Huge amounts of plastic waste in oceans and on land, landfills that cause pollution, animals struggling with our waste: These are only a few challenges humanity is facing at the moment linked to the conventional economic activity ‘produce, use, throw’. One factor is that most business models at the moment are focused on linear growing processes, i. e. they are embedded in linear economic systems. The following blog post focuses on challenges caused by our current economic system and on solutions related to circular economy.
Main challenges caused by linearity in economic systems
Most business models in our current system are focused on a linear value creation. Sales can be increased by following either a maximizing or an optimizing strategy. In contrast, there are limits to growth and only a few businesses are considering circular economy aspects.
Furthermore, we are overusing our resources. The world overshoot day will be at 22nd of August this year (due to the Covid-19 pandemic the overshoot day is three weeks later compared to last year). This day ‘marks the date when humanity’s demand for ecological resources and services in a given year exceeds what Earth can regenerate in that year’ (see overshootday.org).
Further challenges in this context are one-way plastics, fast fashion, food delivery services and online retail for example. Factors such as cultural background and human behaviour also influence the current situation.
Summarized, ‘there is a recognized urgency to move towards a circular economy, due to the effects of resource and biodiversity depletion, climate change and the growing inequalities across countries related to the world’s production and consumption patterns’ (see circulareconomy.europa.eu).
Aspects of a circular economy
Circular economy does not only mean recycling or reusing products and their materials. It can be seen as a holistic approach that considers the whole value chain. For example, it is important to take into account the product design phase and to improve and extend the use phase of products.
The idea of circular economy affects existing businesses and shows potential for new business ideas and models.
Circular Economy in practice
There are already interesting approaches with great potential for minimizing waste pollution and resource use.
Business models relating to the circular economy can be divided into the following categories:
- circular supply-chain
- product life-extension
- sharing economy (see DFGE blog post from 28th 2018)
- product as a service.
A lot of companies and start-ups implemented high potential solutions through their business models or by adapting their business. The manufacturer Caterpillar for example has an own business section that offers remanufacturing services, i. e. they take back used machines, repair and renew them. Mud Jeans is focusing on a product as a service model. There you can rent jeans temporarily and give them back after a while. Also, car sharing can be considered as a circular economy approach, which means that OEMs offer mobility as a service and not as a manufactured car product.
Implementation of a new ISO technical committee
In order to achieve a more efficient and well-organized circular economy a new ISO technical committee (ISO/TC 323) was created. This committee intends to address key points a circular economy requests, e. g. recommendations for new business models and business model adaptations, hints for public procurement, production and distribution, end of life as well as other areas.
The goal is to develop a new management system standard that contains a set of internationally agreed principles, a terminology and a framework of what circular economy is.
DFGE’s conclusion – contributes circular economy to a more sustainable and less wasted planet earth?
Due to the big challenges and problems we are facing currently (see above), the answer to the question is ‘No’. But circular economy has high potential to contribute to a more sustainable and less wasteful planet earth in future. Of course, circular economy is not the only solution to gain a more sustainable state but one important factor among others. Theoretically, there are a lot of promising ideas and approaches (e. g. in science, the new ISO management system, etc.). Furthermore, some companies address such challenges already and try to have a positive impact regarding waste challenges (see examples above).
In cases you’d like dig deeper into this topic or you would like to communicate your circular economy activities through a sustainability report like UNGC or GRI do not hesitate to contact us via or by phone: +49 8192 99 7 33-20.