As we reflect on the close of 2023, it’s evident that we’re facing unprecedented challenges regarding climate change. Last year marked the hottest on record, and the recent climate talks in Dubai left much to be desired. Despite efforts, the extraction and consumption of materials, closely tied to greenhouse gas emissions, have continued to surge, nearly matching the entire 20th-century consumption in just six years.
This scenario calls for more urgent actions from all areas of our economy. The concept of a circular economy emerges as an important pilar in curbing climate change, offering a set of strategies to minimize waste, emissions, and resource use. However, despite its growing recognition as a “megatrend” with a surge in discussions and proposed actions, the world is in fact becoming less circular rather than more, as highlighted in the Circularity Gap Report 2024, recently released by the Circle Economy Foundation.
Circular economy focuses on optimizing the use of raw materials and closing product life cycles to the best of a product’s possibility. The worldwide contribution of the use of raw materials has been estimated at 45% of total greenhouse gas emissions. The transition towards a circular business model can be considered a large step to take, yet options are available to take a step in the right direction.
What is instrumental in successfully implementing a strategy to create a circular business model is the willingness of business leaders to commit to a fixed goal. This article is meant to offer a fresh perspective on how to get there. The key takeaways are:
1) implementing a circular business model is not an all or nothing endeaovour
2) experimenting & piloting can create a glidepath towards circularity
3) succesful implementation of a circular business model can lead to significant cost reductions and have an ROI on it’s own
4) Make your business more future proof to comply with expected regulations
Incremental circularity
When thinking about implementing a more circular business model, we often see that companies try to theorize how they can completely overhaul their full production process rather than vying for incremental changes. While such efforts do contribute to better awareness of the task that needs to be completed it does result in circularity-paralysis where the task at hand is of such an immense scale that lead to long decision processes and the realization that there is no ROI to make the full production process circular.
Rather than this, we offer the option to implement a circular business model by incremental steps in terms of the spare parts consumption. Putting the correct incentives for customers in place, an organization can collect otherwise disposed or deffective parts or machines at a central location. The returned materials will go through a funnel process and will be sorted and handled to retain the highest possible intrinsic value of the part through the following stages:
- Sort – sort parts according to pre-defined logic
- Repair – 100% re-use
- Re-use – dissassemble components which are still used in current production or repair processes to retain their value
- Recycle – make sure all waste left after dissassembly is identified in order to investigate their use at a later stage
During the initial repair stage of the process all failures of equipment are being carefully documented, building knowledge and data over time of the most common failures. This information can be used as input for research and development of the product at a later stage, building more durable and better repairable parts. The remaining waste from the process can be re-used to the best of the parts ability and knowledge of these waste streams will grow over time, feeding valuable information back to the development stage of new products. In this manner, achieving an increasingly circular business model becomes a viable option for a certain portion of materials. Especially in high-tech manufacturing industries, this does not necessarily impede with the sale of new products.
Companies that are applying this method have seen significant cost reduction over time. In 2023, MT unirepair has been able to repair spare parts and assemblies at 33% of the inventory value of a new product. By applying our model, we further help companies become more circular and provide information that can lead the transformation towards a fully circular business model. In a later blogpost, we will dive a bit deeper in how this can help organizations to get ready for the new EU ecodesign directive and digital passport of products, as digitization becomes an increasingly important factor in circular business models. Knowing the goal of the EU is to become a fully circular economy by 2050, starting the journey towards circularity will have to start today.
No responses yet