With many organisations adopting a more sustainable outlook, the transition towards circular economy is becoming more than just an ideal.
Circular economy models coincide with worldwide goals and policies. For example, the United Nation’s Sustainable Development Goals (SDGs) includes targets such as the ‘Climate Action’, ‘Life on Land’, ‘Decent Work and Economic Growth’ and ‘Responsible Consumption and Production’ targets. It’s no question that the growing implementation of the model is significant within a society that’s facing ever-growing environmental concern.
Source: un.org
But to properly understand how the model is revolutionising our world, we must explore the circular economy in action.
A Global View into the Circular Economy
The circular economy is rapidly gaining worldwide attention from many government systems. In 2015, the European Commission established a Circular Economy Action Plan, with clear targets for waste reduction. These targets included initiatives to recycle 65 % of municipal waste by 2030, and economic incentives to discourage landfill disposal (ec.europa.eu, 2020).
Source: ec.europa.eu
This plan was updated in March 2020, as part of the European Green Deal. It includes measures aiming to improve products sustainability and focuses on high impact sectors.
At the 20th EU-China summit in 2018, two circular economy world leaders, China and the European Union, collaborated to focus on sustainability and resource efficiency. They produced the Memorandum of Understanding on Circular Economy, a statement detailing the best practices for implementing policies and strategies to invest in the circular economy.
What are we doing in Australia to support a Circular Economy?
In Australia, the 2018 National Waste Policy introduced its five circular economy principles.
Source: theconversation.com (UTS Institute for Sustainable Futures)
This policy provides a framework of collective actions regarding waste management for governments, businesses and individuals. Each principle includes strategies to enhance efficiency, education and awareness of a circular economy. For example, principle one involves a decrease of waste through smarter designs, reuse or repair. Additionally, it targets behaviour change by implementing education initiatives and coordinated knowledge sharing.
Local governments are also enforcing circular economy-enabling policies. A major policy is the waste levy, a tax imposed on wastes disposed in landfills. Queensland just reintroduced its waste levy in 2019, for 39 out 77 of its local government areas (covering 90% of Queensland’s population). To date, the levy rate in Queensland, where applicable, is $75 per tonne of general waste disposed, with increases for regulated waste disposal.
Monitoring Business Sustainability
Circular economy principles are becoming increasingly common in businesses’ practices. Gartner surveys show the shift in supply chain strategies to build resiliency through circular economy models. Last year, Gartner reported that 70% of supply chain leaders planned to invest in circular economy within the next 18 months.
More generally, businesses are looking to include sustainability in their organisation’s policies for economic, social and environmental benefit. To allow stakeholders to monitor a company’s sustainability state, businesses are following frameworks for sustainability reporting such as the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB). Most sustainability frameworks monitor circular economy principles such as waste management or materials efficiency.
Evolving Business Models
Companies that are going circular need to see their business model evolve, by prioritising access to resources and services over ownership. Some effective circular economy business models include:
The hire or lease model
This model is already utilised within many industries but has recently become more apparent within sectors such as retail and furniture sales. For example, in response to increased customer interest, IKEA is testing subscription-based leasing offers, to rent furniture instead of buying it. Such a model requires the producer to maintain its products in the best state possible to gain maximum reuse, thereby lengthening the product’s life expectancy.
Products as a service
Similar to the hire or lease model, the buyer does not own the product but pays for a service associated with it. This kind of model has become more enabled due to the increase of IOT (connected objects) in everyday life. Like the hire and lease model, the products’ owner will aim to extend the products life expectancy, and will be responsible for disposal, therefore encouraging better design.
Incentivised return
By incentivising return on used products, companies can refurbish or recycle them to produce new products. Incentives can be financial, recognition-based or practical (e.g. no hassle pick-up). Phone manufacturer, Samsung, utilises the incentivised return model through their “trade up now” service, which provides discounts on new devices to customers who trade in old ones. The old device is then recycled or refurbished and reused.
Collaborative consumption
This business model involves rental or sharing of products within a community and is usually enabled through a digital platform. The aim is to maximise product usage, making the collaborative consumption model particularly efficient for low-usage rate products. Businesses utilising this approach are often ‘neighbours helping neighbours’ platforms, such as Nextdoor or Drivemycar.
Asset management
Businesses offering asset management services aim to maximise asset lifespan and efficiency. This is done through tracking performance and identifying when maintenance, an upgrade or replacement is required. Additionally, redeployment to other locations can also manage the assets end-of-life, producing an efficient and sustainable asset. Synengco’s SentientSystem utilises the asset management approach to maximise asset usability.
Resource recovery
Last but not least, a well deployed model is one that involves recovery of already used materials. This includes recycling businesses, where materials are recovered and transformed.
So, why isn’t waste a thing of the past yet?
In a society where sustainability is becoming an increasingly forefront topic, businesses and government systems still experience multiple challenges.
On one hand, consumer demand doesn’t always meet the circular economy expectations. Prices for sustainable products and services may be higher than conventional ones. Even though circular economy is becoming more popular, general trends still favour consumerism and convenience (fast fashion, single use products).
On the other hand, due to major financial and logistical barriers, many businesses fail to propose solutions towards a circular economy. Organisations must undertake adjustments to their business models and partnerships, which requires ample resources and time. Virgin materials are often less expensive than recycled ones, due to a lack of local solutions for end-of-life recovery. In addition, innovation and research is required to uncover cost-effective and sustainable solutions that encompass all circular economy areas and make the economy system work in unity.
How can we make waste a thing of the past?
The concept of a circular economy has gained much spotlight in recent years. The underlying issues connected to consumerism, however, lie within a lack of consumer knowledge and options of circular economies.
Organisations such as the Ellen MacArthur Foundation have already been developed to accelerate the transition into a circular economy through providing awareness and education. Considering the current environmental degradation is predicted to be irreversible by 2030, it is crucial that we develop knowledge and awareness as to the benefits of a circular economy and work to adopt a circular lifestyle.