A paradigm shift: from a "dumping economy" to circular economy

Reverse logistics and resource recovery: creating value for end-of-life products and waste

Not long ago, many business managers would have been blissfully unaware of the concepts of reverse logistics and recycling supply chains. Nowadays the need to understand how these  work and how they affect business can hardly be overstated. With ever growing pressure on companies to address the challenge of waste management due to a combination of consumer pressure, regulation and public company ESG commitments, a linear economy is giving way to a circular economy. 

For those who are still unaware, a circular economy is a system that drives the continuous reuse and reparation of inputs, with the aim of closing the loop on material wastage, whether to landfill or to the environment. In this post I will discuss how this transition from linear to circular economy offers a sustainable path for all businesses to succeed and future-proof their operations, whether they operate in the consumer goods, the manufacturing, or even the services sector. 

It is important to realize starting today that moving from a linear economy to a circular economy is rapidly shaping up to be an inevitable transformation businesses must go through if they are to survive, both in terms of competition and regulation. With this realignment towards a circular economy, the concept of reverse supply chain management is becoming a key business process in order to effectively maximize resource recovery processes. In this post we explore the need to  streamline strategic changes from linear economy to circular economy and illustrate the opportunities to this approach.

Efficiency and productivity have always been keen pillars of business growth.. Every economic sector and industry, from service to manufacturing to agriculture, is focusing on becoming more productive. This is a necessity because if you're not productive, you won't be competitive in the global economy. But today, how we define efficiency and productivity is evolving as consumer pressure and government action is now forcing companies to act more sustainably and more importantly, is forcing the cost of externalities back towards brands and businesses. . The Earth cannot sustain unlimited expansion of industrial activity along with society's continuous search for greater amounts of material possessions. To truly exploit natural resources and create products, our ancestors had to discover methods of mass production. This was an efficient way to combat a lack of resources--but modern-day consumers still have to compete (or feel they need to) over limited resources–caused by mass consumption and wasteful manufacturing practices.

A linear economy encourages overconsumption

A linear economy is a business model that emphasizes the principle of take, make, and discard. After extracting resources from the environment, products are manufactured for consumption. The waste from this consumption ultimately ends up in a landfill or is burned. Plastic is simply one of the bad exterior repercussions of linearity that we are dealing with. Aluminum, steel, paper, metal cans, leathers, oils, and other fossil fuel derived materials are now coming under scrutiny and questioned on their sustainability credentials. The irony is that the search for efficiency through globalization and wasteful linear models of production have now had the reverse effect, as climate change and events such as COVID have led to massive disruptions in supply chains that now point towards a rethinking of those models in favor of more sustainable and more efficient localized and circular approaches to supply chains.

The circular economy: an opportunity to unlock massive economic value for all

The Circular Economy is a new model for sustainable production and consumption. Instead of linear “take, make, waste” processes, it follows more circular patterns. This means less mining, drilling, cutting trees and other destructive activities that are needed to create products that do not easily decompose representing a new way of creating wealth and value by keeping things out of the landfill, oceans and the atmosphere. In this sense, “the less is more” approach embedded in sustainability and circular economy principles is now becoming a necessity when it comes to a company’s bottom line.

Circularity: The Key to Competitive Corporate Social Responsibility (CSR) and ESG performance

Why are businesses practicing circularity as their CSR? Businesses implementing a CSR strategy will be motivated by ethical leadership, risk management, cost savings and social responsibility. Furthermore, the idea of an economy that functions with the limits of sustainability and ecological prosperity has been different from what we have known before. It is an economy that possesses the ability to maintain a self-sustaining or even increasing level of prosperity without depending on unlimited growth.

Companies like IKEA, which collects and resells its previously sold products, are good examples of this. Google LLC diverted 91% of waste generated by its global data center operations from landfills in 2017. These actions have not only reduced the companies' operating costs, but they have also unquestionably improved their image and reputation by lowering their environmental footprints. Circularity encourages the efficient use of resources and the extension of product life. It not only reduces a company's expenses and resource costs, but it also improves its brand equity.

In Europe, The Circular Economy Is The New Normal

Since 2009, the number of climate change laws has expanded from 300 to 500, carbon pricing has been implemented, and landfill fines have been imposed in 20 European countries. Regulation is critical to the realization of a circular economy. The EU Action Plan, which comprises both mandatory legislation and voluntary measures, is part of the European Union (EU) directives on circular economy. Corporations that fail to comply with necessary measures face financial, administrative, or criminal penalties, whereas voluntary actions are not legally binding. This kind of regulation is being implemented or discussed across a wide variety of countries and areas, which is increasing the likelihood that many businesses will see increasing regulatory risks if they do not evolve their models. 

The Circular Model And Extended Producer Responsibility (EPR): A Powerful Combination To Promote sustainability

Extended producer responsibility (EPR) policies are meant to create a viable method for protecting the environment through the waste management of goods and creation of new goods. This type of program allows for one's waste and goods to be more efficiently tracked, traced and controlled, providing economic incentives to prevent the accumulation of goods and others' waste in our landfills. A producer's incentive to create and design eco-friendly items is often minimal. Third parties could benefit if the reverse logistic mechanism, which supports the collection of the goods back to the manufacturer, is adequately developed. Scrapped electronic appliances, for example, are frequently collected and traded by third parties, discouraging the original manufacturer from investing in the circular model. As a result, both corporations and authorities should have clear ERP policies in place to encourage manufacturers to participate in the circular model.

The Circular Economy Is Not The New Economy. It Is The ONLY Economy

Companies and governments across the globe are shifting from a linear to a circular economy. Regrettably, there is still a lot of ambiguity around the circular economy. We're here to help you bring the circular economy into the mainstream, so you know what it is and how it will affect you. You can't make an omelette without breaking a few eggs, and as it turns out, you can't save this planet without breaking a few things too. The good news is that these changes, if carried out effectively, will deliver significant value and growth to businesses and the global economy.

See if your company can improve its waste sustainability and circular economy performance with Kudoti.

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