The Circular Economy Goes Mainstream
By SAP Insights | 5 min read
The circular economy takes sustainability to its ultimate goal: zero waste. In this new economy, waste is a failure.
Creating profitable products with zero waste is becoming possible by factoring circularity into product design, manufacturing, and logistics processes rather than treating waste as an afterthought.
Four factors are driving the future of the circular economy:
- Resource scarcity and volatility are driving up costs. Many resources are becoming harder to find and prices are less predictable than before. Companies are compensating by rescuing more production materials before they hit the landfill.
- Robots and AI improve yields from recycling. Robots, augmented by AI, are smart, fast dissemblers and sorters of used products, making reuse both economical and profitable.
- Customers want everything as a service. Renting rather than selling products and services encourages producers to extend the life of assets to maximize their returns.
- Predictive maintenance lowers costs. Internet of Things (IoT) sensors and AI signal when monitored equipment, such as oil pipelines or airplane engines, need repairs, avoiding expensive equipment failures.
You can learn more about how businesses around the world are using circular economy best practices in the SAP Insights articles linked below.
Where the valuable things are. Traditional business approaches assume that resources are too specialized to be reused or deployed in new ways. In a world with limited resources, however, it pays to adopt a capacity capture mindset. This approach starts with the assumption that any resource has capacity for value beyond its primary or original purpose. Capacity capture is about actively identifying resources that are underused, wasted, or discarded and coming up with ways to recapture, use, sell, or otherwise monetize them.
Learn more in “Capacity Capture: A New Approach to Discovering Business Value.”
Where going in circles is a good thing. In circular business models, everything gets reused. An obscure industrial park in Kalundborg, Denmark, began testing this theory 50 years ago and stands today as a valuable example. The companies located there find that technologies such as the Internet of Things, cloud, blockchain, and analytics enable this environmentally sustainable approach – and cut waste to near zero.
Explore how any company can adopt this way of thinking in “Circular Economy: The Path to Sustainable Profitability.”
How circularity gets profitable. The circular economy makes sense from more than just an environmental perspective; it’s also likely one of the only prosperous business strategies for a resource-constrained future. And while circular business models are not yet widespread, economic, social, and technological changes are making circularity more enticing. For example: By factoring circular principles into product design, companies will net more profits from production, logistics, and the entire value chain.
Check it out: “Virtuous Circles: The Circular Economy Gets Rolling.”
Make it once, sell it many times. With overconsumption of natural resources threatening their availability, there’s a fresh argument for manufacturers to do what some have done for decades: make a product once and sell its use many times. Today we think of this as a product-as-a service model. What it signifies: Facilitating reuse is one of the most effective ways for manufacturers to reap the rewards of a circular economy.
Read about the possibilities in “A Circular Path to Sustainability for Manufacturers.”
The C-suite’s listening. Discussing his book The Waste-Free World: How the Circular Economy Will Take Less, Make More, and Save the Planet, author Ron Gonen says that C-suite leaders have come to appreciate the value of a circular economy. “As companies recapture more of the waste they create, they find more ways to extract value from it, their margins are higher, and they become better positioned for long-term success,” he says.
Understand why in “Taking the Trash Out of the Global Economy.”
Let’s talk materials use. SAP Insights research found that companies’ biggest barrier to taking more environmental action is their uncertainty about how to embed sustainability into business processes and systems. Making more sustainable choices about materials use is one way to address that challenge. And while companies may have to invest in redesigning their products and manufacturing processes to make better use of current materials or substitute different ones, it’s likely they can build on their existing processes and systems. And they may also find new opportunities to cut costs and create new income streams.
Delve deeper in “How to Make Sustainable Materials Use Matter.”
Transformers: New ingredients for old stuff. Plastic and concrete harm the planet but they’re also indispensable. So instead of eliminating them, how about reinventing how they’re made to become more planet-friendly? Researchers and innovative companies are already doing it. Think plastics that are durable but biodegradable because they’re made of food waste. Or concrete fortified with hemp plants (hempcrete!) that is eight times lighter than standard concrete and is ideal for sidewalks.
Dive into the materials future: “The Road to Regeneration.”
A circular action agenda. To hasten the transition to a circular economy, a group of business, government, and civic leaders launched the Circular Economy Action Agenda to help businesses and governments think of waste as a valuable resource. The group also works to find different business models to reduce dependence on scarce resources, and generates innovative services that grow revenues. Also see “5 Key Areas Where Circularity Creates Value from Waste,” which delves into ways in which businesses, governments, and society can drive a faster transition to circularity.
Learn about the group’s agenda in “The Economy of the Future: Government, Business, and Civil Society Unite to Fast Track Circularity.”
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