The growth of the circular economy in the North East of England

2nd November 2018

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Gary Parnell

Marek Bidwell speaks to innovators in the North East who are growing the circular economy, and considers what we can learn from their success.

The North East of England has long been a driving force for British industrial development in areas such as coal mining, railways, shipbuilding, electricity and lighting – a proud industrial history that is still in evidence today. This summer, during the Great Exhibition of the North 2018, I went to see Robert Stephenson’s steam locomotive, Rocket, which was on display at the Newcastle upon Tyne’s Discovery Museum – returning to the North East for the first time in more than 150 years. It is an iconic engineered object a black metal cylinder riveted on every seam, set on large wooden wheels and topped by a tall chimney. Following Rocket’s success at a steam locomotive competition near Liverpool in 1829, Stephenson landed an order to supply locomotives for the Liverpool and Manchester Railway from his factory in Newcastle, which he went on to export around the world.

Innovations such as steam power and the railways during the Industrial Revolution led to unprecedented economic growth, but this wealth was not shared evenly. People flocked to cities in northern England to work in centralised factories, leading to overcrowding and disease. Working conditions also left a lot to be desired: in the north east alone, more than 1,500 men and boys were killed in dozens of mining disasters during the 19th century.

From an environmental point of view, industrial growth was driven by the extraction of non-renewable resources, with little or no thought being given to the safe disposal of waste: it was either dumped on land, poured into rivers or vented into the atmosphere. In the 19th century, it was reported that more than 100,000 salmon were caught annually in the River Tyne, but by the mid-20th century, buyers were reluctant to accept the remaining fish because they tasted of tar. By the early 1900s, almost no salmon were left in the river.

In their book Cradle to Cradle: Remaking the Way We Make Things, authors Michael Braungart and William McDonough acknowledge the benefits of the Industrial Revolution, but suggest that if you were given the task of planning it today, you would not do it in a way that “puts billions of pounds of toxic material into the air, water, and soil every year; produces some materials so dangerous that they will require constant vigilance by future generations; and results in gigantic amounts of waste and puts

valuable materials in holes all over the planet, where they can never be recovered”. Rather than a destructive ‘cradle to grave’ model, you would design a ‘cradle to cradle’ system that uses non-toxic materials to create products that can be endlessly recirculated – as in natural systems.

Pioneers in the North East – such as George and Robert Stephenson, William Armstrong, Charles Parsons and Joseph Swan – were at the forefront of the first Industrial Revolution, but many of those traditional heavy industries have since declined. Coupled with improved pollution control, this has led to the recovery of the region’s rivers, and the salmon have returned. However, this has left the North East with high levels of unemployment and poverty compared to other regions in the UK. Reports from the Ellen MacArthur Foundation and the Waste and Resources Action Programme (WRAP) claim that UK industry could save billions by adopting circular economy principles. This presents a golden opportunity for traditional industrial areas (home to a ready supply of skills and labour) to reinvent their economy by providing the products and services to make this happen - but this time around, along greener lines.

Lessons from traditional industry

A business that knows all about the industrial heritage of the North East is Sabre Rail. The company is based in Newton Aycliffe, a stone’s throw away from the site of the Stockton and Darlington Railway – the world’s first public railway to use steam power – and its offices are graced with evocative prints of early steam trains. Chairman Stephen Thompson tells me that the company was founded in 1987 by his father, who was working for a brake manufacturing firm that supplied parts to British Rail. As is common in many organisations today, the firm was more focused on selling new parts that servicing used ones. “British Rail was growing annoyed,” says Thompson. “Turnaround time was excessive – parts would be languishing in a factory yard for weeks on end before they got looked at”. Thompson’s father suggested to British Rail that he set up his own workshop to offer a dedicated repair service; when it agreed, he rented a factory and starting to repair the equipment directly for British Rail. His ethos was to have a reliable product and turn it around quickly so that the train company could get the vehicle back into circulation – good for the company and the travelling public. The business grew to supply multiple British Rail depots and diversified into other parts.

Looking around the workshop, I see parts being meticulously disassembled, cleaned, inspected, repaired and tested before being hooked onto an aerial conveyor belt and repainted. Thompson tells me that Sabre Rail matches the original warranty on parts leaving the factory: “We recondition the parts as new, so we put our money where our mouth is. All the parts we supply are safety-critical braking systems for trains, so you can’t be cutting corners”.

Sabre’s Rail's customers aren’t always aware that reusing parts instead of replacing them has such a significant reduction on environmental impact. “On an average overhaul of a brake unit we will reuse 95% of the components,” says Thompson. “If the other option is to dispose and replace them, we are making a huge environmental saving.” Are many of the parts Sabre receives beyond repair? And if so, what happens to them? “If the main body of the part has been damaged, we don’t throw the whole thing in the bin – we take all the usable parts out and then reuse those going forward, so we have extensive stocks of spare parts.” Thompson believes that this differentiates Sabre Rail from its competitors: “It is a load of hassle stripping it down and taking out the parts – it is much easier to say to the client ‘it is beyond economic repair, bin it and buy a new one’.” Although the rail industry faces many changes, such as increasing demand and the rollout of new trains across the network, Thompson believes that it is unsustainable for franchises to be required to buy new trains every nine or so years. “It is likely that many older fleets will be repurposed and refurbished to a high standard – as occurred with the London Underground D trains – and ultimately the new trains will be maintained and serviced locally in the UK.”

Lesson 1: The circular economy can operate in traditional industrial sectors, as well as high-tech start-ups.

Lesson 2: Opportunities arise when organisations listen carefully to what their customers want, rather than only focusing on what they want to sell them.

Lessons from overseas

Mark Mattao was born in Turkey, where he trained and worked as a heating engineer. When he detected a faulty part in a customer’s boiler, he would take it to a local workshop, where it would be repaired for a reasonable fee before he reinstalled it. When he moved to the UK, he found that he was forced to buy entire replacement parts at a high price when he only needed one small component. Parts that Mattao knew could be repaired ended up in the bin. “I felt really bad having to pay several hundred pounds when I only needed one component that was worth a few pounds,” says Matteo. The experience led him to set up Heating Trade Supplies (HTS), a firm specialising in the repair and sale of boiler parts in the UK, based at the entrance to the Tyne Tunnel in North Tyneside.

In the workshop, I observe engineers swapping out components and testing the repaired items. Other staff are reconditioning heat exchangers for a second life. They clearly take pride in their work and show me the spotless results. Mark tells me that having a dedicated facility is essential: “Without a workshop, you are very limited because the only way to test a printed circuit board (PCB) is to fit it on the appliance. We have developed test rigs that mimic the each of the hundreds of types of boilers, allowing us to find out which components are faulty.” HTS has developed a standard system whereby, when it receives a faulty PCB, it not only swaps out the damaged components but also replaces all the moving components that commonly cause faults. “The repaired board is practically as good as new, if not better, because our replacement components are higher rated than the originals,” says Mattao.

Like Sabre Rail, HTS salvages and stores parts from obsolete models; these are stacked and labelled in a library, waiting for a customer to call. “If necessary, we can also manufacture obsolete parts in a dedicated facility,” says Mattao.

I am keen to understand what the challenges are in this line of business. “The biggest challenge the sector has is that it is seasonal,” Mattao says. “When we are busy, we are extremely busy – boilers all decide to break down at the same time, so everybody needs parts. The other challenge we have is that, although it is great that we do a unique job, there are a very limited number of qualified people who we can employ. We look far and wide for skilled engineers – although we have now started training some local young people in these skills. So, expanding the business is not as easy as expanding a normal mainstream business.”

Lesson 3: Many traditional repair skills that still exist overseas have been lost in the UK. We should value such skills and train up a new workforce.

Lesson 4: Refurbished items are not necessarily of a lower standard than new items. In fact, they can be fitted with higher-specification sub-components than the originals.

Lessons in security

In Sunderland city centre, 10 miles south of HTS, another firm has spotted a gap in the market to reduce waste and extract value from electrical equipment. Simon Howatson, a serial entrepreneur with several businesses in the region, is CEO of DC Reclamation. He tells me that when the Waste Electrical and Electronic Equipment (WEEE) regulations came out, it was natural for waste organisations to come in and provide a service. Potentially valuable equipment was thrown in a skip, stored outside, mixed up and damaged. “By contrast, we go into an organisation, take what traditionally is a cost-causing exercise and turn it into a profit”.

DC Reclamation removes IT and other equipment from clients’ premises, often when the client is doing a complete computer refresh. It takes the equipment back to its workshop in Sunderland and sanitises the data to Infosec Standard 5 so that it complies with GDPR regulations, before repairing any damaged equipment and reselling it in the UK, online or abroad. Profits from the sales are split with customers. Does it come as a surprise to businesses that they can get money back on their used IT equipment? “I think some people are surprised by it – they think there is a catch!” says Howatson. “But we are open-book and completely fair with it. Customers can have the money back in pound notes but what we really try to do is encourage them to put it back into the community, or into sustainability projects that they are already working on”.

For most clients, the data security aspect is more important than the money. “We tag each asset and bring it directly back to our workshop, where we generate individual data sanitisation certificates, giving the client peace of mind. We don’t leave that equipment unattended for even a second – in a coffee room or service station forecourt, for example – where someone could take a PC or laptop.” Howatson faces a battle when persuading people not to treat used IT equipment as waste. “We have been talking about waste, and I am disappointed it is still classed as waste. I don’t see it as waste”. He says that some clients dump equipment in a room, where it gets damaged and loses value over time. To solve this problem, he has offered to collect equipment more regularly, and even to deck out storage rooms to reduce the risk of damage prior to collection. “If they treat it as an asset, rather than a waste, this increases profit share for the both of us; I will breathe new life into it for them.”

Lesson 5: Don’t leave old equipment in a cupboard to fester, as it will lose value – move it on quickly and carefully.

Lesson 6: It is possible to reuse equipment and comply with regulatory requirements in high-risk areas as long as proper security and tracking systems are put in place.

Lessons from a waste producer

So far, we have looked at examples of the circular economy in firms specifically established to refurbish equipment: train parts, heating components and electrical equipment. Next, I investigate how circular economy thinking can be applied within a large organisation that creates a lot of waste, has tight budgets and is focused on delivering its primary objective – a situation that many readers will know well.

James Dixon is the sustainability manager for Newcastle Hospitals. He tells me that the hospitals create over 5,000 tonnes of waste per year – the same weight as a nuclear submarine – and that much of this has to be heat treated or incinerated due to laws around infection control. Many items, such as medical protective equipment, can only be used once per patient and then have to be heat treated or incinerated, because minimising hospital-acquired infection is a priority. Despite these restrictions, Dixon is clearly enthusiastic. He shows me waste recycling bins that have been installed throughout clinical and public areas of the hospital and how food waste – from returned portions of patient meals– is collected. This waste goes to a treatment facility where packaging is opened, and the waste food goes to anaerobic digestion.

Dixon moves on to describe measures the hospital takes higher up the waste hierarchy, to prevent waste from being generated in the first place. These measures go to the heart of how the service is designed and delivered. The Estates department of the hospital operates a clinical equipment loan library for items such as blood pressure monitors, which prevents individual departments from over-buying and having under-utilised equipment sitting around. Items are checked out, used on a ward, returned and then cleaned and serviced ready for the next use. In conjunction with Newcastle City Council, the hospital also operates a loan equipment service to the community, providing and installing items such as mobility aids and stairlifts. This highly valued service means that people in difficult circumstances don’t have to go out and buy new equipment that may be disposed of after a short period. “We fit them into houses where needed, and when they are no longer required they come back to a workshop to be decontaminated, refurbished and reused.” Most hospitals, including Newcastle, operate an in-house decontamination service, where surgical instruments are cleansed to a very high standard in an autoclave. However, Dixon warns that some instruments coming onto the market are disposable, posing a threat to the traditional reuse model. “It is becoming more and more economically comparable in some services, such as dentistry and podiatry, to switch to disposable items. With pressures to make cost savings, some Trusts are moving from reusable instrument to buying in cheaper instruments for single use. This saves on the requirement for stringent cleaning and sterilisation”. Dixon explains that, as sustainability manager, he challenges decision-making to ensure departments understand the bigger picture. “Any request for procurement has to come to the sustainability team to see if there are any specification and evaluation clauses required for sustainability.” In this case, there is an argument around reliance and resilience. “If the hospital comes to depend upon imported single-use instruments, how resilient is that supply chain to climate change, or the increasing scarcity of rare earth metals they need? With a reusable system. we have a lot more control in-house.

Lesson 7: The design of a product or service will have the greatest overall impact on how much waste is produced throughout its lifecycle.

Lesson 8: The circular economy is not just about doing new things. We need to recognise where it already exists, and protect that.

Lessons in technology

While researching this article, I put out a call for organisations to come forward who were innovating in the circular economy in the North East. Dixon, from our previous case study, suggested I get in touch with Daniel O’Conner, who provides a service called Warp It, which helps organisations track and reuse resources. The service has been put to good use at Newcastle Hospitals.

O’Conner, who is now based in Whitby, tells me that he got the idea for Warp It in 2005 when he was working as a waste officer for Newcastle University. He was running a training course for university staff and saw a skip across the road that contained about 200 operator chairs. “I went to the foreman doing the job and asked: ‘what’s going on with these chairs?’. He said, ‘We just turned up to the job to do an asbestos survey and strip-out, but all this furniture was still in the building’.” O’Conner asked the foreman for time, and within a couple of hours he had found homes for the chairs by emailing his list of contacts. He quickly realised that, while email was a starting point, he could democratise the knowledge of used assets within an organisation more effectively by building an online platform, onto which staff could register excess materials and others could search for equipment before buying new. Warp It was born

Since then, O’Conner says that Warp It has helped hundreds of organisations to save more than £15m and divert over 2,400 tonnes of waste from landfill. The financial savings are accrued by avoiding both unnecessary procurement and waste disposal costs. Organisations listing assets on the system can share them within their organisation only, with other nominated organisations on Warp It, or the whole of the Warp It community, including registered charities.

O’Conner tell me how Sunderland City Council used the software during a large restructuring exercise, managing the flow of assets across 14 buildings in the city and redistributing them internally. If they weren’t used straight away, the assets were stored in a warehouse in Washington, and were drip-fed back to the city council and its 360 schools. Later, the council extended asset-sharing to other parties in the city, including 400 charities, the hospital and the university. This saved more than half a million pounds at a time when the council’s budget was being squeezed.

I am interested to know whether Warp It has run up against any regulatory barriers, especially waste law. O’Conner tells me that, when he first started, there was concern that items listed on Warp It could be classed as waste if the Environment Agency considered that they had been ‘discarded or intended to be discarded’ – “but they very quickly reclarified what that meant, and it hasn’t been much of a barrier since”.

Lesson 9: Technology, such as the internet and social media, can democratise knowledge about assets and resources, thus facilitate sharing and reuse.

Lesson 10: Challenge everything.

The lessons in this article are aimed mainly at sustainability practitioners and business innovators. But reflecting on the embryonic nature of the circular economy, and the opportunities and threats highlighted by the organisations featured, it has become apparent to me that the regulatory and fiscal environment in which they operate is as crucial to their success as their spirit of innovation and determination. In her brilliant book, Doughnut Economics, Kate Raworth uses the analogy of a gardener tending her plants to represent how economists should steward the economy, crafting the conditions that will make it ‘distributive and regenerative by design’ rather than ‘divisive and degenerative by default’.

Businesses who recondition used equipment are profitable because the cost of salvaging and refurbishing an item (despite the extra effort involved) is less than making a new one. However, this is a delicate balance: the margin could be wiped out if cheap goods made from virgin materials flood the market, or if the cost of labour increases. The reverse is also true: if taxes are increased on virgin materials but reduced on labour, the circular economy will be set to spin.

It is also essential that waste legislation does not present a barrier for those wanting to reuse and remanufacture. When the UK leaves the EU the government will have to transpose the definition of waste into UK law and this may be an opportune time to clarify that definition and to provide helpful guidance for those operating in the reuse sector.

Therefore, the final lesson derived from these circular economy case studies is for the government:

Lessons 11: Provide a regulatory and fiscal framework that incentivises organisations to remanufacture and reuse while disincentivising the use of virgin materials.

The innovators I have met over the last few months have given me hope that the circular economy is not just a concept – it is actively taking shape. We have seen that circular thinking can be applied in all types of industry sectors, from traditional to hi-tech, but it will always take imagination, an unwavering focus on what the customer wants and hard work to bend the old-fashioned linear model into a circle.

Is there something special about the North East that has inspired these people? Those of us that live here would say there are many things special about this region, but in this context, the answer is probably best summed up by Dixon, from Newcastle Hospitals: “I think we do pretty well in the North East at sweating our assets and getting the very best we can out of anything!” I imagine Robert Stephenson would be proud.

I hope that these lessons in the circular economy from the North East resonate with you and that you can apply them within your own organisation – or, better still, that they inspire you to set up a new one.

Marek Bidwell is director of consultancy firm Bidwell Management Systems, a guest lecturer at Newcastle University, and hosts two sustainability book clubs at GreenThinkers and IEMA. On twitter @MarekBidwell.


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