Circular business models offer multiple process opportunities for businesses

Academics have spoken about the merits of a circular economy since the 1990s. Companies big and small practice its principles and now Australian governments are actively exploring policies aligned to a circular economy.

So where do circular economy principles fit into waste management and what are some practical examples?

Circular economy thinking is not new; leading think tank, the Ellen MacArthur Foundation has been cheerleading CE principles to governments and industry for almost twenty years. European countries have adopted and integrated strategies to capture and reuse resources already in use, thereby reducing the need to manufacture new materials.

Right now in Australia, circular economy is a hot topic. Following on from draft policy consultations and announcements last year, the Queensland and New South Wales governments recently launched - almost simultaneously - investment in circular economy innovation projects.  

Like it or not, thanks to China’s ‘National Sword’ policy, the business of waste management in Australia has changed forever and new business models and methods will need to be created.

China has long been the preferred destination for the world’s recyclable materials - mostly plastics. Each year, more than 30 million tonnes of the world’s waste flowed into the country, with Australia contributing around 1.25 million tonnes.

The reliance on linear business models within the recycling industry are now being exposed.

Put simply, we have to change the way we think about waste.

Circular economy models

Traditional business models (linear) operate in a take, make, use and throwaway model.

Circular business models are a little different in their thinking in a couple of ways: firstly, what happens to a product at its end of life? And how do they operate in their ‘circularity’? A business can be fully circular or operate as part of a multi-business circular model.

In its Circular Advantage report, Accenture identifies 5 circular business models - Circular supplies, Resource recovery, Product life extension, Sharing platform and Product as a service.

From these circular business models, it's easy to recognise familiar companies and where they operate in one or more circular ecosystems.

For most companies, being part of these circular ecosystems will become increasingly important as we transition into the Fourth Industrial revolution and the global effects of climate change.

For the waste industry, we are already seeing agile, innovative competitors using technology to identify and develop new business opportunities that are threatening incumbents’ market share. Through circular principles, these disruptors are turning the inefficiencies experienced in linear value chains into new revenue models.

Consumers are key drivers of circular economy models, increasingly they are demanding more accountability from brands. They want more transparency, more recycled products and more responsible business practice. Manufacturers have been forced to change the way they design, what materials they use and at the end of product life, have a solution so their products don’t become waste.

The time is now for circular economy adoption across the waste management industry. In fact, most waste businesses should be actively working in one or more of Accenture’s 5 business models. If not, they are setting themselves up for disruption.

By 2021, it is expected that NSW will need to process nearly 20 million tonnes of waste *

Opportunities in Circular Economy

A linear waste model sees a single process, but a circular model recognises multiple process opportunities.

For too long we have identified waste as waste, and it’s value only realised in collection and removal.

A circular business model views waste as value and importantly that value can be realised at many points along the recycling process through handling, processing and life cycles.

As an example, let’s look at the container deposit scheme, value from plastic bottle waste is realised from collection (operator and consumer), from remanufacture into plastic pellets (waste processors), and from product manufacture and from product sales. In this CE model, the process can repeat indefinitely.

And in this example, a recycling business can find the real sweet spot in a circular business model.

When a circular economy model captures value from both supply and demand - from collection through to new recycled product - they control when and where value is released.

In addition to control over material flows, operators can begin to unlock new value driven by demand (network effect) for recycled products by consumers.

Demand drives supply, supply drives recycling and recycling addresses demand - a circular economy.

In Australia, I see two more factors influencing and being influenced by a circular economy.

Firstly, proactive procurement is being considered at the federal and state government levels alongside lobbying by the waste industry. Mandated recycled procurement targets drive supply and demand across the value chain.

Procurement targets for recycled materials advance circular economy models, coupling collaborative partnerships within industry sectors that create jobs and growth locally, state and country wide.

As we move further into the fourth revolution, Like most industries, the waste industry will see more impact from technology and innovation in their day to day operations.

We will continue to see disruptive tech companies redefining the recycling sector, from processes for transparency and tracking in material flows like blockchain and DNA style tracers, future thinking recycling through advanced manufacturing like BlockTexx and niche digital marketplaces that can deliver a circular economy online and across the globe.

Whether your company is working in CE, is moving towards it, or not interested, your environment is changing or has changed. Now is the time to innovate, connect with your customers and your supply chain, create a fully circular economy business, join a CE or develop a new one before you don’t have a choice.

First published in @insidewaste magazine - May 22

*(source: KMH Environmental, 2016, NSW Resource Recovery Infrastructure Needs Analysis)

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