Most probably, you have already heard of the ‘Circular economy’. You might have been introduced to the topic while scrolling through LinkedIn, over a drink with friends or during a refreshing debate with colleagues…
While this topic is getting more and more attention and considered as a strong opportunity towards more sustainable practices for companies, we realized general understanding of the concept is still very superficial. Circular economy is too often limited to the idea that products can be recycled, but it goes far beyond.
In this article, we will thoroughly explain what the circular economy exactly implies – as opposed to the common linear model – and provide you with some examples to illustrate key concepts.
In addition, we will discuss how circular methods can be relevant to your organization from an economic, social, and environmental point of view. Circular Economy is an opportunity and a challenge for businesses: it requires a fundamental, sometimes innovative, transformation approach.
Beyond buzzword: what does circular economy mean and imply?
Dating back to the Industrial Revolution, this is where the origin of the linear economy finds its birthmark. In a period where population was about to grow exponentially and resources were considered easy and abundant to get by, linear economy has thrived for decades. Consequently, linear business models have had 200 years to optimize themselves towards this profit maximizing model.
A linear economy can be described in four terms: Take-Make-Use-Waste. It is the economic system of production and consumption of goods aiming at creating value to maximize profits.
Over the last 30 years, it is becoming more and more clear that the linear dream is bringing headaches to business, people and planet. Recently, both COVID-crisis and wars have highlighted again how resources are not unlimited but easily exhausted. Companies and customers are realizing that they underestimated several hidden costs that can have a negative impact on profit, society, and the environment in the long term.
In this context, circularity represents a worthy solution – among others – to face these challenges.
But what exactly is Circular Economy and how does it differ from the current linear model?
The circular model aims to diminish the final waste stream by redirecting products and materials to alternative streams.
More precisely, it could be defined as an economic system of production and consumption of goods aiming at creating positive value for the 3 P’s (Profit, People, Planet) in an effort to eliminate waste and pollution and regenerate nature (sources: Ellen MacArthur Foundation, ADEME, INEC).
Very concretely, an organization applying circular economy principles aims to slow down and close consumption/production loops:
- Slowing down loops can be achieved by designing long lasting products and offering easy maintenance and repair opportunities. The main goal is to extend the use of a product and maintain its value as long as possible.
- Closing loops can be accomplished by favouring reuse, facilitating remanufacturing, and ensuring final recycling of materials, parts and/or products. Closing material flows is hardly achievable by a company alone and will often necessitate collaboration from different actors within an industry, or even cross-industry.
Many organizations across the globe have already adapted their business models to meet such circular strategies. As the following examples show, Belgium is certainly not lagging behind in this context.
The Soap maker « Les savonneries Bruxelloises » collaborated with the beer producer “Brussels Beer Project” to reuse brewery spent grains and hops to produce soap.
Multimedia and household appliance seller Vandenborre recently launched Vandenborre Life, a repair and maintenance insurance applying to all apparels, including those from other sellers.
“A Smart World”, a Walloon start up founded in 2018, buys old electronics from companies and individuals to remanufacture and redistribute them.
“Etap Lighting” developed a “lighting as a service” offering.
For more examples of circular models, you can get inspired by looking at regional circular websites (Circular Brussels, Flanders, Wallonia) or the Ellen MacArthur Foundation.
Why should an organization start a circular journey?
Now that you have a better understanding of what Circular Economy means and implies, you can start wondering:
Is it something for my organization? What are the triggers and expected benefits? How could I convince my top management to start a circular journey?
In order to answer these questions, ngage identified four types of triggers delivering real opportunities and benefits for organizations involved in circular transformations (perhaps are they relevant for your context?)
- Circular companies can protect their business against external dependencies and be more resilient on resources to regain control of their supply and production chains. Resources are a key concern for most organizations interested in circularity (source: Report wbcsd 2018).
- Circular companies can more quickly adapt to changing legislations (e.g. responsibility of producers).
- Circular companies benefit from sectorial/network/partnerships opportunities as long-term development.
- Circular companies increase the value of their products throughout their whole lifecycle.
- Circular companies offer innovative market approaches, competitive product offerings (e.g. product as a service) and build new business models in order to respond to a changing and growing demand.
Economic & financial
- Circular companies reduce waste in their production and value it via other channels.
- Circular companies can optimize production costs by leveraging remanufacturing and recycling opportunities (either from the supply perspective or from the product design perspective).
Sense of responsibility towards society, customers or employees
- Circular companies feel responsible and act onto the waste generated by their products and services.
- Circular companies want to reduce their environmental and carbon footprint as part of their general sustainability ambition.
- Circular companies position themselves as a purposeful organization having a positive impact on society and environment towards their customers.
- Circular companies engage employees and bring them purpose in their objectives, activities and responsibilities.
These benefits obviously never all occur at the same time and are dependent on the organization’s sector, context and maturity.
On the other hand, circular transformation projects, like any other major business transformation project, can also bring a multitude of challenges and barriers: people and change culture, transformation complexities, lack of customer-orientation, data and tools, financial constraints, legal and supply challenges, culture of silo’s, or performance monitoring challenges… All these need to be identified and addressed appropriately during the execution of a circular strategy through a context-based, holistic and human-centered transformation approach.
Now… you are probably asking yourself: How to address these challenges concretely? How to start this journey and what is the right approach for a circular transformation? Don’t worry... This is what we will cover in our next article on circular economy.
Spoiler-alert! There is no single best method for all organizations... but there are surely traps, attention points, challenges and best practices to address. An appropriate roadmap is required to identify, test and deploy circular projects. It goes step by step, and requires all layers of an organization to move in.
ngage can surely help your organization to find the right path and attention points considering your context, strategic priorities and operational needs while delivering an #excellencedriven, #humancentered and #enjoymentminded co-creation journey.
See you in the next article to read more about our circular considerations and suggestions…
Authors: Martin Tombal, Nicolas Celis, Rutger Vranken, Flor Severens and Simon Peter.