Getting Circular: Five Steps to an Advanced Economy

By John Hoekstra, VP, Sustainability & Cleantech Services, Schneider Electric

The transition from a linear to a circular economy is an essential part of sustainable development.
And the acceleration of that evolution is more critical than ever since the business community and world at large are starting to see the long-term impacts of entrenched linear models — natural resource depletion, climate change and economic risks.

Further, about 50 percent of CO₂ emissions across the globe are tied to materials, goods that often produce a significant amount of physical and financial waste. It’s clear that alternative business models are needed to create an environment where companies can operate and thrive for decades to come.

A circular economy is centered on the cradle-to-cradle design principle, rather than the more common cradle-to-grave path of planned obsolescence. This focus on producing goods and services in a way that limits the consumption and waste of resources allows companies to use natural capital more efficiently. So how do businesses start to evolve their processes toward a circular approach?

Following are several frequent entry points organizations should consider:

1. Opt for Eco Start by reconsidering the design, manufacture and delivery of products — taking inspiration from nature in the form of biomimicry and focusing on process optimization throughout the product lifecycle. For example, Ecovative has designed a new form of packaging made of mycelium or mushroom roots. The raw material is cheap, plentiful and easy to grow, and the packaging is compostable.

 And, breaking from the traditional lifecycle view, the most innovative companies don’t see disposal as the end of the line. They take back and re-manufacture products, or recycle parts to retain their value.

2. Think Collaborative Economies need a range of businesses of various scales to support the shift from an asset-owning to service-based culture. The practice of reusing, sharing and pooling resources is growing among consumers, demonstrated by the rise of collaborative economics. This includes reselling or donating instead of discarding, letting instead of owning (think Airbnb and Lyft), and the prosumption of energy via technology like microgrids and blockchain.

3. Think Durable

In this new economic model, the durability of products becomes an essential factor to avoid scheduled obsolescence, making it possible to decouple the service provided from the quantity of products distributed and create new value chain streams. A well-known example is Patagonia, a retailer that has grown its business on repair and refurbish principles, encouraging customers to reuse its outdoor gear instead of replacing it. The company also has a center where buyers can send products for recycling, helping further its “never in the landfill” approach and philosophy.

4. Focus on Renewable The energy required to power a regenerative economy should itself become a circular asset with a combination of renewable and cleantech resources. From fuel cells to virtual power purchase agreements, there is a growing array of options for companies, all designed to decrease fossil-fuel dependence while increasing business security and resilience. Case in point: The new headquarters for electronics giant Apple includes a mix of solar, fuel cell and microgrid technology to meet the energy needs of the entire campus.

 Businesses should also look at how and when they consume energy, improving operational and process efficiency so they’re using a minimum amount of power — an approach known as Active Energy Management. Ideal for the planet as well as the bottom line.

5. Innovate and Innovate Again As companies move from linear to more modern systems, they must consider the full scope of pre- and post-production. Philips notably created a bespoke “pay-per-lux scheme” where instead of buying bulbs and fittings, customers only pay for light itself. The company is then responsible for the maintenance of the physical fixtures.

To bring it full circle, these actions are significant, but they are ultimately just a start. The proven limitations of a linear approach require the wide-scale move to a circular economy. Adopting circular principles isn’t just an environmental play, although that is of critical importance. It also makes fiscal sense for individual businesses and helps sustain global markets as a whole.

The Ellen MacArthur Foundation is notable resource for additional information. Its CE100 program — a platform to accelerate the transition to a circular economy — is supported by leading companies across the world such as Apple, Coca-Cola and Unilever.