By Proxima

24 Jan 2020

Overconsumption is creating new risks for both society and commercial functions to manage. Proxima investigates whether the circular economy might present a solution


Picture credits: Adobe Stock

As the world’s population continues to grow so does the amount we consume. There is an emerging risk that demand will outstrip supply of key resources, impacting both society and commercial markets. This dynamic is creating new risks for commercial functions to manage.

Across the globe we’re seeing these forces starting to bite. In São Paulo residents have had daily 12-hour water cut-offs over the last year. Closer to home, fashion businesses are facing steep increases in the prices of raw materials as demand from China increases and more volatile weather creates challenges with cotton production.

Resources are typically consumed in a linear economy defined as “take-make-dispose” and are rarely part of a circular economy. As the global population becomes richer and consumption levels increase, we will soon hit a point where the planet is no longer able to cope.

 

A circular economy will build resilience

If governments and organisations can shift supply chains to a circular economy, demands on natural resources will be reduced and efficiencies realised at the same time. There is an opportunity for governments and organisations to build resilience against some of today’s strategic challenges to meet public needs and improve efficiencies.

Achieving circularity is very difficult. Consumers demand convenience and the commercial adoption of consumerist business models such as “fast fashion” exacerbate the problem. At the same time there’s a lack of government regulation, and insufficient waste infrastructure and recycling technology can’t cope with human consumption.

To overcome these barriers, organisations, governments, and investors will need to collaborate; strategically deploying assets and resources which, when combined, can offer solutions that they could not offer alone. Many organisations have already made headway in moving towards a circular economy.

A number of industry and private sector case studies bring this to life using different circular economy strategies we have found in our analysis.


Case study 1: Recovery and recycling

The public sector in Denmark has been paving the way to a circular economy through design. In 2012, Denmark’s central procurement agency established a four-year framework for sustainable office furniture for more than 60 municipalities. Environmental requirements were at the forefront of technical specifications, detailing requirements on the chemicals used throughout manufacturing, treatment and coating, and also the potential to separate and recover materials at end of life. There was also a requirement for wood-based materials to be sourced from legally harvested timber, with at least 70% being either recycled or verified as sustainable timber. Savings of 26% were achieved as a result of the new approach whilst increasing the future market capacity for sustainable furniture.

 

Case study 2: Sharing platforms

In the US, retailers are attempting to build circularity into the heart of their businesses. Last year, Urban Outfitters announced the launch of a clothing rental subscription service in the US, called Nuuly. Costing $88 a month, Nuuly will allow customers to pick six items up to a combined value of $800, to rent, wear, and return. The idea hopes to solve the often contradictory consumer demands for the latest fashion trends and a sustainable planet.

 

As the global population becomes richer and consumption levels increase, we will soon hit a point where the planet is no longer able to cope.

Case study 3:  Product life extension

John Lewis has partnered with Stuffstr to buy back clothing purchases customers no longer use. H&M offer vouchers for old clothing and fabrics donated. Extending a product’s lifecycle or remanufacturing, repairing or upgrading ensures that it remains economically useful for longer.

 

Case study 4: Circular loop

The City of Vaasa in Finland are recovering end-of-life product waste to use for a different purpose. Setting out to procure a fleet of 12 buses, which could run fully on biogas recovered from organic waste and waste-water sludge at local treatment plants, the city incentivised lasting reliable performance through commercial incentives based on efficiency levels. This has led to the city replacing 280,000 litres of diesel every year; a procurement which has created a ‘circular loop’ for the by-products of local waste. 



As these cases studies have illustrated, the circular economy has potential to enhance the value derived from products, avoid wasteful processes and reduce inventory and management as well as grow the economy. It may also aid development of new markets and create jobs in disciplines that may be either shrinking or not otherwise exist (like specialist manufacturing, waste processing, etc.), this creates a circular economy of its own!

So what next?

This is undoubtedly a movement of our time, but it’s not without its critics or complications.

  • -- Critics argue that our governments and corporations are acting as much in self-interest as in the collective interest. Supporters would argue that motivations don’t matter if the right social and environmental outcomes are being achieved.
  • -- Critics also often add that as a western nation it is too easy to project opinion without considering the wider short-term implications across communities and countries far from our own. Supporters would actively advocate broader change programmes.
  • -- Critics have questioned the strength of the entire CAR movement should we enter deeper financial instability, and stated that ‘planet before profit’ is only sustained whilst profit levels are acceptable. Supporters would argue that the 4 P’s of CSR go beyond profit in isolation.

However, there is a growing feeling that the numerous forces for change are likely to create enough tailwind to make CSR and the circular economy in particular a “societal requirement” rather than merely desired.

But undoubtedly the race is on in the private sector, which means that governments and local authorities also have their part to play as regulators, facilitators and standard bearers. They will have to throw sufficient economic support behind those organisations which are essential to achieving greater circularity.

“Being good” starts at home and at work and those that are considering reinventing their relationships with suppliers and with customers have lots to consider. There are different options and opportunities out there, depending on what you value as an individual or consumer.

Governments and global businesses are quickly understanding that a circular economy is an essential feature in creating new profit pools and competitive advantage, and so circularity should not be seen as the latest sustainability fad, but instead acknowledged as a way of recapturing and maintaining value. Industries notoriously associated with poor sustainability practices, such as fashion and manufacturing, are increasingly innovating and gravitating towards circularity, meaning those companies who don’t join the wave run the risk of being left behind.  

A circular economy is not just good for the planet, it’s good for the commercial economy too, and it’s something that we can all get involved in.

Click here to read Proxima's report - The Capability Conundrum.

Or access more insights here

Read the most recent articles written by Proxima - Supply Chain and Logistics: Rebuilding in uncertain times

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