In light of increased environmental destruction, resource scarcity and increased waste production the concept of Circular Economy (CE) has gained increasing attention. It is the main goal of CE to re-form the dominant linear value chains into a circular economic system. By applying sustainable product design, closing resource loops, implementing service solutions or circularity along their supply chain businesses can move towards circular business models. The Ellen MacArthur Foundation, a main institution in the field of CE names three driving CE principles [1]:
- Design out waste and pollution
- Keep products and materials in use
- Regenerate natural systems
These principles are the guidance to make finite resources usable again at the end of a product’s lifecycle. Products are not to be thrown away but are seen as new potential resources. Hence, an intelligent design when drafting or creating the product can determine its reuse. Product design with repairability, reuse or at least recycling in mind makes it possible to use “old” product components as new material for other products. This reduces the amount of new materials required for a new product, as „recyclates“ expand the materials portfolio. This is an important factor in supporting nature regeneration and resource preservation.
A short user perspective
The idea of a circular value loop is not a creation of science but follows nature where new life is gained from old life e.g. new plants resulting from decomposition. However, a practical and system-wide implementation of CE in a dominant linear system faces different barriers and challenges. The consumers, or rather users, and their behaviour are a main driver for CE. Their consumption decisions influence market developments for circular business models which are based on cooperation, prolonged product life cycles and better access to circular products for users. Due to the change in consumption behaviour that needs to occur in a CE, consumers also face implementation barriers related to product use and repair, knowledge of circularity, infrastructure for second-hand products, different price levels and an enabling attitude.
A short business perspective
Businesses are also confronted with challenges when they want to implement circular value creation and become part of a circular economy. The challenges can be internal such as technological, management or business cultural challenges. Or they can be external for example market, infrastructural or social challenges. Often these challenges are interlinked and can lead to chain reactions as can be seen in the figure below.
Low raw material prices are a challenge brought by the markets. If the price level for raw materials is low, a more expensive product that was repaired or produced with recyclables creates little consumer interest. This is an example for an external social barrier. Lacking consumer demand can lead to a tentative company culture when deciding, or not deciding, to develop circular business operations. With few companies in the CE market, the up-front investment costs for other companies are relatively high as few synergies or economies of scale have established.
Overlapping user and business perspectives
Nonetheless, there is a considerable overlap of barriers between businesses and users, who act and interact in many ways along the supply loops. The conflicts of interest occur along the supply loops regarding waste management and the related infrastructure, expected and realised product prices, quality demands and the need for circular product design. A positive relationship and close interaction of two particularly important players in the CE, businesses and users, is highly supportive in the transition phase to CE.
Since 2014 the DFGE – Institute for Energy, Ecology and Economy – is a partner of EcoVadis and supports its customers in getting their environmental and ecological efforts recognized and communicated. Furthermore, DFGE acts as a mentor for businesses doing the CDP program including CDP supply chain. The measures developed or derived from either EcoVadis or CDP can support businesses when aiming for a circular supply or even a circular business model. The DFGE can support your company in upgrading your environmental performance, participate successfully in CDP or EcoVadis and develop action plans for CE.
If you have further questions please do not hesitate to contact us at or under +49 8192 99 7 33-20.
[1]https://www.ellenmacarthurfoundation.org/circular-economy/concept, Stand April 2020
