On Earth Day: 3 Ways You Can Use the Circular Economy to 'Do More Good' for Our Living Planet (and Strengthen Your Business)
What is the circular economy?
In a nutshell, it's a newish term for a better way of doing things. By combining eco-design, biomimicry and resource efficiency with systems thinking, it gives us more effective, sustainable ways to rethink how we make and use everything. It means we can have enough, for all of us, forever, without destroying the planet we depend on.
Circular approaches keep products, components and materials in use for longer, and reuse them, so we get more value out of them. In a circular economy, all ‘waste’ becomes ‘food’: either for another industrial process, or for nature.
New materials, scientific advances and recent technology developments mean circular business can be more resilient, competitive, prosperous and sustainable.
Businesses that work on the basis of circular principles are amongst the fatest growing in the economy
- Dr Martin R Stuchtey, McKinsey Centre for Business and Environment, from Growth Within: A Circular Economy Vision for a Competitive Europe
Circular economy principles
There isn’t a universal definition of a circular economy – in fact, a recent study by Kircherr, Reike and Hekkert found 114 different definitions!
However, most schools of thought share these core circular principles:
- To design products and equipment to be durable and robust, so they stay in use for longer. For the user, this means a better lifetime cost.
- Business models encourage the use of products and equipment, instead of ownership. Circular approaches also create markets for new services: for reuse, repair, remanufacturing and recovery of resources.
- After we’ve used them, we recover the products, components and materials. This means they have value as a resource for another industrial process, or can be food for nature – compost! In other words, all waste = food.
Circular economy supply chain
Benefits for businesses - and our living planet
Circular economy strategies generate substantial savings from lowering material use, together with efficiency improvements in production and supply chain. These lead to lower levels of waste, pollution and GHG emissions... all better for sustainability too. Let’s look at the benefits in more detail, with some examples.
As a strategy for success, circular beats linear
Durable, repairable products
Many people consider reparability as important in deciding what to buy, according to a survey by global repair community Ifixit, and 95% of people say that a successful repair makes them more likely to buy more products from that company.
Does your product live up to customer expectations? In Europe, the average lifetime of a washing machine has fallen by a third between 2000 and 2010, with a machine now lasting only seven years, according to a report by Green Alliance. Consumers expect them to last 12 years – how many will choose a different brand next time? Research tells us that acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one.
Companies can generate new profit streams from sales of spares and provision of repair services, to replace marketing and customer services costs. Loyal customers are likely to buy upgrades and other products from you. Further savings come from spending less on both new product development and disposal of obsolete products and parts.
Business models for access instead of ownership
Commercial models that support those more durable, shareable products keep the products and materials ‘in the loop’ when the customer has finished using them.
Circular economy business models
Robust, repairable products are suitable for contracts, renting or sharing, so more people use fewer products. This, in turn, reduces the resources, energy and emissions. A rented city bike might be in use for 12 hours a day; compared to your personal bike that you use perhaps once a week.
Performance (pay by results) models offer ways to develop a win-win relationship with your customers and suppliers. Well-known examples are Rolls Royce aero-engines, and Philips now selling ‘pay per lux’ lighting services.
In textiles, Dutch aWEARness operates a closed-loop manufacturing process for its workwear production by using recyclable polyester fabric. A leasing model retains ownership of the materials and customers pay for the performance of the clothes over an agreed number of years. This system uses 95 per cent less water and 64 per cent less energy, producing 73 per cent fewer carbon emissions per garment during production than standard cotton. At the end of each ‘life’, the products are recycled back into new clothing, with no loss of quality.
Waste = food
In production, we can save money by recovering offcuts and substandard parts for reuse, and by recycling water, energy and other inputs for reuse. We can also create valuable new by-products from ‘waste’.
At the end of use, we need to recover our products, components and materials, so we can recirculate them. Keeping them as intact as possible minimises the cost of making them fit for reuse. Those durable, repairable products may also be suitable for re-selling by the user, or by specialist retailers. Watchfinder, a specialist marketplace for luxury watches, was acquired in 2018 by Richemont, a Swiss luxury goods brand owner.
If the product needs more work to make it ready for another cycle of use, then refurbishing and even remanufacturing might be required. Designing the product with this in mind can vastly improve the profitability of remaking and resale.
In the US, remanufactured products have the same warranty as a new one, giving the buyer confidence. More companies are developing highly profitable remanufacturing solutions, with Dell, Caterpillar and Cummins as big-brand examples.
Remanufacturing can open up new markets, especially where your brand has a great reputation for quality, but is expensive, compared to the lower-quality competition. Rype Office makes beautiful, high quality remanufactured furniture for typically less than half the cost of new.
Our last recovery strategy is recycling, as this uses most energy and resources. A report by Green Alliance, found that for mobile phones, the value of the recyclate is only 0.24 per cent of the original product value, whereas a reused iPhone retains almost half its original value.
How can we redesign our wasteful, polluting, linear economy? What could you do to rethink waste and create value?
Are you losing customers because you’re not meeting their expectations for durability or performance? Are they frustrated by the waste when they’ve finished using it? Perhaps they’re choosing a cheaper competitor brand.
Getting started with circular approaches helps to create high-quality products that your customers will love – and loyal customers make a healthy business ecosystem (and a healthy planet)!
There is no business to be done on a dead planet