Waste to Wealth: The Circular Economy Advantage

11 December 2015 Consultancy.uk 5 min. read

Linear take-make-waste consumption economies are in many ways highly inefficient. In a bid to move humanity towards a more sustainable model, Accenture recently released a book that explores how digital technologies are creating a space for circular economies to grow and flourish. By focusing on quality, utilisation, maintenance, recycling and upgrading products, consumers get a better deal while business benefits could reach $4.5 trillion by 2030.

Wasteful and highly inefficient uses of resources are costing humanity and the environment dearly, as past excesses come to catch up. From carbon leading to climate change, to plastic clogging the oceans. Without considering how the waste from human activity will be dealt with, considerable harm is being done to the ecosystem in which we find ourselves. In recent years, a ‘cradle-to-cradle’ concept of consumption has been forwarded, that favours a circular rather than linear value chain. Instead of producing waste, shared consumption produces new value in recyclables.

Following the growing recognition that waste is not without consequence, and that the possibility of moving beyond a waste-based economy is approaching, Accenture recently studied the economic benefits to business of moving to a circular economy. In the recently released book ‘Waste to Wealth’ by Accenture’s Peter Lacy and Jakob Rutqvist, the authors explore the potential models that might lead to both a more sustainable way of consuming, as well as economic benefits.

“The take, make and waste approach of traditional, linear business models has now begun to choke economic growth through unpredictable raw material prices and the increased cost of depending on less stable supplies of constrained resources,” explains Lacy, Managing Director at Accenture Strategy and co-author of the book. “By turning waste into wealth with new business models, companies can boost their competitiveness by reducing dependence on scarce resources and generating new innovative services that grow revenues.”

Going circular

The idea behind a circular economy would see wide ranging changes to how both waste and resources are utilised. The predominant aim of the idea is to reduce underutilisation resulting in duplication, waste through quality design, recycling and maintenance. The idea, according to Accenture, would see elimination of “the very concept of ‘waste’ and recognising everything has a value.” Through modes of recycling and changes in methods of utilisation, businesses may be able to change their relationship with customers, creating connections through product returns and customer engagement.

Five circular business models

The economic reward from circular economic business models could hit $4.5 trillion by 2030 according to the book. The book provides five examples of how a circular economy may be able to produce additional revenue from cost savings as well as new business models.

One such method involves improving the supply chain by moving toward a circular supply-chain, whereby products are produced with the aim in mind that the components of that product are reused in a consecutive lifecycle. Cost reductions, particularly for expensive rare earth metals, can thereby be realised. The Recovery and recycling model creates production and consumption systems in which everything that used to be considered waste is revived for other uses.

Another change envisaged in Accenture’s book is a move away from poor quality products to those that are made in a way that they last, can be repaired or upgraded. Through high levels of utilisation, customisation and modability, follows a means of moving customers from transactions to relationships, tailoring upgrades and alterations to specific needs.

A further area in which new technologies are able to transform the way in which people engage with things is that of product utilisation. As it stands, up to 80% of things stored in a typical home are used once per month. Through new technologies and platforms, underutilised goods can be rented out, shared, swapped or lent – thus reducing the need for duplication and waste.

Technology to make it happen

The research highlights a number of technological developments that are spurring a move towards a circular economy. The most important are mobile technologies, which provide universal and low-cost access to data and applications, helping the ‘dematerialisation’ process through which physical resource intensive items are replaced by digital items. An example of which is email replacing post. Changes in social sharing through Facebook and other social networks are increasing the potential for the sharing of goods and information, making it cheaper and quicker for companies to receive consumer feedback to help improve offerings.

Other methods for developing a circular economy are modular design technologies, where components can be swapped out as they are upgraded; 3D Printing, where new modules or repair requirements can be printed at home; advanced recycling technology, whereby products can be easily recycled; and improvements in life and material sciences technology, whereby products can be designed from materials that are created with recyclability in mind.

Ellen MacArthur Foundation

Another recent study on circular economies, conducted by the Ellen MacArthur Foundation in cooperation with McKinsey & Company, the authors found that a transformation to circular models in Europe could increase GDP growth by 7% and disposable income by 11% by 2030.