DELIVERING THE CIRCULAR ECONOMY A TOOLKIT FOR POLICYMAKERS

124 • DELIVERING THE CIRCULAR ECONOMY – A TOOLKIT FOR POLICYMAKERS
Box 6: Remanufacturing and refurbishment 220
Component remanufacturing is defined as a process of disassembly and recovery
at the subassembly or component level. Functioning, reusable parts are taken
out of a used product and rebuilt into another. This process includes quality
assurance and potential enhancements or changes to the components. By
definition, the performance of the remanufactured component is equal to or
better than ‘as new’. 221
Product refurbishment involves returning a product to good working condition
by replacing or repairing major components that are faulty or close to failure
– and making ‘cosmetic changes’ to update the appearance of a product. The
replacement components could themselves be remanufactured. Any subsequent
warranty is generally less than issued for a new or remanufactured product, but
the warranty is likely to cover the whole product. Accordingly, the performance
may be less than ‘as new’.
REMANUFACTURING IS ALREADY A VIABLE BUSINESS CASE
There are numerous examples to show that there is a strong business case for
remanufacturing. The consultancy Levery-Pennell has calculated that for a case with
remanufactured items selling for 20% less than new items, and increased labour costs
for the remanufacturing process, the gross profit could still be up to 50% higher due
to the large reduction in input costs, and that the earnings could be even higher with a
performance-based business model. 222 Indeed, several large companies have already run
successful remanufacturing operations for quite some time:
• Renault’s remanufacturing plant in Choisy-le-Roi, France, re-engineers different
mechanical sub-assemblies, from water pumps to engines, to be sold at 50% to
70% of their original price with a one-year warranty. The remanufacturing operation
generates revenues of USD 270 million annually. Renault also redesigns components
(such as gearboxes) to increase the reuse ratio and make sorting easier
by standardising components. While more labour is required for remanufacturing
than making new parts, there is still a net profit because no capital expenses are
required for machinery, and much less cutting and machining to remanufacture
the components, resulting in waste minimisation and a better materials yield.
Renault has achieved reductions of 80% for energy, 88% for water and 77% for
waste from remanufacturing rather than making new components. 223
• Caterpillar founded its CatReman business line in 1973. It now has global operations
with over 4,200 employees, and fully remanufactures a large range of
heavy-duty equipment to as-new state, including long-term warranties. Caterpillar
has reported that remanufactured components reduce resource consumption
by 60–85%. 224
• Ricoh’s ‘comet circle’ is a well-known and established business model, including
remanufacturing and refurbishment of components, and recycling of materials. 225
220 For more details, see for example Ellen MacArthur Foundation, Towards the circular economy I (2012).
221 Nasr, N., Rochester Institute of Technology, presentation at Re:Thinking progress conference, Circular Economy
and Remanufacturing (14 April 2015).
222 Lavery, G., Pennell, N., Brown, S., Evans, S., The Next Manufacturing Revolution: Non-Labour Resource Productivity
and its Potential for UK Manufacturing (2013).
223 Ellen MacArthur Foundation, The Circular Economy Applied to the Automotive Industry (2013); group.renault.
com/en/commitments/environment/competitive-circular-economy/
224 Caterpillar Sustainability Report (2006).
225 https://www.ricoh.com/environment/management/concept.html