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Supporting the circular transition

Submitted by on 28 Sep 2015 – 09:05

Nordic businesses are already employing business models that are inspired by, or employ the logic of, the circular economy. Birgit Munck-Kampmann, Director, Copenhagen Resource Institute explains why  a circular system is the way forward

Birgit Munck-KammannThe Circular Economy is riding high on the political agenda. Policy makers, business leaders, academics and NGOs argue that a circular economy can help solve pressing environmental and economic global challenges. Material consumption generally progresses along a “take-make-use-dispose” lifecycle, where virgin materials are extracted at one end, and waste is either landfilled or incinerated at the other.

Even highly optimised, this is an inefficient system – it converts value to waste. In a world of finite non-renewable resources and renewable resources with a maximum carrying capacity, this model can only get us so far, and bring prosperity to so many. A circular economy bends this linear model until the ends meet: feeding waste, materials and used products back into the useful economy.

The business case for a circular economy is compelling. Studies show that the global economy could benefit immensely from a more circular approach, embodied by material savings, emissions reductions and job creation. In the Nordic countries, many large companies are already taking ambitious and important steps towards more circular business models, while smaller and sometimes lesser-known companies are already making it happen.

A recent project by the Nordic Council of Ministers – the inter-governmental body for co-operation in the Nordic Region – supported the move towards a circular economy by highlighting good practice, promoting innovative business models and bringing together people from different corners of the economy to share experience and explore new solutions.

The project drew on examples of Nordic businesses that are already employing business models that are inspired by, or employ the logic of, the circular economy. Examples were found across many different sectors, indicating that the principles of the circular economy can be applied to businesses throughout the economy. Listed below are a few key trends.

Selling services rather than products

By identifying the service that a product provides the customer, and making the provision of that service the basis for a commercial relationship, rather than simply the provision of the product itself. This encourages higher product standards, a higher degree of repair, and better management of the product when it finally becomes waste. For example, clothing company Viga operates a subscription service for children’s clothes – as the child grows, the clothes provided grow with them. No textiles are thrown out, repairs are made where necessary, and clothes that are too damaged are recycled.

Managing and reprocessing waste

Production and delivery often results in waste of either production material or packaging material. By re-processing production material, re/engineering production processes to prevent waste, and by rethinking delivery options, waste, and the associated costs, can be significantly reduced. For example, Skagenfood, a fresh produce delivery service specialising in fish, pays for the return of all packaging though the regular Danish mail service.

Repair and re-manufacture

Taking old products back and repairing or remanufacturing them so that they can be sold as new products rather than second hand products. This is particularly prevalent in the business to business sector which often involved high quality and high value products.

For example, Martela helps customers through the process of selecting and buying furniture, maintaining the furniture while in use, and collecting the furniture once the customer no longer needs it. The furniture is then repaired, re-upholstered, and sold back into the market.
Integrating circular economy thinking into the mainstream involves more than collecting a handful of good ideas.

In April 2015, the Nordic Council brought together decision makers from business and government in Copenhagen to share experience, identify barriers and forge partnerships. The one-day workshop addressed circular economy in the context of different business sectors and different business models. The ultimate aim of the workshop was to develop specific policy messages and actions that could support and promote circular business models.

Policy for supporting and promoting circular business models can take many forms and touch on highly diverse policy domains, from macro economic framing to product regulations to waste definitions. However, several issues consistently crop up as relevant for the ongoing viability of circular business models:

Simple, transparent and long-term objectives and regulations: This goes a long way toward providing a level the playing-field for all actors, and allows businesses themselves to set long-term targets and follow long-term development plans.

Enable and support better quality re-use and recycling: Material recycling can easily become the lowest common denominator if waste collection systems do not prioritise maintaining the value of discarded goods and waste.
Public procurement as a first market for innovative circular business models: public expenditure can be used to support innovative circular solutions. This can help reduce costs and increase services in the public sector, and provide a needed boost to innovative businesses.

Set targets for re-use

Recycling targets are already in place and provide political and legal impetus to improve waste handling, but they can also drive potentially re-usable goods down the value chain towards material recycling. Re-use targets could help alleviate this problem. Strengthened requirements on repairability and product warranties: helping the formal and informal repair industry through easier access to information, and extending mandatory warranty periods to increase overall product quality.

Moving an entire economy from one mode of delivering material prosperity to another will not happen overnight, and it is not surprising that entrenched business practices and processes are difficult to change. Through a combination of education and market forces, however, businesses are realising that the circular economy represents an opportunity rather than a threat. Better policy can help reinforce and capitalise on this change in attitude.