We once used resources, such as oil and water, with careless abandon. Now, attitudes are changing fast, amid an increasing recognition that supplies are either finite or diminishing, even as the global population grows and demand intensifies. For forward-thinking businesses, this presents opportunities to explore alternative models that reduce consumption and waste, while also boosting growth and profitability. 

BUSINESS

 

BUSINESS

Waste not –

want not

Waste not – want not

The past two centuries have witnessed sweeping changes in economic growth and social ambition. Once, the status quo was unquestioned. However, aspirations have gradually been transformed as countries around the world have striven to move people from poverty to prosperity through continuous economic progress.

The goal is clearly admirable, but until recently, it was underpinned by one key assumption: that the planet has an unlimited capacity to provide the raw materials, food, water and energy needed for growth. 

Today, that assumption is increasingly called into question. Untrammelled economic expansion has created issues including climate change, pollution, water shortages and deforestation. And these problems are exacerbated by megatrends, such as population growth and urbanisation. 

Regeneration gap

The Global Footprint Network (GFN) provides a stark illustration of the challenge. The think tank makes an annual calculation of Earth Overshoot Day – the date in any year when the demand for ecological resources and services exceeds what the planet can regenerate in that year. 

According to the GFN, we first went into overshoot in the 1970s and the day on which we exceed Earth’s ability to support us has been moving forward ever since. This year, it arrived on 1st August. To put it another way, humanity is currently using natural resources 1.7 times faster than the planet’s ecosystems can regenerate them.

This consumption is far from equal – if everyone consumed at the rate of the US, we would be using resources five times as fast as the planet can cope with. So,  as the rest of the world starts to catch up with the US in economic terms, the issue becomes  increasingly pressing.  

Ponzi planet

“Our economies are running a Ponzi scheme with the planet,” says Mathis Wackernagel, president and co-founder of the GFN. “We are borrowing the Earth’s future resources to operate our economies in the present. Like any Ponzi scheme, this works for some time. But as nations, companies or households dig themselves deeper and deeper into debt, they eventually fall apart.”

The principal reason for this overconsumption lies in our current “linear” model of growth, where natural resources are mined or abstracted, turned into end products, used and then, at the end of their life, thrown away. The model can be characterised as one of “take, make, consume, dispose”, or more succinctly, “take, make, waste”.

The system worked for many years. “When there were no frontiers and the idea of the global economy affecting the planet was seen as ridiculous, we could emit greenhouse gases for free, empty oceans for free and pollute polar regions for free, without risking invoices being sent back from Earth,” explains Johan Rockström, co-director of the Potsdam Institute for Climate Impact Research. 

Payback time

“This is no longer the case,” he adds. “In the 1980s, the first invoices started coming back – the ozone hole, the collapse of fisheries, tipping points in freshwater lakes, accelerated ice melt, and shifts in heatwaves and storm patterns.”

As climate change becomes a more forceful reality, there is a growing realisation that we cannot go on as we did before. But the linear economic model is so entrenched that change has been hard to envisage, let alone achieve. Now, however, there are signs of movement, thanks to a combination of new thinking and new technologies. 

The driving force behind this shift is the idea of the “circular economy”, which aims to redefine growth so that economic activity is decoupled from the consumption of finite resources and waste is designed out of the system. The principle has been around for decades, but it is gaining new traction around the globe.

A rounded approach

The Ellen MacArthur Foundation, founded by the eponymous round-the-world yachtswoman, is a leading advocate for the concept. “The circular model builds economic, natural and social capital,” it says. “It is based on three principles: design out waste and pollution; keep products and materials in use; and regenerate natural systems.”

What this means in practice is a switch from “take, make, waste” to an economy focused on “reduce, reuse, recycle”.

Companies and governments around the world have implemented targets to reduce carbon emissions and water use, for example. Once they put their minds to it, progress often comes much faster than they anticipate. Sweden, for example, recently announced that it would reach its 2030 renewable energy target by the end of 2018, and it is on the way to becoming 100 per cent renewable by 2040.

Less waste, more growth

And in industry, some of the biggest names in the automotive sector, such as General Motors (GM) and Ford, are introducing zero-waste programmes across their manufacturing facilities. “The underlying philosophy is thinking of waste as a resource out of place,” says GM in its zero-waste blueprint, which is used not just to make its own facilities reduce their waste, but also to encourage other businesses to go waste-free.

“Waste reduction also often enhances productivity, quality, efficiency and throughput. The result is a more sustainable company poised to provide products to global customers well into the future.”

It is not just about reducing waste, though. “Using less doesn’t solve the problem, it only delays the point at which you run out,” says MacArthur. “A linear economy is a straight line and you’ll always fall off the end. In a circular economy – whereby you design everything to feed back into the economy and you recover everything – that circle can go on for ever.”

Dutch company Fairphone exemplifies this approach. The firm has created a “modular, ethical smartphone”, designed to be long-lasting, simple to repair and easy to upgrade. The company has won plaudits for its approach, which also focuses on reusing components.

Recycle, upcycle 

French carmaker Renault is an advocate of the re-use model, too. At its factory in Choisy-le-Roi, southern Paris, the group takes in old engines and parts and remanufactures them for new cars. The strategy is good for the environment, but it reduces costs as well. A remanufactured part produces 70 per cent less waste than a new one, while requiring 80 per cent less energy, 88 per cent less water and 92 per cent fewer chemical products.

Other companies take waste from their own or other sectors and “upcycle” it into new products – London-based Elvis & Kresse makes bags, belts and wallets from discarded fire hoses, for example, while a number of Scotch whisky distilleries use waste products from their operations to produce clean energy.

New business models are emerging, too, thanks to the growth of the digital economy and the technologies that underpin it, such as 3D printing, smartphones, advanced analytics and big data. 

Product-as-a-service Uber, Lyft and Airbnb, for example, allow people to use their cars or homes more efficiently, while reducing the costs of moving around cities and staying in them. The concept, now used for everything from tools to Wi-Fi to pets, reflects a growing realisation that consumers do not necessarily want to own a product – they just want the service that it provides. 

Examples of this approach have existed in industry for many years – in sectors ranging from aircraft engines to car leasing. But the concept, known as product-as-a-service, is now used in products ranging from MRI scanners to jeans. While it may seem a small change, the model can revolutionise the way businesses operate – and their environmental impact. 

First, the approach encourages businesses to design and make goods that are more durable and easier to recycle. This helps to save energy, raw materials and all the other resources that go into the manufacturing process. Second, it gives companies more control over products throughout their lifespan. And third, while firms do not receive the upfront revenue that comes from outright sales, they are paid a steady, predictable revenue over a product’s lifetime. 

A remanufactured car part produces 70 per cent less waste than a new one, while requiring 80 per cent less energy, 88 per cent less water and 92 per cent fewer chemical products”​

Customer care

Furthermore, when a product is returned to a company, value can be extracted by leasing it to another customer or recycling the materials within it.

The model works for customers too: they receive the most up-to-date products but only pay for what they need, when they need it. Nor do they have to worry about disposing products when they no longer want them.

“The circular economy is an innovation engine,” says William McDonough, an architect of the Cradle-to-Cradle framework, which encourages the creation of products that can be perpetually recycled. “This is the biggest business opportunity ever seen by our species.”

But consumers have a role to play, too, becoming less focused on ownership and more open to leasing goods or not having them in a material sense at all, as in the case of music streaming services such as Spotify. “Dematerialisation” may not be appropriate for all products, but consumers can also seek out more durable goods, and repair or recycle them when they go wrong or wear out, rather than buying cheap and throwing them away when they stop working.

Contrary to the promises of late-20th Century economic theory, growth won’t simply clean up the mess it makes, says the economist and author of Doughnut Economics, Kate Raworth. “We have to make our economies regenerative by design, so that they use Earth’s materials again and again,” she says. “Figuring out how to do so is one of the greatest design challenges for 21st Century architects, industrialists, entrepreneurs, financiers, citizens and states.”  

Back to articles

The past two centuries have witnessed sweeping changes in economic growth and social ambition. Once, the status quo was unquestioned. However, aspirations have gradually been transformed as countries around the world have striven to move people from poverty to prosperity through continuous economic progress.

The goal is clearly admirable, but until recently, it was underpinned by one key assumption: that the planet has an unlimited capacity to provide the raw materials, food, water and energy needed for growth. 

Today, that assumption is increasingly called into question. Untrammelled economic expansion has created issues including climate change, pollution, water shortages and deforestation. And these problems are exacerbated by megatrends, such as population growth and urbanisation. 

Regeneration gap

The Global Footprint Network (GFN) provides a stark illustration of the challenge. The think tank makes an annual calculation of Earth Overshoot Day – the date in any year when the demand for ecological resources and services exceeds what the planet can regenerate in that year. 

According to the GFN, we first went into overshoot in the 1970s and the day on which we exceed Earth’s ability to support us has been moving forward ever since. This year, it arrived on 1st August. To put it another way, humanity is currently using natural resources 1.7 times faster than the planet’s ecosystems can regenerate them.

This consumption is far from equal – if everyone consumed at the rate of the US, we would be using resources five times as fast as the planet can cope with. So,  as the rest of the world starts to catch up with the US in economic terms, the issue becomes  increasingly pressing.  

Ponzi planet

“Our economies are running a Ponzi scheme with the planet,” says Mathis Wackernagel, president and co-founder of the GFN. “We are borrowing the Earth’s future resources to operate our economies in the present. Like any Ponzi scheme, this works for some time. But as nations, companies or households dig themselves deeper and deeper into debt, they eventually fall apart.”

The principal reason for this overconsumption lies in our current “linear” model of growth, where natural resources are mined or abstracted, turned into end products, used and then, at the end of their life, thrown away. The model can be characterised as one of “take, make, consume, dispose”, or more succinctly, “take, make, waste”.

The system worked for many years. “When there were no frontiers and the idea of the global economy affecting the planet was seen as ridiculous, we could emit greenhouse gases for free, empty oceans for free and pollute polar regions for free, without risking invoices being sent back from Earth,” explains Johan Rockström, co-director of the Potsdam Institute for Climate Impact Research. 

Waste reduction often enhances productivity, quality, efficiency and throughput. The result is a more sustainable company poised to provide products to global customers well into the future”​

We once used resources, such as oil and water, with careless abandon. Now, attitudes are changing fast, amid an increasing recognition that supplies are either finite or diminishing, even as the global population grows and demand intensifies. For forward-thinking businesses, this presents opportunities to explore alternative models that reduce consumption and waste, while also boosting growth and profitability. 

Payback time

“This is no longer the case,” he adds. “In the 1980s, the first invoices started coming back – the ozone hole, the collapse of fisheries, tipping points in freshwater lakes, accelerated ice melt, and shifts in heatwaves and storm patterns.”

As climate change becomes a more forceful reality, there is a growing realisation that we cannot go on as we did before. But the linear economic model is so entrenched that change has been hard to envisage, let alone achieve. Now, however, there are signs of movement, thanks to a combination of new thinking and new technologies. 

The driving force behind this shift is the idea of the “circular economy”, which aims to redefine growth so that economic activity is decoupled from the consumption of finite resources and waste is designed out of the system. The principle has been around for decades, but it is gaining new traction around the globe.

Our economies are running a Ponzi scheme with the planet. Like any Ponzi scheme, this works for some time. But as nations, companies or households dig themselves deeper and deeper into debt, they eventually fall apart.”​

The ‘circular economy’ aims to redefine growth, so that economic activity is decoupled from the consumption of finite resources and waste is designed out of the system”​

A rounded approach

The Ellen MacArthur Foundation, founded by the eponymous round-the-world yachtswoman, is a leading advocate for the concept. “The circular model builds economic, natural and social capital,” it says. “It is based on three principles: design out waste and pollution; keep products and materials in use; and regenerate natural systems.”

What this means in practice is a switch from “take, make, waste” to an economy focused on “reduce, reuse, recycle”.

Companies and governments around the world have implemented targets to reduce carbon emissions and water use, for example. Once they put their minds to it, progress often comes much faster than they anticipate. Sweden, for example, recently announced that it would reach its 2030 renewable energy target by the end of 2018, and it is on the way to becoming 100 per cent renewable by 2040.

Less waste, more growth

And in industry, some of the biggest names in the automotive sector, such as General Motors (GM) and Ford, are introducing zero-waste programmes across their manufacturing facilities. “The underlying philosophy is thinking of waste as a resource out of place,” says GM in its zero-waste blueprint, which is used not just to make its own facilities reduce their waste, but also to encourage other businesses to go waste-free.

“Waste reduction also often enhances productivity, quality, efficiency and throughput. The result is a more sustainable company poised to provide products to global customers well into the future.”

It is not just about reducing waste, though. “Using less doesn’t solve the problem, it only delays the point at which you run out,” says MacArthur. “A linear economy is a straight line and you’ll always fall off the end. In a circular economy – whereby you design everything to feed back into the economy and you recover everything – that circle can go on for ever.”

Dutch company Fairphone exemplifies this approach. The firm has created a “modular, ethical smartphone”, designed to be long-lasting, simple to repair and easy to upgrade. The company has won plaudits for its approach, which also focuses on reusing components.

A remanufactured car part produces 70 per cent less waste than a new one, while requiring 80 per cent less energy, 88 per cent less water and 92 per cent fewer chemical products”​

Recycle, upcycle 

French carmaker Renault is an advocate of the re-use model, too. At its factory in Choisy-le-Roi, southern Paris, the group takes in old engines and parts and remanufactures them for new cars. The strategy is good for the environment, but it reduces costs as well. A remanufactured part produces 70 per cent less waste than a new one, while requiring 80 per cent less energy, 88 per cent less water and 92 per cent fewer chemical products.

Other companies take waste from their own or other sectors and “upcycle” it into new products – London-based Elvis & Kresse makes bags, belts and wallets from discarded fire hoses, for example, while a number of Scotch whisky distilleries use waste products from their operations to produce clean energy.

New business models are emerging, too, thanks to the growth of the digital economy and the technologies that underpin it, such as 3D printing, smartphones, advanced analytics and big data. 

Product-as-a-service Uber, Lyft and Airbnb, for example, allow people to use their cars or homes more efficiently, while reducing the costs of moving around cities and staying in them. The concept, now used for everything from tools to Wi-Fi to pets, reflects a growing realisation that consumers do not necessarily want to own a product – they just want the service that it provides. 

Examples of this approach have existed in industry for many years – in sectors ranging from aircraft engines to car leasing. But the concept, known as product-as-a-service, is now used in products ranging from MRI scanners to jeans. While it may seem a small change, the model can revolutionise the way businesses operate – and their environmental impact. 

First, the approach encourages businesses to design and make goods that are more durable and easier to recycle. This helps to save energy, raw materials and all the other resources that go into the manufacturing process. Second, it gives companies more control over products throughout their lifespan. And third, while firms do not receive the upfront revenue that comes from outright sales, they are paid a steady, predictable revenue over a product’s lifetime. 

The ‘circular economy’ aims to redefine growth, so that economic activity is decoupled from the consumption of finite resources and waste is designed out of the system”​

Customer care

Furthermore, when a product is returned to a company, value can be extracted by leasing it to another customer or recycling the materials within it.

The model works for customers too: they receive the most up-to-date products but only pay for what they need, when they need it. Nor do they have to worry about disposing products when they no longer want them.

“The circular economy is an innovation engine,” says William McDonough, an architect of the Cradle-to-Cradle framework, which encourages the creation of products that can be perpetually recycled. “This is the biggest business opportunity ever seen by our species.”

But consumers have a role to play, too, becoming less focused on ownership and more open to leasing goods or not having them in a material sense at all, as in the case of music streaming services such as Spotify. “Dematerialisation” may not be appropriate for all products, but consumers can also seek out more durable goods, and repair or recycle them when they go wrong or wear out, rather than buying cheap and throwing them away when they stop working.

Contrary to the promises of late-20th Century economic theory, growth won’t simply clean up the mess it makes, says the economist and author of Doughnut Economics, Kate Raworth. “We have to make our economies regenerative by design, so that they use Earth’s materials again and again,” she says. “Figuring out how to do so is one of the greatest design challenges for 21st Century architects, industrialists, entrepreneurs, financiers, citizens and states.”  

Back to articles

Our economies are running a Ponzi scheme with the planet. Like any Ponzi scheme, this works for some time. But as nations, companies or households dig themselves deeper and deeper into debt, they eventually fall apart.”​

Waste reduction often enhances productivity, quality, efficiency and throughput. The result is a more sustainable company poised to provide products to global customers well into the future”

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Bridgepoint  |  The Point  |  November 2018  |  Issue 34