Having introduced the circular economy in my first blog on this topic and considered the adoption of its thinking by some big names and start-ups, I now consider the why and how of adopting this thinking.
Perhaps the question is not why are businesses showing an interest in these schools of thought, but why now? After all, circular economy thinking is nothing new – reuse and recycling have always happened. There are many drivers convincing business that there is a strategic imperative to act:
- rising raw material costs,
- concerns over access to raw materials,
- raw materials price volatility,
- waste disposal costs,
- regulatory drivers, and
- consumer pressure.
As we move into an era of extremely rapid population growth coupled with the rise of the consumer classes in developing countries, these trends will accelerate. The fundamental argument though is that circular economy business models make economic sense: circular economy proponents argue that there is inherent value in the materials and products currently being lost to business and the economy and that new ways of consuming can help realise that value. Companies can find it tough to spot opportunities for new products or transformative business models. For example, consider your by-products – if you’re a saw mill then your waste, saw dust and chippings, has value repurposed in particleboard, as mulch or even in synthetic fireplace logs. In this case the waste is visible and can’t be ignored but there is hidden value in most businesses.
According to a report by McKinsey in collaboration with the World Economic Forum and the Ellen MacArthur Foundation, US$1 trillion a year could be generated by 2025 for the global economy and 100,000 new jobs created for the next five years if companies focused on encouraging the build-up of circular supply chains to increase the rate of recycling, reuse and remanufacture.
Maybe I’ve still not convinced you that circular economy is more than simply sustainability rebranded, more likely to add cost than value to the economy. If so perhaps it’s worth reflecting on the success of eBay, founded in 1995 by a user innovator who wanted a marketplace to buy and sell used items. According to eBay’s website, the first item it ever sold was the founder’s broken laser pointer for $14. As consumers we have always known that our possessions have value far beyond the materials they are composed of. Business is just beginning to catch on.
I’ve spent the last five years supporting companies to innovate the next generation circular economy products and services so have seen first-hand the investments being made. It’s a complex business requiring an understanding of how one’s business will be affected by long-term global mega-trends such as resource price growth, price volatility and population growth, the ability to identify and evaluate circular economy opportunities as well as a detailed understanding of technologies and business models required to turn ideas into a viable business.
Fitting together the pieces of the puzzle is complicated and spotting the future opportunities whilst managing the current business can be a challenge. As consultants our role is to provide that outside, independent perspective, to spot the un-obvious opportunity, provide insight into unfamiliar markets and see where technologies from one sector could transform another.
At Cambridge Consultants we’re in a privileged position to have deep technical expertise working together with strategic innovation experts, designers and service developers – an interdisciplinary approach that is essential when approaching systemic challenges such as circular economy. In a recent opinion editorial for edie.net I go into more detail about what it takes for business to develop an effective circular economy business model.
Working in the field of innovation is a great privilege in itself – I feel like I often have a preview of the future. Working on circular economy projects is the icing on the cake and I’m convinced that these innovations will mean that the Earth’s resources are stewarded better in the future.