Circular Economy: Compelling logic, complex execution

The logic behind the circular economy – a system that designs out waste and pollution, keeps products and materials in use, and regenerates natural systems – is indeed compelling. However, the transition to such a system presents significant challenges to many companies. This article aims to shed light on these challenges and provide practical guidance, drawn from real-world examples, on how to overcome them.

Challenges to the implementation of a circular economy

Technical Feasibility:

While the circular economy concept is intuitive, the technical feasibility of implementing it can be challenging. This is particularly evident in industries that use complex products, often composed of a variety of materials that are hard to separate and reuse. This challenge is also present in industries dealing with products with short lifecycles, where the rate of technological advancement quickly renders products obsolete.

For instance, in the electronics industry, products are often made up of various materials, making them challenging to disassemble and recycle. Companies like Apple are attempting to address this by creating robots that can disassemble iPhones and recover valuable materials for recycling.

Economic Viability:

Transitioning to a circular economy often requires significant upfront investments in research, new technology, and infrastructure. Furthermore, the economic viability of circular practices can also be uncertain due to market fluctuations, the cost of recycling versus virgin materials, and customer willingness to pay for sustainable products.

For example, Patagonia, an outdoor clothing company, has pioneered a take-back program where customers can return their used clothes for recycling or resale. However, the company admits that the initiative currently doesn't generate profits but is an investment in their long-term sustainability vision.

Supply Chain Complexity:

Managing supply chain complexity is another major challenge, especially for companies operating globally. These businesses need to coordinate with numerous suppliers, logistics providers, and customers, which makes implementing circular practices complex.

IKEA, for example, is tackling this challenge by piloting various circular initiatives such as offering furniture leasing and buy-back programs. They're also exploring partnerships with logistics providers to facilitate product returns.

Regulatory Barriers:

In some instances, existing regulations can discourage circularity. For example, some regulations classify certain recycled materials as waste, thereby limiting their use.

Unilever faced this challenge with its revolutionary CreaSolv Process, designed to recycle plastic sachet waste. They had to work closely with regulators to ensure the recycled plastic met all safety and quality standards.

Overcoming barriers

Innovation and Collaboration:

Addressing technical challenges requires innovation and collaboration. Businesses need to invest in R&D and collaborate with technology providers, research institutions, and even competitors to develop new, circular solutions.

One excellent example is the New Plastics Economy initiative by the Ellen MacArthur Foundation, which brings together businesses, governments, and academics to rethink and redesign the future of plastics.

Develop Business Cases and New Business Models:

To tackle economic challenges, companies need to develop robust business cases for circularity. This involves identifying and quantifying the financial, environmental, and social benefits of circular practices.

Philips Lighting, for example, shifted from selling light bulbs to providing "light as a service". This business model encourages circular practices like product take-back, refurbishment, and recycling, as Philips retains ownership of the lighting equipment.

Engage the Entire Value Chain:

Addressing supply chain complexity requires engaging the entire value chain, from suppliers to customers, in the circular vision.

For example, H&M works closely with its suppliers to implement sustainable practices, such as recycling textile waste into new garments. They also encourage customers to return unwanted garments through their garment collecting initiative, regardless of their condition.

Influence and Adapt to Regulations:

Companies can collaborate with regulators to influence policy and adapt to existing regulations. They can demonstrate the safety and quality of recycled materials or work with industry associations to lobby for more circular-friendly regulations.

For instance, Google partnered with the Ellen MacArthur Foundation to influence policies in support of a circular economy. They used their position to push for changes in regulations, particularly around e-waste.

Conclusion:

While the logic of the circular economy is undeniably compelling, the transition from a linear to a circular model is complex. It requires significant changes in technology, business models, and supply chain practices, and may necessitate working within regulatory frameworks that weren’t designed with circularity in mind. However, as many forward-thinking companies are demonstrating, these challenges are not insurmountable.

By investing in innovation and collaboration, developing robust business cases, engaging the entire value chain, and actively working with regulators, companies can successfully navigate their journey towards a circular economy, reaping the economic, social, and environmental benefits that come with it.