The circular economy is a system-wide view that should benefit businesses, society and the environment. In contrast to the “take, make, waste” model, a circular economy is regenerative by design. The goal is to increase the lifespan of products and then recycling materials and components that have reached the end of their useful life as materials and components in new goods. It can also include leveraging by-products in the manufacturing process to make new products.
There’s an urgent need for it: if we continue with linear production techniques, worldwide demand for resources could almost triple by 2050, exhausting Earth’s resources by more than 400%. Research shows that circular economy policies contribute towards tackling the remaining 45% of greenhouse emissions not resolved by transitioning to renewable energy.
There is an additional incentive for business: circular economics also brings commercial benefits. According to the U.S. Chamber of Commerce Foundation report Trash to Treasure: Changing Waste Streams to Profit Streams, if U.S. companies reduced waste by just 1%, it would save them nearly $1 billion.
Consumers are driving demand for circular business, too: in 2020, 43% of consumers actively chose brands based on their environmental values. Further, two-thirds of consumers say they have reduced their use of single-use plastics. For consumer businesses, your sustainability credentials are now alongside price as a purchasing priority.
How does the circular economy manifest?
In a circular economy, manufacturers apply eco-design principles to make products repairable and reusable. Call it “built-in recyclability.” For example, rather than manufacturing electrical devices with built-in obsolescence, design them to be easier to repair. Circular economics encourages companies to reuse resources, components and raw materials as much as possible. Recycling used plastic into pellets that can be melted down and used for making new plastic products is an example. Royal DSM developed a cellulosic bio-ethanol in which agricultural residues like baled corn cobs, husks, leaves and stalks are all converted into renewable fuel. The approach created a new revenue source for Royal DSM while also reducing emissions, creating jobs and strengthening national energy security.
Dutch mattress manufacturer Royal Auping is another example of the circular economy: the company has a goal of all its production being carried out using recycled fibers. By taking back used mattresses, Royal Auping’s can then recycle them into new ones. The business benefits too: Royal Auping has cut water use by 60% and electricity use by 30%. Centralizing production means they have reduced their overall transport by 120,000 kilometers per year.
New technologies, new circular models
The as-a-service (XaaS) business model also has something to add to circular economics. The XaaS is beneficial as companies only purchase the amount of something that they need, so wastage is reduced and costs are controlled. At Orange, we offer connectivity or cloud computing on an as-a-service basis, something which incentivizes us to maximize our assets’ lifespans. The longer we leave our assets in operation, re-using them wherever possible, the more we can maximize their life. The old “sell it and forget it” business model has become outdated: converting a product to a service has benefits for the whole value chain. For example, Orange now gives a second life to over 50% of the routers we decommission from customer premises, through re-using them for new customers or selling them.
How to make it work?
The circular economy’s market value could be worth upwards of $4.5 trillion by 2030. But to make it happen, enterprises need to think about sustainability first and implement innovative new business models and disruptive technological innovations that break traditional practices. The conventional “take, make, waste” system of production and consumption is outdated. The incentive to shift to a circular economy can be driven from both ethical and commercial standpoints.
In the longer term, achieving a truly circular economy requires collaboration across the ecosystem. Large enterprises with highly complex supply chains and processes can find it difficult to keep up with ever-evolving circular innovation. They can also lack the capabilities needed to embrace new ways of working and operating in the transition to being a circular business. Smaller companies and entrepreneurs are often the birthplaces of disruptive ideas that can drive circular economics, but they may lack the capital or resources to scale up their concepts. By connecting large enterprises with disruptive players and creating an ecosystem, a circular economy can be achieved more quickly and benefit all stakeholders across the value chain.
Underway, but more to do
In 2019, the European Union’s rate of circularity of material use was 11.9 %, up 3.6% from 2004. So, things are improving and moving in the right direction. But they must move faster, and enterprises need to commit to more ambitious targets.
As part of our Engage 2025 program, Orange has committed to promoting the circular economy. We start with eco-design and move through collecting, reconditioning, repairing, recycling and increasing the overall lifespan of products. We’re dedicated to producing sustainable goods and services and reducing our consumption and waste. We want to help make the traditional linear economy a thing of the past, so have committed to 100% of Orange-branded products being eco-designed by 2025. The Orange commitment is further evidenced in our new OSCAR program, which puts circular economics at the heart of our infrastructure procurement activities. Our goal is to have all our IT infrastructure, networks and data centers operating using more reconditioned equipment by 2025, and the OSCAR program also incorporates the “Marketis” platform for buying and selling reconditioned equipment.
Furthermore, our Green Act encourages us to put environmental issues front and center in our processes and activities. It establishes key actions we can take that drive sustainability, including circular economics and informs the products and services we offer to our customers.
The linear economy has for too long been built on endless consumption and waste, and it needs to end. With more and more consumers now focused on building a resilient economy that helps the planet, it’s time to make the shift to a circular economy model. Read more about our corporate social responsibility policy.
Frank is Managing Director of Benelux and leads enterprise activities across Belgium, the Netherlands and Luxembourg. He studied commercial economics and marketing in Utrecht and has over 20 years of business and technology leadership experience. Frank is the proud father of two sons and, in his free time, he enjoys being with his family and friends, sailing, playing tennis, golfing and experiencing new sights.