Circular Economy And Sustainable Development: A Match Made In Heaven
February 7, 2024
The circular economy is an economic model that minimizes waste and maximizes resource use. It replaces the ‘end-of-life’ concept with restoration and a shift towards renewable energy.
This model can significantly contribute to the United Nations’ Sustainable Development Goals (SDGs) based on sustainability principles. This goal aims to end poverty, protect the planet, and ensure peace and prosperity for all.
One key aspect of the circular economy is reducing waste and pollution.
The circular economy is an ecosystem where components, products, and byproducts retain value. Therefore, it focuses on reduction, reuse, and recycling.
This post will help you understand the role of the circular economy in modern businesses and how it helps promote sustainability.
Role Of Circular Economy In Businesses
The European Environment Agency states that the circular economy minimizes environmental impacts. It closes the loop on resource use and keeps products, components, and materials at their highest utility and value.
Moreover, with the rise of organizations like Sharpei, businesses are now finding action-based solutions to address short-term consumption and unsustainable conditions on Earth.
Moreover, the circular economy can play the following functions for businesses:
Drive Innovation
Business leaders and investors increasingly recognize the commercial risks and opportunities in sustainability. This leads to more ambitious sustainability programs.
The circular economy is embedded in new practices of cooperation and collaboration. This system drives businesses to look at their existing partnerships differently and consider new kinds of collaboration.
The role of the circular economy in innovating businesses has influenced the following functions:
Business Partnerships & Collaborations
The circular economy encourages collaboration within businesses. However, this has yet to become the regular norm.
Sustainability challenges prompt businesses to reconsider partnerships and explore new cooperation forms.
In supply chains, public backlash has left suppliers with unpaid orders.
For instance, $40 billion worth of stock remained unpaid in the fashion industry until the #PayUp campaign resonated with consumers, forcing many brands to pay their debts.
Processes
Circularity and carbon reduction forces businesses to rethink their processes, such as sourcing, production, and logistics.
This approach links to LEAN production, which optimizes production flow and minimizes waste to maximize resource efficiency.
Therefore, businesses use by-products from processes in other sectors, forming a symbiosis model.
Product
Circular product innovation allows businesses to access new markets, find customers, and stay ahead.
However, influencing consumer usage, care, and disposal of products is crucial for Scope 3 emissions.
Packaging
Plastic pollution in oceans has played a major role in shifting towards circularity.
Therefore, packaging teams collaborate with supermarkets, food and beverage companies, and other FMCG businesses to help them address this challenge.
Create New Business Opportunities
The circular economy can generate new revenue streams for businesses, such as recycling and waste management.
Therefore, emerging markets can explore the following opportunities:
- Develop circular business models.
- Promote sustainable design.
- Support circular value chains.
- Build circular cities and communities.
The Platform for Accelerating the Circular Economy (PACE) is driving this change, with over 200 experts from 100 organizations developing the Circular Economy Action Agenda.
This set of publications analyzes the potential impact and calls for action across five key sectors:
- Plastics.
- Textiles.
- Electronics.
- Food.
- Capital equipment.
Therefore, all organizations, including businesses, governments, civil society, financial institutions, and research groups, have a role to play.
Contribute To Competitiveness
Companies that started in the circular format are set to disrupt linear organizations and erode their market positions.
However, legacy businesses that can adopt new circular business models will survive. The transition to circularity has political support, with the EU aiming to make Europe cleaner and more competitive.
Customers and governments also support this transition, with Gartner predicting that by 2029, supply chains will no longer produce waste.
By 2030, businesses without circular models will be uncompetitive.
Reduce Costs
Circular products and components are designed for reuse, repair, refurbishment, and dismantling, resulting in lower costs for materials and components.
For instance, Sweden-based SKF offers oil-as-a-service through its RecondOil offering. This offering uses double separation technology to remove even the smallest contaminants from oil for reuse.
This allows for the same seven-year production cycle without additional oil or logistical costs.
However, the circular economy requires investments and courageous business decisions to transition to value creation, capture, and delivery, as it does not provide cost reduction from day one.
Improve Resilience
The circular economy aims to tackle climate change, biodiversity loss, and social needs by promoting prosperity, jobs, and resilience while reducing greenhouse gas emissions, waste, and pollution.
It combines economic and business opportunities with environmental and social benefits, generating long-term resilience.
Circular products are designed to recover their embedded components, materials, and energy when no longer functional. Moreover, users get incentives to return them through deposits or product-as-a-service contracts.
Therefore, organizations that control their production input by recovering components and recycling materials can better withstand the following conditions:
- Supply chain instability.
- Product shortages.
- Price fluctuations.
Lastly, for product-based businesses, adopting a circular model can lower production costs by using waste materials instead of raw materials and reduce disposal and procurement costs.
Improved Customer Retention
Circular business models require continuous dialogue throughout the business ecosystem. This starts from the product’s lifetime, unlike the linear economy, where companies sell new products to the next in line.
These models offer product-as-a-service, where customers pay for the use of a service over a limited time while the provider maintains ownership and is incentivized for ongoing maintenance, durability, upgrade, and treatment.
The sharing economy maximizes the use of idle assets across communities, providing affordable and convenient access to products and services.
These circular business models and new recovery models offer several customer touchpoints, including during returns, repairs, and upgrades. This increased intimacy allows for consistent dialogue, helping providers understand customer usage patterns and perceptions.
The Future With Circular Economy
According to speculations, the Circular Economy market will grow at a rate of 7.59%. Its value is expected to increase from USD 339241.5 million in 2022 to USD 526261.8 million by 2028.
Therefore, this transition to a circular economy could create six million jobs worldwide as companies replace traditional money-making methods.
Circularity offers efficiency, as waste streams like plastic, paper, glass, and tires will be stopped from exporting from 2021 to 2024, requiring onshore processing by 2024.
By 2030, the resource recovery rate will increase to 80%, and food waste sent to landfills will be halved.
The growing demand for sustainable raw materials is crucial for the circular economy. It helps conserve natural resources and promotes innovation in design and manufacturing.
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