The circular economy is a better way of doing things: so we can have enough, for all of us, forever.
By keeping products, components and materials in use for longer, and reusing them, we get more value out of them. In a circular economy, all ‘waste’ becomes ‘food’ for another industrial process, or for nature. New materials, scientific advances and recent technology developments mean businesses can disrupt the ‘norms’.
The result? Circular business can be more efficient, effective – and competitive.
Circular economy principles
- Designing products and equipment to be durable and robust means we can use them for longer, giving a better lifetime cost. Alternatively, lots more people can use the same product: rented city bikes are in use for maybe 12 hours a day, compared to the bike you use once a week.
- Business models provide services and use of products and equipment, instead of ownership. This creates markets for new services: for reuse, repair and recovery of resources.
- After we’ve used them, we recover products, components and materials. This means they have value as a resource for another industrial process, or can be food for nature – compost!
New, circular ways of thinking
Different perspectives, including systems thinking, biomimicry and planetary boundaries, can help us create new solutions and disrupt existing alternatives.
Business can be a force for good, with a purpose beyond profit:
- ensuring fair, transparent and shared-value approaches across the supply chain, meaning a good quality of life for everyone involved
- using and regenerating safe, sustainable resources – so we have abundant supplies instead of scarcity.
Take, make, waste…
Why do we need a different approach to business? ‘Traditional’ industrial processes are often called a ‘linear economy’: we take materials, make something, use it and then dispose of it.
We need to redesign our “waste economy”. We extract around 90 billion tons of natural resources, every year, to make what we consume. That’s more than 12 tons for every person on the planet. Based on current trends, that number is expected to double by 2050.
We’ve created systems that are shockingly wasteful. The Circularity Gap report says we recover less than 10 per cent of our resources to make them into new products.
We could call it a throughput economy, or even a waste economy. This system means we’re trashing our planet, with lots of downsides:
- people feel excluded, fearful and exploited
- businesses face resource scarcity, higher charges on waste and risk to their reputations
- and we are overloading and depleting nature. We often forget we depend on living systems that provide critical services for us, including pure air, clean water and healthy soils.
In the linear system, companies want to sell more. They try to persuade us to buy the latest kit to replace the one that’s broken or no longer supported. This wastes precious resources – and wastes our money!
Circular business models
Why do we want to own stuff that we only use for a few hours each year? Owning it while it depreciates, the performance drops off, or the technology becomes out-of-date: all of which leave us worse off. Examples include a power-drill and even a car. Did you know that the average car in Europe is parked up for 23 hours each day?
The circular economy uses different business models, aiming to encourage use instead of ownership. It’s about helping people to use products for longer, or use them more ‘intensively’. What do we mean by ‘intensively’? Let’s return to our car example (typically used for just one hour each day): an hourly rental system would enable the car to be used for significantly more hours in a day. We improve the use ‘intensity’ – in other words, we get more from less.
These business models encourage users to rent; pay for access; buy ‘performance’ of products and equipment; or subscribe to an easily accessible shared service.
Circular is better for your customers
There are many different benefits of ‘closing the loop’, for business customers and consumers. One advantage of using instead of owning is that it smooths cashflow, and that can be a big plus for business buyers. It’s starting to become attractive to consumers: it’s already common for cars and phones in some countries, and of course for housing too.
The upside is new revenue streams and market opportunities for your business.
In a circular system, an upgrade option and a repair service can keep the product updated. Even better, we could repair and upgrade it ourselves.
Subscription services mean the product goes back to the producer after we’ve used it. Having recovered the product, component and materials, the producer can choose to resell, repair, remake or recycle them.
Do not repair what is not broken, do not remanufacture something that can be repaired, do not recycle a product that can be remanufactured.Professor Walter Stahel, 2010, “The Performance Economy”
Circular means a better business
Designing circular systems can build a better business (and a better world)…
Circular inputs = Secure supplies
Closing the loop means you can secure your long-term supplies of materials and process inputs, by switching to abundant, renewable or recycled resources. These resources include energy, chemicals and water, as well as the materials you use to make the product. Maybe you can recover your own end-of-life products, components and materials? You could develop new by-products, increasing your revenue by selling into new markets.
Circular product design
Products that are durable and repairable help build trust in your brand, leading to loyal customers. You’ll benefit from spending less on marketing to find new customers. Selling spare parts and offering repair and refurbishment services means you can create new revenue streams.
Designing products for repair, remaking and recycling creates new, profitable activities. That could mean new service opportunities for you – or your partners. Longer-lasting products have a higher resale value, they build trust in your brand, and mean you can sell in markets where people can’t afford the new product.
New, circular services
Those durable, robust product designs are more suitable for renting and sharing. This can open up new opportunities, especially for products that people use infrequently (power tools), or in a range of different places (city bike and car hire). Those services could help you could grow your business, perhaps by renting a higher quality product at a price accessible to younger customers. BMW developed its DriveNow rental service, finding it helped to grow a much bigger customer base.
Designing products to be modular means repairs are simpler and cost less. Modular products make it easy for you to develop and offer upgrades, such as new technology, better functionality, etc. Upgradable products are a win-win, because the customer gets a better product, and you keep the customer’s business.
Circular = stronger, deeper customer relationships
Business models focussing on access to products, instead of ownership, can help you get closer to the customer. That helps you really understand their needs, and means you can find out how they use your product. You’ll know which parts are likely to degrade or fail first, and how you can make it better.