Top 5 Benefits of the Circular Economy

Top Five Benefits of The Circular Economy

The circular economy concept, also called circularity, aims to eliminate waste and pollution by keeping products and materials in use and by regenerating natural systems throughout the global economy. The Circular Economy, is the opposite of the linear economy, as it incorporates elements of the closed-loop economy, cradle to cradle, regenerative designs, biomimicry, and the blue economy. The circular business model has gained momentum in the past six years thanks to the continuous efforts of The Ellen Mac Arthur Foundation.

In 2015, the foundation and McKinsey published a milestone case study that concluded that adopting a circular economy would boost resource productivity by 3% by 2030. Accenture also concluded that “shifting to the circular economy could release $4.5 trillion in new economic potential.”

Since then, an increasing number of businesses across the supply chain are shifting their processes to transition to a circular business model in order to reduce costs, reduce waste, reduce risks and deepen engagement with their customers.

The top 5 benefits of the circular economy, which include profit opportunities, economic benefits, environmental, and social benefits are:

1.  Increase Revenue While Appealing to Consumers’ Demand for Green, Safe Products

Manufacturers and distributors can deepen their engagement with consumers by producing goods of higher quality, that are made to be shared, reused, repaired, upgraded, resold instead of used and discarded – manufacturers and distributors can deepen their engagement with consumers.

This new concept involves taking the product back so that it can be upgraded, repaired, remanufactured, or safely recycled.

Manufacturers can also benefit from investment opportunities from funds targeting sustainable companies by adopting processes that design the waste out to significantly reduce waste throughout the product life cycle.

2.  Increase New Business and Innovation

Businesses also have the opportunity to shift their profitable revenue generation by focusing on the “sharing economy”, which essentially replaces product ownership with a “Product-as-a-Service” mentality. Uber, for example, successfully adopted the product as a service model by taking advantage of the fact that 95% of a car’s life is spent parked and creating a booming industry. Airbnb allows people to rent unused properties instead of letting them sit empty

In the manufacturing world, that “product as a service” concept is applied by creating new business models tied to after-sale services. By staying involved in the lifecycle of a product, businesses have the chance to create new, local jobs by focusing on repairing and recycling locally instead of exporting their product wastes to developing countries.

3.  Risk Reduction Builds a Resilient Operation

Working closely with suppliers to use recycled material repeatedly, designing goods meant to readily recycled and disassembled provides a more predictable supply of both natural and limited resources and reduces the frequency and the severity of commodity volatility.

In addition, the circular economic model significantly reduces risk as it is tied to greatly reduce the negative impact on crop price volatility caused by natural disasters.

We all remember the impact of China’s 2018 “ National Sword” policy and how it contributed to reduced global recycling rates, as traditional foreign bound recycling routes shut down overnight. As painful as it was, China’s stringent contamination requirements showed the world how much trash, which was loosely classified as recyclable material, was generated and shipped across the oceans.

Adopting the circular economy principles uses long-lasting, regenerative, safe, and sustainable resources, all of which increase efficiencies in production. In addition, it eliminates the need for foreign recycling – as it promotes an abundant, local supply of usable materials and reduces waste.

4.  Reduce Greenhouse Gas Emissions 

Another case study by the Ellen MacArthur Foundation shows that adopting a circular economy could slash CO2 level by half by 2030. The study shows the environmental impact of creating a global supply chain that uses renewable resources and renewable energy, which have proven to create less pollution than fossil fuel-based production cycles.

In manufacturing, products are made with non-toxic raw materials, and with recycled components, reducing the need to manufacture new materials and products. Even the waste materials and residues are designed to be integrated into other products. All of these factors minimize negative externalities such as the cost of soil erosion, and water and air pollution.

5.  Improve Health, Nutrients, and Biodiversity in Topsoil

In a circular food manufacturing model, Important ingredients are looped back into the soil via anaerobic digestions  or composting. Also, regenerative farming uses less water and organic fertilizer – all of which help regenerate lost material and replenish the degraded ecosystem. Again, in a circular economy, everything has a purpose.

It’s not a secret, transitioning to the circular economy offers many benefits including a positive impact on the environment, economic, and societal advantages. Studies from all over the world continue to show the benefits of the transition to a circular manufacturing model.

If your business is ready to transition to the circular economy but don’t know where to start, or don’t know what makes sense for your operation – contact us using the form below.   We will make circularity work for you.