Since the industrial revolution, the world has operated in a linear economy. Raw materials flow out, products flow in and they get used and disposed of, usually in landfill. Our business models are based on making money from volume. This has created misaligned incentives that are difficult to break. The World Economic Forum call it linear lock-in.
As with many broken systems, it's the poorest that are hit hardest. Economically, poorer nations are often at the least profitable end of the supply chain providing raw materials. Environmentally, mismanagement of waste and pollutants has led to approximately 9 million people dying every year. That's 20 times more than die from malaria. The international development community have invested a lot in new green technologies to tackle the problem, but too often without the right business model and processes.
Getting the business model right
The Circular Economy model provides a genuine alternative. Restorative and regenerative by design, it aims to maintain the value and use of products, components, and materials at all times. Take Timberland Tires as an example. The shoe maker has collaborated with tire manufacturer and distributor Omni United to create the first tyres ever purposely designed to be recycled into soles for footwear after their journey on the road is complete. This shows how circular is more than just recycling. It's about building in regenerative design principles up front to maximise maintenance and value.
We've seen that with the right products, business models and training, a Circular Economy can not only reduce the level of waste but also create a significant new source of wealth. That's why we've joined Ellen MacArthur's Circular Economy 100. It's an innovative programme enabling organisations to develop new opportunities and realise their Circular Economy ambitions faster. The programme helps members learn, build capacity, network, and collaborate with key organisations around the Circular Economy.
Restorative and regenerative
The Circular Economy allows businesses and governments to extract value from waste products. This can help reduce the number of individuals suffering because of poor waste management, as well as create new job opportunities. For example, Sanergy installs high-quality, low-cost toilets in the slums of Nairobi. A local franchise owner manages the toilets and safely and professionally removes the waste on a regular basis. The waste is then processed into high quality agricultural inputs and renewable energy. So far, the business has created more than 800 jobs.
With a focus on maintaining or remanufacturing products, a service economy, can generate new job opportunities and bring better products and services for consumers. In South Africa, the Integrated Waste Tyre Management Plan is taking millions of waste tyres lying in dumps and stockpiles and recycling the rubber, steel and textile in them into useful products. Rubber crumb can be used in AstroTurf as cushioning, asphalt, carpet padding, vehicle mudguards and adhesives, for example.
How can the circular economy create value for your business?
Service-led economic growth
Moving from a traditional product-led business to a service-led business can improve the customer experience. The East African solar energy company M-Kopa Solar is currently providing off-grid power to more than 450,000 households in the region with portable solar devices. Kopa means "to borrow" in Swahili, and customers pay $35 upfront and agree to make a daily payment of $0.45 for a year. Customers who were paying $0.75 per day on kerosene lighting and basic charging costs now have a cheaper product that's safer and healthier. It's also simpler, as they can pay for the service using mobile money transfers. With a two year warranty, if the product breaks, M-Kopa will come and fix it.
The service-led model allows customers to pay in instalments making it more affordable. This gives businesses access to a larger market and increases the opportunity to grow. For many customers, it will be the first opportunity to build up a credit rating giving them access to new sources of finance to pay for other products and services. The need to maintain products and components will also lead to more jobs.
Are we ready?
In Europe, with the launch of the Circular Economy Package, a set of EU laws around waste management, we've seen efforts to scale up and introduce circular principles at a system-wide level. While we've illustrated examples in developing countries, the concept is still relatively new amongst governments and aid agencies. But in many ways developing countries already have a head start. Firstly, it's already part of the culture. With the reality of resource scarcity, poorer nations have a mind-set of sharing and adapting. What's more, the lack of legacy infrastructure provides an economic advantage in starting from scratch. With the benefit of hindsight, we can learn from past failures of the linear model.
We've been working with a number of businesses, including global technology business Ricoh and innovative new tyre manufacturer ENSO, to identify Circular Economy opportunities and help them deliver the benefits. We're now exploring opportunities to take that experience into Africa and Asia. But we won't do this alone. We want to build partnerships with governments, NGOs, research institutions and the private sector. With the potential to bring economic and environmental benefits to those that need them most, it's time to get circular.