The industrial economy as we know today is based on a linear model of production and consumption that follows a “take – make – dispose” pattern.
This means that companies, extracts materials, use energy and work to manufacture a product, sell it to and end consumer who, finally discards it when it has accomplished it purpose.
What’s wrong with this model?
From the society’s point of view, the take-make-dispose pattern is dangerous since it will continue to dump environmentally and socially negative externalities.
From the company’s perspective, on the other hand, it is a matter of performance and survival. Firms, in fact, are facing a number of challenges that are inevitably putting under pressure their traditional business models, namely:
- resource scarcity;
- demographic growth;
- climate change;
So, what solution?
In response to this challenges a new economic model has been elaborated with the aim of rethinking value creation: the circular model.
The majority of us probably knows the notion of green economy. The core of green economy is the clean and safe production of goods, materials and energy, the reconstruction of natural ecosystems, the minimization of emissions and pollution and efficient use of non-renewable resources. Circular Economy is part of green economy but it goes beyond it.
The most authoritative definition is the one given by Ellen MacArthur Foundation:
“An economy that is restorative and regenerative by design and aims to keep products, components and materials at their highest utility and value all times, distinguishing between technical and biological cycles”.
The circular model allows companies to free their production system from scarce resources through disruptive technologies and business models.
The core idea is that firms will focus not only on costs, efficiency in the supply chain, factories and operations, rather they concentrate on rethinking products and services, while having a look to their internal operations, as well as, to the external environment.
Internally, companies need to introduce into their supplies chains fully renewable, recyclable or biodegradable materials that can be re-used in consecutive life-cycles as new raw materials.
Basically, everything that is usually conceived as waste, is instead revived for other uses. In other words, companies are asked to recover end-of-life products and to recapture and reuse valuable materials, energy and components.
Externally, they have to address customers’ concerns for the environment – or, if necessary, to educate them – delivering cutting edge innovation.
Innovative and sustainable products are those that can be maintained, or even improved, through repairs, upgrades or remanufacturing. The idea beyond that, is that discarding products when they are broken, out of fashion or no longer needed, is no more sustainable.
From the firm’s point of view, this requires a change of mentality. Specifically, companies should shift from merely selling goods, to actively keep them alive and relevant.
Actually, more and more companies are moving from selling products to delivering services, or building platforms for collaborative consumption, as well as to creating really innovative products that, thanks to the support of the most disruptive technologies, are long-lasting, smart and sustainable.
Summarizing, the circular model can be declined and implemented in several ways: taking into consideration company’s internal operations, focusing on supply chains and/or being oriented toward customers and rethinking products.
It can be considered as a framework for change, and several companies are seriously implementing the principles of circular economy. Others are just taking their first steps in this field, however it is clear that something is changing and that their awareness is increasing.
Within the next weeks we will discover together companies’ best practices in implementing the circular model and how some of them are dealing with sustainability issues.