Despite reports of a turbulent global economy, the World Bank delivered some great news recently. For the first time in history, extreme poverty (people living on less than $1.90 each day) worldwide is set to fall to below 10%. Considering that this rate has declined from 37.1% in 1990 to 9.6% in 2015, it is hopeful that one-third of the global population will participate the middle class by 2030.
For all industries, this growth will bring new challenges and pressures when meeting unprecedented demand in an environment of dwindling – if not already scarce – resources. First of all, gold, silver, indium, iridium, tungsten, and many other vital resources could be depleted in as little as five years. And because current manufacturing methods create massive waste, about 80% of $3.2 trillion material value is lost irrecoverably each year in the consumer products industry alone.
This new reality is forcing companies to rethink our current, linear “take-make-dispose” approach to designing, producing, delivering, and selling products and services. According to Dan Wellers, Digital Futures lead for SAP, “If the economy is not sustainable, we are in trouble. And in the case of the linear economy, it is not sustainable because it inherently wastes resources that are becoming scarce. Right now, most serious businesspeople think sustainability is in conflict with earning a profit and becoming wealthy. True sustainability, economic sustainability, is exactly the opposite. With this mindset, it becomes strategic to support practices that support a circular economy in the long run.”
The circular economy: Good for business, good for the environment
What if your business practices and operation can help save our planet? Would you do it? Now, what if I said that this one business approach could put $4.5 trillion up for grabs?
By taking a more restorative and regenerative approach, every company can redesign the future of the environment, the economy, and their overall business. “Made possible by the digital economy, forward-thinking businesses are choosing to embrace this value to intentionally reimagine the economy around how we use resources,” observed Wellers. “By slowing down the depletion of resources and possibly even rejuvenating them, early adopters of circular practices have created business models that are profitable, and therefore sustainable. And they are starting to scale.”
In addition to making good financial sense, there’s another reason the circular economy is a sound business practice: Your customers. In his blog 99 Mind-Blowing Ways the Digital Economy Is Changing the Future of Business, Vivek Bapat revealed that 68% of consumers are interested in companies that bring social and environmental change. More important, 84% of global consumers actively seek out socially and environmentally responsible brands and are willing to switch brands associated with those causes.
Five ways your business can take advantage of the circular economy
As the circular economy proves, business and economic growth does not need to happen at the cost of the environment and public health and safety. As everyone searches for an answer to job creation, economic development, and environmental safety, we are in an economic era primed for change.
Wellers states, “Thanks to the exponential growth and power of digital technology, circular business models are becoming profitable. As a result, businesses are scaling their wealth by investing in new economic growth strategies.”
What are these strategies? Here are five business models that can enable companies to unlock the economic benefits of the circular economy, as stated in Accenture’s report Circular Advantage: Innovative Business Models and Technologies that Create Value:
- Circular supplies: Deliver fully renewable, recyclable, and biodegradable resource inputs that underpin circular production and consumption systems.
- Recovery of resources: Eliminate material leakage and maximize the economic value of product return flows.
- Extension of product life: Extend the life cycle of products and assets. Regain the value of your resources by maintaining and improving them by repairing, upgrading, remanufacturing, or remarketing products.
- Sharing platforms: Promote a platform for collaboration among product users as individuals or organizations.
- Product as a service: Provide an alternative to the traditional model of “buy and own.” Allow products to be shared by many customers through a lease or pay-for-use arrangement.
To learn more about the circular economy, check out Dan Wellers’ blog “4 Ways The Digital Economy Is Circular.”