The circular economy will put businesses in a spin

The circular economy will put businesses in a spin

laser metal cutting
ShutterstockAndrey Armyagov
Going beyong recycling: The circular economy covers manufacturing optimization such as laser metal cutting to reduce over-ordering and waste.

The circular economy is having a bit of a moment.

The EU's wide-ranging circular economy package is winding its way through the corridors of Brussels and, while it almost inevitably will be watered down, in the coming months it will deliver a raft of new resource-related policies and rules. In Scotland, the previously vague vision to produce a zero-waste society has been backed up by a more detailed circular economy strategy and pledge to cut food waste by a third by 2025. Growing numbers of businesses are taking waste reduction pledges to a new level by securing zero waste status for their facilities. Even the Department for Environment, Food and Rural Affairs (Defra), with its deservedly criticized waste strategy, is finally taking steps to streamline the chaotic situation where the U.K. operates 600 recycling systems.

However, the growing interest in non-linear resource flows amongst policymakers, think tanks and a handful of pioneering green businesses presents a series of challenges for those mainstream businesses who, quite understandably, struggle to even define what the circular economy is, let alone comprehend how it could affect them.

The circular economy is a very useful umbrella term, denoting, to borrow advisory body WRAP's definition, "an alternative to a traditional linear economy (make, use, dispose) in which we keep resources in use for as long as possible, extract the maximum value from them whilst in use, then recover and regenerate products and materials at the end of each service life."

The problem is that at a practical level the term can be applied to vast array of initiatives and techniques. It covers the design of products so that they require fewer resources and are easier to repair. It covers the development of new materials that are lighter or harder-wearing, or easier to recycle or biodegradable. It covers supply chain and design optimization to reduce the amount of over-ordering and resulting waste that besets countless industries. It covers the sales and marketing of products so that people are not encouraged to buy more than they need and are encouraged to use products for longer. It covers the repair, reuse and re-manufacturing of products, a market that is already worth around €30 billion across Europe. It covers social apps that allow for everything from old furniture to cab rides to be shared. It covers the recycling of a wider range of materials and the identification of markets for recyclable materials. And it covers the conversion of genuinely unusable material into usable energy.

Consequently, a comprehensive circular economy strategy would affect virtually every single department within a given businesses. And to complicate things still further, there is tension between components of the circular economy. For example, better eco-design means less material for re-use, wider re-use models means less material for recycling, better recycling means less material for waste-to-energy conversion. Moreover, a true circular economy where products are used for longer and old products are repaired rather than replaced presents a clear challenge to the fundamental capitalist goal of selling more stuff.

The question for businesses is how to respond to such a complicated trend that has implications for so many aspects of their organization.

The first answer is not to bury your head in the sand. The direction of travel is clear. The EU's circular economy package will bring with it more demanding recycling goals and a host of supporting policies. The Scottish government will act to deliver on its new food waste targets and promise to impose greater responsibility on producers to ensure their products are re-usable and recyclable. Assuming that the U.K. stays in the EU (and perhaps even if it leaves), the Westminster government will have to take steps to improve stalled recycling rates or risk massive fines.

This policy push will bring with it risks in the form of tighter regulations, fines and eventually bans on certain materials being sent to landfill, and huge opportunities in the form of research grants and new markets for circular economy services. Savvy businesses need to be aware of these long-term developments.

The second answer is to undertake an honest assessment of how your businesses can play a role in the circular economy and then prioritize the steps that can be taken to reduce your resource impact. This is easier than it sounds and even if it proves challenging, plenty of consultants in the market are keen to help businesses manage their waste footprint. Best of all, this is an area with copious evidence that an effective waste strategy brings with it significant financial savings and long-term returns.

There are plenty of opportunities to be realized from eco-design principles and re-manufacturing processes, but the simplest place for most businesses to start is with their waste streams and it is increasingly clear that going zero waste is a realistic aspiration. As Unilever's Pier Luigi Sigismondi observed recently, if a company of Unilever's size, complexity and global reach can make 600 sites zero waste, then anyone can take steps in the same direction. It may require some lobbying muscle, but for most businesses diverting all waste from landfill is possible and has little or no cost implication.

The circular economy appears confusing and presents plenty of challenges, but any businesses can get involved and reap the financial and environmental rewards from doing so. Sustainability executives should lead the development of a circular economy, starting with more effective waste policies. After all, failure to do so simply invites more regulation and red tape, not to mention escalating resource security risks in a world increasingly vulnerable to price shocks.

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