Third entry in the micro series of posts in which we discuss different business models for the circular economy. This time, we will talk about closing the loop.
There are different ways to approach the circular economy, reflected in different business models that offer different impacts on profits and sustainability. These solutions are important because the current economy is detrimental to the planet.
The circular economy aims to reduce waste and resource use by considering every aspect of a product’s life cycle. Circular business models attempt to find economically viable ways to continually reuse products and materials, incorporating renewable resources wherever possible.
Closing the cycle
Closing the cycle is mainly associated with the recycling of waste, both during the production process and after consumer use. The formal terms of the business model are resource value extension and industrial symbiosis. Both convert waste into value by keeping resources in the system.
Recycling of paper, metal and glass is already commonplace, but can be scaled up with new partnerships and recovery systems. Industrial symbiosis pursues more ways of exchanging industrial products, either within a single company or industry or across industries.
Advantages and disadvantages of closing the loop
Recycling has a real but limited impact. From an environmental point of view, it is not sufficient to address resource use. Even if all waste could be recycled, it would only cover one-fifth of today’s material needs.
Below, we will cite some additional economic and environmental challenges related to recycling:
- Primary raw materials are often cheaper than secondary (recycled) raw materials.
- For the main global manufacturing materials (steel, cement, paper, glass, plastic or aluminum) recycling is complex. Therefore, the effects on energy savings are less clear.
- Materials can become contaminated and lose quality through recycling.
Industrial symbiosis offers a higher value proposition. Companies exchange waste (or use it internally) to create higher-value items. In this way, efficiency and productivity improvements can occur, projecting diversified revenue growth.
In the next post we will look at another type of business model, based on regenerating the cycle.
Photo credit: PM
