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Beyond Recycling: The Circular Consumer Economy

Beyond Recycling:
The Circular Consumer Economy

When you think about a circular economy, what do you picture? It might be a closed-loop system that recycles items and materials. It could be a circular flow of goods, where the raw materials used to make something are farmed from the same place as the finished product. Or it's an industry that has achieved zero waste.

 It's all of these things and more. A circular economy is a business, design, and manufacturing approach that allows companies to create value while minimizing negative environmental impacts.

Defining Circular Economy in the Consumer Space

The circular economy is an economic structure based on reducing resource consumption. Consumers are becoming more aware of their consumption's impact on the environment. As a result, businesses in the consumer space (including manufacturers, retailers, and suppliers) have been looking for ways to use renewable raw materials, reduce packaging and make products with longer lifecycles.

The concept is that consumers should not just be interested in the price of products but also in how long those products will last. Products should be designed to last longer, last forever, or be easily repairable and recyclable. In addition to developing products with a longer useful life, the idea behind a circular economy is also to utilize surplus goods by having them recycled into other secondary resources.

Consumer Goods Take a Toll on Natural Resources

Consumer goods take a toll on natural resources in many ways. For example, consumer goods require raw materials to be extracted from the earth. The extraction process can cause pollution and harm the environment. It also takes a lot of energy to extract these resources, which causes more greenhouse gas emissions into the air. Currently, 20% more natural resources are consumed than can be recovered each year, which is growing steadily, according to the World Wide Fund for Nature (WWF).

Additionally, consumer goods often require packaging and containers to be packaged before they are sold to consumers. This can use many resources and materials, eventually ending up in landfills or waterways, where they can harm wildlife and pollute the atmosphere.

A big part of this problem is that we don't recycle enough of our consumer goods. For example,  91% of plastics are not recycled, according to National Geographic. Almost 100% of plastics become pollution instead of being reused for another product!

91 percent of all plastics are not recycled

The Problem with the Rise of Fast Fashion

 Fast fashion is a term that spells out the trend of fast-changing clothing trends and new styles being introduced to the market at an accelerated rate. Fast fashion retailers take advantage of their ability to quickly bring new products to market by frequently changing their designs and offering customers something new every season. This allows them to offer an ever-increasing selection of clothing at lower prices.

While some customers opt for fast fashion because they want to save money, others do it because they want something trendy or unique. Either way, we should all be aware of some negative consequences of this growing trend.

Here are a couple of ways fast fashion is impacting natural resources:

  1. Fast Fashion Contributes to Pollution and Water Pollution

Fast fashion contributes significantly to water pollution because of the chemicals used in dyeing clothing. Dyes are often toxic chemicals that can cause harm to the environment if they are not disposed of properly. Many fast fashion retailers do not recycle their dyes properly. As a result, these chemicals can end up in drinking water or other bodies of water where they could be ingested by people or animals living nearby.

  1. Fast Fashion Encourages Waste

Fast fashion is a massive contributor to the growing problem of waste in the world. According to the Environmental Protection Agency, the average American throws away 68 pounds of textiles and clothes yearly. In comparison, 85 percent of unwanted clothing ends up in landfills. Every second, one garbage truck of clothes is burned or thrown away! As a result of fast fashion, waste is increasing.

The problem of waste in fast fashion cannot be solved overnight. While consumers have the power to change their behavior, it would take a significant effort from the industry to reduce the amount of waste it produces. However, with growing concerns over pollution and sustainability in recent years, more fashion companies may be ready to start addressing this once invisible problem. This will likely lead to better awareness of waste reduction in the fashion industry.

Average annual American clothing & textile waste is 68 pounds.

The Pandemic’s Role in Increased Online Shopping and Carbon Footprints

In its annual sustainability report, Amazon's activities emitted 71.54 million metric tons of carbon dioxide in 2021. Compared with 2020, that's an increase of 18% and nearly 40% since Amazon first disclosed its carbon footprint in 2019. This is just one slice of the overall pie. How much has online shopping boosted the overall metrics? That is an ever-evolving conversation with a need for solid solutions.

The company's emissions are driven by the growth in online shopping and delivery services and by the company's fleet of planes and trucks used to transport goods around the United States and internationally.

Amazon has been criticized for years for its large carbon footprint — particularly by its employees — but there are signs that the company is taking steps to reduce its environmental impact.

Amazon is heavily dependent on the continued growth of its grocery business which likely includes future emissions increases. The company is still growing – aiming to grow more by aggressively expanding into other areas, including healthcare, cloud computing, and retail banking. And that means the company might need to make a few changes if it wants to curb its emissions increases over time.

Defining the "Circular Economy"

The circular economy is more than "reduce, reuse, recycle." It imagines the economy becoming as closed a circle as possible. Recycling and reuse are not just post-consumer but deployed throughout the production cycle of all goods. Executives of companies will need to take a more thoughtful and strategic approach to make this closed circle a reality.

This has implications for how companies are organized and what they produce. It means less waste and more value from materials used in products. It also implies that companies must be prepared to change their business models to succeed in this new economy.

The innovative circular economy is not just about technology; it involves changing our relationship with nature and each other. It requires us to think and act differently about how we use resources, which ones we rely on, and how we get them into our lives.

Here are some basic ways leaders can begin to close the circle:

  • Increase resource efficiency
  • Reduce waste generation
  • Increase resource availability

Circular economy principles represent a significant shift in how industries can operate. The resources in the world are finite. We can sustain population growth, but the planet's ability to support that growth is not infinite. How we manage these resources will be central to our future. Successful corporate leaders must consider this relationship and understand that they are part of a system, not just a business opportunity.

Can a Circular Economy Save the World?

There is a lot of hope and potential that a circular economy could save the world. The rapid adoption of disruptive technologies and new business models is necessary to succeed in the transition. It is an incredible effort that all executive-level leaders will need to contribute. All ecosystems must cooperate.

There are three tasks executives and management teams can begin to do:

  1.  Be Innovative with Products & Production

Companies can innovate their products, using less material or providing better returns systems for used goods while continuing their standard operations. For instance:

  • Innovate your product design so that it uses less material or less energy.
  • Use recycled materials or renewable energy sources in your manufacturing process.
  • Provide better returns systems for used goods that allow consumers to reuse or recycle them.
  • Find ways to make your product more durable so that customers don't need to replace it often.
  1. Transforming Consumption into a Circular model

Product-as-a-service (PaaS) is a new business model in which products are rented instead of sold. Product-as-a-service allows companies to generate revenue from products that have reached the end of their useful life.

In a circular economy, there are many opportunities for product-as-a-service because consumers are looking for more sustainable options. In fact, PaaS is one of the best ways to reduce waste and make your products more sustainable.

Here are some examples of PaaS in a circular economy:

Cars: Car sharing or ride-sharing services like Zipcar allow users to rent cars by hour or day. This reduces the number of cars on the road, which reduces pollution and emissions from vehicles and frees up land for other uses such as parks or housing developments.

Bikes: Bike-sharing programs allow users to rent bikes by the hour or day. This reduces the number of bikes on the road and frees up land for other uses such as parks or housing developments.

Smartphones: Mobile phone leasing programs allow users to pay a monthly fee to access smartphones rather than purchase their own devices up front.

  1. Recovering Value

Recovering value seeks to close the loop on our current "take, make, waste" linear system, which is no longer appropriate (this can be considered on a corporate level down to a small business level). This includes recycling, reusing, and upcycling. It also includes reducing the materials we use by making them last longer and designing products to be easily repaired or recycled at the end of their lives.

The cluster is made up of three main activities:

  • Reducing consumption by changing our lifestyles (e.g., buying second-hand goods) and reducing waste through better design and recycling systems.
  • Recycling valuable materials from waste streams such as plastic bottles or electronic devices; can also include composting organic wastes.
  • Upcycling raw materials into new products with functionality similar to those they replace is more durable, long-lasting, and repairable. This can include using waste plastics to make new ones or using scrap metal to create new products like bicycle frames and chairs.

 A circular resource management approach will create substantial business opportunities on every scale. No business is too small to get involved, and no industry cannot benefit from a circular economy. If the world can finally come together on this vital issue, it can overcome many of the challenges we now face. The leaders of tomorrow must begin laying the groundwork today, but they'll need help along the way. That's where we come in. As more businesses join in and share their expertise, we'll all be better able to transition towards a sustainable future.

A Classic Way to Fight Pollution

The Loop is an online delivery service started by Tom Szaky. His venture is classic and innovative. The Loop doesn't have a store or a physical location; it's an e-commerce company that delivers products right to your door in reusable containers.

The idea behind Loop is that you can order any of its products online, and they will arrive at your home in a box packed with reusable containers. They're made from high-quality material, sturdy enough to withstand multiple uses, and easy enough to clean, so you don't have to worry about germs lingering on them after each use.

Tom Szaky remarks, "Loop's theory is let's learn from the past and go back to a model where when you buy your deodorant, you're borrowing the package and just paying for the content."

It's a concept reminiscent of the "milkman" days, or when Coca-Cola delivered their soda in glass bottles that needed to be returned.

In the case of pollution, however, we're talking about an entirely different scale and level of responsibility. It's not a simple matter of returning your glass bottle or bagging your trash in the proper container — it requires a fundamental change in our relationship with waste.

It's time for executives and leaders to protect our streets and neighborhoods from pollution through excess waste.

Moving Towards a Circular Economy

Since the initiation of the industrial revolution, our consumerism-driven economies have resulted in a linear economy, where goods and services are made, consumed, and discarded.

Moving towards a circular economy invites corporations, organizations, and small businesses that make all processes more sustainable while providing unique and creative value to their customers.

What Changes are Necessary for Production?

In a circular economy, companies must rethink their entire production processes. They must not only design products that can be easily disassembled and reused or recycled, but they also need to plan a complete value chain that will allow them to do this. That means finding partners who can take care of each stage in the process—from designing products to making them available in stores and managing their end-of-life treatment.

For example, suppose a company makes computer chips. In that case, it needs to find a partner who specializes in recycling those chips—someone who can extract valuable materials from them, so they don't end up in a landfill. This could mean working with a local recycling center.

And suppose that a company wants to make its products more recyclable or reusable. In that case, it needs to think about redesigning its packaging so it's easier to recycle or reuse the product itself. It may also want to consider other ways of making its products more sustainable, using renewable energy options like solar or wind power, and designing products with less material. Hence, they're lighter and use less energy during production and transportation.

Finally, companies must consider how their products affect the environment when they're being produced — from sourcing raw materials to manufacturing.

What Changes are Necessary for Consumption?

Unlike the traditional linear flow of materials from extraction to consumption and waste, a circular economy emphasizes the optimal use of resources by keeping them in use for as long as possible, recycling their components, and then recovering and regenerating valuable elements before returning them to the production cycle at the end of their life.

What is the Current Landscape?

The business rationale for a circular economy is evident. A growing number of mega brands are integrating circular strategies into how they operate their businesses: from Google and Coca-Cola to Michelin and Audi to Patagonia and Nike. Even Unilever, which has long been perceived as the poster child for unsustainable capitalism, has called on other companies to follow its lead and work towards 100% sustainability.

What Companies in the Consumer Space are Doing this Well?

Even though the concept of a circular economy is relatively new, many companies are bringing this idea to reality. Some create innovative circular business models, and others close the loop in their processes. Either way, it's now easier than ever to change your products and techniques to become more sustainable and eco-friendly.

Notable mentions towards a circular economy:

Soda bottling/bottle-to-bottle recycling: Dasani and Sprite. Dasani and Sprite (owned by Coca-Cola) have produced 100 percent recycled content bottles. The company has replaced virgin PET (polyethylene terephthalate) with post-consumer materials. It is the first significant soda brand to commit to this development.

Novel material use: The Ball Corporation. They are leading the way regarding ball jars and recyclable aluminum party cups. 90% of  Ball Aluminum Cup™ material is now recycled. In addition to its infinite recyclability, the Ball Aluminum Cup's carbon footprint is reduced, making it an eco-friendly solution for packaging waste challenges facing food and beverage services, retailers, and consumers.

Apparel: recycled materials, reselling used clothing. Innovative fashion companies and cutting-edge researchers are beginning to envision the possibilities of circular supply chains. Similarly, pioneering apparel brands and retailers are starting to develop strategies to transition out of the linear and into the circular economy.

Examples include:

  • Patagonia used clothing: Even before their founder donated the company to the planet, Patagonia was an early adopter of a circular economy. The brand hopes to help customers extend their clothes' life, reduce their environmental footprints, and feel better about fashion. Patagonia created Worn Wear, a program that takes old clothes that are worn and gives them new life by repairing them and making them available to Patagonia customers at steeply discounted rates.
  • Adidas Parley Collection, "PrimeBlue", and "PrimeGreen”: The Adidas Prime Blue line of shoes are made from recycled materials, and the Prime Green line is made from renewable materials. The lines and other athletic shoe manufacturers are moving toward recycled materials. Adidas has partnered with Parley for the Oceans, an organization dedicated to saving the oceans from plastic waste. In addition to its work with Parley, Adidas has committed to using only recycled plastic.

The Need for Human Capital

Developing and efficiently operating an effective circular economy will be a considerable challenge. Many actors and factors come together to make a circular economy work, but one of the most important is Human Capital, which represents a person's talents, skills, experiences, and qualifications. To succeed in creating a stable circular economy, we must all understand what makes Human Capital such an essential element.

The Skills Necessary to Transition  to Circular Economies

Transitioning to a circular economy requires a new way of thinking and working. This means that skills need to be learned, developed, and deployed. This section explores the skills required to transition from traditional to circular economies.

What skills are needed?

To develop a circular economy around the globe, we need people with the right skills and competencies. These include:

  • Product and process design skills that use less material and energy.
  • The ability to plan and manage supply chains more sustainably.
  • Making products that can be repaired or reused easily.
  • Skills in new technologies (such as 3D printing) can help create more efficient designs.
  • Learn to work with new materials, such as bioplastics (made from plants).

What Do Executives Need to Navigate the Transition?

The circular economy is a new economic model already being implemented by some of the world's biggest companies and most forward-thinking governments. The transition to a circular economy is not an easy one. It requires companies and governments to rethink their business models, which can be scary for leaders. The great news is that many businesses are already succeeding in this transition. So there are plenty of examples for others to follow.

For companies and governments to successfully transition into a circular economy, they need to understand what it means for them, their industry, and their customers.

5 steps to adopting circular economic model

Here are five steps you should take:

  1. First, focus on the customer. Circularity is about creating Value for customers, not just reducing waste. By emphasizing the benefits of circularity for customers, you'll be able to drive innovation and adoption at all levels of your organization.
  1. Understand your role in the transition. Organizations should move from viewing waste as something outside their control to seeing it as part of their value chain - as something they can control with internal policies, processes, and technologies.
  1. Identify where your impact lies in the ecosystem. The first step to becoming more circular is identifying where your company's products fit into the ecosystem. This means understanding who uses them and what happens when they aren't needed. From the cradle to the grave or cradle to cradle — and how much waste they generate along the way.
  1. Create partnerships with others. Bringing together staff from different parts of your organization will allow you to develop innovative initiatives that can be integrated on a large scale. For example, if you are improving your supply chain efficiency, getting input from someone who works with suppliers or customers may be helpful. Consider bringing in experts from other industries that have already created circular models for their sectors.
  1. Think about how you will measure success. Transitioning from linear to circular isn't just about recycling or reducing waste; it's about building new business models that generate value while conserving resources. This requires companies to rethink their success metrics as they transition away from measuring profits based solely on sales volume or earnings per share (EPS). Instead, they must develop new scorecards that reflect how well they do by these new standards.

Overhauling a production or business model is not an easy task. Introducing the Circular Economy requires companies to rethink their processes, reinvent their business models and clearly define who are the real stakeholders within a supply chain. If done properly, execution will yield results on all three fronts: economic, environmental, and social.

—Malia Wofford