Ashley Olsson, David Hicks & Emanuele Di Francesco
- Circular economy opportunities often depend on relationships between firms, material flows, infrastructure and investment decisions.
- System-level intelligence can help regions assess how new companies, capabilities and infrastructure could strengthen circular industrial development, rather than evaluating investments only in isolation.
- Governance mechanisms are essential to turn that intelligence into action by enabling trusted information-sharing, coordinating multiple actors and clarifying how risks, costs and benefits are managed.
- A system-level view also matters for resilience, because circular exchanges can create new dependencies.
- Understanding these dependencies can help regions strengthen resource security and reduce vulnerability to disruption.
Circularity is, at its core, about relationships: between companies, between material flows and infrastructure, and between decisions made by different actors across a system. In a way, this is not unusual, as no company, whether in a linear or circular economy, operates in isolation.
The circular economy, however, has some particularities when it comes to the economic role of those relationships. A company can usually assess a conventional investment largely from the perspective of its own business: what it needs to produce, what it can sell, what inputs it requires and whether the expected return justifies the cost.
Circular opportunities are often harder to contain within those boundaries. The value of a by-product, for instance, depends on whether another actor can use it and for which purpose. The viability of a recovery facility often depends on volumes generated by several companies, and shared infrastructure may only make economic sense if enough actors use it. This means that some circular opportunities cannot be properly assessed one company at a time.
Some of the value, risk and investment logic of circular activity therefore exists between firms rather than within any single one of them. That creates a need for a different kind of capacity: the ability to see how material flows, infrastructure, investments and business decisions interact across an industrial ecosystem, and to act where an opportunity depends on several actors moving together.
The experience of Circular Ecosystems illustrates this well. Its work began with mapping industrial exchanges, but progressively exposed a broader challenge: identifying individual exchanges is not the same as understanding the system in which they sit, and understanding the system is not yet the same as having the capacity to act on it.
Successful exchanges do not necessarily create a system view
The Kwinana Industrial Area in Western Australia is a remarkable example in this regard. Over several decades, the precinct developed an extensive network of industrial symbiosis, involving around 174 exchanges between approximately 54 companies. Water, energy, by-products and other resources moved between firms, making Kwinana one of the world’s most developed examples of industrial symbiosis.
The system-level information describing these exchanges remained, however, relatively limited. Maps and spreadsheets showed which companies exchanged resources, but there was much less information about volumes, frequency, economic value and wider interdependencies. Digitising these exchanges improved visibility, but also exposed a deeper problem: identifying an opportunity did not mean that anyone had the mandate or capacity to take it forward.
Kwinana already had a representative industry council, but representation is different from system-level decision-making. Individual companies remained responsible for their own commercial interests, actors had different levels of influence, and commercially sensitive information created legitimate concerns around data sharing. Government could support individual projects, but this did not necessarily mean that anyone was evaluating how those investments interacted with the wider industrial ecosystem.
Why does the system-level view matter?
Consider a company generating 5,000 tonnes of a particular by-product. That volume may be too small to justify investment in a dedicated processing facility. Looking across the industrial area, however, might lead to identify another 40,000 tonnes of the same or compatible material generated by neighbouring companies. What initially looked like several small waste streams can suddenly become a viable feedstock for a shared processing facility.
This simple example points to a broader issue. The economic potential of an industrial area is not simply the sum of the companies located within it, but depends to a significant extent on how their activities fit together. The relationships between companies in an area can add value, but they can also create constraints.
A new company, with its capabilities and material inputs and outputs, could make some circular activities such as reprocessing or reuse viable. On the other hand, a new activity may compete for a constrained resource, place additional pressure on shared infrastructure, create a bottleneck or introduce a dependency that makes the system more vulnerable.
This is why industrial development for circularity cannot be assessed simply by asking whether an individual investment is attractive. The relevant question is, rather, how that investment changes the configuration and relationships of the wider industrial system.
This leads to different questions. Does a new company use materials that are already available locally? Can its outputs replace resources that other businesses currently import? Does it provide a new recovery, reuse or processing pathway that is currently missing? Does it increase the utilisation of existing infrastructure?
These questions can partly determine whether a region is capable of capturing circular value. Circular industrial development should therefore be approached by considering how activities, capabilities and infrastructure can strengthen the functioning of the industrial ecosystem as a whole. This underpins the need to have enough knowledge of the system to recognise complementarities and dependencies that are otherwise invisible when each investment is considered separately.
This is where ‘system-level intelligence’, as Circular Ecosystems calls it, becomes economically important. It allows regions to understand how businesses within the same area can make better use of their interdependencies and unlock economic opportunities that would otherwise remain invisible when each company looks only at its own activities and interests.
Governance is needed early on
From an industrial development perspective, however, system-level intelligence is only useful if there are mechanisms in place that allow actors to act on it. Knowing where opportunities exist does not by itself resolve how joint decisions are made.
This is where governance becomes central. Companies need to know why they should participate, how commercially sensitive information will be handled and under what conditions cooperation takes place. Opportunities involving several companies need somebody capable of bringing the relevant actors together, maintaining trust between them and moving the discussion from identification to implementation.
The role of governance, and when it needs to enter the picture, has been one of the main lessons from Circular Ecosystems’ experience. In its initial approach to industrial precincts, governance came relatively late in the process. Over time, it moved much closer to the beginning. Mapping the system and developing a shared understanding of what companies and other actors were trying to achieve came first; establishing how they would work together followed closely behind.
The organisation leading this process can take different forms. It may be an industry association, government body, public-private organisation or independent entity. More important than the label is whether it has the trust of the companies involved, access to the relevant information and enough capacity to keep the wider picture up to date and bring actors together when opportunities emerge. The appropriate arrangement will ultimately depend on the local context and on the relationships among the actors involved.
Circularity also creates new dependencies and calls for system resilience strategies
The case of Kwinana also shows why this wider view matters for resilience. Industrial ecosystems constantly change as companies close, new businesses arrive, technologies change and commodity prices shift. An industrial network that appears highly efficient can also become dependent on a relatively small number of companies.
In Kwinana, when three major companies ceased operations, more than 40% of the documented industrial exchanges disappeared within approximately two years. Some resources that companies had previously sourced locally subsequently had to be obtained elsewhere. However, there was no independent actor whose explicit responsibility was to assess the wider consequences and explore how the missing connections could be replaced.
From a system-level point of view, the relevant questions go beyond the number of industrial symbiosis exchanges. Which companies are critical to other businesses? Which material flows have no alternatives? Where are the infrastructure bottlenecks? What happens if a major supplier or customer leaves? Could another business perform the missing function?
These questions go beyond circularity and touch on broader issues such as resource security and regional resilience. Once a territory understands its material flows, infrastructure, capabilities and dependencies, it can make more informed decisions about industrial development.
Building the capacity to see and act on the bigger picture
Due to the nature of circular flows, one of the main challenges for scaling circularity concerns the capacity to act on opportunities that exist at the ecosystem level. The practical challenge is therefore to create the capacity to maintain that wider picture.
The experience of Circular Ecosystems suggests that data alone will not provide this capacity. Companies also need workable arrangements for sharing relevant information, developing common opportunities and bringing the right actors together when action depends on several organisations. Done well, this can make circularity relevant to a much broader set of business decisions.
This is not a call for a centralised, top-down approach to industrial activity. Rather, the main take-away is to give businesses and regions a better view of the industrial system around them, so that opportunities that make sense collectively do not remain invisible when everyone is looking only at their own part of the picture.
Ashley Olsson
Ashley Olsson is Director of Industrial Circularity at Circular Ecosystems. Ashley argues that most industrial value is lost before a project is built: in land allocation, sequencing and governance decisions made without sight of the whole system. He is a Chartered Environmental Engineer with more than 20 years in heavy industry. Ashley contributed as an International Expert to the ISO 59000 circular economy standards and has advised governments and companies on industrial transformation.
David Hicks
David Hicks is Director of Operations at Circular Ecosystems. David's work starts from a simple observation: sound projects fail when the system around them isn't ready to receive them. He has taken industrial technology ventures from concept to commercial operation, coordinating emitters, investors and government along the way. He now works with governments to put precinct decisions in the right order before committing capital.
Emanuele Di Francesco
Senior Manager Communications and Partnerships, World Resources Forum