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Business Strategy

Going round in circles isn’t always a bad thing

The concept of a ‘circular economy’ has become more and more mainstream in recent years as businesses and governments come to terms with the problems of resource depletion, waste and environmental pollution. New legislation to incentivise resource efficiency, recycling and waste reduction is on the horizon - so what does it mean for manufacturers?

What is this circular economy thing, anyway?

If you have even a passing interest in sustainability, you’ve probably heard of the circular economy. It’s a simple, but potentially revolutionary concept that’s already making waves across the global economy in sectors as diverse as aeroplane engines, fashion textiles and plastic packaging.

In a nutshell, the circular economy is a profound shift away from the traditional ‘take-make-use-throwaway’ economic model. You can think of this model as a flat line with a beginning, a middle and an end. Raw materials are extracted, manufactured into products, consumed, and then thrown in the bin. This linear approach to business is hugely inefficient, requiring ever-increasing consumption of raw materials that are disposed of at end-of-life, wasting valuable resources and often damaging and degrading the environment in the process.

A circular approach to business aims to reverse and prevent these problems by designing waste out of the system. Instead of being thrown away at end-of-life, in a circular economy products and materials are kept in use for as long as possible through repair, reuse and recycling. The goal is to ‘close the loop’ on the linear flat line economy, creating a revolving cycle of materials and resources.

Why now?

The idea isn’t new - it’s been around for some time under various names such as ‘cradle-to-cradle’ design or the ‘performance economy’. In fact, the circular economy is all around us in living systems - nothing is wasted in nature.

Circular thinking in business has been accelerating rapidly in recent years because of the solutions it presents to many of the planet’s most pressing problems. Today’s plastic waste crisis is a perfect example. In response to the public outcry over the impact of plastic pollution in the world’s oceans, businesses and governments are coming together to transform the plastics supply chain by ensuring that packaging material is recyclable, reusable or replaced with a sustainable alternative; has higher recycled content; and is fed back into the cycle at end-of-life. UK government has pledged to bring in new legislation to eliminate plastic waste, while the EU has already passed its own legislation to enforce stricter recycling regimes in member states. This is the circular economy in motion.

What’s the opportunity for manufacturers?

The shift to a circular economy is an ideal opportunity for manufacturers to boost efficiency, maximise cost savings and reach into new revenue streams. Manufacturers of the future will focus on designing products for durability and treating waste as a valuable resource that can be re-used or sold into other markets.

It is thought that the switch to circular, resource efficient business models in key sectors in the UK could benefit the economy by £80 billion. There are also huge environmental gains up for grabs: research shows that simply keeping materials and goods in use for longer is far more effective at reducing emissions than even the most exciting green technologies.

One of the biggest opportunities presented by the circular economy is the potential for businesses to diversify from selling products into selling services. By selling the service a product provides, rather than the product itself, manufacturers ‘close the loop’ by retaining control of the full product lifecycle. A famous example is Rolls-Royce’s TotalCare® ‘power-by-hour’ model for aeroplane engines. Rolls-Royce actively manages its engines throughout their lifecycle and airlines pay a fixed price per flying hour for the service - rewarding reliability and efficiency in the process. This shift towards ‘servitisation’ is spreading far beyond aerospace and is even gaining traction in the fashion industry.

 

How to get started

Even if diversifying into selling a service isn’t right for you, there are many simpler ways to take steps towards a more circular business model.

In Greater Manchester, manufacturers can call upon excellent support from both our dedicated manufacturing team and our specialist eco-innovation service to identify opportunities for circular products, processes or services.

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