The climate catastrophe is here. With the global population predicted to grow to 8.5 billion in 2030, and 9.7 billion by 2050, we will need the equivalent of almost three earths to sustainably support our current resource consumption rates.
More than 100 billion tons of natural resources are consumed every year, but only 8.6% get recycled and used again. While every industry produces waste, some industries, like construction, energy, food, agriculture, and fashion, are larger contributors than others.
Individuals, businesses and governments now recognise that striving towards a net zero world is not only essential, but crucial. In order to do so, we need to understand and adapt how products, materials, and food are manufactured and consumed. Perhaps it is time to try something new (or old).
Point blank, “business as usual” is not working, and shouldn’t be considered in corporate strategies going forward. Although economic growth will always be considered a key measure of success, it will be redefined with sustainability and responsible metrics. Therefore, a company’s success hinges on how its ESG responsibilities are prioritized and implemented. Companies reluctant to get with the program will be exposed to serious business continuity risks such as:
Relying on virgin materials will leave companies competing for scarce resources and exposed to volatile prices impacting the ability to forecast, and compete with others with more sustainable practices. The scarcity can be found not just with semiconductors or computer chips, but other commodities such as leather, steel and rubber. For example, the price of iron ore, a predominant component of steel, increased by 101% in 2021. Considering the average passenger car is produced with over 900kg of steel, a hike in these material prices would have serious consequences for original equipment manufacturers (OEMs) sourcing automotive-grade steel.
Companies failing to adapt to changing consumer preferences for brands with sustainable business practices will erode their brand reputations. We are already seeing consumers increasingly opt for products and companies with commitments to limiting impacts on climate change – out of a surveyed 2,000 UK and German customers, more than 60% report going out of their way to recycle and purchase products in environmentally friendly packaging.
As resources become more scarce, supply uncertainties will leave businesses unable to meet consumer demand, causing lost revenue opportunities and market share. Government policies will increasingly favour companies that can prove positive impacts on society, and those that can operate without depleting their communities’ natural resources.
A circular economy — one that gets the maximum value out of materials and takes an alternative look to resource use, gives the opportunity to radically reduce resource consumption and the associated carbon emissions.
Circularity goes beyond just waste and material inputs, it touches on other production areas such as water and energy – some of the more troublesome hotspots for production facilities.
A good example of applied circularity principles can be seen from The Waste Transformers, a company based in the Netherlands, that can turn commercial waste into positive value on-site. With this technology, a food and beverage manufacturer is able to divert its organic waste to produce electricity and heat, by way of an anaerobic digester and Combined Heat and Power (CHP) system, whilst generating fertilizer as a by-product. The energy is fed back into its operations, whilst the fertiliser is used by the farmers in its value chain to grow the organic feedstock used in its manufacturing process. A match made in heaven.
It may seem like circular economy is now a new buzzword for environmental sustainability, and rightly so since it helps businesses be more efficient, creates multiple societal opportunities, and protects the planet’s resources. Circular Economy goes beyond just “doing the right thing”, there are other tangible and intangible benefits of transitioning:
Sustainable products will be the standard and expected from customers and consumers. There will be an increase in product leasing and rentals, meaning longer-term contracts and relationships between businesses and customers. We are seeing this model begin to make moves in the fashion industry, whereby customers rent clothes to own for a period of time and then return to the company when they have had enough.
These reverse logistics processes and getting used products back into the cycle will provide regular consumer/customer interaction after the initial sale, and gives businesses the opportunity to better understand the evolving needs of the consumer.
Production facilities will require additional process steps to accommodate inbound used products, disassembly, and functional testing, as well as separate storage infrastructure.
2. Early alignment with a stricter regulatory climate
We expect to see global institutions like the UN and EU play strong roles in redefining value. Widening policies will be introduced favouring strategies to consume less, and promote better durability and quality products. We are already seeing this play out with the recently issued Sustainable Products Initiative ensuring products placed on the EU market are more sustainable; and the Right to Repair Regulations whereby producers will be held more accountable for their products, energy usage and electrical waste will reduce, and consumers will have more power to identify the most energy-efficient products on the market.
Whether it is recycled textiles, circular buildings or sustainable tech, no industry will be left untouched by circular economy regulations.
As a circular economy will help reduce demand for virgin materials and increase recycling, more materials can be moved between companies, industries and across geographical regions, increasing their value and decentralizing their source of supply.
Products could be leased or used through a subscription rather than bought outright, ready to be returned, and at the end of life, its components taken apart to give new life to other products. Take for example the device you are using to read this article, considering the rate at which technology advances, it will become an old model within the next couple of months and obsolete within a few years. Imagine a technology-based subscription service that allows consumers to lease, for example, laptop computers, while exchanging their old models at predetermined intervals with a new upgrade. The consumer is assured of always being up to date with the most recent technology and associated operating software, and the company is assured of a supply of old equipment that could be taken apart for spares, refurbished, or remanufactured. It’s a win-win!
There will be an increase in asset sharing platforms allowing businesses to earn revenue by lending materials or machines that otherwise mostly remain unused. Businesses that incorporate these new models, will need to establish new sales platforms to meet these requirements. BMW, through research, took the view that most cars sit unused for 95% of the time. If we optimise the full sharing capacity of cars then one car could be shared by 20 households, meaning that we could potentially take 19 cars off the road. It has even teamed up with its biggest rival, Mercedes, to offer car-sharing services, so that more than four million of its car share users worldwide will have access to a much broader range of vehicles.
Innovation will be the new business driver. Be it with products, packaging, production processes, or business models. Out-of-the-box thinking will be the new status quo.
For example, reusable packaging which is already gaining traction in the manufacturing, automotive, and consumer goods industries, will allow brands and companies to significantly reduce packaging purchase and disposal costs. Coca-Cola launched the “Universal Bottle” in 2018, combining multiple sparkling and still brands into a single reusable bottle in a uniform colour, shape, and size. This innovative solution which drives efficiency of collection – a major hindrance to PET bottle recycling efforts – has been hailed by the Ellen Macarthur foundation as a leading practice on packaging reuse.
Instead of driving volume and cutting costs, companies should start to focus on products that have a long life, are renewable, reusable, repairable, upgradeable, refurbishable, and can be shared by multiple users.
Beware, there is no checklist or one-size-fits-all solution to achieving circularity. Circular solutions are unique to the business, the product, the process, and the individual. An effective transition will require input from the top down – from C-suite/board level to the operators on the shopfloor, other players in industry, innovators, and suppliers across the value chain.
As Annie Leonard, the co-Executive Director of Greenpeace says: “There is no such thing as ‘away’. When we throw anything away it must go somewhere.” Where this ‘somewhere’ is, is up to you – it could be that treated wastewater is reused to flush toilets, or that canteen waste is composted and donated to a nearby garden allotment in the local community. In a circular economy, the possibilities are endless.
Call our sustainable operations team to find out how we can help you develop and implement your circularity roadmap, and adopt zero waste strategies and waste management solutions.
more than a word.