How Circular Economy Can Grow Your Business (And How to Implement It)
Most businesses are reliant the use of finite natural resources and the production of wastes in order to be profitable. Efforts to reduce such consumption and waste output are will result in a significant constraint for businesses in the future; particularly considering global population increase and the economic growth of developing nations. The circular economy is a popular solution to this challenge. It enables companies to generate revenue and to remain profitable but in ways where natural resource dependency and waste output are minimised. Examples of circular business activity include:
- Dematerialisation (i.e. from physical to digital products — think ebooks)
- Disassembling and remanufacturing used products into new ones (i.e. beyond material recycling — think mobile phones)
- Sharing of assets, rather than individual ownership (think car-share).
Based on research conducted at The University of Manchester with industry partners, we propose the following five tips to ensure your company can remain profitable both today, and in the sustainable world of the future.
1. Innovation through Imitation
There is a large and growing number of examples of how businesses are adapting to the circular economy — often to great, and well documented, success. Perform research and think… What works elsewhere? How can we apply that approach in our industry? What can we learn from others’ mistakes? What opportunities does our sector hold that theirs does not? For example, Uber found success by democratising the taxi industry to enable anybody to just get in a car and start making money. Airbnb took a similar approach and changed the accommodation industry forever. Could your industry take a similar approach? There are many case studies examples (i.e. here, here, and here) that demonstrate how businesses are taking advantage of the circular economy. Can your business do the same?
The gap between current practice and something radically different can be intimidating. Instead, try using the ‘backcasting’ technique. As the name implies, backcasting requires you to cast backwards from a desired future state to the present, rather than forward thinking. Such planning helps you to identify an ambitious and idealised future vision, free from constraint and importantly on which can help you to develop a step-by-step pathway to take you from current practice to next practice. Thinking backwards ensures that your pathways are feasible, consistent with existing business priorities, and are rooted in goals and milestones to assist implementation.
3. Think in Business Models
The term business model is often used but seldom fully understood. Osterwalder and Pigneur define a business model through the business model canvas, a visual tool as consisting of nine interlinked elements which determine what a business does, and how it does it.
The canvas therefore, acts as a useful map through which a business can be understood and modified. Thinking about your business in this way can help to spur innovation as it enables you to think not just about what products or services you sell, but how you do so. An example is the rental vs the sale of products. Both systems generate revenue for a company, but the former is associated with significantly less use of natural resources, and the potential to sell bolt-on services such as repair. Some examples of circular business models can be found here.
The famous adage from The Godfather said to ‘keep your friends close and you enemies even closer’. Well, as in the dark underworld of the Mafia, the same is true in world of business — although perhaps not with the same intention of Don Vito Corleone. ‘Coopertition’ refers to proactively working with your competition for the mutual benefit of all involved. For example, a number of small businesses may work together to lobby a supplier for products to be sold in sustainable packaging. Similarly, one companies waste might be another’s raw material throughput. Costs could be lowered for each if they worked together to find opportunities for waste to be turned into a usable product. Think; is there any way you and your competition (or other local businesses) could work together for mutual benefit?
5. Leverage Academia
Academics might have a reputation for eccentric personalities and leather patches on elbows but this is not the case (well, we do all know that ONE person). Universities are home to some of the worlds leading researchers in the field of business and sustainability. Academics are also DESPERATE to use their research in real world settings. No good academic wants to see their work sit in the pages of a journal publication. We want to see our creations fly with actual businesses, helping actual people, and contributing to a healthier society.
For example, at the University of Manchester we recently conducted a research project with colleagues to develop an innovative framework to help businesses implement circular economy business models (utilising many of the tips listed in this article). Using this framework (Backcasting and Eco Design, or BECE for short) we helped a small IT Support business of just 4 employees develop two new business models that would help them to increase customer satisfaction, reduce costs, and in one instance, have a potentially global impact via a radical new product offering. What’s more — we offered this project free of charge to the company and required just two short workshops in terms of their time (we did the bulk of the work ourselves back at the university).
Try getting in touch with your local university. They will almost certainly have a department that specialises in public engagement who will be able to put you in touch with the right people.
Remember — although the circular economy implies a different way of doing business, it is not about constraining business. Rather businesses should be encouraged to think in new ways, to see business differently, and make money in such a way that they will be able to avoid risks associated with resource reliance and waste into the long-term future. After all, a sustainable business that provides to the public and offers employment has to be a profitable one. Be bold, be ambitious, and think, what could your company be in the future?
— — — — — — — — — — — —
This article is based on research conducted at Tyndall Centre Manchester and the Sustainable Industrial Systems Group at the University of Manchester. We would like to thank the Higher Education Innovation Fund for helping to support the research project.