CIRCULAR ECONOMY STRATEGY FOR A EUROPEAN RAILWAY OPERATOR

Case study

Context

One of Europe’s largest railway operators wanted to improve its EBITDA margin. Its activity consumes, stores and resells large volumes of materials (steel, copper, aluminium, aggregate, timber), and a high share of its spending depends on raw material prices, including those of metals made more volatile by the energy transition. Supply purchases also weigh heavily in its carbon footprint, so reducing purchased volumes is both an economic and an environmental lever.

Its subsidiaries were already running many circular economy initiatives, very uneven in scale and impact, but no shared circular economy strategy linked them. The Group could therefore not tell which ones actually contributed to EBITDA, nor choose which models to develop first.

Our approach

We mapped the initiatives run by every entity of the Group (infrastructure, passenger transport, stations, freight, urban mobility, logistics and central functions) and tied each one to its measured results: materials recovered, spending avoided, resale revenue. Classifying them by circular economy model showed that almost all fall under two models: closed-loop materials management, and extension of equipment life and value. These two models act on EBITDA through distinct mechanisms: fewer purchases of virgin materials and new equipment, lower depreciation, and new revenue from life-extension services offered to customers.

The analysis of the recycling chain brings out a less visible point. The end-of-life recycling rate is high, but the share of recycled material reintegrated into new rolling stock remains low, and part of the collected steel is recycled into lower-value uses. According to Material Economics, steel loses about one third of its value after one recycling cycle, and aluminium nearly half. Value is therefore lost at reintegration rather than at collection, which justifies closed loops within the sector, whose steel grades are specific.

Finally, we benchmarked the Group against ten European and international railway players, then against more advanced car manufacturers, to measure the maturity gap. Each obstacle identified (design that limits disassembly and sorting, the weight of purchasing, tracking of information on components and materials, access to railway-grade secondary material sources) was tied to a cross-functional action of the circular economy strategy.

Results

• A consolidated inventory of the Group’s initiatives, with their measured contribution, making comparable initiatives that were not comparable before.
• A reading in two models, each tied to its EBITDA levers: lower purchases of virgin materials and new equipment, reduced depreciation, and revenue from life-extension services.
• A diagnosis of material value loss across the recycling chain, which directs investment towards closed loops and access to railway-grade recycled materials.
• A sector benchmark positioning the Group against railway operators and car manufacturers, where dedicated units and industrial refurbishment sites already exist.
• Four cross-functional actions (design, circular procurement, digital tools, value chain coordination), each tied to the obstacle it removes.
• A reverse logistics workstream, to be handled on a separate timeline, since its cost and constraints often make it the weakest link in material loops.

Once this circular economy strategy was formulated, the Group decided to create an organisation dedicated to the circular economy, to steer the two models and the cross-functional actions where initiatives had until then been carried separately by each subsidiary.