Under the mainstream radar, businesses are innovating a new industrial paradigm: the closed loop (PDF) company.
The impetus? Our industrial economy is approaching a tipping point where the old “take-make-waste” business model will dead-end.
A growing and urbanizing global population and resource scarcity already are forcing some businesses to rethink their products based on the assumption of infinite and cheap material inputs.
Looming resource shortages, rising and volatile commodity costs, technological advancements, extended producer responsibilities, landfill bans and changing customer preferences are driving a paradigm shift to the circular enterprise.
In a circular economy, business growth is decoupled from the use of scarce resources through new value propositions based on durability, renewability, reuse, upgrade-ability, repair, sharing and de-materialization.
“A circular economy is restorative and regenerative by design, and aims to keep products, components and materials at their highest utility and value at all times,” according to the Ellen MacArthur Foundation.
The making of multiple-use products
To future-proof their operations against resource constraints and government regulations, while also satisfying aspirational consumers, circular companies produce durable goods that enable multiple use.
Products and logistics chains are reconfigured for eventual disassembly, recycling and return. Expired products are harvested for components and materials for reuse or, preferably, upcycled into still higher quality products.
Forward-looking companies create circular value chains for the benefit of their customers, society and the bottom line.
For example, Novelis, the world’s largest producer of rolled aluminum, is building a closed-loop manufacturing system in which 80 percent of the aluminum it uses to make its products — beverage cans, automobile parts and specialty products — is recycled material.
By decreasing its dependence on primary aluminum and shifting to recycled aluminum as its primary input, the company intends to dramatically reduce its production costs and increase supply security.
This sustainable manufacturing approach significantly reduces the energy, water, landfill waste and greenhouse gas emissions associated with the company’s operations while lowering the carbon footprint of its customers’ products.
Demystifying the circular economy
Recently, the National Zero Waste Council, a network of organizations that advocates for collaboration on a Canadian waste prevention agenda, recently published a series of case studiesshowing how circular businesses fare when compared to companies operating in the traditional linear economy.
BMW, Philips, Enterra Feed Corporation and Canadian furniture maker Nico Spacecraft were among those examined.
The case studies demystify the concept of the circular economy, and illustrate the tangible benefits of this new way of doing business. They demonstrate the five circular economy business models conceived by Accenture:
- Circular supplies: Providing renewable energy, bio-based or fully recyclable materials.
- Resource recovery: Recovering useful resources or energy from by-products or waste.
- Product life extension: Extending the lifecycle of products and components by repairing, upgrading and reselling.
- Sharing platforms: Maximizing the use of products through shared use, access or ownership.
- Product as a service: Offering product access rather than ownership.
An analysis of the case study companies reveals that the circular economy provides benefits to business such as enhanced employee retention, brand trust, partnership opportunities and government support.
These circular enterprise innovators also demonstrate an entrepreneurial zeal to create solutions to societal problems through their core business, with environmental aims positioned alongside commercial objectives.
These companies typically are led by forward-thinking entrepreneurs who possess systems thinking, collaboration and innovation skill sets and mindsets. They see the big picture and notice paradoxes and disconnects between the good life and how we are living it.
By looking at large industrial systems with fresh eyes, these entrepreneurs observe inefficiencies with the way manufacturing, production and consumption currently function. This enables them to spot underused assets, cost inefficiencies and design solutions found in nature.
This big picture reveals design opportunities, cost savings, new customer propositions and value creation potential.
The bottom line: These visionary leaders see waste, and consumption, differently — just as society at large will do a generation from now.
This article first appeared in greenbiz.com and is reprinted here with the kind permission of the author. Coro Strandberg is the Principal of Strandberg Consulting