The environmental issues humanity is experiencing on the planet nowadays are unprecedented and require new innovative solutions from businesses, which have mostly been operating in a linear manner. This article will give you insights on how our ecosystems have gradually been destroyed, how these problems can be partially alleviated thanks to circular economy and what are the limitations of switching to these new business models.

Issues & Reasons for Ecosystem Destruction

The challenges which our environment is facing nowadays are already familiar:

• Record CO2 levels are being registered in the atmosphere, as high as ever before - at nearly 412 ppm (parts per million) in 2020 representing a 47 percent increase since the beginning of the Industrial Age (280 ppm).

• Waste is polluting our ecosystems - 7 billion tons of waste is produced every day all over the world.

• Resources are being over-exploited from the planet.

The global capacity which can safely be extracted from Earth is overshot in Switzerland and in nearly all countries all over the world. Earth Overshoot Day is increasingly showing up earlier, this year on August 22nd. This results in high costs of environmental destruction, from flooding to infrastructure issues. These repairing costs are being externalised and exceed the planetary boundaries, which is the space within our society where humans can safely act on the planet Earth.

Sustainability is not a megatrend; it is an existential necessity.
– Dr. Rudiger Fox, Sympatex Technologies GmbH

Often sustainability is confused with being a megatrend from a business model perspective, but overall it is more significant than that. Thanks to the changing and dynamic nature of the world it becomes not only a possibility but more of a necessity to really act on it.

How today’s economy works

The current economy and business models are structured in a linear way. By extracting resources, products are being made, which then get used and finally are disposed.

Within this linearity many negative externalities are created, e.g.: issues with rainforest clearing and destruction of biodiversity, environment pollution through CO2 emissions, waste and micro plastics enter the biosphere. All these negative externalities are called “waste by design”. Due to the technological progress waste is actually a new invention, since humans did not even have the concept of waste before industrialisation. Furthermore, current business models link resource extraction and production which in return generates economic growth. Last but not least, the majority of these products are heavily dependent on fossil fuels. All these externalities heavily impact the balance of Earth’s ecosystem and its sustainability for future generations.

Circular Economy as a Solution

One of the solutions to tackle this serious life-threatening problem is the circular economy. The most important change lies in the recovery of resources that have been used to make products, thus making them reusable. By switching from the linear to circular economy, material is kept at its highest utility over its entire lifecycle. This is more analogue to the natural ecosystem, as waste does not effectively exist there. Also, it becomes preferable to reuse products than to recycle them since a lot of energy and effort has been spent to manufacture these products, thereby creating further externalities. The longer these products can be used effectively, the more the consumers and the planet will benefit.

One other key aspect of the circular economy is the focus on design, services and access. In this way, ownership can stay with, for example the companies, which makes it more effective to keep these materials in utilisation or to recover them. This business model decouples resource use from economic growth even though this is not always fully possible. This is one of the main aspects which can impact the overall sustainability of our whole society on Earth. However, from a realistic point of view it is not feasible to have a full cycle to keep every material and every product in the loop. Waste will still be generated; the goal is to keep it as limited as humanly possible.

Enterprises should be encouraged to take on this responsibility. Within the context of creating a sustainable society, especially companies can make a significant impact by changing their business models from linear to circular. They can leverage what they do and how they do it as well as the current environment, by shifting customer needs and their expectations from businesses. The aim is to craft solutions that work both for the companies and the society.

Limitations of Switching to Circular Solutions

There are multiple reasons why more circular solutions are not seen nowadays. In many companies most of the work staff is not informed about the implications of sustainable circular business actions and solutions. The employees take on action to implement more sustainable lifestyle in their private life, but it is often decoupled from their work. It is important to address that and to share the relevant knowledge to start change.

The second biggest hurdle is that often sustainable projects miss a business case, a revenue model or effective profitability. Thereby, they are often relegated to pay PR or charity projects. However, it is proven by experts that it is possible to make these projects sustainable, operational and profitable at the same time. Another challenge is the complexity of circular solutions, which need cross-divisional support inside and outside the company. Hence, creating partnerships becomes crucial since no company by itself can create a whole circular ecosystem.

Apart from that, another issue is the timeframe. Currently enterprises operate in fast-paced environments, however the business models of the circular economy require a long time to implement. It can take years until the product goes through the full cycle. This becomes difficult from the financial perspective, therefore the right incentives within your company and with your partners need to be created.

Additionally, the position of companies within the value chain often hinders them to take action. If a business is a material producer, it does not necessarily need to feel responsible. Waste collection companies often do not see themselves in the position to push for better product design. Regulations and laws are needed to enable the circular economy, which becomes a political issue as well.

Conclusion

The circular economy has the potential to elevate the well-being of humans as well as the planet. Businesses and governments are not the only drivers of these new sustainable models. The needs and wishes of the customers can create a huge shift in the marketplace immediately. Profitable, compelling and sustainable solutions can be produced, which not only work for the company on the financial level but also for our planet on the sustainable level, as well as on the motivational level for the employees. The more valuable work will be, the happier humanity becomes as a whole. The circular economy truly represents a win win situation for both planet and people.

Interested in additional information on circular business models? Take a look at our circular economy topic page and download the corresponding whitepaper on Business Model Innovation for the Circular Economy.

Further readings:
Earth Overshoot Day: https://www.overshootday.org
Increase of CO2 in history: https://climate.nasa.gov/news/2915/the-atmosphere-getting-a-handle-on-carbon-dioxide
Current CO2 in the atmosphere: https://www.co2.earth