Back to the future – accelerating the adoption of circularity

The 19th century saw the rise of the linear economy, where raw materials are transformed into products that are used until they are discarded as waste. This ‘take-make-waste’ model was driven by, among other things, the industrial revolution and the availability of cheap energy thanks to coal and steam. It is a polluting model that drives global environmental challenges, including climate change and biodiversity loss.

Linear became totally dominant with mass production and the rise of the consumer society after World War II. That same period also saw, in response, the reintroduction of circular thinking. Key milestones included Boulding’s influential 1966 essay The Economics of the Coming Spaceship Earth, the publication of Braungart and McDonough’s Cradle to Cradle, and the advent of think-tanks such as the Biomimicry Institute and Ellen MacArthur Foundation.

So where do we stand today? To focus minds and drive progress, many ambitious climate and circular economy targets have been set. The European Union, for example, wants to achieve a circular economy by 2050 as a precursor to becoming net-zero and halting biodiversity loss. The Netherlands was the first country to set a 100% circularity target for 2050, with the ambition to halve primary resource use by 2030. And the United Kingdom has adopted an ambitious program to deliver a net-zero National Health Service by 2050. But, on the whole, as IPCC chair Hoesung Lee commented, “We are walking when we should be sprinting." [1]

Traditionally, the focus in healthcare was understandably on caring for people. Energy usage, waste, etc. were not a major priority. But now, with healthcare’s expanding ecological footprint, we face the huge challenge of having to 'green' health systems that collectively use 10% of all materials used globally every year!  This imperative was further underscored when, in July 2022, the United Nations General Assembly unanimously affirmed a clean, healthy, and sustainable environment as a human right – not just a privilege for some.

As an industry, we – health technology companies, healthcare systems and other stakeholders – have a responsibility to act. The good news is that, for a company like Philips, circularity presents a strategic opportunity to help our customers create resilient and sustainable healthcare systems that are resource-efficient and more connected and inclusive – as well as delivering care to more patients.

Circularity is critical to the sustainable use of resources and a prerequisite for the decarbonization of healthcare. Philips’ circular economy strategy can be summarized as: Use less, use longer, use again.

Besides these four customer-focused activities, we drive circularity in our own operations, with a strong program to increase circular materials management across our sites. In 2022, we improved the circularity of the waste stream from our sites to 91%, increasingly reducing, re-using and recycling operational waste. An example is the replacement of single-use plastic in supplier packaging with boxes that can be used repeatedly. As a result, less than 0.1% of the remaining operational waste was land-filled, in line with our ‘zero waste to landfill’ ambition.

Circular design is all about making sustainable choices from the very start of the product creation process, so that materials and components are suitable, at end-of-use, for repair, re-use or refurbishment. Some 40-50% of global CO₂ emissions are attributable to materials extraction, supply, and the manufacture of equipment – often referred to as ‘embedded carbon’ [8].  Healthcare is a huge consumer of these resources. It is, therefore, vital that we find ways to choose and use materials for medical systems and devices in a sustainable manner.

At Philips, we team up with our customers and suppliers to innovate solutions that improve people’s health and well-being and help build resilient health systems while respecting the environment. We are reducing the use of new materials and resources, while simultaneously maximizing the lifetime value of existing products by offering innovative service models, extending lifetime resource efficiency, and implementing smart digital solutions.

Products-as-a-service

With innovative new business models, we are shifting from selling the actual product or system to offering its functionality ‘as a service’. This not only allows our customers to access the equipment they need while avoiding upfront capital expenditure, it also gives us an opportunity to reshape our relationship with our customers and to team up with partners across the value chain to improve material efficiency. To help health systems transition to a circular model, Philips Capital offers efficient circular financing structures and flexible payment models that can, for example, help to extend the product’s lifetime.

Upgrades and lifetime extensions

Remote and on-site upgrades services such as Philips SmartPath make it possible to enhance existing systems to current technology or increased capacities and keep them in valuable use for longer.

End-of-use management: refurbishment and recirculating parts

Our Philips Circular Edition portfolio allows customers to benefit from refurbished, upgraded and quality-tested technology at lower cost. As part of our ambition to close the loop for all professional equipment by 2025, over 3,400 systems were traded-in by customers in 2022.

In the US, our AllParts parts recovery service breaks down the usable parts of equipment from Philips and other major manufacturers to be used again. Recirculating materials in this way helps to reduce healthcare’s carbon footprint and extend access to care.

If repair, refurbishment and parts recovery are no longer an option for a system that is returned to us, local recycling networks help us to recycle back to raw materials.

Smart digital tools, green software and network connectivity make it possible to deliver maximum value with minimum resources. In healthcare, this supports telehealth and the shift of care from resource-intensive clinical facilities to networked lower-cost settings and the home – giving more people access to care. For example, replacing physical visits with telemedicine appointments resulted in a 40-70 times decrease in carbon emissions [10].

The increased efficiency enabled by software can also optimize the utilization of hardware. In radiology, for example, Philips PerformanceBridge helps imaging centers get more value out of their systems.

That said, digital is not a ‘free lunch’ when it comes to resource use. Software and AI need to run on hardware, and with an exponential growth of data, particularly within healthcare, there is growing interest in green software and AI design that can help reduce the consumption of physical materials and energy of ICT hardware, which is the fastest growing e-waste in the EU [13]. In the realm of AI, too, we know that the algorithms are computationally intensive. In another case of ‘back to the future’, some software developers are even advocating revisiting the know-how and capabilities of efficient coding they had when they had to find a way around the limitations of 32-bit programming.

Having discussed ‘what’ we need to do, ‘why’ we need to do it, and ‘how’ we at Philips are doing it, we come back to the central question: How to drive circularity to scale at speed?

To support the adoption of circular business models, the right enabling conditions need to be created at scale. For instance, incentivizing consumers and business customers to return products through deposit and buy-back schemes. And setting up effective collection and processing networks. Governments and other regulators have a key part to play here, by setting clear standards, offering legislative or tax incentives that support circular practices, and removing regulatory roadblocks. Trade associations can assist too, by advocating and harmonizing sustainable procurement practices.

There is also a widely accepted need for global circularity metrics to enable consistent measurement and reporting on progress. Revenue-related metrics help emphasize the economic value of circularity. For Philips, Circular Revenue as a single overarching metric brings together the various circular practices within our company. We will continue to work closely with our partners – e.g. through the Circular Economy Indicators Coalition hosted by the Platform for Accelerating the Circular Economy (PACE) and Circle Economy to drive the definition of practical, actionable metrics to scale circularity.

I opened this article with a brief historical perspective on circularity. Now is the time to come together and write a new chapter, with circularity not as an end in itself, but as an integral driver of sustainable healthcare.

To me, these partnerships clearly show how we live up to our purpose of improving people’s health and well-being, while acting responsibly towards our planet and society. And I am so glad that more and more customers are teaming up with us on this journey.