Closing the Loop: Innovation in the Circular Economy
How can we design innovation to support the shift to a circular economy?
Applying my learnings from Circular Economy Management (CEM) from the European Institute of Innovation for Sustainability (EIIS), in this blog series on sustainability & regeneration, I’ll be exploring how circularity is making an impact on traditional business models, mapping the startups that are building innovative solutions and exploring case studies from industry.
It’s been a fascinating 4 months at EIIS with a diverse group of professionals embarking on the circular economy journey. What drew me to pursue this programme was the close link between sustainability and innovation. To be circular in your business, there needs to be a fundamental shift in how your products and resources are designed, used, managed, and valued. It forces organisations to rethink traditional business models, get creative, and find novel solutions to existing ways of working.
What is the circular economy?
“…a system where materials never become waste and nature is regenerated. In a circular economy, products and materials are kept in circulation through processes like maintenance, reuse, refurbishment, remanufacture, recycling, and composting.” (Ellen McArthur Foundation)
We talk a lot about how the future “can’t be business as usual” and the current model deployed by most businesses for how they produce, distribute and consume products is not sustainable. Both large and small companies are under increasing pressure from their customers, investors, and regulators to take meaningful action to address climate change. The circular economy requires a change from linear production to a sustainable model where the ultimate objective is to design products for longevity, durability, and ease of repair.
The circular economy can help companies in a number of ways. To:
- Gain competitive advantage
- Minimise risk
- Reduce uncertainty
- Ensure long-term sustainability
As an example, IKEA has already started implementing circular product design principles with the aim that all of its products will be reused, refurbished, remanufactured, and, eventually, recycled. As part of their wider strategy, they are also using renewable or recycled materials and testing and developing new business models and concepts. Watch out for future blog posts to hear more case studies from the industry.
In what way does innovation contribute to the advancement of a circular economy?
The transition to a circular economy could generate $4.5 trillion in additional economic output by 2030. The circular business model aims to close the loop of resources by improving resource efficiency, reducing waste from production processes, using renewable energy where possible, and through many other methods.
Implementing emerging technologies and practices in your existing business model could be one facet of transitioning from a linear to a circular model. There are a number of technologies addressing sustainability at each stage of the product lifecycle from sourcing and manufacturing to logistics and distribution.
We can separate these technologies into three types:
- Digital technologies — 🌐 software: this is about designing for circularity using data-driven insights e.g. data management, consumption, usage, and creation. For example, IoT solutions can help measure and monitor the status of equipment and products or enable traceability and transparency in the supply chain ensuring that material is ethically sourced.
- Physical technologies — 🤖 hardware: this is where robotics and drones come into play. Their role is to allow for more efficient, emission-free deliveries, enable automation in warehouses to reduce waste, enhance resource efficiency, and many more applications.
- Biological technologies — 🔬 biological systems: this is about leveraging the principles of biology, genetics, and engineering to develop innovative and sustainable solutions. For example, Phycobloom is a UK-based company using synthetic biology to create algae oil more efficiently and cheaply, with the ultimate goal of providing a new sustainable biofuel. Many more startups will be mapped in an upcoming blog post. Have a listen to Metta’s podcast episode with Phycobloom here.
Despite the many exciting technical developments in the circular economy, moving away from the linear economy is a complex and challenging transition. To move the needle, it will require collective effort on a global scale but it’s an exciting time to get involved.
What are some of the common challenges to implementing circular economy initiatives?
- Supply chains are already complex: Besides investing in and integrating new technologies, circular business practices asks organisations completely re-think how their existing supply chain looks like. For example, designing products for circularity, managing the reverse flow of products, or managing a diverse range of input materials can come with complexity.
- A new innovation initiative needs buy-in: Organisations need to be able to build business cases to demonstrate the value of circular economy initiatives. This will require a change of mindsets and behaviours internally, and resistance to change and a preference for the status quo can hinder circular economy adoption.
- Going from technological discovery to implementation through collaboration: Moving from a linear to circular economy requires more than just technological advancement but also a systems change. It’s important that everyone from government and policy-makers to investors and corporates are brought on board.
As with any organisational transformation, companies need to adopt a holistic approach through a defined circular strategy, strong leadership support, and a willingness to adapt and evolve continuously. While it’s challenging to adopt circular business practices in a world that is set up for linear production, distribution, and consumption, there are many organisations that are realising its benefits. From large corporates and SMEs that are shifting their practices to the startups developing solutions in these areas, there’s a lot of hope for the future.
Stay tuned as we share more in our blog series over the next few months.
Thank you to the EIIS team, Gerardo Volpone from Microsoft, Stefano Pascucci from Exeter Business School, and many others for their insights!
For more information about Metta and the work we do, head to our website. Check out our podcast Metta Talks to hear the latest about startups, innovation, and sustainability. The team is also on Twitter — reach out to us @mettatalks.
Want to learn more about Metta? Let’s talk 🗣
Ksenia Kurileva— ksenia@metta.partners | linkedin.com/in/kseniakurileva/
