ABOUT CIRCULAR ECONOMY
BECAUSE THE FUTURE IS CIRCULAR
The circular economy is a profitable business that delivers more value with fewer resources. In a circular economy, materials and products are kept in the value chain for as long as possible. A circular economy business can increase business profits up to sevenfold compared to a traditional linear business while reducing a company’s environmental footprint by up to 60-85%.
The circular economy improves efficiency:
- In the use of materials
- In the use of capacity
- In the life cycle of products
- In the value of products at the end of their life cycle
- In serving customers by focusing on service sales instead of product sales
Circular economy is built together
Effective networking and network management are crucial skills for entrepreneurs in promoting the circular economy.
When exploring circular economy ecosystems and collaborative networks, it is beneficial to approach them with an open mind. New business opportunities and innovations often arise through collaboration between different industries, sometimes even with those that may not initially seem related to your own business.
Typically, the entities participating in the business ecosystem can vary greatly in size, structure, and impact, ranging from start-ups to large corporations. The same ecosystem can also include public administration entities, research organizations, and even competing companies.
At their best, ecosystems function as living collaborative organisms composed of diverse individuals and organizations, where different knowledge and skills are combined to generate a blend of new business and innovation, regardless of the time frame.
Questions
Have you already created a network portfolio and a network strategy to promote the circular economy in your company?
Do you continuously monitor and develop your network work?
What networks are you working in now, and what networks should you work in in the future, to ensure that your company’s circular economy is moving in the best possible way and in the direction you want it to go?
Are you good at identifying partners who could help you to launch a successful circular economy business?
Four Different Ways of Creating Value:
- Increase profits by selling new services, reselling products and recycling
- Increase brand value and customer satisfaction
- Reduce costs by increasing resource productivity and reducing waste
- Reduce the risks associated with supply chains and regulation
Biological and technical cycles
In circular economy, there are two separate cycles aiming for a closed loop. In a closed loop, the materials used are collected and returned back into the value creation chain.
- In biological cycle organic material eventually cycles back into the soil as nutrients for the next cycle. In the biological cycle, biological materials return to the biosphere through a natural process such as composting or digestion, resulting in fertiliser or biogas. Biological cycles include food, wood products and organic textiles such as cotton.
- In technical cycle inorganic materials are reused in the manufacture of new products. When a product can no longer be used, its components can be remanufactured. Parts that cannot be remanufactured can be broken down into their constituent materials and recycled. Inorganic materials include metals, minerals and polymers.
More about biological cycle
Almost all the raw materials we use can be returned to nature, allowing the elemental components contained in them to re-enter the natural biogeochemical cycles, such as the carbon, nitrogen, and phosphorus cycles.
The biological cycle can be divided into anaerobic and aerobic composting. In anaerobic composting, the material decomposes, producing usable biogas, while in aerobic composting, it decomposes, producing nutrient-rich soil. Different composting methods should be considered for all products made from organic matter.
Wool pellets are a good example of a new fossil-free fertilizer consisting solely of unwashed sheep’s wool. The pellets are made from dirty or coarse wool that would otherwise be discarded.
More about technical cycle
In the technical cycle, materials are generated through human activities and the material requirements of goods. These materials are not natural, even though their original raw materials are derived from nature.
Through processing, the raw materials have transformed into forms that cannot reenter natural cycles. In such cases, efforts are made either to extend the lifespan of products or to reuse the raw materials used in them.
The technical cycle involves maintenance, reuse, remanufacturing, and recycling. Good examples of the technical cycle include the recycling of plastics and metals, as well as the maintenance and resale of used car parts or IT equipment.
The 7 ways of the circular economy
The circular economy is based on the principle of building businesses that consume fewer raw materials to meet customer needs. This involves looking at things from new perspectives to generate innovative solutions and approaches that are sustainable in the long run. By doing so, longer-lasting products are created to meet user needs, increasing opportunities for reuse and utilization. Additionally, product modules, parts, and raw materials can be recycled. Transitioning to a circular economy requires shifting towards a business model where products are increasingly replaced by services. Products have long life cycles with high utilization rates and are maintained and repaired. All of this becomes possible through systematic changes in designing products for compatibility with new industrial ecosystems.
For example:
Customers do not purchase products but rather rent them for the required duration, such as leasing cars and renting tools. Service providers are responsible for maintenance, repairs, and reuse.
Products are manufactured from materials that can be recycled multiple times to create new products, eliminating the need for new raw materials. Examples include plastic bottles, aluminum and cardboard packaging, and gold jewelry.
Shared use of equipment and facilities instead of acquiring individual ones. This ensures professional maintenance, allowing the equipment and facilities to be in working condition when the customer needs them, thus extending their life cycle. Examples include shared washing machines, machinery, and coworking spaces.
Refusing is an effective way to reduce emissions and waste. By refusing, one avoids acquiring new products and instead utilizes something that already exists, consuming fewer natural resources. In this way, a company can save resources and reduce consumption.
For example, by considering:
Avoiding unnecessary packaging.
Avoiding the use of environmentally hazardous substances.
Borrowing or renting equipment for your business instead of purchasing it.
Evaluating the necessity of using a product or service.
Considering if an existing product can serve as a substitute.
Identifying what the customer truly needs.
Key considerations:
Understanding the customer’s needs and what is meaningful to them.
Offering products as services. For example, one can acquire a washing machine on a monthly subscription basis. In such an arrangement, the seller has an interest in preserving the value and extending the lifespan of the washing machine.
Transitioning to a circular economy requires significant changes in how companies collaborate with each other and other stakeholders, as well as how value is created within networks. New partnerships and ecosystems are formed.
Common to all these changes are the use of design processes and methods, agility, and flexibility. By leveraging established design processes, best practices can be utilized, efficiency can be achieved, and a shared understanding of design can be fostered.
Examples of different design perspectives:
System Design -> Focuses on new ways of operating within networks -> Creates new opportunities for various parties involved.
Business Design -> New strategy/business for the company.
Service Design -> Development of services/products, leveraging customer insights.
Circular Design -> Recycling/utilizing material flows in new ways.
Most companies can reduce the use of raw materials, energy, or space in their production processes, thus saving money. In addition to manufacturing products, efforts can be made to use more compact and lightweight packaging. Significant savings and resource reduction can also be achieved by developing more efficient support processes within the company. By reducing their environmental impact, companies can achieve economic benefits. Moreover, customers are increasingly interested in socially responsible businesses.
The lifespan of a manufactured product can be extended in various ways. Good design can promote the use of sustainable materials and components, as well as ensure that the product can be easily maintained, repaired, and upgraded. The most effective way to extend the lifespan of a product is to design it from the start with a long usable life and value retention in mind. If the end-of-life phase of the product is also considered during the design phase, recycling the components and materials becomes easier. Services related to extending the product’s lifespan should be taken into account early on to ensure customer-centric and cost-effective implementation.
Also, explore the Product-as-a-Service business model, which promotes the use of sustainable and durable products and prolongs their usage time. (See additional information)
Ways to extend the product’s lifespan:
1. Reuse – The company can repurchase its own products or organize their resale, making it easy for customers to find used alternatives. Ideally, the same product can be sold multiple times.
2. Repairing – Products are designed to be repairable. Developing repair and spare parts services offers new business opportunities for companies. Repairing should also be financially beneficial for customers.
3. Maintenance and servicing – Timely maintenance reduces unforeseen downtime and lowers costs when work can be planned and parts can be obtained at reasonable and timely costs. Predictive maintenance is already common practice in large facilities.
4. Upgrading – Many devices are mostly usable but no longer fully meet customer needs. In such cases, partial upgrades and a few more years of use can be a good solution.
5. New purpose of use – The product can be designed with a new purpose of use in mind when it is no longer needed for its original purpose. Many devices intended for professional use can still be useful in applications with lower performance requirements.
Example: Medical equipment used in human healthcare can be utilized in veterinary medicine.
Example: High-performance computers used in graphics, engineering, and gaming can later be used in less demanding environments, such as schools.
In many technical devices, certain parts wear out over time. After replacing the worn-out parts, the device becomes usable again and can be resold. This practice is called remanufacturing. Remanufacturing has given rise to many new companies in recent years, creating new business opportunities across various industries. A company can also repurchase its own products and use their intact or slightly worn parts in the production of new products. It is also possible to create entirely new products from reclaimed components.
Example 1: A knitwear manufacturer repurchases its own products, refurbishes them, and resells them.
Example 2: A company buys used mobile phones, refurbishes them, and resells them to consumers.
Example 3: A company repurchases its own equipment and utilizes the well-functioning parts and modules in the production of new devices. At the same time, the company gains insights into the durability-related solutions of its equipment and can improve its products.
Example 4: Car manufacturers repair the parts replaced during authorized servicing and resell them through the distribution network.
At the core of the circular economy is recycling. It enables the use of resources without relying on new virgin materials, the procurement of which requires increasing economic efforts year after year. The use of recycled materials has been proven to enhance a company’s brand value while reducing its negative environmental impacts. Recycled raw materials are already available at reasonable costs in many industries.
Today, the range of reusable products is substantial and continuously growing. Distribution channels for functional products overlap partially with those used for new products. Recently, many retailers selling consumer goods have become active in selling their own used products.
In addition to functional products, various modules, components, and materials can be recycled. Digital sharing platforms play a significant role in facilitating the accessibility of recycled products. There are also dedicated distribution platforms for low-value streams, such as material exchanges, which companies can utilize for the recycling of nutrient-rich materials and waste.
In industrial symbiosis, a company utilizes another company’s byproduct in its own production, thus effectively repurposing the byproduct.
Example 1: Functional products can easily be put back into circulation by listing them for sale on sharing platforms specialized in specific items, such as office furniture or machinery.
Example 2: Consumers have recycling systems in place for most waste streams, while businesses often need to find their own recycling channels, particularly for plastics. However, industrial packaging plastics, for instance, are usually very clean and highly suitable for recycling.
Example 3: In the wood processing industry, the utilization of various byproducts, especially as an energy source, has been mainstream for decades. Now, there are other applications for these byproducts as well. Would someone be interested in utilizing the byproducts of your company? It can be both cost-effective and rewarding.
