One of the biggest projects we are working on in July is a new business simulation that helps companies implement their sustainability strategies. As I was designing the new curriculum, I came across a concept I wasn’t very familiar with: “The Circular Economy.”
A circular economy is an economic system focused on eliminating waste and the continual use of resources. One of the best-known examples of the circular economy is recycling plastic. Instead of throwing away bottles, packaging, and other plastic products after use, they can be collected and processed to convert them into raw materials to manufacture new products, such as clothes, furniture, and even other packaging.
From a business perspective, the circular economy contrasts with a traditional linear economy, which has a “take, make, dispose” model of production. The circular economy employs principles of designing out waste, keeping products and materials in use, and regenerating natural systems for the long-term of the planet.
As I further researched the topic for the simulation, I discovered a set of principles that support a circular economy. Pretty interesting stuff and certainly blog-worthy:
- Designing, developing, delivering, and maintaining for the long-term: Products are designed and made to last longer, be more durable, and be easily repairable. The longer a product stays in use, the longer it will push the need for a replacement, meaning there are many saved resources. However, one of the biggest business challenges will be the ability to charge a premium for the extended life.
- Reuse: Extending the life of products through reuse, repair, refurbishing, and remanufacturing. This is one of the reasons why used cars have become so popular and a premiere car can last 15-plus years.
- Systemic Approach: Systems thinking is a core part of our approach to building simulations and fits in nicely with the principles of the circular economy. In the systemic approach, you consider the whole system to understand how different parts interact and affect each other, promoting symbiosis and closed-loop systems. A great example of this is the continued evolution of retail banking where the more automation that is implemented the fewer people need to go to a retail bank. The less they get in their cars (and waste gas), and the more satisfied they are with their banking experience.
- Recycling: Turning waste into valuable resources by recycling materials back into the production process. This can also include other types of recycling like compost which makes growing plants and vegetables more efficient and environmentally friendly.
- Resource Efficiency: Using resources more efficiently to reduce costs and increase productivity. In our core Perseus business simulation, the closer you get to supply chain and factory efficiency, the more profitable you are and the more sustainable you are.
- Renewable Resources: Utilizing renewable resources instead of finite ones, ensuring that the consumption of natural resources does not exceed their rate of regeneration.
In summary, by optimizing these principles, a circular economy aims to minimize resource input, waste, emission, and energy leakage, creating a sustainable and efficient economic system.