ArticlesInfosCircular Economy icon: one hand holds a green world and a black and white one

The notion of circular economy, still in a mainly abstract stage, is proposed as an alternative to the current model of linear economy take-make-use-dispose. Its core lies in the creation of economic growth through the exploitation of the earth’s resources and raw materials. They should provide for the manufacture of used and discarded products. However, as Webster affirms, to think that we can benefit almost infinitely from the resources available on earth is wrong. 

Circular Economy and reality 

One of the first circular economy concepts is that our world is a highly complex open system. Also, as reading in Foley’s article published in 2005, Global Consequences of Land Use, the Circular Economy emphasizes the importance of optimizing the whole complex system. Over the years, many schools of thought have contributed to the interpretation of the concept of a circular economy. They have considered complex systems to create this visual depiction of a new economic system.

The Ellen MacArthur Foundation and McKinsey & Company presented their circular economy diagram for the first time in 2012. In doing so, they combined a multitude of these different schools of thought. The butterfly structure of this diagram shows two large circles of values, one biological (in green) and one technical (in blue). They are strongly influenced by the Braungart cradle to cradle concept. Indeed, according to his idea, all materials in the economy are understood as nutrients, so waste is equal to food.

Biodegradation, remanufacturing, or recycling must allow the reuse of materials at the end of the product life-cycle. To achieve this goal, it is important for circularity to be one of the main factors during the design stage of a product. It is essential to design the product by ensuring its maintenance and repair efficiently for as long and as often as possible. Furthermore, it must be easily reconditionable and regenerable.

Also, the circular economy is not just about eliminating the current concept of waste and tackling resource scarcity. Indeed, the idea focuses on creating economic value while generating positive impacts on our society and environment.

Circular Economy as a business model

The design stage is key to the development of circular products and systems. However, it is not in itself sufficient to create a truly circular economy. Consequently, what are the economic advantages for companies in designing or redesigning the entire product line? To answer this question, we can refer to the concept of performance economics proposed by Walter Stahel in 1976. According to him, companies must sell products as services. In this way, they maintain control over their products and their value and utility.

In an article published in 2016, Lewandowski explains a very important concept for companies and their customers. He states that the design of a circular product has an economic rationale that can create long-term benefits. In fact, by offering a service, the company is responsible for the correct performance of the product that provides the service. It is beneficial to design the product for longevity, ease of maintenance and repair, re-design, and ease of disassembly.

Companies and costumers

A business model based on performance and service can lead to a constructive relationship with customers. This is because it does not end with the acquisition of the product. Indeed, customer service is the key to a successful long-term relationship, and it is also convenient for the customer. In fact, the promise of service provision by companies reduces the burden of ownership of products.

Another important factor concerns the entire ecosystem to be respected, including a company’s supply chain. An important publication by the Ellen MacArthur Foundation proves it very well. If suppliers are not in line with the company’s circular economy strategy, the supply of materials and services will not be adequate. In that case, the business model will fail. For this reason, it is necessary to create the right ecosystem aligned with the company’s vision and strategy.