Episode 1 What is the circular economy?

Welcome to the Circular Economy Podcast!

Circular Economy Podcast - Episode 1 What is a Circular Economy?

This first episode is a quick intro to explain what the circular economy is and why it’s important.  We’ll explore how it helps create better products and services, and at the same time helps to make a better world.

Maybe you already have some green, or community-focussed elements in your business, and you want to go further:  to find ways of being more sustainable andprofitable!  The circular economy can help you do that, and strengthen your business in lots of ways.

We’ll talk about the aims of circular approaches, then we’ll break it down into my 5 components, helping you think about each part of your business.

Next, we’ll look at the benefits for business, with some examples, so you can think about how it can help your own business.

Subscribe to updates and find more episodes at CircularEconomyPodcast.com

Episode 1 – show notes

Hello, and welcome to the Circular Economy podcast, where we find out how circular approaches make a better business (and a better world):  for you, your partners, and your customers.

I’m Catherine Weetman, of Rethink Global, and in the series, I’ll be chatting with those inspiring people who are making the circular economy happen: rethinking how we design, make and use everything. 

We’ll talk to entrepreneurs & business owners, social enterprises, and leading thinkers.

We’ll find out how they are using circular principles to create value, increase resilience and reduce risk:  to make a competitive, sustainable organisation

You’ll find the show notes and transcripts at www.circulareconomypodcast.com, where you can subscribe to updates and useful resources. 

This first episode is a quick intro to explain what the circular economy is and why it’s important.  We’ll explore how it helps create better products and services, and at the same time helps to make a better world.

Maybe you already have some ‘green’, or community-focused elements in your business, and you want to go further:  to find ways of being more sustainable and profitable!  The circular economy can help you do that, and strengthen your business in lots of ways.

We’ll look quickly at the global megatrends that make it so important for us to switch to circular, regenerative ways of making products and designing services, then I’ll suggest a few questions you might think about, to highlight the parts of your business that might be vulnerable, and ways to spot opportunities for these new, circular ways of doing things.

We’ll talk about the aims of circular approaches, then we’ll break it down into my 5 circular economy components, helping you think about each part of your business.

Next, we’ll look at the benefits for business, using those 5 components, with some examples, so you can think about how it can help your own business.

[02:06] So, what is the circular economy?

People often think it’s just a new buzzword for recycling.  But it’s much more than that – it’s rethinking the way we typically do business now – take some materials, make something, use it and then discard it – take, make, waste.  That’s a linear system, consuming and depleting resources and creating waste and pollution.

The Linear Economy – take, make, and waste

This linear economy relies on using finite resources – metals, minerals, and fossil fuels.  It also relies on land and water – and we often forget that they are finite.  It creates waste and pollution all along the process, destroying the living systems we depend on, and often harming people as well.  When we discard the product, we waste all those resources – and we waste all the energy, labour and knowledge we invested in the product at every stage in the process.

We extract around 90 billion tons of natural resources, every year, to make what we consume.  That’s more than 12 tons for every person on the planet.  Based on current trends, that number is likely to double by 2050.

The systems we’ve created are shockingly wasteful.  The Circularity Gap report says we recover less than 10 per cent of our resources to make them into new products.

We now know we are causing dangerous climate change by burning fossil fuels, using fertilizers and clearing forests, all of which creates Greenhouse Gas (GHG) emissions.  Our world population continues to grow, and people have more money to spend on food, clothing and other stuff.  It’s great news that people’s standards of living are improving, but the downside is that we are creating even more demand for resources.

The linear economy relies on companies striving to sell more – so we try to cut costs, try to encourage customers to buy the latest version, or persuade them to buy products with a short life-cycle (eg fashionable clothes).  We try to create new ‘needs’, like antibacterial wipes for your kitchen, bottled water, probiotic yoghurt, or smart speakers.  We’ll come back to the business downsides of this ‘sell more’ approach in Episode 2.

[04:41] Circular Economy Components

The circular economy uses a different mindset, aiming to keep products and their materials in circulation, so we get more value out of them.  We’re trying to optimise the productivity of materials – how can we get more use, or value, out of each gram or ounce of the raw materials?

So if that’s the theory, how do we make it real?  I find it easiest to think about each stage of the business and the supply chain, and divide it into what I call the 5 components of a circular economy.  We’ll look at product design, circular materials, circular processes, recovery flows, and business models.

First, we design products to be durable and repairable, maybe even upgradable, so they stay in use for longer.  Good quality, well-designed and functional products will have a healthy resale value, like used cars, bikes & boats, vintage clothes, good quality furniture, houses and so on.

For some products, if we design them to be rugged and easy to use, we could make them sharable, so more people can use the same product. We can share with each other, like a car-share or renting out your spare room.

Alternatively, we can rent stuff. We’re familiar with examples like rental cars, bikes and specialist tools, and now we’re starting to see rented clothing, such as from Rent the Runway in America.

Secondly, we use safe, sustainable materials.  How do we make sure they are sustainable?  By using recycled materials instead of mining or extracting virgin, or new finite materials, and by using and regenerating abundant natural materials.  A good example of this is Ecovative, which uses mycelium, a fungus, to grow packaging, decorative and construction products from agricultural waste.  For finite materials like metals and synthetic plastics, if we want to make them easy to recycle, we need to simplify the design so we can separate the materials easily at the end of use – our designs and specifications should avoid bonding, laminates and compound materials.

Thirdly, we design our processes to use less, use safe, sustainable inputs, and to be zero waste.  We aim to recover the chemicals, water and excess materials to use again in our own processes, so saving money and becoming more self-sufficient and resilient.  Alternatively, we could find ways to create by-products and co-products, creating new revenue streams and new markets, again increasing our resilience.  I like to use the example of a business selling fresh orange juice.  They end up with lots of waste – the orange peel, the pips, and the pulp: all those white bits you’re left with afterwards.  They may even have to pay to dispose of all that waste.  In a circular economy though, researchers have found ways to create new by-products.  The pips and pulp can go into food manufacturing, as a thickener for other foods.  Orange essential oil, from the peel, is a valuable input for cosmetics and pharmaceuticals, and now a company called Orange Fiber, in Italy, is making a luxury fabric similar to silk, using 100% citrus peel.  The bonus for the orange juice business, is a range of valuable new by-products instead of wasted resources and cost.

Our fourth circular component is End of use recovery.  If we’ve designed products to last longer, we want to keep them circulating and get that extra value from them, so we develop systems to recover the product, component and materials and to process them for reuse.  This might be repair and refurbishment, or even remanufacturing, and eventually recycling.  We prioritise activities that involve the least effort, energy and cost, so we retain the most value from the original product.  Recycling is our last option because it needs more effort and energy and loses more of the original value.  Resource Resilient UK, a report by Green Alliance, tells us that a reused iPhone retains almost half its original value, whereas the value of the recyclate is less than ¼ of one per cent of the original product value.  In other words, the reused iPhone retains over 200 times more value than the recycled materials.

The fifth and last component is the business model that helps all of the other components to fit together, and creates a circular system that works better for your business, your customer, your suppliers, and for nature and society.  Business models that encourage use, instead of ownership, help products to stay in use for longer.  We use products and equipment more intensively, so we get more productivity, or value, out of the materials and everything else we invested in the product when we made and delivered it.  Business models for rental, pay-per-use, and even contracts for performance are starting to become more common.  Performance contracts can include the consumables and the energy used by the product or equipment.  Let’s think about a pay-per-use washing machine:   you pay for each ‘wash’ that your washing machine does, and the washing machine provider pays for the detergent, the water and the energy.  This means you’re more likely to fill the washing machine instead of washing a couple of items that you’d like to wear tomorrow.  Meanwhile, the washing machine provider has an incentive to design the machine, and upgrade it, so it uses less energy, water and detergent whilst ensuring you, the customer, get nice clean clothes.

Those are the 5 components for a circular business:  product design, circular materials, circular processes, recovery flows, and business models.  You can find more on this, including my Circular Economy Components diagram, in What is the Circular Economy.

[11:16] Going beyond recycling!

So the circular economy is much more than recycling – and recycling is our least preferred circular strategy.  

We want to start with the design of the product, equipment and infrastructure, redesign the business model that supports it, and rethink the whole system to get more value out of less.  In short:

  • we choose fewer and simpler materials, using less of them overall, and choosing safe, abundant or recycled sources.
  • we want well-designed, useful products with a life of their own,
  • we encourage ‘use and access to products, instead of ownership
  • and we need zero waste and pollution.  Everything we don’t use should be a useful input for another industrial process, or should be food for nature – compost!  Waste is only waste if you waste it!

The circular economy creates, circulates and captures new value for businesses.  It’s gaining momentum as a critical tool, with big companies like Nike, M&S, Renault and many others developing circular products and services.  Circular start-ups and small businesses are thriving too. 

But you might be questioning some of this – is it just greenwash?  

[12:43]  Business benefits and real examples

For instance, you might be thinking this extra quality and durability just adds cost, making you less competitive. 

But the user, your customer, gets a better lifetime cost for the product.  The user has choices:  either they keep the product for much longer than an inferior, lower quality product, or, when they want a new one, they sell it, offsetting the replacement cost.  In both cases, they feel good about the product and your brand – they’ve had lots of use out of it, they feel attached to it, and like to be able to use a high-quality product that works well and doesn’t let them down.  They’re more likely to stay loyal to your brand in the future, and even recommend it to their friends. 

A good example here is Patagonia, providing high-quality clothes and outdoor gear, with an ‘Iron Clad Guarantee.’ That gives you confidence they will perform and last well, and that if anything goes wrong, at any point in the product’s lifetime, Patagonia will repair it for you.  This is great for the customer, and despite the fact that the clothing is more expensive than the competition, Patagonia is growing year on year and doing well by doing good

How much do you know about your customer’s satisfaction?  Not getting complaints doesn’t mean your product has met customer expectations, for durability, performance and value.

What about the rental model?  How is that better for business?  A good recent example is BMW’s ‘Drive Now’ car rental service.  BMW set that up to allow existing customers, who loved the brand, to be easily able to rent a BMW when away from home, perhaps when they’ve travelled abroad.  The company found that lots of non-BMW owners wanted to rent a BMW car too – opening up a whole new market of potential customers, as well as capturing more share of the rental market.

Companies are developing reusable products, and even packaging.  Recycling specialist Terracycle started Loop in 2019, to introduce zero waste, reusable packaging into households in the U.S. and France.  Loop already has two dozen major household brands on board, including Tide, Crest, Dove, and Gillette.  Logistics company UPS is a partner, and has designed Loop’s compartmentalized, reusable delivery boxes.  The product packaging is high quality and designed to look nice in your bathroom or kitchen.  The consumer pays a deposit, and the packaging can go back on the delivery truck to be cleaned and refilled for another user.  The benefit for the brand is a new form of product and direct engagement with the consumer, instead of being under price pressure from supermarket own brands and Amazon.

Using recycled materials can engage consumers (and reduce your marketing costs).  Adidas makes trainers and swimwear using ‘ocean plastic’ (that’s discarded fishing nets, plastic bags and so on, from the millions of tonnes of plastic waste that ends up in the oceans each year, threatening marine life and entering our food chains).  Recycling ocean plastics into new products is engaging consumers, who are proud of supporting something that’s doing good, and helping spread the message on social media… in turn supporting the brand for free.

New businesses are starting up in every sector, providing repair, remanufacturing, rental or specialist resale services.  They might work independently, or partner with some of the bigger brands and manufacturers. 

Providing repair and maintenance services and selling spares provides new revenue streams, with the added benefit of regular cashflow.  Smartphone company Fairphone has a simple online fault check and diagnosis system, that helps you avoid the need for repair by checking for other issues, perhaps software or user error.  Once it is clear that you need a part, you can order it easily, and there are online videos to help you take the phone apart and quickly swap in the new module – all you need is a single screwdriver.

Remanufactured products can have the same warranty as a new product (this is a legal requirement in some countries).  Remanufacturing can open up new markets – especially where your brand has a great reputation for quality, but is expensive, compared to the lower-quality competition.  International engineering companies like Cummins and Caterpillar have sizeable, highly profitable remanufacturing operations.  Meanwhile, Rype Office in the UK remakes beautiful, high quality office furniture for typically less than half the cost of new. 

[17:53]  The circular economy builds better businesses

So, the circular economy is a new way of thinking about products and services. 

There are lots of potential benefits for business – it can reduce costs and smooth cashflow, can create deeper, longer-lasting relationships with your customers (and suppliers), and engage your employees.  It can help you continuously innovate too, as you find circular, sustainable and profitable ways to keep ahead of your competition.

I’d like to sum it up with a quote from the late Ray Anderson, head of carpet company, Interface.  He said we should:

“…take nothing, waste nothing, do no harm, and do well by doing good, at the expense not of the planet, but of less alert competitors.” 

Ray Anderson

In Episode 2 of the Circular Economy Podcast, I dig into the linear economy, going a bit deeper into the global headwinds facing businesses of all shapes and sizes.  Then we look at how you could deal with some of those risks, with a quick checklist to help spark some ideas for your business.

From Episode 3, I’ll be talking to people in small businesses and start-ups: who are proving that circular approaches can create a thriving business.  I think they’ll inspire you to go beyond doing a bit ‘less bad’ and strengthen your business by doing more good.

[19:13]  How to find out more

If you’d like to learn more about the circular economy, then why not subscribe to the podcast and listen to my discussions with those people making the circular economy happen.  Find us at www.circulareconomypodcast.com

We want to help people discover, use and benefit from the circular economy.  You can find more information and diagrams, on the Website… look for “What is a circular economy” in the Resources section.

My book, A Circular Economy Handbook for Business and Supply Chains, takes a bottom-up, practical approach, with lots of real examples from around the world, to help you really ‘get’ the circular economy, and come up with ideas to make your own business more competitive, resilient and sustainable. 

Please let us know what you think of the podcast – and we’d love it if you could leave us a review on iTunes, or wherever you find your podcasts.  Or send us a Tweet: @Rethink _ Global

Podcast music

Thanks to Belinda O’Hooley and Heidi Tidow, otherwise known as the brilliant, inventive and generous folk duo, O’Hooley & Tidow for allowing me to use the instrumentals from the live version of Summat’s Brewin’ as music for the podcast. You can find the whole track (inspired by the Copper Family song “Oh Good Ale”) on their album, also called Summat’s Brewin’. You can follow them on Twitter too.

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