How the circular economy can benefit your business

The circular economy has become a buzzword for a good reason. In an increasingly warming planet, where climate risks become business risks, individuals and organisations are asking how we can decouple economic growth from environmental impact. The circular economy aims to answer this question by creating a framework that mimics the life cycles of natural resources and proposing that by cycling resources in endless loops, we can avoid the negative externalities of the current linear paradigm – extract, manufacture, consume and waste – and establish a new normal for business. 

Earthed Consultant Karina Seljak outlines exactly what the circular economy is and why circular approaches are good for the bottom line as well as the planet. 

What is the circular economy?

The circular economy is a systems-thinking approach to designing products and services, where waste is seen as a resource and natural assets are regenerated. In a circular economy, materials are cycled through processes like care, reuse, refurbishment, remanufacture, recycling, and composting to maintain their highest possible value. In this way, there is far less reason to extract virgin resources, manufacture and consume new products and waste valuable materials and embodied energy.

Origin of the circular economy

The term ‘circular economy’ has multilayered origins, varying from design philosophies like Cradle to Cradle and Biomimicry to Permaculture farming. Of course, Indigenous knowledge and practices have far preceded such schools of thought, where people work is symbiosis with the land, successfully managing finite resources for millennia. In 2010, the Ellen Macarthur Foundation propelled circular principles into the mainstream. The foundation was inspired by yachtswoman Dame Ellen Macarthur’s experiences sailing solo around the globe and her careful management of her own finite resources on the boat. 

The scale of the circular economy

From this micro-scale, the same set of principles can be applied to corporations and, indeed, entire countries. Following the European Union by two years, in late 2022, the Australian Federal Government committed to transition Australia to a circular economy by 2030 and Net Zero by 2050. The circular economy has since been adopted as best practice from the Australian fashion industry to the national waste policy to many other sectors. 

So, let’s get down to business and see the circular economy in action. 

Why go circular? 

Save on costs

Linear models that include extraction and waste lose out on harnessing the full value of products and materials. Using waste as a material input to your product is often less costly than using virgin resources. For example, my own company Seljak Brand, was founded on woollen offcuts from the production of luxury blankets, allowing us to launch into the market with a product a third of the cost of 100% Merino blankets. 

Optimising all the resources in your business means you can also avoid costs like landfill levies. The Australian Government has set up the ASPIRE exchange platform where companies can list their waste streams for other organisations to jump on, whether it be offcuts like woodchips or products like used office chairs. 

Create new income streams

By re-framing ‘waste’ as a resource, you have the opportunity to monetise your waste streams and create new income streams in other areas of your business. An example of this can be seen in the newly launched Circular Sourcing marketplace, where fashion businesses can earn money on the fabric they no longer need, also known as deadstock or overstock. 

But the circular economy is not about waste alone. The other ‘R’s are, in fact, more important and more lucrative. Reuse, redistribute, repair and remanufacture are each increasingly higher value solutions and should be pursued before recycling. Offering services that bring your customer back to your business, like Bose’s repair program or Patagonia WornWear initiative, means you ‘own’ the lifecycle of your product and can continue to profit from it. 

Build stronger business networks

The circular economy works by businesses collaborating in networks. Although digital platforms are a fantastic tool for connectivity, there’s nothing like human relationships. Getting to know other businesses in your industry and local area makes for new opportunities to share knowledge and resources. 

A great example of this is the brewing industry, where a non-competitive approach to manufacturing enabled the proliferation of the craft beer sector. Canning machines are often hired out beyond the brewery that owns it to other beer makers. This system has seen the craft beer industry balloon in the past 10 years.  

Create engaging customer experiences

The circular economy requires the ongoing participation of customers to uphold the value of products for as long as possible. This creates revenue streams not only for your business but also meaningful touchpoints for customers, increasing trust, brand loyalty and the likelihood of word of mouth and referrals. It means creating seamless customer communications (which benefits everyone!) and designing engaging activations. A fantastic example is Project Blank’s Wetsuit Recycling Drive, which asks customers to return old wetsuits at Saturday morning coffee events at their store in Manly Sydney. The wetsuits can be any brand, opening the event to potential customers as well as current customers, and attendees are invited to check out new surfboard models and even take them for a test drive. 

Other brands, like Ripcurl, have ongoing recycling programs with re-manufacturers like TerraCycle. Beyond good marketing, these programs require sound reverse logistics supply chains and a substantial market for the ‘waste’.

Reduce negative impacts on the environment and associated risk

It makes business sense to reduce costly externalities like emissions output, biodiversity loss, waste, and pollution for many reasons. From avoiding growing calls for taxation to meeting consumer demand for more responsibly made products, to perhaps the most fundamental of reasons insinuated in the common-sensical phrase ‘don’t sh*t where you eat’. 

If the Earth continues to be poisoned and plundered at the current rate of extraction, a catastrophic set of consequences will mean that all businesses will have to innovate in an unprecedented way. In fact, businesses are already facing challenges like insurance increases, seasonality changes, extreme weather and diminishing supplies, to name a few business risks based on a warming planet. Whether proactively or reactively, supply chains, both local and global, will be redesigned in the coming decades.  

As the impacts of climate change upon people, communities and businesses become more apparent by the day, it’s essential to see the circular economy framework as part of a long-term trend to reassess business norms and redesign economic systems. Organisations and companies have the fantastic opportunity to participate in this transition, creating value for all stakeholders, including the planet. 

Consider our circular economy services to apply circular economy approaches to your business. 

Article written by Karina Seljak  - Circular Economy Specialist Consultant

Image from Seljak brand.