The benefits of going circular

22 january 2014

Going circular is likely to strengthen a company’s commercial success, increase its innovative capacity and make it less exposed to raw material price hikes.

In fact, the circular economy could be worth billions of dollars every year to industry. In the EU alone, the savings made through using circular models could amount to between $380 billion and $630 billion per year, according to a 2012 report from the Ellen MacArthur Foundation and McKinsey & Co. And this was calculated on the basis of a ‘subset of manufacturing’.

Further studies from the Ellen MacArthur Foundation identified an overall annual one trillion dollar opportunity in going circular.

As defined by the Ellen MacArthur Foundation in the same report the circular economy is: “an industrial system that is restorative or regenerative by intention and design. It replaces the ‘end-of-life’ concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals, which impair reuse, and aims for the elimination of waste through the superior design of materials, products, systems, and, within this, business models.”

Currently, the linear model leads to excessive waste of finite natural resources. In Europe, only 40% of 2.7 billion tonnes of waste produced in 2010 was reused, recycled or composted. A recent UNEP report showed that only one third of the 60 metals it studied had recycling rates of more than 25%. Even with metals which have high recycling rates, significant value was lost annually: $52 billion for copper, $34 billion for gold, $15 billion for aluminium and $7billion for silver. (MacArthur Foundation/McKinsey).

There are four global crises the circular economy will help us tackle: the climate crisis; the toxicity crisis; the raw material scarcity crisis; and the energy crisis. There are major challenges to scaling up the circular economy. Governments need to look at tax and other policies. Businesses need to rethink how they design goods, so they are made for disassembly and safe recycling, bearing all the initial costs and issues involved in major organisational change and transformation. And customers and end users need to be open to new sales models, moving more from ownership of things to leasing or renting from the manufacturer. The rise of collaborative business models like car sharing or renting out private homes for holidays indicate that people are already making this mind shift, which is encouraging.

This is the future we need to embrace, no matter how hard it will be to make the shift. Changing mind-sets is a challenge but we are starting to see these shifts happening and working with the Dutch leasing company De Lage Landen, Desso is going to be able to offer leasing carpets as an option, which will make it easier for us to manage the recycling process and close the loop.