Huge numbers of companies are currently trying to become more sustainable. For many, part of this involves transitioning to the “circular economy”. But what is the circular economy? And why are so many businesses in so many industries interested in it?
Because from the European Commission to the governments of Canada and the Netherlands to business leaders in every sector, sustainability is on everyone’s lips – followed by, with seemingly increasing inevitably, “the circular economy”.
So is this innovation going to get us to the all-important Net Zero and beyond? Let’s check it out:
What is the circular economy?
The circular economy is the idea that materials and products should be renewable, reusable, or recyclable. The goal is to eliminate a great deal of (or preferably all) waste so that production can be maintained.
A circular business model means longer product lifecycles and aiming to produce much less or zero waste. No more disposable, plastic-based products that swiftly end up in a landfill. Products and the way companies operate should aim to reuse and regenerate wherever possible.
The circular economy will require business models, product design, and more to be completely reimagined in some cases. A key part of this will be ensuring that your IT systems allow you to interact with suppliers and other partners clearly and efficiently.
Make no mistake – these changes are already happening. And – without getting too apocalyptic about things – it needs to if we are to survive as a species on this planet. But it hasn’t all been plain sailing so far…
Is the circular economy sustainable?
The intention of the circular economy idea is definitely to become more sustainable. Many companies are making big changes to their processes with this in mind. Unfortunately, that isn’t actually how it always works out.
Because “circular” is good in theory. But it doesn’t actually guarantee any given change will make things better for the environment. Chiefly, this is because small well-intentioned changes can have a ripple effect that might not work to the planet’s advantage.
For instance, several studies have shown that consumers will buy larger quantities of products if they believe them to be “sustainable”. This can negate the benefits of making that product so many percentage points more sustainable in the first place.
It is also the kind of effect that isn’t built into many prior forecasts of the effects of changes to business models.
How are companies joining the circular economy?
Those sustainability and “circularity” impact assessment tools are worth a mention. Because there’s currently a big gap between the tools researchers have invented and those that seem to be used by real-world businesses (this seems to be part usability, part relevance-related issues).
This means that companies experimenting with how they might change their business model to become more circular tend to essentially go for a “try it and see” approach. This is partly due to the lack of those forecasting tools but also a desire to hit the low-hanging circular fruit, as it were.
Frequently, this involves closing resource gaps or switching to suppliers that sound more sustainable. Often, this happens without any wider checks as to the effect this will have on anything other than a company’s bottom line or public profile.
It’s only as the availability of data grows (via tech like the Internet of Things and distributed ledgers) that companies will be able to figure out if their plans will actually have a beneficial effect for both the way they operate and the planet too.
What are the benefits of a circular economy?
All of that said, on a planet of many finite resources and with climate change a looming threat, the major benefits of a circular economy are obvious. But there are many others that can fly under the radar, including:
- Product value is recoverable – because truly circular products aren’t destined for the landfill, some (preferably all) of their value can be recovered by their producer or by other actors.
- Companies are motivated to recover that value – because the profitability of a truly circular business comes from the recoverable value in their products, they are strongly motivated to have consumers return them (e.g. through Product-as-a-Service models).
- Less societal waste too – a linked benefit of a more circular economy is touted as reduced waste of society’s more intangible resources like talent. Remote working (via collaboration tools such as Microsoft 365, Google Workplace, and the internet in general) has been suggested to be a big net benefit in terms of improving diversity, for example.
All in all, true implementation is challenging for businesses and the results in terms of direct environmental benefits still often difficult to measure. But the circular economy is something we need desperately as a society and that will benefit us all in years to come.
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