Circular Economy: The Best Business Model

In my 20 years of work experience, I have never felt so passionate and committed to promoting sustainable development. I started my professional career under the premise of making things more sustainable and more profitable. As a businessman, this business model has allowed me to understand that doing the right thing generates even more profitability for a company. And as a citizen, contributing to the benefit of society and the environment creates far greater personal satisfaction.

As the economy expands, the demand for more raw materials required for the production of goods has increased. Economies are growing so rapidly that we have to examine how wise it is to increase the rate at which we extract more raw materials and generate waste. This current unsustainable model that consists of “take-make-use-dispose” is called linear economics.

If we fix our attention a bit on our behavior as consumers, we will observe that society has increased its consumption of products and services of which we only gain satisfaction for a short time. With this, I mean that on average a product can last in the hands of the buyer is between 6 to 12 months due to a new model being launched in the market, it no longer being useful, the use of the item was not essential, etc. Designs are constantly altered to attract the buyer and achieve their loyalty, however, we face new challenges daily. The population is growing exponentially and currently, middle-class consumers are enjoying products that were catered for a certain social status. It is estimated that in the next 20 to 30 years more than 2 million new consumers will enter the market and will exert strong pressure on society.

So one has to wonder, do we have enough resources to supply this increase in the world’s populations if we continue with the same behavior?

Most of us have become accustomed to the habit of only using and discarding, but now we have to create a culture of reusing in which each item or material we use is regenerated instead of discardied. Globally, food culture must be improved since it is the real driving force behind this excessive waste.

From inception, Nature has given us the formula for sustainability. When an animal dies, its remains to nourish the soil, and then renewable energy (the sun) creates another living being (the plants). If we simulate the process of nature in our manmade processes, we can close the loop and we would be re-designing the business model to a circular economy (CE).

The (CE) is inspired by the natural system and allows us to radically reduce the extraction of raw materials and the production of waste. It achieves this through the repeated recovery and reuse of as many products and materials as possible, in a systematic way, paying particular attention to “manufacturing / re-manufacturing – use/ reuse”.

The Ellen MacArthur Foundation defines the circular economy as a restorative and regenerative alternative which aims to ensure that products, components and resources in general maintain their usefulness and value at all times. This concept distinguishes between technical and biological cycles. In short, it is an attractive and viable solution that has already begun to be explored by different companies.

There are several principles that should be considered:

• Waste = raw material

• Diversity.

• Renewable energy.

• Work systems.

Waste = raw material: If we redesign the products so that they can be reused or disarmed at the end of their life span, we could generate value in processes where they are generating expenses.

Diversity: A company can gain greater value from diversity by sharing strengths and having a greater set of resources to take advantage of in its value chain.

Renewable energy: It is highly beneficial to use renewable energy in a circular economy because it helps to build long term, non-detrimental, energy providing systems.

Work system: The objective is to integrate different factors which work together to create effective flows of materials and information. We utilize the connections between people, places and ideas and observe how we can create opportunities to generate social gains.

TOWARDS A SUSTAINABLE FUTURE…

It is important to create appropriate models that guarantee long-term gains in order to close the gap in the cycle. There are several processes that are key to the development of a circular economy. Among the main ones:

1. Product recovery

2. Reprocessing

3. Re-marketing.

Recovering the product in terms of quantity, quality and reasonable prices are the first steps towards a circular economy. Followed by the reprocessing of these products, this can cover the expectations of the market. Re-marketing plays an important role in locating and managing the flow of information that facilitates the output of these products.

The implementation of appropriate strategies and investment in the education of consumers will allow sustainability and will impact the triple bottom line: economic, social and environmental.

Innovation in business

For the creation of a circular economy, it is necessary that all industries discontinue the promotion of the linear economy, in terms of the development of single-use packaging where, we purchase, remove the packaging and then discard it.

Can companies change their business models to a circular model? The challenges are not only in the design of the processes, but also in having responsible leadership that is willing to continue generating profitability by doing the right thing. With adequate consultancy, it is possible for any organization, regardless of its size, to achieve a sustainable business model.

Several companies have been pressured for a long time to assume greater responsibility for the single-use items they sell. Thanks to many initiatives, the consumer is increasingly attracted to socially responsible companies, to reprocessed products and they are even involved in continuous improvement through effective communication strategies which generates value in the supply chain.

Currently there are many successful cases in different countries which have managed to break all kinds of paradigms and generate great returns. These include Burberry, Gap, H & M, HSBC, Starbucks, McDonald’s, phone manufacturers such as fair phone and many more.

As entrepreneurs, organizations, governments and citizens, we are responsible for the impact that we have on our economy, society and the environment. There are many ways to contribute to this new business mode, which include the following:

Governments: Promote sustainable development by encouraging local trade. Create laws that facilitate the recycling and collection process and which encourages the use of renewable energy.

Entrepreneurs: Design reusable and recyclable products. Send products and services that have a long lifespan and that impacts our planet as little as possible to the market. Encourage staff to consume responsibly.

Non-profit organizations: Educate citizens on the importance and impacts of sustainable development.

Consumers: Acquire long-life products and 100% recyclable products. Support initiatives to improve the environmental footprint of companies, organizations and governments and initiate a reuse culture for the good of society and the planet.

All these actions are completely feasible and have been proven to increase profitability considerably. Now it is in the hands of responsible leadership to promote and develop the circular economy as the new business model.

Darwin Daniel I Managing Director I Inversa Consulting LLC    

darwindaniel@inversac.com   

www.inversac.com