Transition to circular economy is accelerating and a growing amount of companies want to understand what this will mean for their business environment, stakeholder expectations and future regulatory requirements. There will be a global shortage of critical materials such as precious metals and nutrients as well as some basic everyday supplies including food and water. There are thus several good reasons why circular economy and life cycle thinking needs to be a part of product development, strategy, business model re-engineering, as well as board room discussions. After all, this is all about resource efficiency and minimizing waste–which makes perfect economic sense.
Sitra is seen as a global thought-leader in circular economy having been recognized in several forums such as Davos Economic Forum in 2018. WCEF (World Circular Economy Forum) was arranged for the third time in 2019, gathering over 2200 leaders from public and private sector to Helsinki again. The second, 2018 WCEF was held in cooperation with the Environmental Ministry of Japan in Yokohama.
Many leading companies have seen the business potential of circular economy already years ago.
Transition to circular economy is a key target for EU and will be incorporated in the Green Deal. According to recent studies it is also quite evident that the Paris 1,5 C target–challenging as it is already–will not be reached without this transition.
Many leading companies have seen the business potential of circular economy already years ago, creating new products, services and business models. One of the pioneers is the American carpet manufacturer Interface. Their Mission Zero programme set a zero-waste target for the company already in mid-90s based on new technologies and a radical redesign of processes and products. French Schneider Electric, which specialises in energy management and automation, uses recycled content and recyclable materials in its products, prolongs product lifespan through leasing and pay-per-use, and has introduced take-back schemes for its supply chain. Circular activities now account for 12 % of its revenues.
Automobile industry contributes to circular economy by remanufacturing components, reducing waste and by prolonging the service life of the vehicles. Many initiatives in this industry are driven by tightening regulatory requirements such as EU End-of-Life Vehicles Directive, which sets a target of 95 % recyclability. This industry is facing a big disruption as mobility services, electrification as well as a shift from a product to a product & service business requires car manufacturers to rethink many aspects of how they operate today. One example of this is the German car manufacturer BMW, which through its car-sharing service DriveNow offers a fleet of vehicles replacing privately owned cars. This service was first launched by its subsidiary Sixt, as private cars are in traffic only about 8 % of the time. The new business model leverages a growing trend of particularly young urban citizens not wanting to own a car anymore.
There are also several Finnish companies leading the way towards a transition to circular economy. Neste has become the biggest manufacturer of biofuels in the world and this business now accounts for most of their profits. Majority of raw materials for renewable fuels are today based on waste and residues. 3StepIT’s offering is based on efficient life-cycle management of IT equipment, providing it as a service and thus making the reuse of old equipment easy. MaaS Global is one of the pioneers in developing a business model which offers mobility as a service. L&T has circular economy in the core of their strategy aiming at more efficient use of resources. They have recently opened a modern plastic processing plant which addresses one of the wicked problems of modern societies, the excessive use of plastics.
The need for this transition is evident and we are only in the beginning. There are several wicked problems to be solved starting from how to cover the basic needs of humankind such as how to eliminate food waste or develop new technologies to recycle water. It is thus time for business leaders as well as boards to understand how this transition will affect their companies and how to incorporate it to their strategies.