Circumnavigating the Circular Economy
The Circular Economy has never been more in the public domain. With the UK Government setting a national target for businesses to become carbon neutral by 2050, many firms are looking for ways they can close the loop on circularity both in the products they produce, and in the resources they consume. Indeed, the West Midlands region – famed for its manufacturing and industry – has gone one better with the West Midlands Combined Authority #WM2041 Pledge which calls for local businesses to reach Net Zero by the slightly earlier date of 2041.
But how do you reach Net Zero emissions and how can you embrace circular economy principles to help you on your way? At Wylde Connections, we regularly have this conversation with our customers and deliver several interactive learning courses on the topic of sustainability, which encompasses the circular economy theme. In this blog post, we explain the role the circular economy should play in your company’s environmental and sustainability policy.
What is the circular economy?
According to Wrap UK, a circular economy can be defined as a model in which we keep resources in use for as long as possible, extracting the maximum value from them whilst in use, then recovering and regenerating products and materials at the end of each service life. The concept of the circular economy goes far beyond the idea of recycling. Instead, the model utilises all available options across the supply chain in order to use as few resources as possible from the beginning. From design, production, and during use, resources are kept in circulation for as long as possible and once a product reaches the end of it service life, rather than being discarded, materials are recovered, re-used and regenerated.
Why is it important?
With current world population figures standing at more than seven billion, the impact upon both the environment and the Earth’s resources has long been a pressing agenda. With the United Nations predicting population growth to rise steadily over this century, to more than 11 billion, the question of how the world manages it consumption of finite resources is now a critical issue for world leaders and policy makers.
The current linear model of make, use and dispose is a model dependent on a ready supply of resources and energy; a model which was never going to be a sustainable option in the long term. The urgency of finding an alternative solution is now essential, as Jim Leape, director general of the World Wide Fund for Nature International (WWF), points out, “We are using 50% more resources than the Earth can sustainably produce, and unless we change course, that number will grow fast.”
Reducing our use of resources and fossil fuels will not prevent supplies running out, it will only delay the outcome. To prevent this from happening, a new way of thinking is needed. A circular economy model is the answer.
How does it work in practice?
According to Accenture, in its report Circular Advantage, there are currently five circular business models which are currently being utilised by industry, either in isolation or in combination:
1. Product as a service
Within the circular economy model, businesses can implement a product as a service concept, a model whereby customers no longer own products. Instead, manufacturers retain ownership and offer the use of their products on a lease or pay to use basis. This is also known as servitization.
One company already putting this model into good use is Philips, which now sells lighting as a service. What this means in practice, is that the company retains ownership of lights and equipment, meaning its customers are no longer required to pay upfront for installation costs, and through the use of software, Philips is alerted when a product needs to be replaced, allowing the company to recycle or upgrade equipment as appropriate. As a result, Philips is helping its customers to get the maximum use out of their lighting products, reducing the throwaway culture of lighting products, and re-engineering and re-using old lightbulbs in its production processes.
2. Resource recovery
The resource recovery model focuses on retrieving and reusing products at the end of their lives, taking them back into the manufacturing loop. Utilising the resource recovery model means business need to rethink their approach to product design in order to make the process of recovering and reusing resources easier. It is an approach which incorporates an economic, industrial and social framework, allowing businesses to create a system that is not only more efficient and cost effective but even more crucially, eliminates waste entirely. Starbucks recently implemented this model and as a result, its stores now turn food and coffee waste into succinic acid, which is then used in a range of products from detergents to bio-plastics and medicines.
3. Life extension
The product life model enables businesses to extend the lifecycle of products for as long as possible or as long as they remain economically useful. Under this model, products and material which would normally be wasted, are instead re-used, repaired or remanufactured, eliminating the amount of waste materials sent to landfill.
4. Sharing platforms
Thanks to the proliferation of social media channels, the prospect of shared ownership of products and services is now a real possibility. Examples of businesses already putting this into practice includes BlaBlaCars, which is a long distance ridesharing service, allowing drivers with empty seats to connect with people travelling to the same destination, and Airbnb, a service which enables people to find holiday rentals. This ensures that products are being used to full capacity, so there are fewer materials being used to create new products.
5. Circular supplies
This business model utilises renewable, recyclable, or biodegradable resource inputs that support circular production and consumption systems. Companies using this model remove inefficiencies by cutting out waste and replacing a linear resource approach.
What are the financial rewards that come from the circular economy?
Utilising lean production methods, reducing waste and keeping products in service longer provides clear social and environmental benefits, and of course, saves money in the process.
A major study by the Ellen MacArthur Foundation recently demonstrated that adopting a circular economy approach to production could boost Europe’s resource productivity three percent by 2030, generating cost savings of €600 billion a year and €1.8 trillion more in other economic benefits.
This is in addition to more obvious financial savings that can be made by reducing the amount manufacturers spend on raw materials as a consequence of lean manufacturing models. Furthermore, manufacturing businesses that implement product as a service, or servitization strategies, can boost revenues simply by offering a return and end of life service for products, collecting failed goods for reengineering or recycling into new products.
With a global focus on sustainability, embracing circular economy principles can go a long way to improving both your environmental impact and your bottom line.
At Wylde we work with businesses to support their sustainability plans and implementation, which includes looking at circular economy measures. To find out more about our sustainability planning consultancy and learning support, please click here.
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