Despite circularity being a hot topic across industries, very few systems are implemented to put materials back into circulation. Experts say we currently use 60% more resources than the Earth can provide. Switching to a circular economy is seen as the way forward, and according to research, the approach could unlock USD 4.5 trillion of value by 2030.
In a circular economy, products are kept in use for as long as possible through repairing, recycling and redesigning to minimise the use of the world’s resources, cut waste, and reduce carbon emissions.
Dieuwertje Ewalts, Circularity Lead Consulting at Deloitte Netherlands, says people often mistake circularity for recycling, but that is the last step. “We must begin with the product design. How can we make them more modular so that they can be repaired or have parts replaced? We need to return to making durable products.”
Deloitte partnered with Circle Economy to produce the 2023 Circularity Gap report, released during the World Economic Forum’s (WEF) annual meeting in Davos. According to the report, the global economy is now only 7.2% circular, compared to 9.1% in 2018. And the situation is worsening, driven by rising material extraction and use.
Former Head of Resource Circularity at the WEF Kristin Hughes describes the findings as thought-provoking. “We want to see an upward trend in companies adopting circular economy practices, and it’s unfortunate when this is not reflected in the current climate. However, industry leaders are interested in investing in circular economy principles.”
We need to move from the linear sales model of trying to push as many products as possible to one that ensures they can be serviced.
So why is circularity still not a more significant part of business operations?
Despite the growing interest from company leaders, Hughes believes the biggest hindrances to companies adopting circular economy practices are a fundamental need for more understanding and systemic obstacles.
“We are hearing that businesses often run into roadblocks regarding circularity processes. Ultimately, we need to have a complete system change. If you have one player who adopts changes, but the rest of the value chain does not change alongside it, they will continue to stumble,” notes Hughes. Ewalts agrees, saying it is time to end the ‘we need to grow’ mantra because there is no infinite growth on a finite planet.
“We need to move from the linear sales model of trying to push as many products as possible to one that ensures they can be serviced. From a legislative perspective, we must focus on taxing materials more and labour less because repairing is always more labour-intensive than production. The true environmental cost of using materials must be considered to break this cycle.”
Adopting circularity can seem daunting, but most stakeholders inherently understand it from the perspective of maximising material value before discarding it to the landfill or incinerator. The difficulties lie in presenting them with how it would work for their business and where to start.
Ewalts advises businesses to analyse their suppliers and the product lifecycle and ask, ‘Where can I make changes? Can I use the same components? Can I address modularity?’ “Think big, start small, and scale fast. Have that ambition but start with a small-scale pilot and then find a partner to scale up. One company’s waste could be a resource for another.”
The importance of changing how businesses operate is becoming increasingly widespread, with Deloitte warning that companies not taking steps now will have a hard time reaching their 2030 goals in five years.
“From a climate change and resource availability perspective, we must start doing this now. It would be best if you worked outside the boundaries of your company. It’s not just the supplier-customer relationship but rather strategic partnerships. We’re trying to go from a value chain to a value circle. In the end, your customers might become your suppliers again.”
Ultimately, we need to have a complete system change. If you have one player who adopts changes, but the rest of the value chain does not change alongside it, they will continue to stumble.
This is an approach being taken by Wärtsilä in the maritime sector. As ships have a long operational life, identifying the lifecycle impacts of maritime products is critical to understanding their total environmental impact.
Wärtsilä manage the lifecycle of its products through design, the careful selection of suppliers, production methods, and by optimising transportation, maintenance, and repairs throughout their operational life. Additionally, the reconditioning of products and components increases their reliable service life, while modernising improves the existing operational performance of installations.
By embracing strategic partnerships and moving towards a value circle approach, the maritime industry can play a crucial role in achieving the emission reduction goals set out by the International Maritime Organization (IMO).
“The size and durability of a well-maintained vessel make this approach much more economically viable. In addition, engine replacements make them more efficient, and legislation requiring scrubbers, tackles emissions. To make the maritime world even more sustainable, it’s about the fuel being used,” adds Ewalts.
However, green fuels alone will not make shipping sustainable. Additionally, increased transparency about product and asset lifecycles and rising consumer pressures for extended producer responsibility are crucial considerations in applying circular economy principles to shipping.
The WEF is calling for new metrics and shared data. Currently, no standardised set of metrics tracks progress on approaches such as reuse. Better data on the materials available for hard-to-abate industries such as construction could slash emissions and protect biodiversity through reuse.
Hughes concludes, “We are hoping that, through these conversations, different businesses can collaborate and support each other in that effort. A single business cannot make the change alone; they need other businesses. Equally, governments and companies must work together to accelerate progress.”