What is a ‘circular economy’?

The ‘take, make, dispose’ way of doing things is coming to an end. With the reuse, remanufacture and recycle of products there exists the huge opportunity for continuous value creation, all stemming from rethinking our traditional economic system, generating what is now referred to as a ‘circular economy’.

Promoting resource efficiency

According to edie’s ‘Jargon Buster’, their definition of a circular economy is:

An industrial economy that promotes resource efficiency by replacing a linear ‘take, make, dispose’ model of production with one where materials function at their highest utility at all time. The circular economy model aims to extract maximum value from resources while in use, and then recover and reuse these materials at the end of each service life.

The circular economy is more a movement than a concept. It is being developed and growing day by day with new principles and business forms originating constantly as a result.

Capturing the value lost in a linear system

The circular economy looks at how we can capture more of the value that is lost in the linear system. A recent Global Circularity study found that more than 90% of raw materials used globally are not cycled back into the economy.  By utilising a fully circular economy we could be looking at the reduction of global natural resource use by 28%. Not to mention that fact that greenhouse gas emissions could be cut by a staggering 72%.

This is not just about recycling,  which is often the first thing people assume the circular economy is about. This is actually a low-value option, there is far more potential value from refurbishment, increased utilisation, secondary life uses, and parts harvesting for instance. These are tighter loops than recycling and therefore a far more viable option to target in a circular economy system. Businesses have real potential to generate great revenue from the secondary life of products. There is also a real benefit in growing relationships with customers through long-term service offerings opposed to traditional sales that end as soon as they walk out the store or receive their goods.

According to the Ellen MacArthur Foundation:

“A circular economy has profound consequences for production, employment, education, money and finance but also induces a shift in public policy and taxation. The economic advantage of this model lies in designing out waste, enabling access over ownership, favouring radical resources productivity, with prospect of rebuilding natural capital and resilience.”

The foundation has a great video below that sums it up just nicely:

Consumer behaviour is changing, technologies are improving, governments and stakeholders are starting to become increasingly mobilised to drive change among businesses. It should be a clear advantage for the business and be driven from the top down. This requires businesses to act as cross-functional units looking beyond it as just another task for the sustainability team. Businesses need to be reconsidering their value chain, their upstream sourcing and downstream logistics, from origin all the way to benefits reaped in their marketing. Applying principles of the circular economy can be used as a source of competitive advantage, not just another tick box claim.

The best examples are when the entire business model changes

This could be something like purchasing miles instead of tyres or renting jeans instead of buying them. This relies on reverse logistics, however, which means getting the products back from the consumer to then put back into the circular loop – but as mentioned earlier, this brings more opportunity to grow better, stronger relationships with your customers.

Feeling empowered?

You don’t need to be a business to lead the way in the circular economy. This high-level action is driven by smaller actions of consumers like you and I. So, if you want to consider the small changes you can make in your every day to contribute to a circular economy you may want to take a look at the book I reviewed, called ‘What’s Mine in YOurs’ which looks further into access over ownership.

If you feel you want to go a little deeper into the circular economy, there is a great MOOC available for free online from edX here: https://www.edx.org/course/circular-economy-wageningenx-bb05x

Or listen to some podcasts to help you find out more: https://itunes.apple.com/gb/podcast/global-business-the-circular-economy/id73330642?i=1000345045816&mt=2


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