Everyone is talking about the circular economy.
23 Feb 2016
The circular economy seems to be heavily featuring on major companies’ sustainability and government investment agendas across the world and has been consistently identified as one of the key business trends of 2016. James Griffin explains why.
What is the circular economy and why is it leading agendas?
Well, first of all I’m aware that the circular economy is a relatively new term that not everyone understands yet. We define it as an economy where the lifecycle of materials is maximised, usage optimised and at the end of life all materials are reutilised.
Getting back to the question as to why the circular economy is leading agendas around the world, well quite simply, organisations that are looking for competitive advantages now, as well as long term prosperity, realise they have to change the way they are utilising their key finite resource inputs.
Of course this has been understood for a while, but only more recently started to be acted upon at any real scale. Interestingly, we are now also seeing ‘pull’ factors for change emerging with the recognition that the customer, in the Western world, may not have the appetite or capacity for ever-increasing purchases of ‘things’ which is what traditional linear business models are largely based upon. This is what Ikea’s Chief Sustainability Officer recently described as 'peak stuff' and is influencing its move into more circular business models.
Governments are looking to stimulate their economies in sustainable ways and the circular economy and the business models it incorporates is a completely logical, and perhaps the only, solution to achieving continued long-term prosperity without destroying the planet.
Why are businesses drawn to the circular economy?
Businesses are attracted to the circular economy because it’s based on maximising asset value and therefore in tune with something that is part of their DNA (over and above the knowledge that many resources they rely on are finite and the need to minimise adverse environmental resources). The circular economy also represents a positive growth opportunity ripe for innovation and gaining first mover advantage, which of course is the perfect playing field for entrepreneurs. So no coincidence that all the organisations you would associate with innovation – like Google, Nike, Philips and Unilever – are heavily investing in it. If you add in the ‘Peak Stuff’ concept then it’s quite clear why everyone is talking about the circular economy.
What about governments?
The EU and governments like Scotland are investing millions of Euros, Pounds and Dollars in stimulating the circular economy because they understand both the business and environmental cases as well as the social case with regards to job creation. They recognise that in most cases circular economy practices are still in the pioneering stage and financial stimulus will dramatically help accelerate the timeframe at which they will reach a tipping point to go mainstream and become the norm.
Interestingly the Scottish Government, overseeing a similar population size to New Zealand, has just announced a $70m investment fund in the circular economy primarily targeted at small and medium sized manufacturing businesses. Furthermore the EU investment of billions of Euros to accelerate the circular economy announced in December is hugely significant.
In New Zealand there appears to be no sign of an equivalently sized investment coming from the Government so local businesses shouldn’t wait for that before moving.
Is it a trend?
Business commentators are picking up on all of this, which is why the circular economy is featuring in everyone’s top trends for 2016. However, I think to consider the circular economy a ‘trend’ is incorrect as it's essentially a practical business operational model that is somewhat aspirational at the moment. But with the momentum we can see and the undeniable business sense it makes, it will simply be the way business is done over the next decades.
How can I find out more about the circular economy and apply it to my business?
The Sustainable Business Network is committed to helping New Zealand based organisations to start that move towards more circular practices: we are leading collaborative practical projects such as the Circular Economy Model Office, sharing knowledge and connections, and running events such as the upcoming Resource Revolution event on the 9th March in Auckland.
This event will demonstrate how leading organisations such as NZI Sustainable Business Network Award winners Wishbone Design, Tork, Philips and Inzide Commercial are utilising and benefiting from circular economy models, for example by designing out waste, dematerialisation, closed loop manufacturing and utilising the Internet of Things to optimise efficient use of assets. Then thinkstep and Catalyst will demonstrate how such models can be practically applied to any business.
This is the first practically-focussed circular economy event to take place ever in New Zealand, so if you are keen for your organisation to be a successful part of the inevitable future and help to shape what that looks like in New Zealand I would really encourage you to come along.
James Griffin, National Network Manager and Transformation Leader at the Sustainable Business Network, is leading SBN’s work to accelerate a more circular economy in New Zealand.
He can be contacted at firstname.lastname@example.org