Squaring the Circle

This idea of a circular economy has been around for a long time, but the profile of sustainability in the media and the desire to “build back better” after the COVID-19 pandemic has brought circularity into common usage.

Lift off

I first encountered the core arguments in the 80s when my boss introduced me to Kenneth Boulding’s work on Spaceship Earth, and the concept of a closed system for materials and energy. Its appeal for me was eliminating waste, resource efficiency, and minimising use of virgin materials. This seemed to be something that could help the environment, and it made financial sense too. There was an elegant fit with management theories of that time, such as Total Quality and the westernisation of the Toyota Production System.

Roll the clock forward and we now have ISO Technical Committee 323 working on four new standards, China incorporating the circular economy into national policy, the circular economy Action Plan as part of the European Green Deal, and a full economic theory ably promoted by the Ellen McArthur Foundation. Sectors such as Fashion are busily moving towards models that break the linear “take, make, dispose” mould. The circular economy is about to take off.

Value retention

The basic aim of the circular economy is to decouple resource consumption from demand and hence value creation. As well as consuming non-sustainable raw materials, the dominant linear value chain leaks value left right and centre through waste. In a circular economy, redesign of business models, products and processes avoids the waste in the first place and maximises recovery, reuse and recycling of biological and inorganic inputs.

Take a fashion example: Hugo Boss shoes made with a pineapple-leaf derived material called Piñatex. This is a leather substitute made by upcycling pineapple leaves that would be burnt after harvest (and 40,000 tonnes of leaves are burnt each year). It creates an additional revenue stream for subsistence farmers and hence makes the food supply chain more secure. It prevents atmospheric carbon release from burning and reduces water and deforestation pressures that would occur if animal leathers had been used. And it is a premium product.

Brands working with Plastic Bank offer a different glimpse of the circular economy in action. Through the Social Plastic® Partnership discarded home and personal care bottles are recovered and transformed into feedstock for new containers as part of a closed-loop supply chain.

Regulatory pressure

Many companies have got behind the idea of a circular economy, but some will need a push from regulators.

The EU Green Deal and EU Circular Economy Action Plan 2.0 contain policy initiatives in areas such as targets for reducing overconsumption, strengthening packaging, waste and recycling legislation, better information on sustainable products for consumers and a right to repair, and mechanisms for acting on unsubstantiated green claims.

China has had a Law for the Promotion of the Circular Economy since 2009 (being a larger consumer of raw materials that the 35 OECD countries combined is a powerful incentive). This profoundly influences government policymaking, and requires all industries to put in place improved re-use, repair and recycling, as well as management processes and systems to minimise resource usage and waste.

The legislative situation in the USA is more fragmented. Federal and State laws relating to the circular economy tend to focus on specific issues such as plastic waste (eg the Federal Break Free From Plastic Pollution Act of 2021 and the 2021 Legislative Plastics & Waste Reduction Package in California), rather than the circular economy as a new economic system. However, the private sector is taking much of the initiative to self-regulate.

Loopy data

Data is central to the circular economy. Data helps with measuring progress and identifying areas for improvement, and the Global Reporting Initiative (GRI) is now embracing the principles of a circular economy for disclosures. They have also released a revised version of the Waste Standard GRI 306: Waste 2020.

In the value chain (loop?) data helps to keep track of inputs and finished products so that sound “waste” management strategies can used. Increasingly, this will be automated across all value chain participants. Where producers can keep ownership of products and packaging (“product as a service”) this will extend out to the consumer. This is already happening with textiles: you can buy or lease MUD Jeans. For consumables such as food box subscriptions, the circular economy potential is lower, but data can help identify how and when to collect packaging and other technical materials in the lowest impact way.

Consumer Goods companies have strong capabilities to measure efficiency. However, to optimise on value in a circular economy requires reliable and relevant real-time data about leakage of materials, and embedded energy and water. It requires knowledge of how and when resources, products and services are being used. There are already powerful examples in precision agriculture and some recycling facilities. Perhaps as sensors and intelligent systems become more commonplace, it may be possible to create a digital twin of all the value loops involved and maximise value that way.

Step forward

Systems that embody the circular economy can capture more value than linear ones, but there are challenges with unnecessary packaging, poor recycling infrastructures, consumer behaviour, formulations and recipes. Still, these are just problems to solve and Consumer Goods companies pride themselves on their innovation.

As these problems are resolved, the industry moves step by step towards regenerative and restorative practices and, in this UN Decade on Ecosystem Restoration, that is something we need alongside profits.

And, to learn more about sustainability and the consumer goods industry at large, look at the resources available from The Consumer Goods Forum.

This blog was written and contributed by:

Trevor Davis
FRSA