A Week of Circularity: Circular Aviation
Alessia Falsarone
Senior Managing Director | Global Investments and Sustainable Finance Executive | Public Company Board Director
As the first circularity-focused project on the aviation and aerospace sectors comes to a close this month, we are one step closer to witnessing the first fully circular flight take off by 2050 if not sooner. Three and half years since its launch, the EU Horizon 2020 funded project SUSTAINair - coordinated by the AIT Austrian Institute of Technology - is set to bring evidence of the increased sustainability of the airframe value chain: from materials, to circular aircraft design, and end-of-life solutions.
With close to 90% of an aircraft's weight available in the aftermarket for used serviceable materials, leasing companies, owning over half the global commercial fleet, have an opportunity to influence and drive the economic case for aircraft circularity.
🔍 The Science of Impact
Circular aviation is responding to the societal demand for sustainable aviation. Green solutions connected to propulsion are the most talked about aspect of it. Another aspect encompasses circular economy approaches tackling resource consumption and emissions along the entire value chain, including aircraft manufacturing, predictive maintenance, and end-of-life solutions.
SUSTAINair is introducing the circular economy along the entire aircraft value chain.
This includes:
The expected impact of project SUSTAINair translates in cost savings across the airframe value chain: from lower fuel consumption to a marked decrease in take-off gross weight.
🎯 Circularity Roadmaps Explained
The aviation industry is increasingly focusing on circular economy principles to reduce environmental impact beyond waste. A significant portion of the industry already prioritizes recovering functional parts from retired planes and responsibly repurposing or recycling other components. As technology improves these processes, circular economy principles is becoming even more crucial throughout the value chain, from design to decommissioning.
In their recent 2030 Aviation Series, the team at KPMG explains how retired aircrafts, even after over 20 years of service, hold substantial value due to intensified regulations and innovations that unlock value during recycling and disposal. Such is the case for landing gears, auxiliary power units, electrical and flight controls, navigation systems, and cabin seating as nearly 80% of aircraft components and over 90% of an aircraft's weight join the aftermarket for used serviceable materials (USM).
The market for USM is experiencing strong growth, driven by competitive pricing, efficient servicing of aging fleets, sustainability and decarbonization focus, and the increased focus on supply chain resilience. Companies across the aviation spectrum, including airlines, maintenance organizations, and aircraft operators, often resort to USM to save money, as certified USM parts are typically 20-40% cheaper than new parts.
Technologies like augmented reality, virtual reality, and RFID tags are being deployed to simulate the disassembly process, and improve teardown efficiency. Data analytics helps then predict which components will yield the most value and capture key performance indicators. Robotic systems increase speed and accuracy while reducing labor costs.
OEMs like Boeing and Airbus are adopting circular design principles, working towards creating a closed materials loop where retired aircrafts contribute to new ones. On the other end, leasing companies, owning over half the global commercial fleet, have an opportunity to influence and drive the economic case for aircraft circularity.
💰 Investing in the Circular Economy
A year ago, the team at Ark Invest Limited , led by Wall Street pioneer Catherine Wood , launched the first circular economy ETF to score Article 9 status under the EU SFDR: the Rize Circular Economy Enablers UCITS ETF (CYCL).
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CYCL provides investors with exposure to companies that are driving the circular economy forward by developing new business models, technologies and systems that enable the transition to a more sustainable, resource-efficient and regenerative economy. Although CYCL has invested so far only across 30 stocks, 70%+ in US market based, its stock selection is quite unique as it follows a thematic classification to score companies on their contribution to advancing the circular economy while also maintaining financial strength.
Specifically, CYCL invests in companies that score high in the thematic classification built in partnership with the team at Sustainable Market Strategies , a Montreal, Canada-based ESG intelligence firm.
Th SMS classification is an enabling taxonomy designed for the investment and research communities with the aim of identifying companies that are making a substantial contribution to “The Transition to a Circular Economy” objective of the EU Taxonomy.
Each company is assessed for its relative contribution in supporting other companies to enhance circularity within their own business models. SMS Circular Economy Enablers are assigned a score which reflects both the contribution of revenues to circularity as well as their financial strength.
Note: Waste Management, Waste-to-Energy, and First Generation Biofuels are not considered activities that contribute directly as circularity enablers. They are therefore excluded from the circular economy revenue score.
Here's a simplified summary of the SMS and Ark teams' observations:
Building the categorization a product value chain perspective does also guarantee a greater degree of alignment with the EU Taxonomy. No wonder ARK’s thematic ETF has achieved Article 9 status under SFDR.
💡 You don't want to miss this month...
From Étoile-sur-Rhône (France) to Vienna (Austria), and Geneva (Switzerland) the month of June offers new opportunities to connect with fellow circularity practitioners, and stir our world towards a more sustainable economic transition.
Discover, grow and leave your mark!
June 5th: The Circular Economy Donut - Donut de l'Economie Circulaire (Étoile-sur-Rhône, France)*. This conference focuses on the circular economy in the French Drôme Ardèche region, with three site visits included in the program. Keynote speaker Fiona Ottaviani , an associate professor at Grenoble Ecole de Management , will discuss "The Donut and living well: a circular and cross-cutting approach for tomorrow's economy". The event will feature four workshops: identifying regional materials and energy flows for implementing a local circular economy policy, recycling plastic in Drôme, regional food projects from field to plate, and tools for public authorities to promote the circular economy in building renovation and construction.
Note (*): The event will be held in French.
June 11th – 12th: Circular Aviation in the EU (Vienna, Austria). The closing conference of the SUSTAINair project funded by the EU Horizon 2020 program will bring together researchers, industry leaders and stakeholders to discuss the future of aviation sustainability. The interconnected themes of smart materials, innovative composition, digital solutions, and circular economy principles will demonstrate how to create a greener and more resilient aviation future. Discussions will be moderated by Jean-Paul Judson , founder of NOWMORE with Georgios Bampanis from CINEA - European Climate, Infrastructure and Environment Executive Agency and Chimani Christian from the AIT Austrian Institute of Technology delivering the opening remarks.
June 26th: UNECE Regional Conference on the Circular Economy (Geneva, Switzerland). Held under the Circular STEP network at the Palais des Nations, the conference will focus on four aspects of the circular economy transition: leveraging innovations, attracting investments through public-private partnerships, advancing the circular economy in agri-food value chains, and improving product traceability along international value chains. The event is jointly organized by the Committee on Innovation, Competitiveness and Public-Private Partnerships and the Steering Committee on Trade Capacity and Standards as part of their annual sessions. Please use the registration link for attending either of the two Committees.
Off to another impactful week!