The Circular Economy De-Mystified: Part 1

The Circular Economy De-Mystified: Part 1

To describe the previous year as difficult for SMEs would be the biggest understatement of these tumultuous last 12 months. In an economy that feels battered and broken, looking ahead towards the next few years, it seems like a challenge just to survive financially without considering the short period we have to also fix our planet. The challenge that hangs over us is how we can address climate change and Covid-19 in a way that benefits us all.

For governments, businesses and especially SMEs, the answer is simpler than you may think. It lies in moving from our current linear economy of take, make and dispose to a circular economy. The concept of a circular economy is not new, in fact it is something many authorities and businesses are recognising as a high priority, and yet many are also still scratching their heads at what exactly it means?

In a recent survey by ReLondon across local authorities and SMEs in England, 74% of all respondents stated they would like their organisations to make more use of the circular economy however only half of respondents felt confident they understood what the circular economy meant, and a quarter were unsure how it could help the climate crisis.

So, let’s debunk this concept. Put simply, the circular economy aims to eliminate waste, keep resources in use for as long as possible and support regenerative practices. It promotes reducing consumption of inputs, reusing, repairing, recycling and remanufacturing items alongside a shift towards renewable energy, so that our growth (as a business, economy and society) is not dependent on the continuous consumption of new goods.

Moving towards a circular economy could have transformative effects on our environment. 45% of climate-changing emissions currently come from the global management of land and the production of goods and food. With SMEs accounting for 90% of global firms, transferring to business models on a wide scale that reuse goods and regenerate natural systems could have significant influence over our global emission reductions. Research estimates that a circular business model can achieve a 50 – 90% reduction in a products’ environmental footprint.

Source: Oliver Wyman

Alongside its substantial environmental benefits, the circular economy also makes sense for our communities and businesses. By decoupling your growth from linear resource use and shortening your supply chain, a circular business model has been proven to build the resilience of a company against market shocks such as Covid-19.

It can also have benefits for production costs. Raw material costs are continuously rising but they make up, on average, one third of a company’s total costs. By reusing your materials and eliminating any waste, closing the loop can have important financial savings.

Finally, in a society that is increasingly promoting inclusive and responsible business, the circular economy encourages more connected communities and illustrates a genuine commitment to responsible consumption.

Taking all of this into account, the circular economy can have a crucial impact on addressing the Sustainable Development Goals by tackling, as a minimum,

• Goal 8 - Decent Work and Economic growth;

• Goal 11 - Sustainable Cities and Communities;

• Goal 12- Responsible Production and Consumption; and

• Goal 13 - Climate Action

So, the circular economy sounds pretty sensational right? But what does this actually mean in practice for your organisation and how accessible is it? Look out for Part 2 of this blog to find out how to put circularity into practice.