Looking Through Circularity Binoculars
The circular economy offers a multitude of benefits for companies including resource efficiency, reduced supply chain risk, reliable feedstocks, improved corporate reputation, cost savings, product innovation, and more. But starting off can be tricky and confusing. Where do you begin? How do you shift your company to circularity?
One of the best pieces of advice I’ve heard for doing this comes from Helga Vanthournout, a senior expert with the McKinsey Center for Business and Environment in Germany, who spoke on the circular economy at The Wharton Initiative for Global Environmental Leadership conference I attended last spring.
Vanthournout pulls her advice from the Ellen MacArthur Foundation’s Circular Economy Toolkit and suggests that companies use “circularity binoculars” to look at different action areas to see where they can create value. Circularity binoculars refer to the circular economy diagram, resembling a pair of binoculars, created by the Ellen Macarthur Foundation, which encompasses the three founding principles of a circular economy.
- Preserve and enhance natural capital by controlling finite stocks and balancing renewable resource flows (i.e., select and use natural resources carefully).
- Optimize resource yields by circulating products, components and materials in use at the highest utility at all times (i.e., reuse, recycling and prolong).
- Foster system effectiveness by revealing and designing out negative externalities (i.e. design for human health and the environment).
With the principles of the circular economy in mind, Vanthournout encourages companies to peer through the binoculars into six suggested action areas to help companies identify opportunities for circularity within their own business models. The six action areas, or ReSOLVE levers (also developed by the Ellen MacArthur Foundation) can inspire change.
- Regenerate (use renewable resources)
- Share (move from individualized products to shared products)
- Optimize (improve performance)
- Loop (recycle)
- Virtualize (offer virtual products instead of tangible ones)
- Exchange (replace a wasteful product or material with a less wasteful one)
Once an opportunity area is identified, Vanthournout stressed the importance of developing a sound business plan to ensure ideas make economic sense. If the economics aren’t there, just as in the linear economy, the idea won’t be sustainable long term. To create a sound business plan, a business must take a close hard look through their binoculars to ensure that they:
- Have a sophisticated understanding of markets. If you don’t understand your markets – commercial markets, resource markets, and secondary markets – you may be designing a product nobody wants or needs, is dependent upon an unreliable or risky natural resource supplies, or is composed of unrecoverable materials or materials that have little or no residual value at end of life.
- Design solutions that offer new functionality instead of same-performance substitutes. In other words, create something novel that fills a new niche – be inventive.
- Take care not to destabilize relationships with suppliers by asking for change too quickly. This piece of advice is particularly crucial. Change doesn’t happen overnight. Supply chains are complex and involve vast networks of people, resources, relationships, interdependencies, and livelihoods. Companies need to take care to see that everyone is onboard and able to adapt to new procedures seamlessly before implementing them.
It is also valuable to define a set of metrics that acts as your guide and indicator toward achieving highest utility of resources.
So go ahead, take a look through those binoculars!
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