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Here's Why Embracing the Circular Economy is Smart Business

Posted by Veronica Morozova on

Good business and sales strategy always looks to the future, picking up on trends and ideas that are set to change the way we live and consume. If you listen carefully, you'll be able to learn about themes that are relevant to your niche, and even those that aren't. 

This is one of the reasons why paying close attention to the circular economy is so important. Whether you like it or not, we are being asked to reassess how we live, work and prosper, and one of the ways we are expected to do this is to address the urgency of the detrimental effect that unchecked consumerism has on the environment. 

If your impulse is to bury your head in the sand and continue 'business as usual', we've got some bad news: it won't work. Instead, why not prepare yourself for the inevitable shift and find out how you can take these new trends, and make them beneficial to you and your business?

What's the Circular Economy all about, anyway? 

Ellen MacArthur, an English yachtswoman who in 2005 set a world record for the fastest nonstop sailing voyage around the world on her very first attempt, famously spoke in a TED talk, saying that “never before in life had I translated that word ‘finite’ to anything outside of sailing until I stepped off that boat at the finish line. Suddenly I connected the dots. Our global economy is no different.” (TED 2015

Her epiphany led to the birth of the Ellen MacArthur Foundation, a leading voice in the ambitious 'zero waste' movement that seeks to completely rid the world of waste. Sound a tad too utopian? Well, get this: MacArthur's passionate sustainability plea sent ripple waves through major corporations including Google, Apple, and Unilever. This effect was dubbed the circular economy.

While the definition of what the circular economy actually means indeed has small nuances, generally speaking, the concept refers to the vision outlined by Dr Michael Braungart and William McDonough. Their manifesto, titled Cradle to Cradle, outlines the key principles of the circular economy: waste reduction, reuse and recycling. Businesses would build these principles into the foundations of everything from manufacturing to product design. 

So, if you're in the business of manufacturing, applying sustainable circular economy principles would mean that every step in the life cycle of a manufactured product would help to ensure that the raw materials of that product could be fully recycled or recovered. The end result would be profit AND zero waste

Considering that the
 world is experiencing an unprecedented pressure on its natural resources, with the population expected to rise to nearly 9 billion by 2030 and the oceans already at breaking point, it's no surprise that a linear economic approach to growth is no longer sustainable. 

OK. But why should businesses care?

Despite what convention suggests, businesses are already making money out of circular economy models.

To begin with, 'there are higher returns to be made from different business models such as refurbishment and recycling as compared to the status quo.' (McKinsey 2016). In fact, The Ellen MacArthur Foundation has some great studies to get you inspired - from components for heavy machinery (Caterpillar Reman), ships (Maersk) and even jeans (Mud Jeans) (Virgin 2016). 

Another apt case study is Dell, who are 'making some of the first inroads to a more “circular” supply chain. As part of its 2020 Legacy of Good Plan, Dell also established two objectives tied to cutting down on e-waste: using 50 million pounds of recycled materials and recovering 2 billion pounds of e-waste by 2020.' (Smart Company)

Then there are the undeniable benefits of waste reduction for business

According to a report by the European Business Review, an estimated 90% of the raw materials used in manufacturing becomes waste before the product leaves the factory, while 80% of products made get thrown away within the first six months of their life. (European Review 2016)

Reducing waste can help you save money through more efficient use of raw materials, packaging and technology, and allow you to cut your waste disposal costs

Another business case for sustainability is that it will help boost your brand's reputation among customers, suppliers, potential employees and insurers, who may want to be sure that you take your environmental responsibilities seriously, as well as boosting morale of existing staff. Corporate Social Responsibility not only helps boost your company's image, but has been proven to boost media coverage and employee engagement.

Moreover, environmentally conscious, circular economy companies are more likely to attract and retain investors. Investors are more likely to be attracted to and continue to support companies that demonstrate a commitment not only to employees and customers, but also to causes and organizations that impact the lives of others.

According to Morgan Stanley, millennials are driving global growth in sustainable investing, which has discovered that the younger generation are twice as likely to invest in companies targeting social or environmental goals. (Morgan Stanley, 2016). As Edie Newsroom writes, 'Millennials are regarded as the 'challenger generation', driving forward the uptake of electric vehicles and new products and services, embracing the circular economy, and helping to shape new approaches to sustainability reporting.'

To sum up, companies that don't act quickly enough to adapt to the demands of the circular economy are more likely to lose-out. Embrace the transition and watch the world and your business reap the benefits of the circular economy.


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