One of the concepts that we are starting hear a lot more about the circular economy. At the heart of a circular economy is the idea that we produce little or no waste because everything we have and use will have a continued existence.
Why is this important? Essentially our current ‘take-make-dispose’ linear economy approach means that most of our resources are wasted throughout the supply and manufacturing chain with about 80% of products made get thrown away within the first six months of their life.
Consequently, growing tensions around geopolitics and supply risk, are contributing to volatile commodity prices. A circular economy could help stabilise some of these issues by separating economic growth from resource consumption.
On the face of it you probably think I am talking about recycling…well yes and no.
The circular economy goes beyond recycling as it is based around a restorative industrial system geared towards designing out waste. Recycling is essentially the ‘outer circle’ of the circular economy, requiring more energy input than the ‘inner circles’ of repair, reuse and remanufacture. The goal is not just to design for better end-of-life recovery, but to minimise energy use.
Now it could be argued that revamping our economy to take advantage of better and smarter design and use of raw materials is just good common sense. But it turns out that the business case for a circular economy also stacks up. Economic analysis estimates shifting towards circularity could add $26 billion to the Australian economy by 2025. The main economic beneficiary would be the manufacturing sector that tends to have a greater reliance on raw materials.
Our relationship with the products and services we purchase could also change significantly under a circular economy. What if we didn’t buy the goods we use, but instead favoured access and performance over ownership? The ‘pay per use’ contractual agreements associated with smartphones for example could be extended to standard goods such as washing machines, clothes and DIY equipment. Some companies are already piloting product-as-service models, which would see us become users rather than consumers. Such a shift would allow companies to retain product ownership for easier repair, reuse and remanufacture.
So how is this all going to happen – we are already seeing it through the same disruptive innovation that has already brought us changes in accommodation and transport services. As we start to see greater emphasis on the collaborative economy that supports use over ownership and business models that focus on bypassing traditional business models, we can expect to see significant changes in the way we operate in the coming decades.