Circular Economy

What is a circular economy?

It is an economic and operational model in which we keep products, components and materials in use for as long as possible by reusing, repairing, and recycling them rather than discarding them. It aims to extract the maximum value from resources whilst in use, then recover and regenerate products and materials at the end of each service life.

Bullet point the key points of a circular economy.

• Keep resources in use for as long as possible

• Extract maximum value from them whilst in use

• Recover and regenerate products and materials at the end of each service life

What is the traditional linear model?

Take-make-use-dispose

• Extract raw materials

• Manufacture products

• Sell and use

• Dispose as waste

What are the 3 principles the circular economy is based on driven by design?

1. Eliminate waste and production

2. Circulate products and materials (at their highest value)

3. Regenerate nature

What are the pros of the circular economy?

• Lower costs- less spending on raw materials and other energy use through reuse and remanufacturing

• Waste elimination- materials are reused, repaired or recycled instead of being discarded.

• Competitive advantage

• Regulatory compliance

• Resource efficiency

• Reduced risk

• Long-term sustainability- sustainable operations improve brand image

What are some real world examples of how a circular economy works?

Caterpillar construction company

Explain how caterpillar uses the circular economy in its operations?

1. Product Return - Customers return used engines, transmissions, and components. Operations must plan transport, storage and inspection of returned items

2. Inspection and sorting- returned parts are inspected and graded, where some components are reusable and others are recycled

3. Remanufacturing process- usable parts are disassembled, cleaned, repaired, and reassembled to “like new” condition

4. Resale- remanufactured parts are sold at 40-60% lower cost than new parts

How has caterpillar demonstrated the circular economy?

Instead of: Make-use-dispose

caterpillar operates: Make-use-return-remanufacture-reuse

This creates a closed loop system which is the core idea of the circular economy

How would a company using the circular economy in its operations give it a competitive advantage?

Sustainable operations improve brand image

• Attracts environmentally conscious customers and investors

How does the circular economy help support resource security and price stability?

Swapping from finite, potentially risky or under pressure resources to safe sustainable materials helps to support resource security and price stability

How does Ikea utilize the circular economy model in its operations?

1. Design for circularity- products are designed to use fewer materials, flat packed (less transport waste), easy to disassemble and repair

2. Use of renewable and recycled materials - aim to use only renewable or recycled materials in products

3. Product take back and reuse- customers return used ikea furniture and items are resold as second hand or refurbished this extends the product life instead of disposal

4. Repair and spare parts- ikea provides spare parts and repair instructions online, this encourages customers to fix products rather than discard them

5. Energy and regeneration- heavy investment in renewable energy (solar and wind)

How does IKEA operate?

Design-Use-Repair-Reuse-Resell-Recycle

instead of : take-make-sell-dispose

What are the 5 ways in which companies are rethinking business models and commercial frameworks?

To capture value from circular approaches companies are changing how they design, sell and manage products and flows.

1. New product design

2. Circular flow and closed loop supply chains

3. New commercial models

4. Extended product responsibility

5. Use of digital technologies

How are companies changing the products they design?

Products are designed to be :

• Durable

• Modular

• Easy to repair and disassemble

This gives lower material costs, longer product life and reduced waste

How are companies introducing circular flow and closed loop supply chains into their operations?

Companies introduce reverse logistics to bring used products back from customers

• Returned products are reused,refurbished,remanufactured or recyycled

• This creates a closed loop system rather than a one way flow

How are companies introducing new commercial models?

Companies move away from one time sales to:

• Product as a service (leasing,subscriptions)

• Buy back and resale schemes

• Repair and maintenance services

How does the circular economy model lead to cost reduction?

Reusing,repairing,recycling products reduces the need for virgin raw materials and energy intensive production.

E.g. caterpillars remanufacturing program reduces material and production costs by up to 85% compared with new components

How does the circular economy model eliminate waste?

Circular economy designs aim to “design out” waste and production from the start. Products and components are reused or recycled at end of life.

E.g. IKEA’s repair and resale schemes prevent furniture from being discarded.

How are companies achieving resource efficiency via the circular model?

By reducing waste and maximizing the efficiency of resource utilization in their production processes.

How are companies utilizing reuse and recycling in their business models?

This involves systems where products or their components can be refurbished,remanufactured or recycled into new products at the end of their life cycle.

How are companies utilizing digital technologies in their business models?

Utilizing digital technologies such as AI and blockchain to track and manage resources, products and materials throughout their life cycle helps in better resource management and tracing materials for recycling.