- Circumnavigating the circular economy
Circumnavigating the circular economy
06 October 2017
Even though many manufacturing businesses have an environmental or CSR policy in place as part of their supply chain requirements, a significant number have still never heard the term circular economy before, or, mistakenly, they thought that it simply meant they have a recycling policy in place. The circular economy is a key component of Industry 4.0, the fourth industrial revolution currently facing UK manufacturing businesses.
What is the circular economy?
According to Wrap UK, a circular economy can be defined as a model in which we keep resources in use for as long as possible, extracting the maximum value from them whilst in use, then recovering and regenerating products and materials at the end of each service life. The concept of the circular economy goes far beyond the idea of recycling. Instead, the model utilises all available options across the supply chain in order to use as few resources as possible from the beginning. From design, production, and during use, resources are kept in circulation for as long as possible and once a product reaches the end of it service life, rather than being discarded, materials are recovered, re-used and regenerated.
Why should I care?
With current world population figures standing at 7.4 billion, the impact upon both the environment and the Earth’s resources has long been a pressing agenda. With the United Nations predicting population growth to rise steadily over this century, to more than 11 billion, the question of how the world manages it consumption of finite resources is now a critical issue for world leaders and policy makers.
The current linear model of make, use and dispose is a model dependent on a ready supply of resources and energy; a model which was never going to be a sustainable option in the long term. The urgency of finding an alternative solution is now essential, as Jim Leape, director general of the World Wide Fund for Nature International, points out, "We are using 50% more resources than the Earth can sustainably produce, and unless we change course, that number will grow fast.”
Reducing our use of resources and fossil fuels will not prevent supplies running out, it will only delay the outcome. To prevent this from happening, a new way of thinking is needed. A circular economy model is the answer.
How does it work in practice?
According to Accenture, in its report Circular Advantage, there are currently five circular business models which are currently being utilised by industry, either in isolation or in combination:
Product as a service
Within the circular economy model, businesses can implement a product as a service concept, a model whereby customers no longer own products, instead manufacturers retain ownership and offer the use of their products on a lease or pay to use basis. This is also known as servitization.
One company already putting this model into good use is Philips, which now sells lighting as a service. What this means in practice, is that the company retains ownership of lights and equipment, meaning its customers are no longer required to pay upfront for installation costs, and through the use of software, Philips is alerted when a product needs to be replaced, allowing the company to recycle or upgrade equipment as appropriate. As a result, Philips is helping its customers to get the maximum use out of their lighting products, reducing the throwaway culture of lighting products, and re-engineering and re-using old lightbulbs in its production processes.
The resource recovery model focuses on retrieving and reusing products at the end of their lives, taking them back into the manufacturing loop. Utilising the resource recovery model means business need to rethink their approach to product design in order to make the process of recovering and reusing resources easier. It is an approach which incorporates an economic, industrial and social framework, allowing businesses to create a system that is not only more efficient and cost effective but even more crucially, eliminates waste entirely. Starbucks have already implemented this model and as a result, now turn food and coffee waste into succinic acid, which is then used in a range of products from detergents to bio-plastics and medicines.
The product life model enables businesses to extend the lifecycle of products for as long as possible or as long as they remain economically useful. Under this model, products and material which would normally be wasted, are instead re-used, repaired or remanufactured, eliminating the amount of waste materials sent to landfill.
Thanks to the proliferation of social media channels, the prospect of shared ownership of products and services is now a real possibility. Examples of businesses already putting this into practice includes BlaBlaCars, which is a long distance ridesharing service, allowing drivers with empty seats to connect with people travelling to the same destination, and Airbnb, a service which enables people to find holiday rentals. This ensures that products are being used to full capacity, so there are fewer materials being used to create new products.
This business model utilises renewable, recyclable, or biodegradable resource inputs that support circular production and consumption systems. Companies using this model remove inefficiencies by cutting out waste and replacing a linear resource approach.
What are the financial rewards that come from the circular economy?
Utilising lean production methods, reducing waste and keeping products in service longer provides clear social and environmental benefits, and of course, saves money in the process.
Current research by McKinsey estimates that by moving towards a circular economy could add around $1 trillion to the global economy within the next decade, creating 100,000 new jobs by 2020. With such a wide scope of benefits, isn’t it time to take action?
Despite all the benefits, circular economy is still not receiving the attention it deserves. It would be interesting to hear your thoughts on this and what you are currently doing in your manufacturing business to contribute to the circular economy. Please let us know.
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