Did you know that the average car lies idle for 90 percent of the day? Or that the average power drill is used for 30 minutes of its entire life? Wasteful exploitation of the world’s resources is taking its toll on the environment. And the recent cyclical fall in commodity prices should not deceive us into assuming that pressure has eased. The long term rate and nature of our consumption is also choking economic growth as the cost of depending on scarce natural resources increases.
As much as $25 trillion could be at stake by 2050 unless we change the relationship between natural resources, customers, and the market. Thanks to radical new business models and technologies some companies are now growing by finding value in resources which have been vastly underutilized.
The circular economy is about more than recycling and managing landfill. We need to look at all aspects of waste as an opportunity. Value can be found in wasted resources that could become renewable, such as biofuel. We can exploit the wasted capacity in property or assets, such as the 60 percent of Europe’s truck capacity that remains empty most of the time. Reduce the wasted lifecycles that currently see products discarded rather than refurbished. And we can find uses for otherwise rejected materials.
Accenture Strategy has identified five circular business models all of which demand major changes in mind-set, organisation and strategy to implement them at scale:
- Sharing platforms, such as Uber make the most of underused assets.
- Products-as-a service that encourage manufacturers to maintain products for longer. Philips has been a pioneer with lighting services.
- Product Life Extension that requires companies to repair and re-use used products.
- Circular Supply Chains that enable all partners to take in and re-use materials and products without compromising quality and processes.
- Recovery and Recycling that uses traditional waste to remanufacture or use as energy. Caterpillar has saved significant costs in this way.
Despite such progress, we are still not close to making the circular economy mainstream. More policy intervention is required to bring transparency to the content of products and to reward the repurposing of materials. Above all, governments should put the circular economy on an equal footing with today’s linear economy.
The negative environmental impact of industrial activity is now being taken seriously. But the positive economic impact of the circular economy is a more appealing way for business to incentivise responsible use of resources.
Peter Lacy, managing director, and Jakob Rutqvist, Senior Manager, Accenture Strategy, are the authors of Waste to Wealth, the Circular Economy Advantage, published by Palgrave MacMillan. It can purchased from amazon.com and amazon.co.uk.