Closing the business circle worth upwards of €1.8tn

Circular businesses could unlock upwards of €1.8 trillion of value for the European economy, according to the Ellen MacArthur Foundation, which works to promote and develop the idea of the circular economy.

A circular economy is based on the principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural systems.

Entrepreneurs, managers, companies, and entire industries need to understand the skills, technologies, opportunities and problems of the circular economy in order to survive into the future, Orlagh Reynolds, postdoctoral researcher with the Beacon Bioeconomy Research Centre and the UCD College of Business says.

“At its core, circular business is about minimising environmental costs such as waste, keeping materials ‘alive’ and in use for as long as it is possible to provide value. There are many potential entry points into circular business, and moving from linear to circular requires an examination of internal processes of the firm as well as external links across your supply chain,” she says.

A common entry point is waste reduction, but to really move towards circularity, firms need to look at their raw materials and efficient use of these materials.

“This means the substitution of fossil based, non-renewable materials with biological, organic, renewable analogues. The opportunities to do so are rapidly increasing with advancements in, for example, bioplastics produced from sugarcane molasses, fruit and potato waste, glycerol and even carbon dioxide,” she says.

At a process level, firms can also look to technologies that change production processes by enabling the reuse of waste in product lines. The opportunities are there, as waste and side stream resources work well with existing process manufacturing techniques, she says.

At product level, firms need to consider environmental impacts at each stage of the product life cycle. This also includes considering a product’s role in society, such as considering access to and sharing of products rather than ownership.

Even though the advantages to a circular business are vast, it is estimated that less than 10 per cent of the global economy is circular, meaning that the traditional take-make-consume-dispose linear value chain remains the dominant model in use by businesses, Russell Smyth, partner, KPMG Sustainable Futures says.

“Successful circular business models can improve efficiencies, de-risk value chains, reduce pressure on natural systems, and drive innovation. Each of these benefits can improve profitability, reduce costs, and promote responsible business practices. The circular economy is not just about reducing waste, it is a fundamental rethink and redesign of entire value chains as well as an assessment of where inefficiencies can be removed, and sustainable innovation can be progressed. This will require companies to develop creative strategies, upskill workforces and engage with upstream and downstream stakeholders - to ultimately transition from a cradle to grave toward cradle to cradle type approach,” he says.

There are many examples of companies that are moving towards or have moved to a circular business model. Key members of the Irish food processing industry including Danone, Dairygold, Glanbia, Tipperary Co-op, Carbery and Wyeth Nutrition and Renewable Gas Forum Ireland, in conjunction with KPMG Sustainable Futures, are progressing work on Project Clover – a food and agri-industry led programme to commercialise a number of decarbonisation strategies within the Irish dairy, and wider food and drink industries.

“One of the key objectives of Project Clover is to achieve a circular economy within the Irish agricultural sector, where waste from Irish farms [eg slurry] is processed to extract renewable gas to power industry, while the residual material from the process is returned to the land as an organic fertiliser,” Smyth says.

‘Driven by purpose’

In the context of fashion, there are some examples that approach circularity from different angles and challenge the status quo by using fashion as an instrument to bring change forward, says Dr Hakan Karaosman, FReSCH – Fashion’s Responsible Supply Chain Hub.

“Circular business examples, in the context of fashion, are radical because they approach product design as a function driven by purpose. They are not trying to find incremental solutions to become more than ‘less unsustainable’; rather they transform their design and production processes to embed circularity into the core of their DNA.

“Ecoalf is a great example to illustrate how purpose can meet radical innovation to transform a linear business paradigm into circularity. They are upcycling the oceans by collecting plastic waste, in addition to other types of waste, from the bottom of the oceans. This waste becomes an input material and after a wide range of technical and mechanical steps, the waste coming from the oceans is transformed into yarns and fabrics that are consequently used to create fashion and lifestyle products,” he says.

At the moment we are using resources 1.7 times faster than they can be regenerated according to Global Footprint Network 2018, and we are already at a critical level beyond which “environmental and social degradation will be unimaginable”, Karaosman says.

“This means that we are absolutely in need of designing and executing transformative paradigm shifts. Hence, we have to see more circular business examples. Beyond profit maximisation, we have to build a new system to ensure environmental and social justice for everyone because the growth can no longer be measured only by financial terms. On the whole, I hope that we will see less marketing campaigns and more radical actions surrounding the circular economy landscape,” he concludes.