A linear approach to production entails taking, making and wasting. Natural resources are used to create a product, the by-products are then disposed of. The circular economy disrupts that chain, using new technologies to create a far more sustainable, efficient, cost-effective relationship between markets, consumers and natural resources. Circular models entail taking, making, taking, making – in perpetuity. It means eliminating the concept of waste altogether and acknowledging the value in everything.
Transitioning to the circular economy would represent a revolution in the global economy’s organisation of production and consumption. Supported by a simultaneous digital revolution, the ‘circular advantage’ could represent a $4.5 trillion opportunity by 2030, according to Accenture Strategy research. That reward comes from cutting waste and from utilising assets, resources and products far more effectively.
Start-ups and industry leaders alike are tuning into this opportunity, but most businesses remain anchored to a linear approach to growth. Accenture’s analysis of 120 companies for the book ‘Waste to Wealth’ identified five circular business models which will help companies maximise the advantages of the circular economy. The first of those is the circular supply-chain, using fully renewable, recyclable or biodegradable materials which can be repeatedly used and therefore reduce costs while increasing predictability.
Secondly, adopting recovery and recycling means by-products and waste are either recaptured or reclaimed, and ultimately revived. Proctor and Gamble already operate 45 facilities on this zero-waste basis. Product-life extension – repairing, upgrading or remarketing products which have fallen out of use – is another key model in the circular economy. It means keeping products alive and relevant, and building customer relationships that go far beyond transactions. Through its refurbishment business, Dell takes back and sells old units when possible.
The sharing platform opens opportunities for consumers, companies and entrepreneurs to rent, share, swap or lend their goods. Less resource goes into production, and consumers can earn from their goods. Uber, Airbnb and Lyft are just a few examples of the enormous potential of this model. Finally the products as a service model, implying manufacturers bear the total cost of ownership, places the emphasis on reliability and longevity of products. That means that durability trumps disposability, making for a far more sustainable economy.
Underpinning these new models are technological innovations. Mobile enables easy access to data and applications; social media supports rapid customer feedback; cloud computing allows for dematerialisation – the transfer of physical objects to the digital realm; while big data analytics means companies can understand behaviours and preferences. Machine-to-machine communication makes work on factory floors near-seamless; advances in modular design and advanced recycling mean that individual components can be replaced or rebuilt with greater simplicity. Life and material sciences technology enables outputs, as well as inputs, to be altered; trace and return systems reduce the costs of collecting and repurposing used products; and 3D printing simplifies repair and replacement.