3 reasons why a company should move into a circular economy

Today, the economy is built on a linear approach, which means that we extract natural resources, produce goods, and throw them away as soon they served their purpose (i.e., ‘take-make-waste’ model). On the other hand, a circular economy allows materials to flow in a continuous cycle and decouples growth from restricted resource consumption. A circular economy is founded on the idea that materials can be reused and recycled many times. By doing so, we protect the world’s natural resources and reduce waste. The cycle is achieved when companies, in their production process, remanufacture goods by recycled material and when consumers choose to reuse and repair products instead of buying newly manufactured ones.

The circular economy model is based on two loops, a biological loop and a technical loop (see picture). The picture illustrates the most important processes when implementing a circular economy and the parties involved. The cycle starts with renewal energy, clearly pointing out that there is no place for fossil fuels in a sustainable economy. The scheme specifies both the stakeholders and their role(s) in the process. Moreover, the picture indicates that consumers play a critical role in prolonging the product life cycle instead of ending it by throwing it away.

According to the technical loop, a company needs guidelines and a holistic approach for each stakeholder’s responsibility. Firstly, the company should aim to prolong the product life cycle by offering product maintenance and service. In a circular economy, when a consumer claims a product is damaged, the company should try to repair and redistribute it. If that is not possible, the product should be dismantled and send to the part manufacturer and refurbished. As a last resort, the materials should be recycled. The biological loop refers to the process of using material and components over time until it can be returned as nutrients to the environment. For example, torn fabric from clothing can be used as a cleaning cloth, then used as insulation material before being anaerobically digested and returned to the soil as nutrients.

Of course, there are economic and environmental gains when transforming your business into a circular economy, even if it requires a new way of thinking and often a reorganization. Three benefits include:

  1. Cost reduction: The company decreases the cost of purchasing raw materials. Also, waste disposal costs are reduced.
  2. Value chain cooperation: Closer collaboration with suppliers as the production processes need to synchronize. Also, residual products can be used if coordinated smartly.
  3. Environmental benefits: A circular economy is a more sustainable approach and supports the environment by increasing resource efficiency and contributing to more sustainable products.
    According to the principle “Rethink, Repair, Reuse, Remanufacture, Recycle,” product value should be maximized in a circular economy. Therefore, a circular economy emphasizes the need for a new product design that incorporates sustainability in its core. To extend the product life cycle, the products in a circular economy must have the ability to be dismantled in parts, repaired, and upgraded easily. Information regarding the products’ content is also crucial, as we must avoid recycling dangerous substances.

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