The need for a circular economy: Our Earth needs us now
The fact that the surface of our planet is warming up globally is no longer news. The fact that we humans are causing a share of this global warming and must take responsibility for it is still discussed dissidently, but recognized by the vast majority of people. In addition, there is the primary raw material exploitation of our earth, which demonstrably goes far beyond the extent of natural regeneration possibilities. Around 50% of global climate gas emissions are caused by the extraction and processing of primary raw materials.
Aware that we are depriving ourselves of our livelihood, we must act decisively now, each and every one of us. Not only private individuals, but above all companies, have opportunities to supply markets while at the same time using raw materials sparingly and protecting our environment. An effective instrument for this is the circular economy. Here you can find out why it is worthwhile for our planet and for companies to introduce a circular economy, what concrete possibilities there are for doing so, and what challenges you should expect to face in the process.
What is the circular economy and what is its purpose?
Our world is hungry for consumption. For the production of almost every product, raw materials are consumed, energy is used, and pollutant emissions are released. During the product’s use phase, further energy is usually required; in addition, spare and wear parts are needed and further pollutant emissions are produced. At the end of the product’s life, it is usually disposed of. In most cases of classic value chains, this process is linear: It leads from production, which is often organized in several stages, to use and often thermal disposal – from a source to a sink.
However, waste wastes primary raw materials and energy. And the amount of waste generated is increasing worldwide. The challenge is to meet rising consumer demand while conserving resources and our environment. This can be achieved by moving from a linear economy to a circular economy in conjunction with changing consumption patterns. This concept has the following goal: By keeping raw materials in the economic cycle, waste and emissions can be reduced or even eliminated. There are 10 R-strategies available to companies for design and implementation:
- and Recover
Because raw materials are becoming scarcer and their extraction more expensive, as well as causing climate-damaging emissions, there is now both an ecological and an economic motivation to use products for as long as possible and to reuse raw materials instead of thermal recycling or final disposal.
Beyond the immediate economic, environmental and social aspects, circular economy concepts can make companies more independent of the availability of primary raw materials, of price increases on the raw material markets and decouple them from geopolitical dependencies. Circular economy thus also serves to improve the resilience of companies.
However, circular economy not only helps to save primary resources, reduce global warming, preserve biodiversity and make companies more resilient. It also preserves habitats for people, contributing to social peace and limiting migratory movements. Circular economy thus makes an important contribution to sustainability. In this context, a significant aspect to conclude: let’s expand our thinking and actions beyond today’s benefits, because sustainability is defined as a state in which the needs of the current generation are met without limiting the possibilities of future generations.
How can companies achieve circular economy?
A circular economy is a mix of product longevity (long use), reuse resp. repurposing and material waste recovery through the separation and processing of raw materials (recycling) for reuse. There are thus many different approaches to promoting the circular economy. However, this diversity already suggests that it is a complex task to introduce circular economy in companies. If thinking about the circular economy only starts at the end of a product’s life, it will hardly be possible to develop a viable, sustainable concept. Instead, thinking about the circular economy begins in product management and continues in product development.
Material selection and product specification
If you want to make a commitment to the circular economy with your company, it is a good idea to start at the beginning. Think about material selection with an innovative end-of-life strategy in mind. With this in mind, completely different criteria for material selection emerge. There are decisions to be made about whether to use natural or synthetic materials. There are also decisions to be made about the origin and transport routes of the materials. It must also be taken into account that the continuous reuse of raw materials is not possible with all materials. While this works very well with aluminum, plastics lose some of their original properties with each reprocessing cycle until they can no longer be used for the same product. Thus, material selection is not a trivial decision from an ecological perspective alone. Aspects from the entire value chain should be included in the material decision. Material selection can limit the possibilities for reuse or open up completely new possibilities.
Always consider the entire process. Material reprocessing operations may require additional energy input and the use of chemicals. Both cost money and impact the environment. Material reprocessing is not the first choice in every case. In some cases, the decision to use a different raw material is indicated for this reason. In addition, depending on the availability and nature of input products, material processing can lead to a wider variation in the specification of recycled raw materials, to which users must adapt in their processing operations. Neither the quality nor the quantity of products can be standardized in recycling processes as well as in processes using primary resources. With the integration into the circular economy, manufacturing processes should be provided with a greater tolerance to variation. This may be difficult to do if processes are trimmed for high efficiency and may impact profitability.
It may be that there is no possibility of an economically justifiable product or material cycle within a company’s own value chain. However, in order to close product and material loops in a meaningful way, it makes sense to examine transdisciplinary options. Our environment knows no industry boundaries. Often, waste products generated in one industry can be ideally used in another.
One example of such a reuse opportunity is the reuse of discarded batteries from e-vehicles in stationary applications in building services, where no strong dynamic stress is required.
Another example is discarded denim fabric, which is dyed cotton and appears to be excellent for use as insulation material in the construction industry.
Business models for the circular economy
These examples illustrate that cross-industry business models are needed to realize such stretched life cycles. To implement such business models, specifications relevant to the second product life should already be considered in product development. Keywords are “design for reuse” and “design for recycling”. In order to promote secondary product and material flows, the longevity and reparability of products, the modularization and standardization of components, the dismantlability of products and the automated separation of materials play a major role in addition to the selection of materials. In addition to these technical aspects, political and economic incentives can help motivate companies to address these issues. Not only product development, but above all product management and marketing are required to ensure that products designed for the circular economy are perceived as more valuable at their end of life than products that are only suitable for the linear economy. In addition, a suitable infrastructure for recycling and reprocessing is required.
Hardly any company is in the position to implement such a cross-industry concept on its own. Strategic foresight and strategic partnerships are needed to implement such innovative business models. Investments in recycling facilities are fraught with risk. For example, if we think about recycling batteries from e-vehicles, battery technology and the materials used in batteries may change. Specific re-cycling methods and processes may become obsolete as a result. Such uncertainties may slow down the circular economy. For this reason, too, close cooperation between product developers and recycling experts is essential.
The redefinition of the value chain may suggest that costs and emissions are shifted and some process steps are carried out at other locations. This may result in new economic, environmental and social impacts. It becomes apparent that the decision for the circular economy is also a decision for a compromise. This compromise can be all the more balanced the better the communication functions at the interfaces along the entire value retention process – internally and with relevant partner companies, customers, suppliers and infrastructure providers (collection companies, recycling companies).
Legislative framework for the circular economy
In 2018, the European Parliament adopted the “Circular Economy Package” as a framework model now enshrined in law in European countries. Twelve Sustainable Development Goals (SDGs) of the United Nations are derived from this. In practice, companies are likely to participate more in the follow-up costs associated with the products they manufacture in the future. At the same time, companies will benefit if their circularly designed products have a higher market value at the end of their life cycle.
Key figures for the circular economy
To capture the full impact of a strategy, it is recommended to use holistic indicators. These indicators include the digital footprint, which takes into account material use, product lifespan, return rate, reuse rate, and recycle rate. In this respect, the digital footprint is a consumption-related indicator. In addition, the Material Circularity Indicator has been introduced, which includes the use of primary raw materials for products, the duration and intensity of product use, and the non-recyclable waste attributable to the products. The Material Circularity Indicator only includes quantitative criteria that allow the path toward a circular economy to be tracked. Criteria such as additional energy consumption, additional transport routes, chemicals used and additional greenhouse gas emissions due to material collection, recycling and processing are not taken into account in this indicator. It therefore makes sense to link the Material Circularity Indicator with a life cycle assessment (LCA). However, the LCA only considers a single life cycle of products. Unfortunately, the idea of circularity is therefore not taken into account in the LCA. Linking the Material Circularity Indicator with the LCA could lead to a reasonable picture of the ecological burden.
But sustainability does not only include the ecological criteria; rather, economic and social impacts of a development towards a circular economy should also be tracked.
The economic impacts can be recorded and compared with a life cycle costing, the social impacts with a social balance. In this way, the degree of sustainability of value creation processes can be recorded and tracked in a holistic, life-cycle-related manner. This combined sustainability indicator can be used to derive ecologically effective and economically and socially acceptable circular economy strategies for regions, industries and companies.
Circular economy is an effective instrument for the conservation of primary resources and for climate protection. At the same time, companies can benefit economically from their activities to promote the circular economy by actively participating in value preservation and becoming less dependent on geopolitical events Driven by the twelve Sustainable Development Goals of the United Nations.
Although the sensible development of circular value creation strategies is extremely complex, companies can already develop and implement interesting business models in cooperation with third parties that contribute to the circular economy. In order to achieve an ecologically, economically and socially balanced result, it is advisable to develop the evaluation and decision-making competencies in companies for this purpose. In addition, well-founded communication at the interfaces contributes enormously to a common understanding and joint optimization of the entire value preservation process.
To conclude: Circular economy is not only limited to physical products and raw materials that go into products, but also to water and energy that can be recycled or recovered, and this concept can even be transferred to concepts and ideas.