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A Curious Concept Called Circular Economy

Companies are adopting this model as it will help them be more sustainable. So, what is it?

What Happened?

Kochi Metro Rail Ltd (KMRL) has decided to adopt a circular economy. KMRL MD Alkesh Kumar Sharma said, as quoted by The New Indian Express, ‘’By adopting circular economy, KMRL can work on the concept of reduce, reuse, redesign and regenerate”.

The circular economy is gaining attention around the world but what is this concept?

What Is A Circular Economy?

A circular economy is based on the idea that there is no such thing as waste. So, how do you achieve that? By designing products that will last longer (you use good quality materials to make long-lasting products). Those products must be optimised for a cycle of disassembly and reuse that will make it easier to handle and transform or renew them.

This concept is completely opposite to the concept that we have grown accustomed to (i.e) Linear Economy. In a linear economy, we mine raw materials which will then be processed into a product and then thrown away after use. On the other hand, the circular economy focuses on value preservation.

Circular economy sounds like a cool concept, which will help the environment. So, how will it help businesses?

Circular Economy Business Models

Circular economy business models serve to lower the extraction and use of natural resources and the generation of industrial and consumer wastes. These models utilise already existing materials and products as inputs and therefore their environmental footprint tends to be significantly smaller than that for traditional business models.

Below are some examples of circular economy business models:

1) Hire and Leasing: Instead of buying products, companies could hire or lease them.

2) Circular Supplies: This model is particularly relevant for firms dealing with scarce commodities, in which scarce resources are replaced with fully renewable, recyclable or biodegradable resource inputs.

For example, Royal DSM developed cellulosic bioethanol in which agricultural residue is converted into renewable fuel.

3) Resource Recovery: This model takes advantage of technological innovations and capabilities to recover and reuse resource outputs that eliminate material leakage and increase economic value.

The food waste from Walt Disney World Resort is converted into renewable biogas for generating electricity, with the remaining solid material processed into fertilizer.

4) Product Life Extension: This model helps firms extend the life cycle of their products and assets to make sure that they remain economically useful.

Through its Reman Program, Caterpillar’s remanufacturing activity has focused on returning components at end of life to same-as-new condition or quality over the past 40 years. This move cuts costs, waste, greenhouse gas emissions and needs for raw inputs.

5) Sharing Platforms: This is centred on the sharing of products and assets that have low ownership or use rate.

Companies that take advantage of this model aim to increase the use of the products they sell, enhance productivity and value creation. Examples include transportation (Lyft, RelayRides, BlaBlaCar), lodging (Airbnb) and neighbours helping neighbours (TaskRabbit, NeighborGoods).

The Benefits

  • Provide new commercial opportunities
  • Contribute to business growth and sustainability
  • Generate new revenue
  • Protect the economy against resource shortages and the increasing cost of materials

So, doesn’t the circular economy and such business models sound like a wonderful concept? We believe that more companies and governments should come forward and adopt this idea as it will help both businesses and economies in the long run.

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