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Circular economy, an innovative business model developed recently, offers countries like Pakistan suffering from chronic resource shortages and serious financial constraints a way out of their economic stagnation and perpetual poverty.

Accenture Strategy, a research organisation in a new book, Waste to Wealth, published by Palgrave Macmillan, identifies five business models that will drive the circular economy: Sharing Platforms use digital technologies to maximize the use of underused assets, such as hotel rooms, vehicles or consumer goods. The authors note that 80 percent of typical household items in mature economies are used only once a month; Products-as-a-Service replace ownership-based models with usage based services, such as selling driving time instead of selling cars. These encourage companies to maintain products for longer and offer new services, such as predictive maintenance or fuel efficiency support; Product Life Extension relies on remanufacturing and repairing used products to give them a longer life with existing or new customers; Circular Supply Chains allow suppliers and partners to use recycled materials repeatedly, saving costs and bringing predictability to supply chains e.g. a clothing company using new materials to avoid the environmental damage and risks associated with cotton cultivation and; Recovery and Recycling saves costs and reduces the volume of waste and landfill. Some major companies now re-use 100 percent of the waste generated at certain manufacturing plants.

What goes around comes around, according to an old saying. And in the case of the circular economy, that’s certainly true. To that end, the following 3 shifts are key according to Ellen MacArthur Foundation and Frans van Houten, Chief Executive Officer, Royal Philips (3-shifts can scale the circular economy – triggering a more resilient, prosperous system, published in World Economic Forum’s Newsletter dated 11 Feb 2021):

Shift #1: Design for circularity-In the circular economy, waste is eliminated, products and materials are kept in use throughout their product lifecycle and natural systems are regenerated. Such an approach is dependent on systems designed with a focus on reuse, repair, refurbishment and (when a product can no longer be of use) recycling. That means changing what we produce and how we produce it – both in terms of inputs and when it comes to the end of its first useful life. It can mean adopting modular design, designing for renewable materials, designing for easy repair and disassembly, and designing new products with backwards compatibility in mind, so that parts can have multiple applications and be used longer.

For consumer products (such as clothing): Shifting from textile blends that can’t be separated and towards natural fibres or blends that lend themselves to be cycled.

For consumer electronics: designing products with less raw materials and using more recycled plastics or parts, and designing for disassembly.

For capital equipment producers: Designing for serviceability, upgradability, modularity, and refurbishment.

Who’s already benefiting: Many success stories already exist, such as the Ellen MacArthur Foundation’s Jeans Redesign, which brings together key brands working towards a world where clothes never become waste. To date, over 65 organisations have committed to producing nearly 2.5 million pairs of jeans in line with the Jeans Redesign Guidelines by May 2021. Such projects reflect the growing recognition that circular design is a significant business innovation opportunity, one that allows us to create value without relying on the consumption of finite resources.

Shift #2: Shift to new business models-There is huge growth potential for new business models that move away from short-lived products that quickly end up as waste. Where a business shifts to a ‘product as a service’ model, customers pay for any resulting value, outcome or service, but any physical products are owned by a business. Models such as subscription, rental, and re-commerce keep products and their components in use for longer periods of time while preserving and maximizing value. This offers a clear incentive for companies to keep products and materials in use for longer. Meanwhile, customers benefit from being able to access products without the full cost of buying it upfront.

Shift #3: Resource management systems that preserve value— The fundamental shifts already described eliminate waste from the system through deliberate upstream strategies. This focus must be complemented by resource management systems that enable value to be preserved. Such an approach includes reverse logistics, the separation of technical and organic by-products to avoid contamination (and generate “clean” flows), and refurbishment and remanufacturing. It also means leveraging high-quality recycling facilities as a last resort.

Who’s already benefiting: Investment in innovative recycling technology ensures that the maximum value of products and systems can be maintained for as long as possible. For instance, Apple’s disassembly robot Daisy can disassemble 200 iPhones an hour. This makes it possible to recover key materials (such as tungsten and rare earth magnets) in higher quantities and at higher qualities than most conventional recycling processes.

The Circular Economy Action Agenda is a rallying call for businesses, governments, researchers, consumers and civil society to work together to accelerate the transition to a circular economy. The Action Agenda is made up of five publications: plastics, textiles, electronics, food, and capital equipment. These are crucial areas for the creation of a circular economy, with many lessons that apply to other sectors.

There’s no longer any question of whether we need a circular economy – the evidence is clear. The Circular Economy Action Agenda tells us how to make it happen, and how to ensure it has the greatest possible impact on people and planet.

What are the key elements of the Circular Economy Action Agenda?

Food: We cannot survive without food. But our planet cannot survive our current wasteful, resource intensive and polluting model. Changing how we make and produce food through transition to a circular economy can help us to tackle climate change and feed the global population of tomorrow.

Textiles: Fast fashion has huge human and environmental costs. It makes unsustainable demands on the planet while emitting large quantities of chemicals and toxins. At the same time, millions of items go to waste: unsold, unused or discarded. A circular economy for textiles will help reduce and reuse waste, reducing climate impacts and protecting the people who produce and dispose of our textiles.

Plastics: Plastic waste has become one of the defining issues of our time. A move to a circular economy will help drastically reduce our use of plastics and ensure those we do use are managed responsibly.

Electronics: New production of vast quantities of smartphones and computers use up precious natural resources. Most are simply discarded and replaced by a newer version. A transition to a circular economy is a major economic opportunity that will protect people and the environment.

Capital Equipment: Production of capital equipment - the buildings, machines, and infrastructure-uses 7.2 million tons of resources per year. These are products that are designed, built and acquired to last, often staying in use for several decades, and the capital equipment industry can offer important lessons for the transition to a circular economy.

Who’s already benefiting: New circular models already work well for capital equipment. Large machines such as MRI scanners or agricultural equipment are inherently of high value and it’s easy to make the business case for repair and refurbishment. Philips, for example, is working with many others in this field.

Following the World Economic Forum pledge in 2018, they are now repurposing all large medical equipment that becomes available to them in a responsible way. Healthcare customers have the opportunity to buy a refurbished MRI scanner, a pre-owned system that has been thoroughly upgraded and quality tested. Through these kind of practices, Philips no longer relies on the use of natural resources.

There is an important role for research organisations to develop new science-based methodologies and tools to guide new business model design and measure impact, and we also need to see governments and financial organisations provide an enabling environment to support companies implementing these kinds of circular business models.

The incentives must be put in place for both consumers and business-to-business customers to return products through deposit and buy-back schemes, and refurbishment. At a consumer level, there is an important role for information campaigns, as well as initiatives such as pricing schemes that make circular solutions attractive. It will also be crucial for businesses to share their success stories and learnings to show the way.

Copyright Business Recorder, 2021


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