You may have heard the term, but just what is the circular economy? And why should you begin to utilise it? David Cashmore, Senior Teaching Fellow in Birmingham City University’s Business School, discusses why making the change can yield long-term benefits for your business, your customers and the planet.
Much of today’s manufacturing adheres to a “make, use and dispose" approach. Raw materials are extracted to build a product, which is bought by a customer and then disposed of once it is no longer desirable or functional.
This approach has many problems, not least that it requires unlimited raw materials and energy for ongoing production, as well as unlimited space to accommodate the waste produced.
Essentially, the circular economy offers an alternative approach.
In a circular economy, businesses aim to keep resources in use for as long as possible, thus extracting the maximum amount of value from them. They then recover the waste and re-use it in future processes.
In other words, the circular economy is based on the idea that there can be zero waste overall, as any material from one process can be used in another.
Create milestones for your business
Want to start your journey in the circular economy? The starting point is for your organisation to understand its sustainability vision for the future.
For example: are you looking to change in anticipation of future legislation? Are you aiming to gain a competitive advantage by making sustainability a part of your brand? Do you wish to take on an industry leader role and lobby government for change?
Once your long-term strategic goals are decided, you can plan progressive steps to move towards a circular economy business model.
I would first suggest creating a product roadmap. This will identify how each iteration of the product can be made more sustainable over a period of time.
In doing this, milestones can be agreed for product development, with targets established for areas such as:
- Product packaging
- Storage and transportation
- Material sourcing
- Manufacturing processes
- Product design
Larger companies may favour a ‘big bang’ approach to transformation. However, taking an incremental approach to adopting circular economy principles can also allow for smaller but equally meaningful changes to germinate quickly.
The benefits of adopting circular economy business models
Now you have answered the question ‘what is the circular economy?’ Now the question is, ‘what are the benefits to my business?’
In the very short term, the move to a circular economy approach is likely to incur additional costs. However, it’s important to understand that there will be multiple benefits over the longer term.
There is an inextricable link between businesses and the natural world. Businesses both affect the Earth’s ecosystems and rely upon them.
As it stands, more than half of our world’s ecosystems are in decline, which poses significant risks for organisations.
From an operational perspective, there is increasing scarcity of raw materials that will ultimately result in increasing procurement costs.
As such, it will benefit your company to extract as much value from the raw materials used in your products, through development of a robust end-of-life process as part of a circular economy approach.
Another benefit of adopting circular economy principles is that it anticipates the inevitable increase in sustainability legislation.
Given the enhanced awareness of sustainability issues amongst the general public, as well as the commitment by UN member countries to achieve the 17 Sustainable Development Goals, organisations are likely to face further regulatory pressure as the government seeks to address key sustainability issues.
Address these issues quickly and you will have a ready-made advantage over competitors who may have adopted a reactive approach to regulatory changes.
With over 1,200 businesses aiming to become more sustainable, now is the time to make this your focus.
Think of your reputation
More and more customers are making purchasing decisions based on what is good for the environment.
Deloitte’s recent report into sustainability and consumer behaviour tells us that consumers are now focusing on reduced waste and packaging when they do their food shop.
Given those prevailing consumer trends, it could be that the most compelling reason to adopt a circular economy approach is reputational.
There is increasing pressure on organisations from consumers and activists demanding that organisations operate in a more responsible, ethical manner.
In a world where non-sustainable behaviour by organisations can go viral on social media, the adoption of a circular economy approach can:
- Enhance corporate reputation
- Attract investors
- Provide greater access to financial customer
- Help you win new customers
Support in following circular economy principles
Many businesses are asking ‘what is the circular economy?’ but aren’t sure where to go for help.
A good starting point would be the Ellen MacArthur Foundation, formed in 2010 by renowned, record-breaking yachtswoman Ellen MacArthur.
The Foundation aims to accelerate the transition to a circular economy through collaborations with decision makers from business, government, product development and innovation.
Closer to home, academics at Birmingham City University (BCU) pride themselves on using their real-world experience to provide first-hand support to businesses. Recently, for example, a team of BCU academics helped a group of leading car manufacturers create courses to enable their staff to support the transition to electric vehicles. BCU also offers research and development partnerships that can really make a difference to whatever sustainability challenge your organisation is facing.
You can also pick up further useful tips on becoming more sustainable by talking to green businesses who launched their concepts at Birmingham City University’s STEAMhouse facility.