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Circular Economy - BMW

Circular Economy - BMW

15 Jan 2019 01:04

Written By:  Nabaraj Giri

 

Table of Contents

1.     INTRODUCTION.. 1

1.2. Description of BMW... 1

1.2.1. Main Products: 1

1.2.3. Main Services: 1

1.2.3. Main Customers: 1

2. THEORETICAL ASPECTS.. 2

2.1. Concepts and characteristics of the Circular Economy. 2

2.2. The main drivers of the Circular Economy. 3

2.3. Why Circular Economy is important?. 3

2.3.1. Economic Benefits. 3

2.3.2. Social Benefits. 3

2.3.3. Environmental Benefits. 4

2.5. The role of circular supply chains in supporting restorative processes advocated by the circular economy  4

3. APPLICATION OF CONCEPTS.. 6

3.1. Description of BMW's business model in terms of circular economy aspects. 6

3.2. Economic, social and environmental benefits. 10

3.2.1. Economics and Social 10

3.2.2.         Environmental 11

4.     CONCLUSION AND RECOMMENDATION.. 12

5. REFERENCES.. 14

5.     APPENDIX.. 19

 

 

 

  1. INTRODUCTION

When a business move to the circular economy (CE) model from linear one, "take, make and dispose” extractive business model, it is expected to increase economic growth by creating new job and business opportunities, reducing the cost of materials, reducing the environmental impacts and pressures and controlling price volatility (EC, 2014a; EC, 2014b; Ellen MacArthur Foundation, 2018). As per circular economy (2015a) it has been planned that eco-design, reuse and prevention of waste can bring savings for EU industries of up to 600 billion EUR. Four main concepts of transition to circular economy are new business model, global reverse networks, enabling condition, create new job opportunities, product and martial design.

1.2. Description of BMW

MBW (Bavarian Motor Works in English, or Bayerische Motoren Werke in German) is a German Multinational company founded by Karl Rapp in 1916 headquarters located in Munich, Bavaria, Germany. BMW produces motor vehicles in United States, Germany, India, China, the United Kingdom, Brazil and South Africa (BMW Group, 2018). Total number of employees in 2018 are 129,932 and total revenue in 2017 was 85, 742 million pounds (Automotive World, 2018).  

1.2.1. Main Products: are BMW, BMW i, MINI, MINI John Cooper Works, Rolls-Royce Motor Cars, BMW Motorrad, Audi and Mercedes-Benz (BMW Group - Brands & Services. 2018).

1.2.3. Main Services: Group are DriveNow, ParkNow, ReachNow, ChargeNow, Digital Energy Solutions, Alphabet, BMW Group Financial Services and Designworks (BMW Group, 2018).

1.2.3. Main Customers: Countries USA (21%), Germany (21%), Europe (24%), India (14%), China (7%) main cities are New York, Texas, Delhi, Munich. Only Europe and North America covers the 64% of total sales (Chauhan, 2016; Research-Methodology, 2018).

2. THEORETICAL ASPECTS

2.1. Concepts and characteristics of the Circular Economy

Whereas Hynes, Murry and Skene (2015) described many claimed origins for the Circular Economy and presented the many definitions regarding its concept, they claimed it is most basic form, "a circular economy can be simply well-defined as one which equilibriums economic growth with resource and environmental protection."  circular economy concepts are developed around a variety of activities which consider reducing uses for natural resources, raw material inputs and to recycle, reuse, recover those inputs and resource of nature as an integral part in the production process. Additionally, restorative and regenerative and distinguished are the main idea of the circular economy, by its followers, with the old-style "linear economy" in the production process which tries raw materials into wastages and that seen as a major cause of removal of natural resources from the environment and its pollution (Hynes, Murry and Skene, 2015).

The concept of the circular economy holds entire parts of the product life from the design of the product and the process of production, through promotion and use to waste management, reprocessing, and reuse. According to the Coopers (2017c), circular economy is about reconsidering including models of business themselves, so that anyone can decrease consumption."  Business Council for Sustainable Development (2017) described that “by moving towards circular economy, companies and countries can capture higher growth, competitive advantage and innovation while enjoying reductions in energy consumption, cost savings, and CO2 emissions, in addition to better resource security and supply chain.”

The World Economic Forum (2014) projected that universally, the circular economy is a “massive probable for innovation with trillion-dollar opportunity, economic growth and job creation.” Additional, McKinsey et al. (2015) stated that a circular economy “would permit Europe to raise productivity of resource by up to 3% per annum” and which could produce a net monetary gain of 1.8 trillion Euros by 2030.

 

2.2. The main drivers of the Circular Economy

Analyzing the development of circular economy in business, sectors and countries (Muller and Bottcher, 2013; Geng et al., 2009; Cuerva et al., 2014; Geng and Zhu, 2013; Nikolic, 2016) exactly concerning drivers to develop the circular economy, a research of Preston (2012) described the main drivers of circular economy: complex global supply chain, high up-font prices, capitals concentrated infrastructure lock-in, imperfect dissemination of invention, lack of customer interest and failure in business collaboration in the all evolving economics and advanced nations. As per Rizos et al. (2015) he also stated the six major drivers of circular economy these are financial barriers, lack of effective legislation, environmental culture, low technical skills, administrative problems and information shortages.  

2.3. Why Circular Economy is important?

2.3.1. Economic Benefits

Effectiveness in use of resources and materials and the value creation will help to reduction in costs and bring the financial benefits. As mentioned by Ellen MacArthur Foundation (2018) the expected European GDP is to rise by 11% by 2030 and by 27% by 2050 as comparing to the existing 2015.

2.3.2. Social Benefits

Mainly material demand measured by construction materials and car, real-estate land, pesticides, fuels, synthetic fertilizer, agriculture water use and non-renewable energy reduce as much as 32% by 2030 and 53% by 2050. Finally, the circular economy signifies an opportunity grab the sustainability of the business in the long run as it confirms the accessibility and availability of sources in the future, which permits the business to jump to new marketplace whose desires have not been encountered (Manring and Moore, 2009). Accordingly, these opportunities are changes into various benefits: firm might be exposed new business (Manring and Moore, 2009; Porter et al., 1995), customers seem to assume good value from this kind of products (Combris and Bougherara, 2009; Naspetti and Zanoli, 2002), development of the sustainable products helps to advancement of eco-innovation cycles, when the institutions and government requirements and consumers' demand may lead to a growing of creations, design and innovative solutions in company to satisfy the desires of the nature and human (Huisingh and Hofstra, 2014; Prieto-Sandoval et al., 2016)

2.3.3. Environmental Benefits

Ellen MacArthur Foundation (2018) stated that the application of circular economy in food, mobility and construction sectors which help to protection and recovery of environment because "CO2 emissions can reduce as much as 48% by 2030 and 83% by 20150 as comparing to 2012 levels (Prieto-Sandoval et al., 2016).   

 

2.5. The role of circular supply chains in supporting restorative processes advocated by the circular economy

According to the Daniel and Guide (2000) nowadays, it was thought that end life of the products can create the new opportunities for re-using and recycling features using supply chain for remanufacturing and repair. As a statement by the McKinsey and EMF (2012; 2013) circular economy would create many prospects for value creation over further process for re-productivity and efficient uses of raw materials based on cascaded use, power inputs, inner circle and circling longer.  In the inner circle power more environmental and economic value is created through some end of life policies as they are able to retain additional from products embedded labor, materials and energy (Gorissen et al. 2016). Thurston and Nasr (2006) stated that end-of-life policies should practice as per following:

  • Re-using for similar purpose with little or no changes.
  • Maintenance for long durability.
  • Recycling.
  • Restoration that contain changing appropriate parts and repossession of components for being working in new business procedures. 

1: An industrial system which is restorative by design which help to circular economy. Sources (ellenmacarthurfoundation.com, 2018)

Braungart et al. (2007) stated that the reusing or recycling is the smallest value creation opportunity as it relays more to down-cycling instead of up-cycling and materials lose quality and sustainability in the process.

 

 

 

Above figure represent the restorative design based on circular economy. The key idea of this system is to keep products, martials and components at their maximum value and utility for as long as possible within biological and technical cycle (EMF, 2013, 2014, 2015, 2016).  The circular economy beyond ideas such as the 3Rs reusing, recycling and reducing wastages to maximize efficiency of resources (Wells, 2013; Bocken et al., 2014; Lüdeke-Freund and Boons, 2018).

3. APPLICATION OF CONCEPTS

3.1. Description of BMW's business model in terms of circular economy aspects

As mentioned by Sailer and Ernst (2017) and BMW (2018) the business model of BMW in terms of circular economy, they have implemented the 'triple bottom line' also called social, economic and ecological.

2: BMW's Three-Pillar Model of Sustainability. Source: Sailer and Ernst (2017)

Above figure indicates the sustainable business model of the BMW.  As stated by Sailer and Ernst (2017) it is globally recognized sustainability and corporate social responsibility business model. In the ecological model are main three strategies that are:

  1. Efficiency.
  2. Consistency, also called in terms of 'Cradle to Cradle' (McDonough and Braungart, 2002).
  3. Sufficiency (Share Economy, example: car sharing). 

 

 

BMW Circular Strategy

The sustainability strategy of BMW passed in 2009, it was derived from the previously created strategy called 'Strategy Number ONE' and it is emerging strategy in corporate world. The key objective to start sustainability with the completely value chain in all its main procedure and therefore added value for the organization, society and environment (Blunck & Circular_Economy@BMWGroup, 2016)

3: BMW’s Strategy Number ONE. Source (BMW, 2018)

Sustainability has been strategic corporate vision of the BMW Group since 2009. All the major projects of BMW are therefore, measurable in case of sustainability. It confirms that supportive to economic factors, social and environmental aspects are measured in the decision-making process (Blunck, 2016; BMW, 2018).   

The automotive industry in the world changing the traditional engine concepts into new concepts which promise lower emissions so that decreasing in emissions can be main drive to global warming and climate change (Blunck, 2016). The main objective to reductions of CO2- emission agreed in cross-country contract such as "Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC)", carbon-neutral mobility goal have sated by the governments.  The government of German has part of pushing for e-mobility by initiating through Chancellor Angela Merkel of German a clear aim is 1 million by 2020 and 6 million by 2030 e-driver cars on the road in Germany (Automotive IT, 2011, BMW, 2018).

Implementations of Circular Strategy

Accepting many challenges BMW has developed the sustainability strategy (BMW, 2014). Responding to those challenges with a strategy evolution and revolution, that means BMW is improving emissions and efficiency of combustion engines and developed a revolutionary product-line of e-cars i-series i3 and i8 (BMW, 2018). 

4: BMW’s Sustainability Goals and Strategy implementation. Source (BMW, 2018)

BMW i-series refers to the vehicle of the future with the e-driver, exceptional design, revolutionary lightweight construction and range of mobility (BMW, 2015a). BMW is using environmental management systems to identify the wastage of the company. In the manufacturing facilities BMW using the ISO 14001 to place an emphasis on supply chain management. With the ISO framework the company is also complying with new end of life vehicle legistration. Original Equipment Manufacturers (OEMs) required an update in 2015 to recover and recycle 95% of their vehicles, that is German Carmaker is doing (Mace, 2018). As stated by the MBWGroup (2018) reusing and reprocessing materials is main commitment of BMW Group to a circular economy with regard to aluminum and steel. To ensure the sustainable standard BMW is working together with the "Responsible Steel Initiative (RSI)" and "Aluminium Stewardship Initiative (ASI)". In ASI MBW group was involved in a certificate programme for value chain of the aluminium. Main objectives of BMW are sustainable production, procurement and utilization of materials as proven by certificate. 

Circular-Economy

5: Circular development process of BMW. (Source: bmwgroup.com, 2018)

Above figure indicated the circular value chain process of BMW collaborating with the suppliers after used in production process remaining raw materials are return back to suppliers (Mace, 2018).

The aim of BMW group is to be most sustainable and successful premium provider.  BMW already had competitive advantages in sustainability. BMW sold more than 62,000 electrified vehicles in 2016 and it is almost double as comparing to 2015 and since the market start of BMW in 2013 was sold 1,00,000 electrified vehicles. BMW extended the car sharing to fourteen cities in United States and Europe. By celebrating the 100 years in 2016. BMW was introduced corporate strategy for sustainability. BMW extending the range of electrified vehicles and extend services which will rise environmental protection worldwide which helps to get excited to stakeholders and customers of BMW (BMW, 2018).

6: Sustainability SWOT Analysis for BMW. Source (Blunck, 2016)

Above figure indicates sustainability SWOT analysis of BMW in terms of circular economy.

3.2. Economic, social and environmental benefits

3.2.1. Economics and Social

BMW has huge economic impact in the State of South Carolina.  BMW invested for the sustainability in Carolina supports over 28,000 employments statewide workforce about 1.6%.  Every 1 job created on BMW plant over 3 extra employment are created in another place in the economy.  BMW promised to protect and preserve the local resources. Over business enterprises financial support, environmental awareness and conservation, BMW playing an important role in supporting the fragile eco-systems which makes the Upstate public so unique. BMW's responsibility of environmental is one BMW take seriously, in order to confirm the give and take among business and nature is a well-adjusted one (BMWusfactory, 2018; BMW, 2018).     

      1.  Environmental

Main objectives to be most resource efficient automobile company. BMW monitors the environment major investment decision and its environment indicators (BMW, 2018). BMW was started the environmental protection concept in 1993 based on the ICC Charta sustainable development agenda.  BMW production process designed for minimum martials consumption and environmental impact.  The International Declaration on Cleaner Production of the UN Environmental Programme was signed in 2001 (Blunck, 2016; BMW, 2018).

According to Blunck (2016) BMW is looking for contribute to emission CO2 and climate change by preventing greenhouse gas (GHG) through the implementation of effective manufacture process, production of efficient vehicles, selection of production location and use of renewable energy (BMW, 2018).  Among 2006-2012 BMW defined a goal of minimizing the use of martials and emission per vehicle by an average of 30%. That was highly-achieved with the reduction of 35.7% using the water, parameters of energy, profess wastewater, solvent emission and wastage for disposal.   Reducing the consumption by 45% per vehicles by 2020 is the new strategy of BMW regarding environment protection. To improve the energy efficiency BMW has been identified the five strategic areas:

  1. Develop the Integrated energy management system.
  2. Planning, implementation of energy-efficient plants, technologies and properties.
  3. Continuous development of current processes.
  4. Motivating employees and managers, raising awareness training on energy efficiency and energy (BMW, 2018).
  5. Application of renewable energy projects;

BMW follows the 5-step hierarchical model stated by the EU: prevention, reuse, recycle, recovery, & disposal. This action helped to the company 69.7% resource emission in 2013 as compared to 2006 (Blunck, 2016; BMW, 2018).

  1. CONCLUSION AND RECOMMENDATION

This assignment has presented impact of circular economy, sustainability can improve the the environmental, social and financial performance of a company. Every organizations are driven by several legal requirements of governments and factors as well as pressures from customers and NGO's would eventually encourage them to apply circular economy.  BMW has been very responsible and promised to BMW's responsibility regarding implementing the circular economy and has been achieving the success in term of implement circular economy.  The main reasons of development of I-series vehicles is to implement the circular economy by producing the light-weight and electronic vehicles which will help to consumed low product material and also decrease the CO2 emission. New products of BMW also creating the social job opportunity and adding the value in the overall countries economy.

 Furthermore, some recommendations and tools and techniques for implement circular economy in BMW.

  1. For the sustainability and sufficiency BMW need to incentives for pioneering business to present business new mobility patterns and innovations.
  2.  Set the reliable emission reduction and fuel-saving targets which would permits organizations to work on meeting those targets and also invest in the technology, research and development sector.
  3. Sustainable economic condition requires in a company's change process of circular economic.  The main factors of the organization financial success which help consumer lend to the organizations sustainable products and strategy. 

Finally, BMW need to follow the above recommendation and tools and techniques to be a sustainable market leader in automobile implementing the circular economy (Blunck, 2016).

 

 

 

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