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Circularity assessment in companies: conceptual elements for developing


assessment tools

Conference Paper · June 2017

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Circularity assessment in companies: conceptual elements for
developing assessment tools

Juana Camacho-Otero1, Isabel Ordoñez2

1
Juana Camacho-Otero, Department of Design, NTNU, Kolbjørn Hejes Vei 2b, 7491 Trondheim, Norway, [email protected]

2
Isabel Ordoñez, div. Design & Human Factors, Product and Production Development, Chalmers University of Technology, Hörsalsvägen
5, SE-412 96 Gothenburg, Sweden, [email protected]

Abstract

Circularity assessment is a relatively new term that started to be used by organisations promoting the circular economy, but
that has not been adequately defined in the scientific literature yet. Different actors have recently developed proposals for
circularity assessment at the company level. Having an assessment tool that could be used as a measuring stick against which
companies can compared themselves has been suggested as the first step in the transition towards a circular economy. Existing
proposals for circularity assessment tools have different approaches to what should be evaluated, risking their potential for
meaningful comparisons. To contribute to minimize the gap between tools, this paper provides a general framework of what
a circularity assessment at the company level should include, based on input from expert sources. The framework was used to
evaluate four existing circularity assessment proposals at the company level (Circle Economy and PGGM, Ellen Macarthur
Foundation, Viktoria Swedish ICT and VBDO) resulting in the identification of alignments and misalignments. From this
examination, it is possible to conclude that the main disagreements relate to what principles and criteria of circularity are used
in the proposals, while scale and purpose of the assessment are the most agreed upon elements. Our results suggest that there
is still room for improvement of existing circularity assessment tools for companies if they aim at supporting the
implementation of a comprehensive circular economy strategy.

Keywords: Circular economy, companies, circularity assessment

1. Introduction
Circularity assessment is a relatively new term that started to be used by different entities promoting the circular economy the
past four years. As of 2015, Circle Economy (Circle Economy & PGGM, 2014), VBDO (VBDO, 2015), the Ellen MacArthur
Foundation (Ellen MacArthur Foundation & GRANTA, 2015) and, Viktoria Swedish ICT (Viktoria Swedish ICT, 2015) had
launched initiatives to measure or assess circularity in a company context. Other initiatives include Geng et al. (2012) who
provide indicators for evaluating the circular economy program in China at the country level and Haas et al. (2015) who offered
a way to measure how circular the global economy is by using material flow analysis. More recently, the British Standard
Institution released the BSI 8001 standard for implementing the circular economy at organisations in May 2017 1.

IMSA & Circle Economy (2013) suggest a circularity assessment tool as the first step in the transition towards a circular
economy. In their report, they lay down a set of milestones that need to happen to move into a circular future, from bottom-up
and top-down perspectives. The report calls for an "index of circular performance [that] the maximum of companies can join"
(p. 20), i.e. a general metric that can be used by different organisations to assess their performance and that of their partners.
Such measurement would allow them to make informed decisions about procurement and incentives. From a government


1
https://www.bsigroup.com/Sustainability/BS8001_Executive_Brief.pdf
perspective, it could assist them in deciding what front-running companies to support. The report also encourages companies
to develop their metrics to evaluate their achievements while the index is developed.

After a rapid review of the proposals developed as of 2015, a lack of agreement was evident about the scope, relevant scale
and criteria used to assess circularity in companies. It is suggested that such discrepancies exist because of an incomplete
understanding of what the circular economy means at the company level. If such tools are going to be used for comparisons
between companies, it is important to minimise such disagreement. This paper aims at contributing to such task by answering
the following questions regarding the existing proposals:

• What critical elements are required to assess the circularity of companies?


• What factors have been considered by existing circularity assessment tools?
• What gaps exist between what experts suggest and what current proposals include?

By answering these questions, this article wishes to provide a common basis for understanding circularity at the company level
that would allow for more coordinated evaluation of performance. The rest of the paper is divided into four sections, methods,
results, discussion and conclusions and areas for future research.

2. Methods
Several steps were taken to answer the research questions. First, a framework or scorecard was developed, based on expert
input, consisting of the following building blocks:

• Purpose: the aim that a circularity assessment has, what is the objective of implementing it.
• Principles: guiding values or ideas that support the evaluation proposal and help identify what criteria are need to be
included or not.
• Scale: the system level at which the tool should be applied;
• Criteria: refer to the different features that are evaluated by the assessment;

Second, four different circularity assessment proposals were reviewed and organised following the categories mentioned
above. Third, the proposals were compared against the reference framework developed in the first step, to find alignments and
misalignments.

Information was collected through literature review and semi-structured interviews with both experts2 and stakeholders3.
Experts refer to people from academia and private sector, working on issues related to the circular economy. Stakeholders
refer to the organisations developing circularity assessment proposals. To develop the scorecard, fifteen (15) expert sources
were reviewed, including eight (8) peer-reviewed articles and seven (7) business documents and reports. Four (4) proposals
from stakeholders were considered. Documents included internal working papers and presentations facilitated by the contact
individual in each organisation. These reports are not peer-reviewed and were being developed at the time of the study.

In addition to the literature review, ten (10) interviews were conducted with experts and four (4) with stakeholders between
March and May 2015. A brief description of the research project and questions to be asked was sent via email to the potential
interviewees. Interviews were conducted via Skype, phone and personally. Each interview lasted between 45 and 60 minutes.
Interviews were recorded, or the researcher took notes that were later included in the systematisation matrix alongside the
notes from the recordings.

The definition of the topics to be addressed and the questions to be asked through interviews was done based on the following
elements:


2
Seminal papers from the founding disciplines of the Circular Economy, Industrial Ecology, Cradle to Cradle and the
Sustainability principles and business reports providing input on what the circular economy is.
3
Organizations that have developed circularity assessment proposals at the time of this study (May 2015).
• The type of actor to be interviewed (Expert or Stakeholder)
• Their area of work
• The sector they belong to
• Their previous work on the topic

Table 1. Expert interviews by sector.

Sector Interviewed Recorded

Government 1 0

Academia 8 6

Private 5 5

Total 14 11

3. Results

Based on the data collected and analysed, this section presents the proposed general framework for evaluating circularity at
the company level; it also includes an evaluation of existing proposals against such framework, and the analysis of alignments
and misalignments between the existing proposals and the suggested framework.

3.1 Critical elements for a circularity assessment tool: a general framework

The resulting framework has four (4) blocks, purpose, principles, scale and criteria. For each block, a group of elements is
derived from the expert sources and are summarised in the following paragraphs.

Purpose

From an academic perspective, two aspects are relevant when discussing the purpose of a circularity assessment, according to
experts interviewed: it should contribute to closing the material loops and keep resources for future generations. Sources from
the private sector indicated that a circularity assessment should allow companies to understand what natural resources they
depend on and what internal opportunities they have from waste streams. Other actors from the same sector mentioned that
this kind of assessment could be essential to encourage strategies towards circularity and to communicate the importance of
the transition. In sum, the purpose of a circularity assessment tool at the company level is three-folded: resource stewardship,
a management tool for decision-making and engagement tool.

Principles

Principles are derived from the fields of industrial ecology and cradle to cradle is provided. A first issue highlighted by the
Industrial Ecology authors (Gallopoulos, 2006; Garner & Keoleian, 1995; Lifset & Graedel, 1997), is the need for a system
approach to understanding problems. A second issue raised in the literature refers to the need to recognised that human systems
are dependent on the ecological environment, also known as strong sustainability (Frosch, 1992; Gallopoulos, 2006). They
emphasised that since ecosystems should be models regarding cycling, community and diversity, environmental concerns
should be considered before; making a business decision (Lifset & Graedel, 1997). Another important element suggested by
all of the authors reviewed is the need for closing the loops by moving from a linear approach to a cyclical one to reduce waste,
achieve dematerialization and environmental impact reductions (Frosch, 1992; Gallopoulos, 2006; Garner & Keoleian, 1995;
Lifset & Graedel, 1997). In addition to this, they also stressed the need for a future-oriented perspective or forward-looking
type of analysis (Garner & Keoleian, 1995; Lifset & Graedel, 1997). In summary, common principles from the literature in
Industrial Ecology can be recapped as systems thinking, strong sustainability, closing the loop, resilient systems and future
orientation.
The Cradle to Cradle literature also provides guidance on what elements should orient the development of business and
solutions that can be used in the circular economy. In their pivotal book McDonough & Braungart (2002) add four principles,
first the idea of creating safe objects with a long-term value; second, the need to rely on natural energy flows (e.g. renewable);
third, they promote the idea of positive footprint. And finally, the importance of sharing knowledge and understanding the
limitation of single fields. These principles were coded as maximise value, use renewable energy sources, positive footprint
and collaboration.

Resulting from this analysis, the categories of principles presented in Table 2 are thus proposed.

Table 2. Principles suggested by the expert sources


Principle Explanation

Closing the material loops refers to the need to close the material loops by decoupling growth from materials,
transforming waste into valuable streams and managing non-renewable material flows in
such a way that do not leak.

Systems thinking Refers to the need of understanding the economy as a system within other systems and
consequently of acknowledging the complexity that entails. This principle requires that any
circularity effort incorporates a systems approach.

Resilient system establishes the need to consider both efficiency and resilience as goals of the economic
system, to achieve its ultimate aim of satisfying human needs sustainably.

Maximize value deals with the need of the economic system to maximise returns from all types of capitals
(natural, financial, human, social, etc.)

Collaboration Refers to the need for a new approach to interaction between economic agents based on
cooperation rather than competition to maximise all types of values.

Renewable energy sources Addresses the need to rely on renewable energies including labour for all economic
processes.

Positive Footprint Calls for the aspirational aspect of the economic system regarding being capable of restore
and regenerate what is depleted by the system instead of only mitigating.

Strong sustainability Requires economic agents to acknowledge sustainability from a top-down perspective
where the economy depends on society, which in turns depends on the environment,
instead of a bottom-up perspective where all dimensions are equally relevant.

Future based orientation which refers to the need of conducting analysis that looks into the future and provides
solutions that are free from lock-in and path dependence effects.

Scale

The suggestions here were quite varied, depending on the type of organisation of the interviewee. Academic experts suggested
that the value chain was an adequate level, taking into account the need for a life cycle perspective. However, product offerings
and components were also mentioned as important; nonetheless, another source from academia contradicted this last argument
by stating that the smaller relevant scale for assessing circularity was the company and not the product if a systems perspective
was to be considered. In the case of the private sector, different scales and approaches were proposed: life cycle, value chain,
the business model and the product. Thus, circularity assessment is considered as a multi-scale tool that needs to address the
component level, the product level, the value chain, the business model and the company as a whole and should have a life-
cycle perspective.

Criteria

The experts consulted also provided input about what the relevant aspects to assess are when evaluating the circularity of a
company. Representatives of academia mentioned recycling, refurbishment, closing loops in a strict sense, reuse, smartness,
energy use, costs, dependency on future materials, ability to retain value and waste reduction. Another expert from the same
sector mentioned that these aspects are not general but depend on the product offerings. From the perspective of the industry,
the relevant criteria include the number of times the product is used, the level of renewability, the origin of inputs, the type of
business model, material intensity and waste generation.

In Table 3 the different criteria are presented with an explanatory question companies should ask to assess their level of
circularity, according to the sources consulted. An additional step was conducted to group the different criteria under wider
categories regarding scale. The criteria were clustered under product if they were referring to the components, material aspects;
processes when they referred to how the company creates the product or delivers it; business model when discussing how the
value was created and, a more general group dealing with the role of the company at the system's level. This classification is
arbitrary and is only suggested for the purpose of clarity.

Table 3. Criteria for circularity, suggested by expert sources.


Criteria Explanation Scale
Use intensity How many times is the product used per unit of Product
time?
Recycling How much of the value proposition is derived Product
from recycled inputs?
Refurbishment How much of the value proposition is derived Product
from refurbished products?
Remanufacturing How much of the value proposition is derived Product
from remanufacturing processes?
Renewability How much of the energy/material inputs is derived Process
from renewable sources?
Repairing How much of the value proposition is derived Process
from repairing processes?
Reusability How much of the value proposition is derived Business model/Product
from reused materials, components or products?
Waste generation How much waste is generated to deliver a unit of Process
value?
Waste reduction How much waste is reduced as a result of the Process
value proposition?
Raw materials How much of the value proposition comes from Product
raw materials?
Dependency of future materials How much of the value proposition depends on Product
materials that are going to be needed in the future?
Costs How much do costs increase by implementing Business model
circularity?
Retained value How much of the value proposition returns to the Business model
company in a specific period of time?
Smartness How tight do materials, components or products Process
of a company circulate?
Hazardousness How much of the materials used to deliver the Product
value proposition are toxic?
Energy use How much energy is used to deliver the value Process
proposition?
Material intensity How much material inputs are needed to deliver a Process
unit of value?
Efficient use How efficient is the use of materials and energy to Process
deliver the value proposition?
Circulating of materials How much does the company contribute to the System
closed circulation of materials at a society level?
Type of business model How much of the value proposition comes from Business model
circular business models?

Circularity assessment scorecard

Table 4 summarises the findings from the expert interviews and literature review in the form of a general framework to assess
circularity for companies or “scorecard”. It consists of the four building blocks evaluated, each of them with a set of
components that help understand how circularity is embedded at the company level.

Table 4. Circularity assessment framework


3.2 Existing circularity assessment proposals

Given the attractiveness of the circular economy, different stakeholders have developed initiatives to assess circularity in
recent years:

• Circle Economy (Circle Economy & PGGM, 2015)

• VBDO (VBDO, 2015)

• The Ellen MacArthur Foundation (Ellen MacArthur Foundation; Granta Design; 2015)

• Viktoria Swedish ICT (Viktoria Swedish ICT, 2015)

These proposals have different approaches, levels of development, targets and goals, but all have the aim of assessing
circularity at the company level. The summary of the proposals is presented in Table 5.

Table 5. Summary of circularity assessment proposals


Dimension Circle Economy VBDO EMF Viktoria ICT

Purpose To evaluate To measure to what To develop a methodology that To help companies


organisations based on extent a company is measures how well a product or progress along a path
how well they are taking concrete steps company performs in the towards CE. It could be
upholding circular towards a circular context of a circular economy used mainly internally to
economy principles and business. in order to help companies focus business strategies,
implementing their design more circular products, calculating potential cost
policies and intentions to compare different products for savings. It can be used to
move towards a circular internal reporting or benchmark and compare
economy. procurement purposes, or to companies and products
compare to encourage a race to
departments/companies. the top. It will also
quantify costs of
different degrees of
circularity.

Scale Organisation/system Organisation/system Product/Organisation Business Model/ Product


offerings

Aspects Materials, energy and Strategy and Inputs: virgin, re-used or Materials: LCA or MFA
labour: Renewability, governance: which recycled are tools relevant to
recyclability, criticality, includes how circular assess the material use
geopolitical risk, thinking is embedded in and environmental
locality, competition. the strategy, the long- impacts.
term strategy, targets
and accountability.

Activities: smart, Implementation: Use: length and intensity Costs: cost savings due
efficiency, modular, revenues from circular to reduction of material
extended lifetime, products and services, costs
degradability, product design and
procurement.
hazardousness,
precaution.

Practices: transparency, Innovation: circular End-of-life: landfill, reuse, Value retained: portion
collaboration, integrity business models, recycle of added value that
innovation budget and comes back to the
strategic partnerships. company

Impact: global impact on Communication and Complementary indicators for Recirculation: costs of
land, water, atmosphere engagement regarding assessment: Energy use, CO2, input coming from reuse,
and society circular economy water use, cost, price variation, recycle, remanufacturing
customer, stakeholders, toxicity,
raising awareness

3.3 Gap analysis

Each of these proposals was analysed regarding the elements proposed in the circularity assessment framework or scorecard
presented in the previous section. The question asked here was whether an item of the scorecard was present in the proposal
or not. Three answers were allowed, included explicitly, included implicitly or not included. Then this information was
translated into arbitrary scores: "included explicitly" being 1 (green), "Not included" a 0 (grey) and "included implicitly" 0,5
(light green). Normalised scores were used to find levels of alignment. As illustrate in Table 6.
Table 6. Example of a comparative analysis for Circle Economy

From an overall perspective, none of the proposals is entirely aligned with the framework suggested as it can be concluded
from Figure 1. Circle Economy’s assessment tool integrates most of the elements followed by VBDO and Viktoria ICT, while
the Ellen MacArthur Foundation seems to be the least aligned initiative. Regarding the particular building blocks, perspectives
regarding 'purpose' are relatively aligned with what the framework. In contrast, ‘principles' is the category which exhibits less
agreement among stakeholders. 'Scale' is the aspect over which stakeholders most agree upon, considering at least 50% of the
elements suggested by experts. Criteria to evaluate circularity does not strictly follow experts' suggestions.
Alignment
100%
100%
100% 90%
90% 80%
78%
80% 75%

70% 65% 63%


58%
56% 56%
60% 50% 50% 50%
50% 45%

40%
30%
20% 11%
10%
0%
Circle Economy VBDO Viktoria ICT EMF

Purpose Scale Criteria Principles

Figure 1. Level of alignment between the stakeholder´s proposal and the framework by building block.

Looking into more detail, regarding purpose ‘Keep resources for future generations' is the least included item, while the most
prevalent one is ‘To encourage decisions towards circularity'. As it is evident, most of the purposes offered by the expert
sources are integrated into the different proposals as presented in Figure 2.

Figure 2. Level of alignment for different purposes of a circularity assessment tool


Regarding the principles, none of the proposals considered all the principles identified. Moreover, the principle named as
‘Future-based orientation' was not added in any of the proposals. All other principles were included in one or more proposals.
After this principle, the two less considered were ‘Strong sustainability' and ‘Collaboration'. Most of the proposals agreed that
‘Closing the material loops’ was a principle to be considered, while the least agreement is connected to the principles ‘Systems
thinking', ‘Resilient System' and ‘Positive Footprint.'

Principles
120%
100%
100%

80%

60%
43% 40%
40% 33% 33%

18%
20% 13% 10%
0%
0%


Figure 3 Level of agreement regarding principles.

Regarding the scale at which the assessment should be implemented, only the Ellen MacArthur Foundation does not include
the business model and lifecycle perspectives while all other proposals have a multi-level approach, which was strongly
suggested by the expert sources. It is important to highlight that the value chain and product/offerings perspectives are
predominant, with all stakeholders agreeing that these levels have to be included in the assessment, while the lifecycle
perspective was not so strongly advocated for.
Figure 4. Level of alignment for different scales relevant for a circularity assessment tool

Finally, Figure 5 illustrates different criteria considered by the stakeholders' proposals. Retained value and recycling were
included in all the proposals. Less mentioned aspects are the value proposition, smartness, refurbishment, dependency on
future materials and remanufacturing.

Criteria
remanufacturing 25%
dependency on future materials 25%
refurbishment 25%
smartness 25%
value proposition 38%
number of times the product is used 38%
hazardousness 50%
origin of inputs 50%
repairing 50%
renewability 50%
costs 50%
energy use 50%
type of busines models 50%
waste generation 63%
reuse 75%
material intensity 75%
closing the material loops 88%
waste reduction 88%
retain value 100%
recycling 100%

0% 20% 40% 60% 80% 100% 120%

Figure 5. Level of alignment for each criterion of circularity


To conclude, regarding purpose, proposals acknowledge that it is important that assessment tools help companies plan for the
future by identifying dependencies and sustainability issues. However, current proposals focus more on current challenges
than future ones reflecting the second main finding of this evaluation, that none of the proposals uses 'Future-based orientation'
as a principle. In addition to this, the principles 'Strong Sustainability, 'Collaboration' and 'Positive Footprint' are only partially
integrated. Concerning scale, the business model and company level are less considered, and the life-cycle perspective is still
missing from the proposals. Finally, concerning criteria refurbishing, remanufacturing, smartness and dependency on future
materials are less recognised by existing tools while closing the loops is the most relevant aspect to be assessed.

4. Discussion
In this section, significant findings that were not explored in detail and would offer opportunities for further inquiry are
presented. A first element that affects the evaluation conducted here is the understanding of assessment in itself. Although
throughout the text the concepts of assessment, measurement and appraisal were used as equivalents, they are different, and
this may affect comparisons between the various proposals. Moreover, the lack of agreement between sources about the
relevant scale for a circularity assessment might come from the diversity of backgrounds and the novelty of the circularity
assessment concept. Additionally, different experts raised the question about the relationship between circularity assessment
and tools such as Life Cycle Assessment or Material Flows Analysis. This issue was slightly mentioned by the stakeholders
in two opposite senses: on the one hand, the Ellen MacArthur Foundation and Viktoria Swedish ICT proposed that their
circularity measurement can be part of Life Cycle Assessment. On the other, Circle Economy and VBDO expressed that these
tools can, in turn, be part of the circularity assessment. In sum, if circularity assessment is understood as only concerning
circulation of materials, it will be part of broader tools, and if it is defined as more than just materials, for example,
organisational aspects, it will use these tools for its evaluating process.

Finally, a key aspect brought up by academics is the role of context in the assessment process. This aspect was not introduced
in the framework as it was only mentioned once, but it would be important to address it. This issue, the role of site-specific
conditions, is also cited as a key point to take into account for sustainability assessments. In sum, the framework suggested
here is specific to the type of expert sources consulted. Moreover, both the interviewees' context and the interviewer
background shaped the information and resulted in this report, making it necessary to recognise this influence and to read the
results and conclusions under this light.

Also, the definition of the questions to be asked also affected the contribution received and therefore, the results obtained. In
this sense, this research has been more a process of interpreting what the sources of information provided rather than just
registering them so they could be understandable and useful for answering the research questions. Another key element was
the questions that guided the analysis process in itself yielding the categories and basic elements of the suggested framework.
Taking into account the above-mentioned factors, several particularly interesting findings were identified: first, circularity
cannot happen just at one scale, mirroring the complexity of this phenomenon; second, stakeholder proposals are different and
rather complementary, which could be explained by their different aims at measuring and assessing circularity. Third, a gap
was identified between what the expert literature suggests as principles and what the experts consulted consider as relevant
aspects, but this was not further explored. Finally, a significant challenge lies on how to incorporate context specificities into
an assessment tool. These findings offer opportunities for further research if the issue of circularity assessment is to be explored
and strengthened.

5. Conclusions
The aim of this inquiry was to establish the fundamental elements of a circularity assessment framework that effectively
contributes to improving resource efficiency. Such a framework was structured based on experts input from literature sources
and interviews. Perspectives from academia, the private sector and civil society were combined to identify the purpose,
principles, scale, and criteria that should guide a circularity assessment. This framework was used to evaluate existing efforts
for developing tools to assess circularity at the company level and identify alignments and misalignments. The proposed
framework has four building blocks: a purpose for circularity assessment; what principles need to support the assessment; the
relevant scales at which it should be implemented; and, the criteria that allow defining if a company is circular or not.

Regarding the purpose, a circularity assessment assists companies in addressing their role in society as resource stewards, in
making management decisions and in engaging with a wider audience. Circularity is about reducing resource use and negative
environmental impacts and creating value as much as making our economic system resilient, and future proved while
delivering wellbeing. Regarding scale, circularity does not happen only within the boundaries of the company; it is a property
of the broader system in which the company is embedded. In this sense, circularity assessment has to be multi-scale and have
a life cycle approach.

Existing efforts to assess circularity consider these aspects partially; in some cases, like in the case of the Circle Economy and
VBDO proposals, they are closer to the framework proposed here than the proposals suggested by the Ellen MacArthur
Foundation and Viktoria Swedish ICT. The first group has a more comprehensive approach to the assessment, while the other
two are more focused on measuring circularity. Thus, it is concluded that the different proposals are complementary and
elements of all could be combined to have a basic proposition that follows more closely the suggestions made by the experts.

In sum, the main contribution of the circular economy is the systems' approach to understanding the economy, which in turn
requires a change in mindset by key actors in society. This is only achieved if the operationalization of the idea follows the
principles proposed by its foundational disciplines. It is not enough to just mention the principles and acknowledge them, but
it is mandatory to translate them into measurable practices.

Circularity, like any social phenomenon, is not a technical fix or a management solution; it is a multifaceted approach that
requires a sophisticated understanding and complex solutions. In this sense, a circularity assessment requires collaboration
between experts from academia, private and government areas. Additionally, it demands integrating approaches from other
sectors of society, like consumers, civil society and unions. Current proposals come from either technical or management
experts; some organisations have incorporated input from civil society (companies and business associations), but this needs
to be taken further if complexity is to be addressed.

Acknowledgements

The authors would like to thank to Associate Professor Ida Nilstad Pettersen at the Design Department at NTNU for her useful
comments on the last version of this draft.

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