Reshaping production and consumption patterns from a linear to a circular economy makes good business sense, says Andrew Morlet from the Ellen MacArthur Foundation: it can reduce costs, generate new revenue and future-proof supply chains.
Constantly refined since the dawn of the industrial revolution, the linear ‘take-make-dispose’ model has led to impressive economic development. But it is now facing an increasing number of challenges. Whether you consider supply risks, negative externalities or acute price volatility, we need to look beyond our current extractive model to capture new economic opportunities. Can a circular model pave the way for a new era of growth and development?
The circular economy is designed to regenerate natural systems and manage non-renewable resources by keeping materials and products at their highest value as they circulate through the economy. Everything becomes an input to another process so waste is eliminated by design. Economic growth is decoupled from the consumption of non-renewable resources, which strengthens the long-term durability of the system.
Circular economy delivers considerable material cost savings and reductions in structural waste.
The Ellen MacArthur Foundation’s research shows, that the business case for a circular economy approach is compelling. First, a circular economy delivers considerable material cost savings and reductions in structural waste. It also makes value chains more resilient and increases security of supply. Furthermore, a circular economy will likely open up revenue opportunities by creating new business models that drive product innovation – something a number of leading businesses piloting circular models are seeing. Finally, people around the world are getting behind the concept so early adopters can capitalize on the potential to increase customer loyalty.
Collaboration is key
Reshaping today’s linear production and consumption patterns and establishing circular models will be a disruptive process that requires collaboration. We have to take a system view of the economy, and we won’t be able to do that unless all stakeholders and sectors work together across the value chain. Our business-led collaboration platform, the Circular Economy 100 (CE100), is designed to do just that: accelerate the transition to circular by bringing together leading organizations from around the world. It’s a unique, cross-industry and multi-disciplinary pre-competitive collaboration platform that helps members on every step of their circular economy journey; deepen individual and organizational knowledge, build internal momentum, establish networks, and develop collaborative projects.
Collaboration must go beyond sharing best practices in production and marketing. CE100 members recognize how important physical and virtual infrastructures are to the circular economy and the collaborative projects reflect this.
Smart products and reverse logistics
In the face of dynamic complexity, we need to understand how to design efficient circular value chains. One of the barriers to implementing reverse logistics operations at scale is the lack of effective returns forecasting across varying product models feeding into the circular loops at different times in a variety of conditions. At one end of the spectrum you need a highly standardized network that maximizes return volumes to create return pathways for products such as consumer electronics. On the other end, advanced industrial products such as medical equipment demand bespoke, high-touch requirements vis-à-vis handling and an integrated solution for asset collection and replacement.
Unlocking the circular potential
The Reverse Logistics Maturity Model is an example of a new logistics tool designed to help break down these barriers and reshape systems. It enables businesses to map out and scale up their reverse logistics operations, which are crucial elements for closing material loops in the circular economy. The model is a concrete outcome of collaborative projects developed through the CE100 program.
Today’s linear ‘take-make- dispose’ economic model will face more and more challenges. The circular economy is an attractive and viable alternative that forward-looking businesses have already started exploring. It harbors potential to reduce costs, generate new revenue and future-proof supply chains. Collaboration coupled with technological innovation and business model innovation is key to enabling the transition to a circular economy.