call from the co-op. The local landfill had run out of space; the co-op was told they needed to find a new home for their used poles, and suddenly the utility needed help in identifying an alternative disposal option. Shenandoah Valley ended up becoming one of the first customers I worked with.

This utility’s response to a disposal dilemma reflects what we see regularly across the country. First, few utilities have a defined long-term strategy for wood disposal, and most have instead become reliant on what has historically worked best and cost the least for them: landfilling. Second, due to the lack of a disposal strategy, few utilities have a good understanding of what other disposal options may exist for them.

Every municipality and utility will have unique needs. And while the EPA governs the classification of pole waste as non-hazardous, regulations governing what specific disposal options are available locally vary from state to state. The result is that disposal solutions that are available in Massachusetts and Florida may not be available in Missouri or Washington.

The following are the options available that some municipalities are currently leveraging in order to reach a greater level of sustainability.  Each have their benefits and drawbacks:

Repurposing – The first, most straightforward method is what we might call simple reuse or repurposing. In the past, going back decades, this actually was a much more common way of disposing of old poles. In rural areas in particular, a utility would simply chop a pole into manageably-sized pieces and then sell them, give them away, or even just leave them out for Farmer Fred to pick up and use as a fence, build a retaining wall, or serve myriad other needs.

Landfill-to-Gas (LFG) – One relatively low-cost semi-alternative to landfill is to deploy the material housed in the landfill itself as an alternative energy source. As landfill operators have started to become tapped out in terms of the space they have to offer, many have invested in accessing an alternative revenue stream by converting their landfills into plants that produce energy by taking in the methane gas coming off of the landfilled material.

Waste-to-energy (WTE) – These facilities take raw material waste and, as the name suggests, convert it to energy by incinerating it at a high temperature. This either generates heat or electricity or provides boiler fuel to generate steam or gas energy. Most of the raw material for these facilities comes in the form of municipal solid waste—in other words, garbage. Typically, a facility will contract with a municipality to collect its garbage to fuel the plant. However, many facilities will also take certain types of ground-up treated wood (e.g. creosote and/or penta treated wood) as fuel. A facility that takes wood will work similarly to a landfill, charging a fee, analogous to a landfill’s tipping fee, to accept and dispose of the material.

Biomass – Similar in ways to WTE, biomass energy production involves incinerating an organic material to fuel boilers to provide power for very energy-intensive industries, such as the manufacture of cement. It largely shares the environmental benefits of WTE regarding the energy captured, and thus the value generated, from the waste. It also has the upside of being more desirable to the utility from a cost standpoint: instead of having to pay a facility (whether landfill or WTE facility) to take the wood waste, biomass facilities are actually much more reliant on this type of feedstock as a fuel source and will thus pay suppliers for the material.

None of the solutions available provide a complete answer for utilities and their municipalities.  However, the need for options other than the traditional landfill solution is increasing exponentially. Learn more about how to integrate sustainable solutions within your utility in my latest book, Transforming the Utility Pole: Using Innovation to Disrupt Commodity Markets and Fuel Sustainable Business. 

What is Truly Waste? What Cannot be Reused and Everything Else

Utilities want to reduce waste; the EPA wants to reduce landfill usage; and everyone wants to find an environmentally friendly way of disposing of this treated wood waste. The question becomes, what can be reused and what is truly waste that just can’t be repurposed?

A challenge we found when building a disposal program for repurposing poles was that only a relatively small amount of the wood collected is actually in good enough condition to be used again. Typically, only about 40 percent of the material to be disposed of is really reusable anyway, and the rest—whether it is rotted out, full of nails, or whatever the case may be—is landfilled. Sometimes utilities may believe they are headed down a more sustainable path by implementing a disposal program based on repurposing poles when, in fact, 60 percent of that material is not marketable as a reusable product, so it goes to a landfill either way.

The current slate of disposal options leaves us with a tough situation; in every case, we run into a disposal situation where there are significant costs (financial or environmental) and obstacles to implementation. From a life cycle perspective, we keep running into a wall at the end of the process, which moves from development of the raw material (tree growth), manufacturing (cutting and treatment), use, and finally disposal. You grow the tree, you harvest the tree, you manufacture it, it goes up in service, and then ultimately it gets disposed of one way or another.

It’s that last step, the end of the line, that keeps presenting difficulties. Even in the best-case scenarios currently available, the material has to somehow go away, albeit in a relatively environmentally friendly way that can produce some value in the form of energy. Even reuse, as I mentioned, does not keep the pole from eventually being a waste product.

That is where there is more room for innovation as we seek to find ways to dispose of true waste in a manner that is productive or environmentally friendly. Learn more about what some utilities are doing to be more sustainable in my next post.

Trash cans on side of road

Your Place in the Landfill: Considering the Waste an Individual Produces Annually

Garbage day. This day is committed to memory each week as we take the time to empty the trash cans throughout our homes into a larger bin that is either hauled off to the community dumpster or set out on the curb to be dealt with by the local waste management company.

The bin is emptied, we bring it back in from the street, and the cycle continues the following week. Beyond the monotony of this chore, are we taking the time to think about where that trash actually goes and what the impact of this seemingly “normal” activity is having in the grand scheme of our communities and future?

Most of us aren’t. There’s an assumption that it’s being handled in an acceptable, manageable way. The problem is the solution that has been deemed “acceptable” is running its course.  Historically, city dumps were largely unregulated; they bred pests and, since much waste is toxic, allowed poisonous materials to leach into the ground and affect the water supply and the broader environment. The landfill developed in the early twentieth century as a cleaner, safer alternative and would eventually grow to replace the city dump. The idea behind the landfill is essentially to isolate the garbage (known as “municipal solid waste”) in a confined space, control leaching and gas emissions, and cover the surface with soil on a daily basis. In the United States, landfills are subject to stringent EPA regulations.

These facilities, however, are running out of space; across large portions of the Northeast and especially the upper Midwest, there is less than twenty years’ worth of useful life in the landfill space available. The numbers are only increasing. Data from the EPA indicates that the total generation of municipal solid waste in 2015 was 262.4 million tons, approximately 3.5 million tons more than the amount generated the year before. As the amount increases, many of the country’s largest landfills are closing their doors.

Remaining US Landfill Life

The EPA’s site states the following which is telling of the situation and the direction we need to head in” “[the] EPA is also thinking beyond waste, and we have transitioned from focusing on waste management to focusing on Sustainable Materials Management (SMM), which refers to the use and reuse of materials across their entire life cycle. SMM conserves resources, reduces waste and minimizes the environmental impacts of materials we use. In an era of limited resources, the sustainable management of natural capital is increasingly at the forefront of international dialogue about how to achieve economic growth without compromising human health and the environment.”

A shift must occur, not only from business entities, but from us as individuals as well. When we start to understand the waste situation we are in and educate ourselves about the state of today’s disposal methods, we can make better choices about our involvement in it and ask for that same awareness from business entities as well. Learn more about the future of disposal and sustainability in my latest book, Transforming the Utility Pole: Using Innovation to Disrupt Commodity Markets and Fuel Sustainable Business.


What Brand Differentiation in a Commodity Market Looks Like

Brand differentiation is not common in commodity markets; nor is innovation. What is common is downward pressure on prices; often, for the end user, price is the only differentiator for commodity producers, so the only competition that occurs is a race to the bottom on price.

As in any commodity market, the buyer of utility poles—the employee of a utility who controls which poles are purchased from which vendors—has a lot of power to shape the market. If the buyer only looks at price, then competition keeps happening only on the basis of price; this is how industries fall into the commodity trap. Creative, disruptive innovation is needed to help companies operating in commodity markets escape this trap.

It can be done.

Looking Beyond the Commodity

When it comes to treated wood products, for example, it likely will always be a commodity market. If you put two utility poles produced by two forest products manufacturers next to one another, 99.9 percent of the buyers are unlikely to identify any brand-relevant difference between them.

How then could a commodity product such as the utility pole differentiate itself? The answer is typically not found in the product, but rather in the potential related services that surround the use of the product itself.  The challenge becomes helping the buyer understand the value of these services so ultimately they are willing to pay more for your product than competition. Creating services that have recognizable value in the eyes of the buyer requires adopting the mindset of the buyer and understanding what current processes create challenges for them—and therefore represent opportunities for new innovation to occur. For us, a key area of focus was what disposal of the utility pole looks like down the road.

Differentiation Lies in Looking at the Entire Lifecycle

Typically, our buyers don’t spend a lot of time thinking about where the poles come from, and probably no time at all thinking about where a pole is going to go fifty years down the line at the end of its useful life span. The pole is a line item in their budget; apart from due diligence, they will most likely make their purchase decision—based on price. However, it is in their best interest—just as it is in many industries—to understand the product lifecycle and its impact on multiple stakeholders down the road. That is where true differentiation lies—by treating business transactions as a part of an entire process, not just one exchange of product procurement.

In the case of utility poles, it has been our priority to help buyers engage in the supply chain conversation and walk them through what the costs of disposal actually are. At some point, those poles will need to be replaced, to go somewhere—a consideration that is all-too-often dismissed. However, when this challenge is discussed upfront, everyone is aware of critical aspects in the process and why the end of a product’s life is just as important as the procurement of it.

In this industry—as in many others in today’s market—sustainability and a more responsible approach to a product’s life cycle is expected. Beyond the financial benefits, which I’ve discussed in previous articles, commitment to sustainability is a shift that utilities are seriously considering and many are starting to fully embrace. Learn more about implementing innovation in commodity markets and how sustainability initiatives may be one area worthy for you to incorporate into your business by visiting,

Listen to the Market

When the Market Speaks, What Wins?

When it comes to offering something new, always listen to the market. If you don’t, your company certainly won’t win.  All too often, innovations tend to be ahead of the market, and sometimes it will take a significant amount of time before the market will accept them.

Companies that don’t heed the market’s voice will find themselves investing resources into innovation that may not be accepted. Years ago, I was a part of this kind of scenario, where we created an RFID-based business, Sustainable Management Systems (SMS), that could create a great amount of value to our customers – or so we thought.  We failed to understand the specifics behind our go-to-market strategy. We erroneously thought the utilities were ready to adopt RFID into their business – they weren’t.

In this case the innovation was cutting-edge and had the potential to be extremely valuable.  However, the market wasn’t prepared to incorporate that kind of technology. We learned from this experience, and while the SMS technology is now a relevant offering, we made sure that our next innovation would be a recognized market need. To accurately identify what the market wanted, we needed to implement a dedicated innovative process.

In the early stages of the formal innovation process, which I’ve described in previous posts,  we made sure to conduct market research among customers and prospective customers, to see what their pain points were and how we might be able to help address them. Through this process, it soon became clear that there was a huge opportunity present in trying to find ways to help these customers create more sustainable business models for themselves. We kept hearing from our biggest customers—investor-owned, publicly traded utilities—about the greatly increasing scrutiny they were facing with regard to their environmental sustainability practices, so we knew that making these practices more sustainable from an economic standpoint as well would be very attractive to our customers.

By integrating the market’s voice into our innovation process, we not only gained valuable ideas and insights, we would create an innovative initiative that would be welcomed and embraced by the very market we serve. When the market speaks, listen; more importantly, take the time to actually ask the market. Doing so will ensure successful implementation of your innovation from the beginning.

Learn more about our successful approach to innovation by getting your own copy of Transforming the Utility Pole which you can find here.