by Kay Harrison
For companies that are just starting out in the world of circularity, it can be unclear exactly how to get started and what the end goal is. Business leaders might find themselves talking in circles around the topic without making any progress, especially when talking to different stakeholder groups across their company or when looking at peers in their industries. Circularity can seem like an impossible end goal, but there are strategies to help you start and move toward a circular economy.
Understanding Traditional Linear Economy vs Circular Economy
To understand the different circular economy strategies, you first must understand the current model of production, consumption, and disposal. This traditional model has been termed the linear economy. The linear economy was born out of the industrial revolution and has driven tremendous global economic growth. However, this growth has been based on the unabated conversion of the world’s natural capital to material goods, which potentially implies long-term depletion of our natural resources.
On the other hand, the circular economy seeks to remedy this imbalance by keeping our natural capital in an extended – and ideally endless – loop. Manufactured goods are repaired, reprocessed, and recycled so that the base materials can be reused. Many people think of the classic “blue jeans” example when they think of circular economy. In this example a pair of jeans is made with sustainably sourced materials and an efficient design process. The consumer rents the jeans – meaning they will wear the jeans for as long as they like and when they are finished, they will return the jeans to be recycled. The cotton and materials used in the jeans will then be recycled and repurposed. Extending the product’s life creates jobs, and energy, resources, and waste are conserved by not manufacturing something new.
Circular Economy Business Strategies
While the blue jeans example seems like an ideal system of circularity, it’s just one strategy and may not be practical for every type of business. Employing one of the five circular economy business strategies listed below can present a host of new opportunities for your business.
1. Product-as-a-Service: This strategy focuses on leasing access to a solution instead of selling ownership of a product. Services can reduce cost volatility and create more active customer relationships.
2. Embedding Intelligence: A company with this circular business strategy builds technology into their materials or products to gather user data to improve the customer experience.
3. Product Life Extension: This strategy helps businesses extend the life of their products to make sure that they remain useful. Companies make sure a product is used for as long as possible and stay out of landfills by repairing, remanufacturing, or remarketing materials.
4. Smart Material Choices: A circular business strategy that considers a product’s end of life treatment when first choosing the materials. A company using this strategy for example would choose recycled, recyclable, or biodegradable materials when designing their product.
5. Closed Loop / Take Back: Businesses pursing this circular economy business strategy provide a service to collect old or used products and recovering the value in the materials by recycling or reusing them to make new products.
Circularity is Not a Perfect Circle
“Often when people think of moving to a circular business model, they picture one large, continuous circle for their material flows. However, in many cases, circular business models do not operate in perfect, closed loops. Most circular business models can be thought of as cascading flows of materials that stay in use but move across value chains and industries as the material quality or market needs change.” – Owen McKenna, Circular Economy Service Leader, Antea Group USA.
This concept may require a paradigm shift in thinking about how a business model can and should operate, as restructuring corporate strategy to fully embrace circularity could force a reconsideration of multiple aspects of a company’s business model including design, manufacturing, distribution, use and disposal at end of life. Companies must re-imagine how their supply chains could be organized to reduce risk. As sustainability and environmental stewardship receive more attention from shareholders, customers, and society-at-large, industry can adapt by leveraging circularity to capture greater value from materials and products and designing out waste.
Not a “One-Size-Fits-All” Approach
There is no one-size-fits-all approach to achieving circularity. It is an ongoing process unique to each company that will continue growing and improving overtime. Circularity does not happen overnight. Each company will have their own path to circularity that starts with making the decision to pursue a circular business strategy moving away from a traditional linear economy.