3 hurdles barring the track to a circular economy

The circular economy may be the way of the future, but some major hurdles still must be overcome before we get there.

Modifying the foundations of our “take-make-waste” linear economy to be more “circular” isn’t going to be easy — even if it makes business sense. The idea of viewing waste as nutrients has profound power to create production models that reduce reliance on raw materials by continuously cycling materials of all types back through supply chains.

At the same time, a growing number of businesses and governments are recognizing that changing demographics and resource availability are necessitating a global shift toward a circular economy, which can create more reliable and resilient supply chains.

But several hurdles must first be overcome before the circular economy’s full potential can be realized, according to business and government leaders on Thursday in Washington, D.C. at a seminar on boosting the circular economy organized by the Royal Netherlands Embassy.

Chief among these hurdles are making the internal business case for, updating antiquated public policies to promote and educating consumers about the circular economy.

Circular economics drives innovation

“A circular economy is not a drain on the bottom line — it grows jobs, innovative jobs where engineers and problem solvers are reached to where we can create these opportunities that are not even on the radar screen,” said New York Congressman Paul Tonko.

“With the growth of the circular economy, we create new avenues of work opportunity. It does not bring us into decline.”

During a plenary panel on how the private sector is reimagining the future of business, Philips’ John Pouland said that his company has moved toward circular thinking out economic necessity. Growing global demand for products and rising commodity prices and Millennial behavior shifts toward having access to rather than owning products meant that the light fixture firm had to rethink its business model. Meanwhile, advancing lighting technology means that some light fixtures may last decades rather than years.

“We decided we will sell light, we will not sell light fixtures,” Pouland said. “Selling light, the more light you can produce with less energy, the more money you make.”

Through its managed equipment services offering, for example, Philipps installs equipment in hospitals but retains ownership over it — when the equipment becomes obsolete, Phillips can install it in other regions where it still is in demand.

Dell’s Scott O’Connell recounted how he faced challenges convincing his company’s engineers that using recycled materials to make new products was a sound idea — there was a lingering misconception that recycled materials were somehow lower quality.

O’Connell surmounted this through direct engagement with the engineers, and the C-Suite was sold on the idea of securing its own waste stream to free it from the volatile global plastics market, which can fluctuate depending on the price of oil and other mounting competition for recycled plastics. Since 2013, it has incorporated into products more than 21 million pounds of recycled plastics from sources including water bottles and CD cases, and has recovered 1.2 billion pounds of e-waste.

Discussing his grandfather’s journey toward circular practices with his carpet company, Interface, John Lanier, executive director of the Ray C. Anderson Foundation said:

“Instead of thinking in terms of dollars and cents, we aspired to higher values. Our ultimate goal wouldn’t be to maximize shareholder profit. Business doesn’t exist to make a profit, but a profit to exist.”

Pro-circular economic policies needed

While the shift toward a circular economy may be a free market response to global trends, public policies often impede its ascent, said Pouland.

“If it’s hard to incentivize different behavior in the private sector, it’s impossible in the public sector,” he said.

However, the great public sector hope for adopting circular thinking may rest with cities.

“Cities generally are the leaders in innovation, driven by a desire to cut costs to improve the quality of life.”

Internationally, laws regulating the flow of materials across borders can stymie the growth of circular supply chains — such as with Dell’s efforts to close the loop on its plastics supply chain.

“Regulatory policy is a big challenge to circular economy,” O’Connell said. But this is an opportunity for businesses to work together to push for circular economic policies.

Consumer education is key

Leveraging information flows is one of 12 ways we can intervene to promote the rise of the circular economy, Lanier said.

“Imagine a world where everyone graduating from high school understands the concepts of a circular economy intimately,” he said. This could lead to the implementation of a global circular economy within one generation.

But many consumers already are demanding more circular products without even realizing that it’s part of a new paradigm for doing business.

“Being a customer driven company, customers tell us the energy efficiency is number one,” O’Connell said. Likewise, customers want to know what to do with their old electronics, he said.

That’s why Dell offers free consumer take back in 78 countries — for Dell or any brand of products, which then feeds into the company’s circular supply chain for plastics.