For decades, product design, production, sale and use have followed the take, make and dispose industrial model. The manufacturing company takes natural and synthetic resources; converts them to a product; and then sells the item to a consumer, who ultimately uses and then disposes of it. In this model, products are designed to be sold at a low price, are not intended to have long lives and are difficult to service. This means that, when a product breaks, the consumer’s best — and sometimes only — option is to throw it away and buy a new one. The problem is that products that follow this model are quickly using up natural resources and polluting the environment with all types of waste.
Most industries know better, though, and do not strictly adhere to this process. Instead, producers are moving toward a circular economy production model. According to Accenture (2014): “In a circular economy, growth is decoupled from the use of scarce resources through disruptive technology and business models based on longevity, renewability, reuse, repair, upgrade, refurbishment, capacity sharing and dematerialization. Companies no longer focus mainly on driving more volume and squeezing out cost through greater efficiency in supply chains, factories and operations. Rather, they concentrate on rethinking products and services from the bottom up to ‘future proof’ their operations to prepare for inevitable resource constraints — all the way through to the customer value proposition. This implies eliminating waste; creating step changes in resource productivity; and, at the same time, enhancing the customer value proposition on dimensions such as price, quality and availability.”
Furthermore, in a circular economy, a product is designed to have a longer life; be easily repaired in order to extend this life; and, at the end of its useful life, be recycled — with minimal loss — to build new products (Accenture 2014). This, in turn, cuts down on waste and helps protect natural resources.
Figure 1 offers a model of this process. Companies first have to extensively research the materials and processing methods for each product to ensure waste minimization and maximum resource recovery, profitability and return on investment. Products also should be designed with ease of maintenance in mind. This maintenance and repair extends useful life and could be handled by the manufacturing company, a third party or the consumer. In some cases, companies can remanufacture used items and resell them as used, but still useful, products.
The consumer has an important role to play in the circular economy as well. Essentially, each consumer is responsible for maintaining and seeking repairs for a broken product — rather than just discarding it and buying another one — and somehow recycling the product at the end of its life.
When the product finally reaches the end of its useful life, the component parts will be recovered and recycled into new products, thereby significantly reducing the need for new virgin materials. In turn, the new product will have lower material costs, which could enable the manufacturer to lower the price of the product.
The benefits of such a system include
- products that last longer and are of higher quality
- improved customer satisfaction
- ·net material cost savings
- higher revenues from product sales
- reduced environmental footprints for companies and consumers
- increased transparency
- ·new jobs in product research and design, product repair, material recovery, upcycling and other areas
- economic growth
- increased innovation.
Although some of these benefits can be achieved sooner, others will be experienced eventually as more companies transition to the circular economy production model.
Ahead of the game
Companies in a variety of industries already are seeing the benefits of the circular economy production model and taking steps toward implementation. Atlanta-based carpet manufacturer Interface designs its carpets with sustainability in mind. The company actively seeks out sustainable raw materials, including discarded fishnets, for use in its products and manufactures the finished pieces in such a way that the carpet fiber can easily be separated from the rubber undercoating, which can be recovered for use in other applications (Interface 2016). In addition, the carpet is installed as small tiles, enabling the consumer to replace affected tiles if they become worn, stained or otherwise unusable, rather than scrapping and replacing a whole room’s worth of carpet.
Milwaukee-based Johnson Controls has a goal of recycling 100 percent of the automotive batteries it produces and moving toward a circular economy production model. Because of the hazardous materials the batteries contain, the most responsible way to handle them after use is recycling. However, demand for replacement batteries and the supply of recycled batteries is seasonal, with peaks in the early summer and late fall months. Despite these difficulties, the company has set up a circular flow of replacement batteries that are picked up from retailers and used to make new batteries (Blanco and Cottrill 2014). As much as 80 percent of the materials used to make new automotive batteries can be derived from recycled ones, and the company currently is recycling about 97 percent of the batteries it sells.
In the printing industry, Bridgewater, New Jersey-based Brother International has been practicing its version of a circular economy production model since 1999. Brother’s model in particular focuses on its 5 R’s:
- “Refuse: Avoid [the] purchase of environmentally burdensome materials whenever possible.
- Reduce: Reduce waste material.
- Reuse: Reuse waste material without processing.
- Reform: Reuse materials in a different form.
- Recycle: Reuse materials as resources” (2017).
In addition to the environmental benefits and cost savings achieved through this model, Brother has opened up a new revenue stream through its reform step. Consumers participate in this process by mailing empty toner cartridges to Brother for reuse.
Similarly, Ventura, California-based Patagonia calls on its consumers to add sustainability to its supply chains. In 2013, it launched its “Worn Wear” program, which encourages consumers to care for their clothing and gear by washing and repairing it as needed and then recycling items so their materials can be used again (Byars 2017). The company offers consumers free tips for repairing their own clothing and operates Worn Wear facilities around the world where consumers can have products mended. With each fix, the company also gathers feedback for designs to improve the durability of the products to tighten the loop even more.
Easier said than done
These efforts are even more impressive when you consider the amount of research and design effort involved in each step of the circular economy production model and the amount of change management required to transition from the make, take and dispose model. Even businesses that have been active in encouraging the recycling of their products for lower-value use may find it challenging to reorient the directions of their companies to fully embrace the even more sustainable model. Of course, when you consider all of the potential benefits — including the conservation of resources that people need now and future generations will continue to need in the decades and centuries ahead — it’s easy to see that these improvements are well worth the effort.
- Accenture. 2014. “Circular Advantage: Innovative business models and technologies to create value in a world without limits to growth.” Accenture. https://www.accenture.com/t20150523T053139Z__w__/us-en/_acnmedia/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Strategy_6/Accenture-Circular-Advantage-Innovative-Business-Models-Technologies-Value-Growth.pdf.
- Blanco, Edgar, and Ken Cottrill. 2014. “Closing the Loop on a Circular Supply Chain.” Supply Chain Management Review 18, no. 5: 6-7.
- Brother International. 2017. “The 5 R Concept.” Brother International. http://www.brother-usa.com/Environment/5Rs.aspx.
- Byars, Tessa. 2017. “Patagonia Wins Circular Economy Multinational Award at World Economic Forum Annual Meeting in Davos.” Patagonia Works, January 17. http://www.patagoniaworks.com/press/2017/1/17/patagonia-wins-circular-economy-multinational-award-at-world-economic-forum-annual-meeting-in-davos.
- Interface. 2016. “Products.” Interface. http://www.interfaceglobal.com/Sustainability/Products.aspx.
Richard E. Crandall, PhD, CFPIM, CIRM, CSCP, is a professor emeritus at Appalachian State University in Boone, North Carolina. He is the lead author of “Principles of Supply Chain Management.” Crandall may be
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