The circular economy in today's business world

It was a delight to be invited to 6head’s recent seminar and creative workshop ‘Designing a Circular Economy’ at the IDEO London office. During the workshop, Chris Grantham, Portfolio Director of IDEO London, unpacked the concept of circular design and discussed how this new mindset can enable businesses to create competitive advantage, better serve customer needs, and work towards long term economic and environmental sustainability.

The concept of the circular economy is entering the mainstream and becoming better understood, but there is still misunderstanding about how to finance it, and the risks and opportunities it presents.

As the concept of sustainability becomes more deeply embedded in the fabric of society and the economy, the notion of the circular economy has started to gain traction.

But while there has been much talk of what the circular economy is and how businesses can adapt to it, one area that has not been fully explored is how it will be financed.

But exactly what is a Circular Economy?

One interpretation is that a circular economy can be an alternative to a traditional linear economy; using the concept ‘make-use-dispose’ in which we keep resources in use for as long as possible, extract the maximum value from them whilst in use, then recover and regenerate products and materials at the end of each service life.

As envisioned by the originators, a circular economy is a continuous positive development cycle that preserves and enhances natural capital, optimises resource yields, and minimises system risks by managing finite stocks and renewable flows. It works effectively at every scale.

This video is a perfect introduction to re-thinking progress in our world and The Circular Economy:

These developments mean that it is increasingly advantageous to redeploy resources over and over, often for the same or comparable purposes. This is the organizing principle of circular economies, and the benefits that come from following it can be substantial. According to the research documented in “Finding growth within: A new framework for Europe,” a circular economy could generate a net economic gain of €1.8 trillion per year by 2030. The building sector, for example, could halve construction costs with industrial and modular processes. Car sharing, autonomous driving, electric vehicles, and better materials could lower the cost of driving by 75 percent.

The benefits are just as significant for less-developed economies. “Ahead of the curve: Innovative models for waste management in emerging markets” describes effective ways of encouraging the conversion of waste materials into valuable inputs. These include aggregating waste flows into large volumes that businesses can work with and establishing incentives to lessen waste creation. South Africa increased collection rates for scrap tires to 70 percent, from 3 percent, in just 18 months, leading to the creation of small and midsize processing and recycling companies. The country also aims to divert a majority of scrap tires into high-value material-recovery processes by 2020.

When you consider the facts its clear there are some significant opportunities to considering our future as one that can be sustainable and one that provides opportunity for others

Developing products for a circular economy offers another point of view on how to eliminate waste and create value and creates significant innovation. It is not easy to create products that are lasting, simple to reuse or recycle, and profitable. But when design teams get together with other company departments and use design thinking like IDEO, they can conjure up resource-efficient ways of delighting customers. Greater collaboration allowed one medical-equipment company to figure out that collecting and refurbishing used devices would allow it to meet the needs of underserved customers in emerging markets.

I believe and this belief is very evident with the likes of Adidas, Bundles, Fairphone, Caterpillar, Desso to name a few have proved and as other companies will follow these pioneers in the transition from circular-economy theory to practice, they are certain to encounter obstacles. This is natural: breaking out of old models and letting go of time-tested approaches is challenging. But the lessons of the circular economy are accumulating and they show that the gains from making the transition outweigh the effort and the risk. With those benefits in mind, you will see that The Circular Economy in today’s business world is here to stay!

Rob Eglash once said:

“The reason that Google was such a success is because they were the first ones to take advantage of the self-organizing properties of the web. It’s in ecological sustainability. It’s in the developmental power of entrepreneurship, the ethical power of democracy”.