Circularity in Denmark

In January 2023, Professors Willy Shih and Mike Toffel led more than 40 HBS MBA students on site visits to witness the energy transition and innovative sustainable production activities throughout Denmark and the Netherlands, in their new Immersive Field Course (IFC). This is one of 13 student essays posted on the HBS Business and Environment Initiative’s Blog that highlights their reflections. Learn more about this IFC course on Decarbonization and Sustainable Production by watching this five minute video summary.

Waste as Input

We live in a world of finite resources, both in terms of raw materials and physical space. As we traversed Denmark in the first of our two-week immersive field course (which would later take us to the Netherlands), we were lucky to meet several organizations that are turning to circular economy strategies to address the growing pressure of finite resources.

At our first visit, Sr. Director of Technology Soren Kristiansen walked us through the LEGO Group’s efforts to develop the next generation of blocks. Their team is working in parallel on bio-based and recycled plastics, iterating on formulation and manufacturing processes to achieve more sustainable products that precisely match the toys we all grew up with.

Just an hour south in Bjerringbro, world-leading pump manufacturer Grundfos is preparing to start closing the loop on physical waste with their Take Back Program. This program yields a dual benefit by reusing robust components and properly recycling waste materials from retired products. Grundfos encourages its customers (both consumer and industrial) to return old pumps; they then fully deconstruct and repurpose or recycle the pump’s constituents. Today this program is small, accounting for only about 40,000 of the roughly 16,000,000 pumps they sell annually, but Grundfos is building the knowledge and infrastructure that will be necessary to scale.

In Kalundborg, we saw circularity applied to energy as NGO Kalundborg Symbiosis presented Kalundborg Bioenergy’s production of biogas from local industrial enzyme byproducts and Kalundborg Refinery’s second generation bioethanol production from wheat straw. We closed the day with an inspiring view of how this biotech hub will continue leading innovation in sustainable energy infrastructure as Kalundborg Utility (which already uses wastewater to generate district heating) prepares to break ground on a massive district cooling system that may pave the way for the complete replacement of natural gas usage with industrial waste heat for the city of Holbæk.

Making sustainability accessible and breaking the “chicken and egg” problem

Denmark and the Netherlands are leaders in climate action. They are working not just in international forums affecting policies and regulations, but are also trying to make their climate goals and impacts accessible to the public by highlighting their targeted UN sustainable development goals. Even in marketing at sporting events, Port Esberg’s advertisements include their UN sustainability goals. Lego prominently displays their UN goals on their easily accessible sustainability webpage.

Many of the companies we visited and spoke with, including Maersk and Arla Foods, have zero carbon goals for 2050. While there is a “chicken and egg” problem, these companies understand that they have to start now in order to make progress on their climate goals. They are not letting the perfect get in the way of progress, as many other companies are doing. We were impressed by the commitment and actions these companies are taking to be green leaders in their sectors.

The companies we visited have proven that we can make progress on climate goals without making financial sacrifices. Green investments can have short ROIs. However, in hard-to-abate sectors such as shipping, a carbon tax might be needed to incentivize decarbonization. Maersk is proposing this tax on their own sector of ~$150 USD per ton of carbon emitted to incentivize the shipping industry to move forward.

The role of culture

Our week in Denmark opened our eyes to how integrated sustainability is in both corporate decision-making and day-to-day life.

On the corporate front, there were two main takeaways: the use of a foundation and co-op corporate structures to better enable progress towards sustainability goals, and the distribution of sustainability roles across multiple departments within companies. Foundations control a quarter of Denmark’s 100 largest companies and about 60% of stock market capitalization. Several companies that we visited – including LEGO Group, Maersk, and Novo Nordisk – are foundation owned, which makes it easier to set ambitious sustainability targets without the pressure of returning profits to shareholders, as is generally expected of publicly-held companies. Novo Nordisk Foundation, owner of Novo Nordisk (the world’s leader in diabetes and obesity care), has a net worth of approximately 94 billion euros and awarded 1.2 billion euros in grants in 2021, putting it in the top three for philanthropic activities in the world (a related impressive statistic is that 13% of all public research and 23% of all private research in Denmark were funded by the foundation!).

Arla Foods is the world’s fourth largest dairy company and the largest organic dairy producer. The farmers who supply Arla are also the company’s owners, which allows for innovative incentives for meeting sustainability goals, such as a point-based Sustainability Incentive model in which low-performing suppliers (as measured by progress towards the model’s 19 different sustainability levers such as feed, manure delivery to biogas, biodiversity, and use of renewable electricity) have agreed to transfer a portion of their profits to high-performing co-owners. We learned that 95 percent of Arla’s farmers have already submitted their “Climate Check” data.

On a societal level, it was heartening to see how committed Danish citizens are to sustainability. We learned how Danes sort waste into 10 different streams at their homes, which enables more efficient recycling and waste-to-energy processes down the line.

In general, we were inspired by the high level of ambition regarding sustainability goals as well as a high level of optimism surrounding those goals.