AS.jpg)
The ‘circular economy’ - trying to keep products, parts materials in use for as long as possible through refurbishment, remanufacturing and recycling - is still at the smart idea stage. It’s being pitched as a win-win, reducing the dependence on natural resources while also reducing risk in terms of access to materials and delivering bottom-line growth. Accenture estimates the circular economy offers a $4.5 trillion opportunity. The World Business Council for Sustainable Development argues it is “the biggest opportunity to transform production and consumption since the First Industrial Revolution 250 years ago…we can boost the global economy’s resilience, support people and communities around the world and help fulfil the Paris Agreement and the UN Sustainable Development Goals.”
This kind of portrayal can be too big and too idealistic for businesses - looking just too detached from the everyday realities of existing models of resourcing and production. How can such long-established and intricate systems be replaced without involving major, high-risk investment and re-organisation of the entire business?
The shift to a circular economy is critical for global sustainability. The United Nations International Resource Panel has reported that demand for resources will reach 130 billion tons by 2050 (from 50 billion in 2014), an overuse of the planet’s resources by more than 400%. But for the idea to catch hold in practice, and for
businesses to be successful, it’s important to not only think in terms of processes for resources and products. We need to take into account the role of people as consumers, the social environment and its readiness to be part of the circle.
Loopy Business?
The principle is simple enough for businesses - don’t let anything to go to waste. Think about how products can be made more durable, renewable, reused by other consumers, repaired and refurbished rather than ditched. But where to start? The World Business Council for Sustainable Development (WBCSD) this year set out basic models for moving forward. These were:
- Circular Supplies: using renewable energy and bio-based or fully recyclable inputs.
- Resource recovery: looking again at all by-products or waste and what can be used elsewhere. In one of the projects developed at the Centre for Global Eco-innovation at Lancaster University, one local food manufacturing business sells its eggshells to cosmetics firms for the collagen.
- Extending product life: encouraging longer lifecycles through repairs and upgrading, and by ensuring products are designed in ways to allow for this.
- Sharing: helping to connect product users and encourage shared use. In other words, does everyone need to own two cars, or have their own lawnmower - couldn’t someone else be making use of it when you’re not?
- Becoming a service provider: change the model of use away from ownership to providing paid access to a product. For example, not buying new your own IT hardware every few years but paying for computing power.
The WBCSD has pointed to technological developments that will support implementation: the Internet of Things for tracking resources and waste; 3D printing and modular design to reduce production wastage; bio-energy and bio-materials to reduce dependence on fossil fuels.
Importantly, there are different forms of capital to be made from the new models, beyond the core issue of sustainability and security of resources. Most obviously as new generations of consumers become aware of scarcity issues - and have more choices - they will want to be associated with ‘clean’ brands. There will be
significant reputational capital to be made from substitutions of less harmful materials, innovative product design and promoting ‘cool’ new ways of being a ‘good’ consumer. And also social capital in terms of generating new forms of employment in skilled areas such as repair and refurbishment; offering affordable services to disadvantaged communities; and creating new partnerships and collaborations across business networks to share materials.
There is low-hanging fruit in businesses manufacturing noncomplex products; a simple example would be a bicycle shop which relies less on selling new product and more on repair services, leasing bikes when they’re needed, trade-ins and upgrades. Other operations are far more complex and require more unpacking in terms of components of manufacture and systems of reverse logistics to recover them. IT is a good example of what we have come to see as everyday items that actually need exotic, precious and highly scarce treasures from Africa, Asia and South America to work at all.
A key point, however, is that becoming part of the circular economy is not all or nothing. Most businesses will be able to include useful elements from the approaches listed, taking the benefits from the changes that best fit their sector, operations and forms of governance.
Love waste
While the circular models are possible and the financial figures can look impressive, the social context needs to work alongside them both. People need to be accepting of the implications in terms of acting differently as consumers, the quality of goods, and what the circular economy may mean for jobs.
There are technological challenges when it comes to identifying and capturing good quality waste materials, available in the right quantities and right forms, and then being able to process them at the best price. Virgin natural resources, at this stage, can sometimes be cheaper to access and meet higher quality standards. There is a divide between countries willing to take waste resources for re-use, such as lower grade materials, and those that don’t. The principle of a circular economy will flounder if wealthy economies just depend on the emerging economies to take their waste, ticking the box of re-use. This is only waste tourism. It will be essential in the coming years that the shift to circular models isn’t only seen as an opportunity - and an excuse - to continue consuming new products at the same level.
Global support for circular business practices will be needed: policies relating to waste management, shared international standards on waste and reuse, as the basis of mass, international markets. That will take public understanding and support for change along with new thinking on the value of waste. Who finances the new systems of waste management, involving a mixture of incentives for business – high charges for ‘polluters’ and disposal, more opportunities for commercial financing, landfill mining and recovery.
Another challenge will be expectations around job creation associated with the “greening” of the economy. In one piece of research we looked at cases of a nonprofit organisation and a small private enterprise in the North West region, and we saw that, despite government support for developing skills in e-waste, the actual use and development of skilled roles was minimal. The relatively more skillintensive process of reuse was seen to be substantially less profitable than recycling and resource capture.
Circular development
We have brought the circular economy into the classroom. MBA students who take the Responsible Management and Ethics module, or undergraduates in Management & Sustainability and Business & Management in the 21st Century, will grapple directly with how business operations can be adapted, working on real-world case studies. This is the key at this stage in the life of circular ideas, making sure there is the knowledge and skills to push for innovation, manage the fall-out from change and secure implementation for the long-term. Critically the LUMS programmes are plugged into the work of the WBCSD and its Circular Economy project
group, as well having set up relationships with some of the leading innovators like 2degrees and its worldleading network for collaboration onustainable business.
Takeaways:
- See the latest insights and advice from the World Business Council for Sustainable Development and its Guide for CEOs published in February 2017 - wbcsd.org
- Manufacturers and retailers should look into the Manufacture 2030 global platform (a collaboration between Lancaster University, Wrap, the Pentland Centre for Sustainability in Business and the CDP network of investors and purchasers) aimed at bringing together members of supply chains to cut costs, risks and environmental impacts through cross-industry collaboration. More information can be found here - manufacture2030.com
- More information on the MBA programme and its Responsible Management and Ethics module can be found here - lancaster.ac.uk/lums/study/mba
- There’s updates on the latest Pentland Centre for Sustainability in Business research into the circular economy at lancaster.ac.uk/pentland
Dr Alison Stowell is a social scientist working in the Department for Organisation, Work and Technology and Pentland Centre for Sustainability in Business. Her research focuses on social and organisational responses to the challenges of waste - and e-waste in particular.
You can subscribe to Fifty Four Degrees here: lancaster.ac.uk/lums/business/fifty-four-degrees/