IN
DEGREE PROJECT THE BUILT ENVIRONMENT, SECOND CYCLE, 30 CREDITS
STOCKHOLM SWEDEN 2020,
Integrating novel circular economy technologies in complex trans-
sector value chains:
Case study of insect larvae conversion
technology within waste and feed value chains AUDINISA FADHILA
KTH ROYAL INSTITUTE OF TECHNOLOGY
Integrating novel circular economy technologies in complex trans-sector value chains:
Case study of insect larvae conversion technology within waste and feed value chains
AUDINISA FADHILA
Supervisor
MONIKA OLSSON
Examiner
MONIKA OLSSON
Supervisor at Ragn-Sells AB GRAHAM AID
Degree Project in Sustainable Technology KTH Royal Institute of Technology
School of Architecture and Built Environment
Department of Sustainable Development, Environmental Science and Engineering SE-100 44 Stockholm, Sweden
TRITA-ABE-MBT 20700
Sammanfattning
Trots att den nuvarande linjära värdekedjan (Linear Value Chain) för organiskt avfall och djurfoder har potentialen för en cirkulär ekonomi, så utgör den nuvarande praxisen fortfarande stora risker såsom avskogning samt överfiske. Därför föreslås en ny cirkulär värdekedja (Circular Value Chain), som förbinder den organiska avfallsströmmen med djurfoderproduktion med användning av insektbaserad omvandlingsteknologi för organiskt avfall.
Svart soldat fluga (Black Soldier Fly/BSF) utses som den insektsbaserade omvandlingsteknologin eftersom den har näringsegenskaper som bistår både avfallsbehandling och djurfoderproduktionsändamål. Trots att det redan finns initiativ och samarbeten i det svenska sammanhanget har övergången ännu inte lyckats. Studien syftar till att identifiera och föreslå nödvändiga lösningar för den cirkuläravärdekedjan. Genom att använda övergångsstudieverktygen av Teknologiskt Innovations System (TIS) samt Multi Level Perspective (MLP) och diverse värdekedjeövergångsstudier, konstateras det att tekniska och informationsrelaterade justeringarkrävs för att ytterligare möjliggöra övergången från en linjär till en cirkulär värdekedja.
Teknologiska anpassningar studeras ur Ragn-Sells ABs perspektiv som en potentiell aktör för omvandling av organiskt avfall. Scenarier för att undersöka ekonomisk hållbarhet utformades baserat påfluktuering av mängden avfall som materialinmatning (3,000 ton per år och 15, 000 ton per år), möjlighet till automatiserad drift som påverkar både CAPEX & OPEX i anläggningen (hög CAPEX och låg CAPEX), och upphandling av små BSF-larver (avel utanför anläggningen). Från de olika utformade scenarierna konstaterades att scenariot med en kapacitet på 15,000 ton per år, hög CAPEX och avel på plats är det mest fördelaktiga för Ragn Sells AB.
För att besvara informationsrelaterad justering föreslås en informationsflödesram (IFF). IFF består av ”Value Chain Interessholders”, “CVC Relevant Regulations”, “Information Data Pool” och
“Information Flow”. Ramens huvudfunktion är att identifiera vilken typ av materialinformation som krävs för att distribueras i systemet och den aktör som kräver och/eller tillhandahåller informationen, med det huvudsakliga målet att öka förtroendet bland aktörerna relaterade till materiell information.
Abstract
Even as the current linear value chains (LVC) of organic waste and animal feed hold the potential to become circular, these practices continue to pose major environmental risks such as deforestation and overfishing. Therefore, a novel circular value chain (CVC) is proposed, connecting the organic waste stream with animal feed production by the use of insect-based organic waste conversion technology. The Black Soldier Fly (BSF) is chosen as the insect-based conversion technology since it has nutritional properties, which serves both waste treatment and animal feed material production purposes. Although there are already initiatives and collaborations in the Swedish context, the transition has not yet been successful. The study aims to identify and propose required solutions for the value chain transition. By using the transitional study tools of Technological Innovation System (TIS) and Multi Level Perspective (MLP) alongside sustainable value chain transition studies, it is found that technological and information-related adjustments are required to further enable the transition.
Technological adjustments are studied from the perspective of Ragn-Sells AB as a potential insect- based organic waste conversion actor. Scenarios to see economical sustainability were designed based on the quantity fluctuation of waste as material input (3,000 tons per year and 15,000 tons per year), possibility of automated operation which affects both investment and operating costs of the facility, and procurement of small BSF larvae (off-site and in-site breeding). From the different scenarios designed, it is found that the scenario with the capacity of 15,000 tons per year, higher investment due to automation, and on-site breeding is the most preferable for the case. To answer information- related needs, an Informational Flow Framework (IFF) is proposed. The IFF consists of “Value Chain Stakeholders”, “CVC Relevant Regulations”, “Information Data Pool”, and “Information Flow”. The framework’s main function is to identify the type of material information required to be distributed in the system and the stakeholders whom require and/or provide various information, with the main goal of increasing the trust among the stakeholders related to material information.
Keywords
Organic waste, circular economy, circular value chain, sustainable transition, transition studies, Black Soldier Fly, sustainable animal feed
Acknowledgements
The thesis work is done with Ragn-Sells AB, of which I would like to offer a huge gratitude on the opportunity to learn many valuable things on Swedish waste management in the company since summer 2019. Special thank you for Graham Aid, my summer trainee and thesis supervisor for the constant guidance, who inspired me to always think big when doing works. I hope the thesis contributes on the effort of making the project living up to the dream.
Monika Olsson as my supervisor (and examiner) who always see things in detail and for the reminder to always remember the bigger picture. Thank you for always listening and your guidance even on the tiniest detail of the thesis. I would also like to thank you for your generously shared knowledge and kindness during my study in Sustainable Technology program.
I would also like to mention the Swedish Institute for making it possible for me to pursue my master degree in Sweden by providing plentiful means for my education and for the abundant offer on self- development and networking. I hope more people get the same opportunity.
Many people have supported me on doing this thesis of which I cannot mention one by one however;
Although far away I’d also like to thank Project FORWARD – Eawag especially dr. Christian Zurbrugg, Bram Dortmans, and FORWARD the for the introduction to the mesmerizing BSF world, and the constant support.
My friends at KTH, especially Sustainable Technology people, Indonesian students organization in Sweden (PPI Swedia), Forskarbacken 3 friends, and everyone which I can’t mention one by one for putting up with my absence during my thesis period and for the emotional and intellectual support when its direly needed (especially during the trying times of COVID-19).
Ultimately, I would like to thank my family, especially my sister Diandra Zahra Karima and my parents in Indonesia for the never-ending love and support to keep me going.
Again I hope the BSF project in Sweden comes to life.
Table of Contents
1. Introduction ... 7
2. Aim & Objectives ... 9
2.1 Aim ... Error! Bookmark not defined. 2.2 Objective ... Error! Bookmark not defined. 3. Methodology ...10
3.1 Theoretical Framework ...10
3.2 Technical System Design Requirement ...10
3.2.1 Front End Engineering Design (Facility Systems Design) ...10
3.2.2 Cost Benefit Analysis (CAPEX OPEX) ...10
3.3 Information-Related Requirement ...10
4. Theoretical Framework & Background ... 11
4.2 Technological Innovation System (TIS) ... 12
4.3 Multi-Level Perspective ... 15
4.4 Circular value chain transition requirement ... 16
5. Result: application of the value chain transition framework in Swedish case ... 21
5.1 Current linear value chain of Swedish “organic waste to animal feed” value chain ... 21
5.2 Proposed novel circular value chain (CVC) ... 23
5.3 Value chain transition analysis with TIS and MLP ... 24
5.4 Required adjustment for the system transition ... 27
5.5 Technical System Design Requirement... 27
5.5.3 Total CAPEX, OPEX, and production cost of BSF OW conversion facility ... 31
5.6 Information-Flow for Circular Value Chain Framework (IFF) ... 32
6. Analysis/Discussion ... 42
6.1 Transitional Studies ... 42
6.2 Technical System Design Requirement ... 42
6.2.1 Scenario Calculation Result ... 43
6.2.2 Post Processing of Harvested Insect Larvae ... 44
6.3 Informational Flow Framework ... 44
6.3.1 Data point ... 45
6.4 Applying IFF to another typical CVC ... 46
7. Conclusion ... 47
8. Future Works and Recommendation ... 47
Other References: ... 51
Abbreviations
ABP Animal By-Products
CE Circular Economy
LVC Linear Value Chain CVC Circular Value Chain BSF Black Soldier Fly
TIS Technological Innovation System MLP Multi-Level Perspective
STS Socio-Technical System TPY Tons Per Year
CAPEX Capital Expenditure OPEX Operational Expenditure IFF Information Flow Framework
1. Introduction
For various reasons, the world’s economic society has started though a slow but progressing shift from linear economy towards circular economy (CE) (Haas et al, 2015; Matthews & Tan, 2011; Mayer et al., 2019). Some mention-worthy benefits of CE are environment, economy, and limited available resources reasons (Lacy & Rutqvist, 2016; MacArthur, 2013). The current economic activity produces waste which is currently not defined as resource but rather as residue, and ends up creating environmental hazard (MacArthur, 2013). Beside environmental reasons, in economic context, the strongest motivation for shifting to CE is the limited availability of raw materials resources to support our economic activities. Macarthur (2013) stated that in 2010 alone 65 billion tons of raw material were utilized in economic activities and predicted to grow to 82 billion in 2020. While a report by OECD (2016) stated that by 2050 the world’s resource use would double from the current usage. With the population increase prediction from 7 to 9 billion in 2050 (OECD, 2016), the availability of resources would no longer be able to support even our basic demands. Therefore, if we want to maintain continuous economic growth, we should radically change the way we process our resources.
Looking from the viewpoint of economic value chain creation, the current traditional practice can be defined as the linear value chain (LVC). LVC consists of mining raw materials, processing it into valuable products, delivering the product or service to the consumer, and whichever item considered as waste would be disposed of. With reasons as mentioned before, the proposed novel approach for economic activity is to shift to the novel Circular Value Chain (CVC). In CVC, rather than obtaining raw virgin material for production, waste from other economic activities which have the potential to serve similar value as the raw material is used. Consequently, waste from processing, consumption, and other activities would be collected and therefore considered as a valuable material. This may happen in a company line of process, or in a cooperation of several stakeholder of which enable the economy of scale. Roos (2014) stated that the principal of CVC is based on ensuring outputs of all forms such as material, energy, information, connection, etc which has finished with its function in one value chain would be further utilized as an input to the other value chain, outside of the original form. While a study by Jordens (2016) defines CVC as a group of different stakeholders sharing, exchanging, and co-developing resources to utilize a certain material together forming a value chain.
However, the shift to CVC from the current LVC would need systemic adjustment, of which there has been several studies of it on various materials cycle projects. Geldermans (2016) investigated the requirement of transition to CVC for construction materials. The study concludes beside communication between stakeholder, the main requirement to enable the circular value chain of construction material is to fulfil both “intrinsic properties'' (quality and source of the material) and
“relational properties'' of the material (dimension and usability in other construction projects).
Jackson., et al (2014) studied the transition from LVC to CVC of metal using the lens of multi-level perspective (MLP) and the transitional-management theory. Another study by Leendertse (2016) uses the Technological Innovation System approach to analyse the sustainable transition of composite material value chain, of which the study concluded that the lack of supporting policy, limited market for the recycled composite, and deficient financial investment are the main obstacles of the transition.
Looking at these studies examples, the transition from LVC to CVC would require systemic adjustment based on the material properties, current regime, and circularity design.
In Sweden, the study of applying CVC approach for the case of food waste to animal feed has been going on for the past 5 years (Mutafela, 2015). In the current system, most animal feed are sourced from soy production which comes in hefty environmental cost (San Martin et al, 2016). On the other hand, the abundance of organic waste also holds the potential to be further processed into animal feed. One of the technologies which has been investigated to release the potential of organic waste to animal feed CVC in Sweden is the Black Soldier Fly (BSF). The BSF technology utilizes the larvae
phase of BSF to convert organic waste into valuable protein and fat. After a relatively short period of time compared to other organic waste treatment technology of around 14 days, the harvested larvae contains protein ranging between 42%-45% and fat content 31-35 % of its dry weight (Diener et al., 2009) which makes BSF larvae an interesting alternative material for animal feed. In the context of general-consumable protein, production by BSF technology would require 6-23 times less grass or grain to feed the larvae compared to conventional beef production (Muthafela, 2015), which proves BSF’s advantage as a more resource efficient method to produce protein. These properties make the BSF as an interesting technology to focus on in enabling the circularity of organic material.
The BSF technology itself has been proven to work and has found itself being implemented in various scales globally either for academic or commercial purposes (Diener, 2010; Marshall et al, 2015;
Nyakeri et al, 2017). Globally, there is a growing number of large scale BSF production plants which validates the demand of alternative sources of protein. Some of the biggest BSF companies in the world are Enterra which located in the USA (enterrafeed.com) and Agri Protein in South Africa (agriprotein.com), of which the latter valuing $117 million and producing 7 tonnes of larvae meal.
Specifically in the European context exist Agroloop (www.agroloop.eu) and Protix (www.protix.eu) in the Netherlands which the latter just commissioned its new factory last June 2019, Bio Fly Tech as the biggest BSF company in Spain (bioflytech.com), and Innova Feed in France (innovafeed.com) which just received a 15 million euro investment in 2018 (Feed Navigator 2018, https://www.feednavigator.com). This growth also corresponds with the findings that published in February 2020 which stated that in 2030 the global BSF market will reach 2.5 billions US dollars (Meticulous Research in Globe Newswire, 2020).
However, despite the rapid development in other European countries, Sweden still does not own a commercial scale implementation of BSF technology, although there has been several BSF research on the implementation of the technology in the country (Johannesdottir, 2017; Mutafela, 2015;).
Moreover, several studies on Sweden as a part of Scandinavian countries which has advanced knowledge in fisheries (Sandvold et al., 2019; Thorarinsdottir et al., 2011) have also looked into insects as a more sustainable feed material. An example is Tebrito (www.tebrito.se) as one of insect- based company in Sweden which uses the protein produced by mealworm (tenebrio molitor) instead of BSF as animal feed material. However according to various stakeholders, law and regulation on the application of the product hinders the development of the BSF and the insect based industry in Sweden in general.
Ragn-Sells AB, as one of Sweden’s biggest waste management companies has also been looking into utilizing the BSF technology as a new value chain. Several works that have been done by the company over the past years conclude that it is feasible for the company to use BSF technology to treat the incoming organic waste stream, in the context that it can aid the treatment of the biogas treatment residue while producing economic benefit for the company (Mutafela, 2015). The company had also analysed the product downstream potential through work of Sundberg (2015) which investigated the market and regulation side of the treatment product. The study summarized that there are clear interests from Swedish feed companies to use insect-based protein in the feed mix as a more sustainable raw material. However, getting into that stage regulation still limits the development.
Furthermore, to see the amount of feed supply for the larvae or the “upstream” part, Fadhila (2019) collected data on potential organic waste producers in Sweden. By analysing these conditions and potential it is then interesting to find out the aspects required to integrate CE technologies to current linear economic society and to apply the findings to the study case of commercial BSF plant in Sweden.
Observing from a higher level of perspective, the delayed success of applying BSF technology as mentioned above is only an indicator of the struggle of shifting to CVC of food waste to animal feed
in Sweden. In 2019, Vinnova (Swedish Innovation Agency), together with Ragn-Sells and other food waste circularity related stakeholders together worked on the project titled “Food waste as a resource in a circular system with insects such as fish feed and blockchain for quality assurance” (Vinnova, 2019). The project of which different stakeholders representing the value chain of insect based organic waste to animal feed value chain shared their perspective on what would be needed for technology to be applied in Swedish context. From the project, it can be concluded that the sustainable transition of food waste to animal feed in Sweden still lagged by partly identified obstacles such as regulation and demand. Therefore, there is a need to construct a framework to describe the transition from the current LVC of organic waste management and animal feed production to the CVC, for describing the transition will help decision makers to identify the current hindrance and therefore support to define the next step necessary to achieve the transition.
The introduction of BSF technology as a CE enabling technology would be categorized as system transition based on radically new technology, of which a descriptive context needs to be built upon it.
One specific tool that can describe this technical transition is called the Technological Innovation System (TIS) (Potting, 2017). TIS aids in describing the configuration of actors and regulations afecting the “speed and direction” of the technological innovation diffusion in a certain techno- geographical boundary (Hekkert et al., 2011). As described by the same author, TIS described the diffusion by analyzing the current “structure” of the innovation ecosystem using some predefined system “functions” to describe the system. The result of these descriptions can then be used to determine the drivers and obstacles of the innovation diffusion in society. Studying the shift, Multi- level Perspective (MLP) would be a rather interesting theory to describe the phase of transition. MLP is a tool to elaborate the entrance of a novel-niche technology to the society when faced with the established current regime (Geels, 2006). The use of MLP is expected to be able to describe the socio- technical system supporting the transition towards the circular value chain.
To conclude, looking at the necessity to shift from the current linear value chain to a circular value chain, a framework is required to map and guide the transition. The background of Swedish case of food waste to animal feed value chain makes an interesting case to apply these measures by focusing on the technological and information-related aspects to achieve the circular value chain.
2. Aim & Objectives
The aim of this study is to understand the transition process from linear value chain to circular value chain (specifically material, product-based value chain) and to formulate necessary
adjustments focusing on the technical and information aspect of the transition, using the study case of Swedish insect based organic waste to animal feed.
To achieve the aim 2 main objectives are to be answered:
a. What are the necessary requirements for a material value chain to shift from the linear towards a circular value chain especially for product-based value chain?
b. How could technical and information-related adjustment be formulated to shift from the linear value chain to circular value chain for the case of Swedish organic waste to animal feed value chain?
3. Methodology
To fulfil the aim of the study, the methodology is designed to answer the overall theoretical framework of transitional study, technical aspect of the system, and information-related requirements. The study itself will be done with a combination of literature review, technical design, economic calculation, and framework designing as explained below.
3.1 Theoretical Framework
To observe the transition, MLP and TIS are considered as the two most suitable frameworks to describe the value chain transition process. Both tools will be complemented with the aspects of circular economy collaboration to identify the barriers that need to be overcome to achieve the transition, and to formulate the transition requirements. Based on resource collaboration study by Aid et al (2017) as mentioned in the introduction, the study will focus on the technological and the information-related aspect of the value chain transition.
3.2 Technical System Design Requirement
The aim for this step is to identify the preferable technical scenario of a food waste to animal feed conversion system. This will require the designing a BSF waste treatment facility with a set of criteria for different operational capacity. This point will be carried out by first designing the conceptual and front-end engineering system, then to calculate the CAPEX and OPEX accordingly.
3.2.1 Front End Engineering Design (Facility Systems Design)
The design will be based on a streamline BSF treatment mainly by the BSF organic waste treatment guidebook by Dortmans (2019), while also considering the type and quality of materials the facility would receive and what kind of product the facility would deliver. This will be tested theoretically on different scenarios which are based on different (pre-defined) material input capacity, automation options, and choice of BSF larvae procurement. The FEED step would yield technical requirements that can be applied in the calculation of corresponding CAPEX and OPEX.
3.2.2 Cost Benefit Analysis (CAPEX OPEX)
In order to assess the economic feasibility of the BSF technology, using design derived from the FEED, to calculate the CAPEX and OPEX of the facility. CAPEX and OPEX will be structured based on the design requirement. The scenarios will then be sorted based on the production cost per ton and ultimately the profit of the facility from each scenario.
3.3 Information-Related Requirement
Based on other studies of sustainable value chain transitions and information flow of a sustainable value chain, a framework to aid information flow will be designed. Furthermore, the demands from the proposed value chain will also be utilized to identify aspects required in the framework. Firstly, the extensive value chain of the organic waste to animal feed was mapped. Then information demands coming from both regulations and supply chain demand were listed. Finally, the information was distributed to the stakeholders accordingly.
3.3.1 Application to Study Case
After the information-related framework is formulated, these will be applied to the case of organic waste to animal feed value chain transition in Swedish context. A project of Ragn-Sells together with Vinnova and other organic material value chain will be introduced as the current on-going value chain transition project in Sweden and will be used as a study case. The goal of the application is to create a flow of data required and can be provided by each stakeholder in the value chain to help enable the sustainable transition.
3.4 Literature Review
To identify the requirements for sustainable transition, established studies on value chain transition were listed and compared. The studies were collected through an online literature review. Most of the research is done through an online literature review using articles search engines such as Google Scholar, KTH Primo, Elsevier, and other search engines.
3.5 System Boundary
Theoretical boundaries are confined to the transition of the circular value chain of which the study will focus more on the material, product-based supply chain. This will be applied in a real-life system by the example Swedish organic waste to animal feed circular value chain which is confined to the technological system of circular value chain of organic waste to animal feed. This system consists of organic waste sourcing which is qualified as non-animal by product (due to compliance to regulation) and will be focused mostly to monostream (one uniform type of organic waste, due to operational and regulation simplification). The value chain then continues to conversion by insect-based technology of which the Black Soldier Fly technology is used. Afterwards the system continues to animal feed production, which the study will focus on fish feed production (due to available data and regulation), to be continued to fish farms, which a case of aquaponic farming will also be briefly introduced.
Geographical boundary of the system will be confined to Sweden.
4. Theoretical Framework & Background
As mentioned in the introduction, this study is aiming to formulate the required system modifications to support the value chain transition into the CVC. To do so, firstly the terms of linear and circular value chains are defined. Then suitable transitional theories will be used as a theoretical framework.
The Technological Innovation System (TIS) describes how a technology would diffuse in society while Multi-Level Perspective (MLP) theory describes the ecosystem landscape with the hard and soft aspects determining the novel technology’s development in the current regime. Afterwards, more circular-transition relevant theories based on other studies are introduced to formulate what is required to successfully shift to the circular value chain.
4.1 Linear Value Chain to Circular Value Chain
The term value chain can be defined as connected links or steps required to deliver a desired final product or service (Huws, 2009). The same author elaborates that the consecutive chain links in the value chain includes the input material provision, processing the raw material, then continues to the next link of processes until it produces the desired product or service. The name value chain itself exclaims that along the way, each link of activities increases the value of the material. However, the chain is not necessarily formed in a single continuous chain, but rather a tree branch like form, which means that a former link can provide for more than one demand (Huws, 2009). Each of the activity links might be executed by the same company or several different ones. In the context of organic refuse material, value chains are designed to convert the available organic material into varieties of economically valuable material, such as high-value chemicals, renewable energy, or secondary-use by products as raw material (Lokesh et al., 2018).
In material context, supply chain is a term closely related to value chain, since it was initially used to describe the network of labour and resource of goods manufacturing but the two are getting used more in the same context on current business studies (Huws, 2009). The main difference between the two is that the supply chain does not necessarily produce value in each link in the chain, but rather
to address the materials and components supplies for the next link of material processing activities.
As mentioned before, animal feed is a material-based value chain, therefore in this study theories for supply chain would also be applied as a similar concept to value chain.
Based on the linear economy model of take-make-dispose (Sariatli, 2017) and the definition of value chain by Huws (2009), the traditional or also called the linear value chain (LVC) is defined as the traditional organization of a service or product provision by a single or multiple companies, which start by input material gathering obtained in the regular, limited resource pool, to be processed in the next value chain activity, transformed into the final product or service, then after the use phase would be discarded and considered as waste.
Realizing that this kind of model is not sustainable both environmentally and economically, a novel value chain based on the principle of circular economy is proposed. The circular value chain (CVC) can be described as an organization of different parties/stakeholders who combine, share, exchange, and co-develop resources to increase the utilization of available material in order to deliver the product value (Jordens, 2016). Reflecting on the circular economy principle, the difference between LVC and CVC is that the LVC practices more the business-as-usual while CVC would require more collaboration and information exchange regarding the available resources in the value chain network to optimize the value extraction from it (Jordens, 2016). Another worth-mentioning difference between the two is that in CVC, closing the loop of material inside the value chain network is essential which means waste would be considered as valuable material (Sariatli, 2017). On the other hand, in LVC there is little intention for the expanded resource collaboration as long as each stakeholder manages to fulfil their material demand. However, the transition from LVC to the novel CVC would need to be further studied using suitable theories and requires several systemic adjustments which will be discussed in the next sub-chapter.
4.2 Technological Innovation System (TIS)
TIS approach may aid in describing how a certain technological innovation is diffusing in society, which in this study case is a technology based value chain transition. As described by Edsands (2017), TIS is not confined only to explain the technical aspect of technological innovation but rather describes the “socio-technical” factors of the innovation introduction which affects the diffusion of the innovation into society in general. This is done by breaking down the “7 system’s functions”;
entrepreneurial activities, knowledge development, knowledge diffusion, guidance of the search, market formation, mobilization of resources, and creation of legitimacy (Hekkert et al, 2007).
Current innovation studies suggested that industrial or value chain transformation especially the technological based one is profoundly determined by its surrounding system (Leenderts, 2016), therefore TIS approach will be briefly used to describe how the novel circular value chain of organic waste to animal feed and to identify what can be focused to integrate the CVC better in the current society. According to Hekkert., et al (2008), to conduct a TIS study, one starts with describing the TIS structure which consists of the actors and current regulation which defines the current system. The second step is to determine the phase of development of the TIS diffusion. Third step is then to describe the seven system functions and the interaction between them. Lastly, after both of the system’s structure and function has been defined, one can identify systemic problems that block the innovation diffusion.
4.2.1 TIS Structure
According to Hekkert et al (2011), the TIS structure supported by four main building blocks or called components consists of actors, institutions, networks, and technological factors. Furthermore, on the components are described as the following:
Actors
Actors are defined as private or public individuals and organizations whose activities contribute to the technology diffusion and utilization. Actors in TIS are further divided into industry, knowledge institute, educational organizations, market actors, government bodies and supportive organizations.
By describing the “industrial” actors of the TIS, one describes the value chain of a technology and analyzes what type of value would a particular activity by a certain industry/company adds to the value chain. “Knowledge institute” or research unveils the condition of the system regulating technological knowledge which therefore also affects access to knowledge to various stakeholders.
Some questions to help elaborate the research actors are which stakeholder would produce the knowledge and how much knowledge has been produced. Hekkert., et al (2011) consider “educational organizations” as one of the most important factors as this ensures the meeting ends between the educational and entrepreneurial actors. The availability of skilled labour graduated from university is also an important point to fulfil. Last point to find out in the educational organization is whether there is knowledge-production collaboration between industries and universities. As for the “market”
actors, the most important question is which actor would provide demand for the technology.
Institutions
Institutions can be considered as the “rule of the game” for which constraints or support interaction between actors. The component of institution can be divided into “formal institution” which is organized by formal authorities and the “informal institutions” of which more naturally shaped by actors interaction.
Networks
Networks elaborates the nature of interaction between actors of the system. It analyzes more on the geographical context of the interaction. For example, it helps to describe whether the interactions are more in localized or globalized context. This is done by observing nodes and ties of the system’s network of which the actors act as the nodes and the relation between them as ties. This would also determine who is the central player in the system.
Technological Factors
Technological factors describe the technical artefacts and infrastructure that would be the central part of the system. This component will also help to describe the interaction between actors and the physical side of technological factors. Another aspect studied in this factor is the technological trajectories which is the prediction of the technological development direction.
4.2.2 Defining the current phase of development
Phases of a TIS development describes how far technology has diffused in society. The progress can be demonstrated in a S-diffusion curve as shown in Figure 2 below. The development of TIS is divided into 4 stages; pre-development phase, development phase, take-off phase, acceleration phase, and lastly stabilization phase. Pre-development phase is marked where a prototype of the technology is produced to prove that the technology worked. Then the TIS goes up to the next level of development phase where technology has entered the market (still without subsidy). The take off phase is marked with increasing diffusion and market size of the technology in the society until it reaches the next level, acceleration phase. Afterwards the system enters the stabilization phase described with saturation of the technology diffusion.
Figure 2 Phase of TIS development (Modified from Hekkert et al., 2011)
4.2.3 TIS Functions
TIS system functions are also considered as the “key processes of innovation system”. It consists of assessment criteria used as a framework to elaborate how a TIS functions. As stated by Hekkert (2011), the essence of a system function compared to system structure is that a system function is more “evaluative” in nature rather than “describing” as the system structure. The premise offered by Hekkert is that if all functions are fulfilled then the system would properly develop. It is also stated that system function is required to be evaluated by “key stakeholders” which in this study can be done through interviews of the field’s experts or practitioners. This evaluation of system functions by experts of the specific TIS is required since there has not been a quantitative evaluation criteria, which is due to the different nature of technology diffusion in different countries. Based on the study by Hekkert et al., (2007) and Hekkert et al., (2011) the seven TIS functions and its indicators are explained in Table 1.
Table 1. TIS Functions (source: Hekkert et al., 2007 & Hekkert., et al. 2011)
Function Definition
Entrepreneurial
activities Entrepreneurs are the fore-front stakeholder which deliver the technology’s value to the society through commercial activity. This function can be performed by new players or incumbent which seeks for new value chains.
Knowledge
development In a TIS research and development of the technology is considered a vital prerequisite. This function is mostly done by academic researchers although possible to do by other stakeholder.
Knowledge
exchange Carlsson & Stankiewicz (1991) stated that the fundamental function of TIS network is information exchange. Examples of this function is when governmental policies are made based on technological development and R&D direction are influenced by current “norms and values”.
Guidance of the
search The function of directing the focus of R&D which is based on policy, previous technical and economic studies. The direction of R&D can also be influenced by expectation of the technology related to one of the example environmental benefits. Compared to function 2 & 3 which is the creation of
knowledge, this function is more on giving the direction of knowledge development.
Formation of
markets Formation of niche markets in order to bring leverage to the new technology compared to the current regime. Temporary niche market formation can also be one of the indicators of this function existence, which also allows the learning process of the novel technology. Other actions that can be taken to support the market formation is to give temporary
“competitive advantage” to the new technology. This can happen in the form of tax reduction as shown by the Dutch government towards
renewable energy sources or “minimal consumption quotes” shown by the German government for renewable energy feed-in law.
Mobilization of
resources An obvious but vital function which needs to be fulfilled. This requires allocation of sources (material and human resources) into the new TIS development. This can be provided by venture capitals or government funds. Most technology would also require this function in order to support Function 2 (Knowledge Development).
Counteracting resistance to change
Authorities, together with other stakeholder would form a legitimation which in some examples is a mixture of support towards other functions to give advantage to the novel technology compared to the current regime.
This function is required in order for the market formation to stabilize.
4.3 Multi-Level Perspective
Multi Level Perspective (MLP) is a tool which describes the diffusion of a new socio-technical system (system innovation) into the current regime. Jackson et al., (2014) stated that using MLP to study transitional processes is particularly useful to observe the macro pattern of the transition and how the system’s element both the current and the emerging ones interact. As defined by Geels (2006), the term system innovation means “changes from one socio-technical system to another” which in this case is the transition from the current linear value chain to the circular-technology based value chain. According to Geels (2006) system innovation have characteristic as the following:
• Requires co-evolution of involved elements simultaneously
• Requires transformation on both the “supply side” such as in the industry, technology, and knowledge of the system, also on the “demand side” which is user preference, cultural understanding, and supporting infrastructure
• Requires engagement of a wide range of actors
• Is a long-term process which might generate hindrance to consistent policy intervention and the analysis of it.
To describe system innovation, it is also necessary to first define a socio technical system. Socio technical (ST) system is a system comprising a group of “elements” including technology, user behaviour, regulation, market, culture, supporting infrastructure and networks (Geels, 2005).
Moreover, the elements do not work separately but are rather connected and maintained by the actors
Figure 3. Dynamic Multi-level Perspective on System Innovation (Remade from Geels & Schot, 2007)
or stakeholders related to the system. This would be the first dimension to understand MLP. The next dimension is how to understand the interaction between the elements. There are three levels acknowledged in MLP, the macro level which describes the landscape of the system, meso level which describes the system of which the current technological system regime, and micro level describing the niche which holds the new emerging innovation (Genus & Coles, 2008). Regimes exist inside landscapes and within regimes are niches, with niche thriving to substitute the current regime as the direction of the relationship, although this effort in most cases will not be easy since the current regime has been established in many aspects.
Geels & Schot (2007) stated that the exchange and conversation between system dynamics such as niche, regime, and landscape-level in different levels induces MLP transition. Figure 3 describes the interplay between the levels. Firstly, ST in the novel niches entrench new trends on multiple dimensions such as technological development, consumer acceptance, new policy and regulations, meanwhile increasing internal momentum. At this point the current socio-technical regime is still in the “dynamically stable” state. The next phase is marked with the breakthrough of the new configuration. If the new system technology is more preferred, the landscape (consists of external factors which affect social changes of politics, culture, and people’s point of view) will pressure the current regime, creating a “window of opportunity” for the novel system technology. Depending on which ST suits the landscape demand, either the incumbent socio-technology regime rules for some more time of the new ST holds the regime and shapes the new landscape.
An example of study which uses MLP as a method to describe transition of the metal value chain in Australia is by Jackson et al., (2014), The study concluded that the main challenge of shifting to a sustainable socio-technical system is not the technology introduction, but rather how to adjust the elements surrounding it such as establishing the new market, user behaviour, regulations, culture, and supporting infrastructure.
4.4 Circular value chain transition requirement
To achieve a circular value chain, instead of creating value by traditional product life cycle, companies ensure the delivery of the whole product value chain through the activities of exploitation, preservation, and restoration of one’s product value (Jordens, 2016). Due to resource limitation, it
would be far from possible for only one company to fulfil the whole value chain by themself. Therefore, collaboration with another company or other type of stakeholder is vital. Jordens (2016) also emphasized on collaboration by stating that the circular value chain can only happen if all related stakeholders in the value chain would combine, share, exchange, and co-develop available resources in order to improve the material value and utility. However, it is still unclear what are the practical necessary requirements to achieve this transition. Therefore, the following subsection is set to compare and summarize the findings from other studies regarding the necessary requirements for a value chain to shift from LVC to CVC.
4.4.1 Requirements from other study cases of material value chain sustainable transition
In a 2016 study, Geldermans investigated the main requirements for circular value chain transformation of construction material. The study concludes that beside enhanced communication between involved stakeholders, the main requirement to enable the circular value chain of construction material is to fulfil both “intrinsic properties'' which entails ensuring the quality and source of the material and “relational properties'' of the material which define the dimension and usability of the material in other construction projects. However, these two requirements should be present in the system since separately neither bring circularity value.
Lokesh., et al (2018) formulated a set of criteria to select promising novel EU bio-based value chains, which is based on the EU's ambition to achieve CE. The criteria consists of feedstock variability, multi- regional supply chain, variety of end-of-life, gaps in sustainability scheme, country based feedstock preference, and multi sector application. The author concluded that some issues that is need to be addressed to allow the new EU (bio-based) value chain to thrive are the “food vs non-food”
bioproducts conflict, feedstock cost, supply risk, interconnectedness of value chain, penetration of non-bio based value chain, public acceptance of the bio-based products, and lastly the “top-down and bottom-up” initiatives. Almost similar to Lokesh et al., (2018) the study by Borrello., (2016) et al also figured out the transition into bio-based economy in the agro-food sector. The approach was first to again identify the stakeholders and the network system. Based on the network map of the current supply chain, using CE principles, the circular supply chain is designed. From this, seven challenges of the transition are identified; irrelevant regulation, reverse-logistic management setup, geographic location of the value chain activities, system boundary, consumer acceptance, technological diffusion into the current system, lastly both initial and operational financial resources.
Jackson., et al (2014) used the framework of both MLP and Transition Management Cycle (TMC) to suggest the value chain circular transition of Australia’s metal industry. TMC is a transitional study tool which “provides guidance on practical implementation for a managed transition”. The TMC describes a transition by dividing it into four phases. First phase is identification and mapping of the current and designed system, the second phase is the initial stage of stakeholders’ collaboration to plan and agree on the desired system. The third phase consists of the planned system implementation by the various stakeholders. And lastly the fourth phase is the evaluation phase. Looking at the current
“organic waste to animal feed” value chain transition, this can be categorized into the third phase, of which Jakson., et al (2014) formulated the questions for this phase such as; “which networks need to be established or reinforced? What kind of information is necessary to be collected? What kind of policy, regulation, or incentives need to be set up to enable the system? What kind of institutional modification should be made to enable the system? Beside TMC, this study also applied the MLP approach which draws the conclusion that the circular industrial transition not only involves technological transition but also user behaviour, market, law and regulation, supporting infrastructure, and cultural transformation.
Another study by Leendertse (2016) uses the Technological Innovation System approach to analyze the sustainable transition of composite material. Leendertse (2016) argues that by analyzing a novel production system using TIS, one can identify the drivers and obstacles of the transition. The result can then be used to figure out the necessary interventions. The study concluded that the lack of supporting policy, limited market for the recycled composite, and deficient financial investment are the main obstacles for the circular transition of the composite material. Looking at these studies examples, the transition from LVC to CVC would require particular system adjustment based on the material properties, current regime, and circularity design.
4.4.2 Other studies on LVC to CVC transition
The capabilities of the value chain are the ability to identify, utilize, and assimilate the resources residing in the value chain to facilitate its activities (Wu et al, 2006). Transition to CVC by collaboration of companies is determined by the combination of organizational boundary conditions, operational resources, and managerial capabilities as shown in Figure 4 (Jordens, 2016).
Organizational boundary conditions mean a set of shared identity or value. This also means that the collaboration should be based on mutual interest and commitment, which can also lead to formal agreement, which also comes to the next point which is transparency. Lastly a formal structure would be required. Operational resources are about the physical resources necessary to conduct the collaboration. Supporting this are the circularity enabling technologies, circularity measurement system, sufficient human and financial resources. Finally, only with managerial capabilities all other existing resources can be put to work effectively and efficiently. Managerial capabilities which should be owned by all involved stakeholders are collaboration, coordination, integration, and stabilization.
Another related concept supporting the circular value chain, also marked as one of the determinants of a circular supply/value chain is the Reverse Supply Chain management (RSC). Genovese., et al (2017) also stated that RSC is a method to integrate the CE approach in sustainable supply chain management. RSC is defined as an array of activities of retrieving or collecting used material or product (waste) from consumers in order to dispose or preferably reuse it Haneef Abdul Nasir et al., (2017). The same study also stated that one of the main determinants of success for companies to achieve circular supply chain is the ability to control both their forward and reverse supply chain.
Regarding the number of stakeholders involved in RSC, this system can also work in closed-loop or open-loop systems.
As suggested by Aid et al., (2017) in order to support resource exchange and development, it is important to build strong partnerships which are based on available knowledge development in the form of best practice cases and available resources exchange in a particular area, also research new business models. To identify which aspect of the system would need to be adjusted to enable the transition especially related to resource collaboration, the same study classified the barriers to material resource synergy collaboration. The barriers were divided as; economic, social, technological, information related, and policy related with each category described in Table 2.
Therefore, it is of the study’s interest to evaluate the current food waste to animal feed value chain transition using this classification framework.
Figure 4. “The inter-organizational resources and capabilities of a circular value chain” (Modified from Jordens, 2016)
Table 2. Barriers of resource-collaboration by Aid et al, (2017)
Category Barriers
Economic • High investment cost
• Shortage of internally available capital
• Difficulty to acquire external investment capital
• Long return on investment
• Low results due to limited access to material (Economies of Scale)
• Division of income and costs between organizations Uncertain margins
• Different investment cycles
• High transaction costs
• Unstable market (unsure market)
• Economies of Scale
Social • Social Isolation between organizations
• Lack of engagement by the organization
• Lack of time and resources
• Other priorities in the company
• Lack of trust between organizations
• Aversion to collaboration and dependencies
• Aversion to change by the organization
• Resistance from external actors (such public actors) Technological • Distance-related barriers
• By-product requires complex processing before reuse
• Mis-match between industries
• Technical solutions not on commercial scale
• Material is unsuitable for reuse
• Lack of technical knowledge
• Quality assurance demands on materials
• Quantity demands on materials
• In time delivery demands for materials Information
Related • Lack of necessary information
• Limited knowledge about the market
• Limited information on collaboration methods
• Limited information on potential benefits
• Lacking contact and communication between companies Policy Related • Demanding logistic requirements
• Tough administrative requirements
• Permit requirements
• Lack of supporting legislation
• Policy supporting the primary extraction industry
• Complex, uncertain legislation
4.4.3 Conclusion on necessary adjustment in the sustainable transition of LVC
Based on the studies mentioned above, steps required to formulate the necessary adjustment to shift from LVC to CVC can be done in steps consisting of current system mapping, future system designing, implementation, and evaluation. Two useful tools to conduct the current system transition mapping are TIS and MLP. TIS is useful to see how far the technology has diffused in society, while MLP demonstrates the interaction between the novel technology niche and the current regime within the landscape of socio-technical systems. For sustainable value chain transformation, summarizing requirements introduced by some studies are information related aspects (committed collaboration and material information), sustainable sourcing, supporting regulations, sufficient financial investment, available market, social acceptance, and technological development.
Based on these required aspects, the study of circular value chain transition of organic waste to animal feed will be conducted. However, due to focus of the study and limitations some aspects are to be prioritized. Mutafela (2015) had studied the economics of converting organic waste into animal feed and showed the feasibility of the new value chain. While the current on-going study by Vinnova is delving into the social acceptance aspect and the policy-related matter of the transition. However, the technological and information-related adjustment of the system to suit the transition has not been sufficiently defined. On the technological aspect, the barrier “quantity demands on materials” would definitely be applicable to the case since the quantity and the quality of organic waste from the source fluctuates heavily. The quantity issue would correlate heavily with the technical design, and thus affect the economic aspect of the value chain.
Other technological barriers exhibited in the case such as “quality assurance demands on materials”,
“by-product requires complex processing before reuse”, and “mismatch between industries” pose the second question of material quality. In the case of food waste to animal feed value chain, this was found to be the main issue as the quality requirement varies throughout the value chain (Vinnova, 2019). As a brief example; the quality of material required by the feed producing plant might have different requirements with the material produced by the waste-to-protein plant. While on the earlier part of the chain, feed-to-protein plants have certain criteria for material input which might require adjustment from the waste source. Therefore, the second question also relates to the second category of barrier which is information-related barriers, especially on the barrier of “Limited information on collaboration methods” and “lacking contact and communication between companies”. Therefore it can be concluded that in the food waste to animal feed value chain the two most important questions to be answered is the matter of the adjustability and scalability of the operation and the type of information required for the material to be able to be valued across the value chain.
