Circular economy: the new development model

Circular economy: the new development model

The circular economy has been installed as the new litany, chanted ad nauseam in forums, conferences and the media. However, it is much more than a concept. This new development model stands as the only one possible in the face of the demographic, environmental and social problems that humanity faces. A new cycle begins in modern history, where the rates of progress must be matched with respect for the limits of a planet that has long set off alarms.

The history of humanity is, far from the gaze of the most skeptical, a history of progress. However, it is also the story of exponential growth in a finite world: more development, more consumption, more spending, more population, more pollution and fewer resources. As a logical (and necessary) response to this trend, in the 70s the concept of circular economy emerged: efficiently manage and close the life cycle of products as a solution to the shortage of raw materials and the foreseeable global demographic growth that, according to the UN, will go from 8,500 million people in 2030 to 11,200 million in 2100.

In a society already immersed in what the founder of the World Economic Forum, Klaus Schawb, baptized in 2016 as Fourth Industrial Revolution, new projects inspired by this circular spirit emerged in the business scene at the beginning of the century.Startups such as Bay, Wallapop or Vibbo showed that this new economy did not refer (only) to recycling, but was laying the foundations for another, radically different way of doing business: to reinvent itself circularly or to disappear. And what are brands doing to adapt or, what is the same, to survive?

Serving: a response to scarcity

“Many companies have opted for servification: turning a product into a service. What used to be just a mantramarketinian that was looking to increase sales, now it is a tool of transition towards a more sustainable model ”, explains Nicola Cerantola, founder of Ecologing. Collaborative consumption applications such as BlaBlaCar or Airbnb are native to the circular economy. For their part, the brands with the most experience have sought surprising ways to integrate into this new dynamic.

An example that can illustrate this trend is IKEA, which until very recently encouraged us to permanently redecorate our lives thanks to a proposal low cost, which since 2017 repurchases the furniture from its clients and rents them for a second use. In addition, to reduce total emissions from your activity by 80% by 2030, the Swedish giant has opted for the use of renewable energies to obtain raw materials and it has begun a process of redesigning the transport networks and the products, made with long-lasting materials. His effort was recognized at the Davos 2018 World Economic Forum (World Economic Forum), where he was awarded for his transformation towards a circular model.

Nicola Cerantola: "Serving, which was previously only a‘ marketinian ’mantra, is now a tool in transit towards a more sustainable model"

However, completely rebuilding the business skeleton is not available to everyone. Jorge Barrero, general director of Fundación Cotec, explains that the transformation of current business and production models towards completely circular systems «involves substantial changes in all stages of production, from the design of products and services to the relationship with suppliers and customers. ».Dhence, many brands have chosen to take small steps ... with global impact.

At the beginning of 2019, Carrefour announced in Spain that those customers who wanted it could use their own containers to buy fresh products, such as fruit, meat or fish. In this way, the supermarket chain seeks to reduce the consumption of packaging - 8 tons of plastic end up every year in the ocean, where they sail for decades - and, at the same time, fight against food waste that, worldwide, is translates into 1.3 billion tons that are thrown away annually.

The ‘butterfly effect’ from our shopping list

Consumers' awareness of its power is the key that is quietly transforming the market from the ground up. Responsible consumption grew 15% in 2016, doubling that of the previous two years and reaching sales that translated into 40 million euros, according to the latest Fair Trade report in Spain. But the magnitude of the ecological crisis we are witnessing prevents us from letting our guard down: Today, we get a new mobile phone every 14 months and we buy 60% more clothes than 15 years ago –and we keep them for half the time–.

The path to a sustainable business model originates from the beginning of the production chain: the best waste is the one that is not generated. «It is not a question of managing waste, but of rethinking a type of business that is born from the awareness that the ecodesign of the product is also a competitive advantage. If we want to innovate in the business model, but we do not think about how to make the product better, we are left halfway, "says Cerantola.

The Italian engineer refers to ecodesign, a process that reconsiders all the elements that make up the product and chooses them on the basis that they are not susceptible to becoming wasteor, failing that, they can be recycled. With these premises, the French textile Decathlon has produced in recent years about 3,000 eco-designed products. To do this, polyester (a plastic resin) has been gradually replaced by cotton. In turn, cotton has been reused, so that the birth of the product is already based on its future uses. The sports brand expects to close the process in 2020.

The ‘big data’ as a vehicle for circularity

For David Martínez – Simarro, Director of Information Technologies and Communications at AINIA, the big data it is a strategic tool that can help accelerate the transition to a circular economy. He explains that analyzing internal data makes it possible to identify the less efficient flows of companies and replace them with ones that are more respectful with the environment. "The use of data intelligence makes it possible to use the information generated by social networks to know consumer preferences and create products that better meet demands," he argues.

This practice also affects the first of the three principles –or 3R– of the circular economy: reduce (production), reuse (product) and recycle (waste)"It allows the creation of cooperation systems between companies that, through the exchange of information, facilitate business circularity," says Martínez-Simarro. Block technology (blockchain) –A large database divided into incorruptible blocks to which several participants have access–, emerges as well as the ideal option to simplify the flows of information and feed this desire for circular cooperation.

However, its application in a sustainable closed system has only been carried out in small-scale initiatives. Thestartup In 2018, LO3 Energy created the Exergy platform, a digital microgrid that allows residents of a New York neighborhood to exchange or sell the excess energy they have generated with their solar panels. Those operations are done through a chain of blocks that lets you know what time of day is best to exchange energy and minimize surplus.

A system of reuse of resources has been carried out in a similar way on an industrial scale, as in the systems for the reuse of treated water in some food and beverage industries: Factories located in agricultural areas use the nutrients from the wastewater already treated –such as phosphorus or nitrogen– to irrigate the crops of neighboring plots. Thus, a pollutant becomes a nutrient and, instead of eliminating it, it is used. The multinational J. García Carrión has implemented a similar system for the treatment of wastewater in its production infrastructures for the Don Simón juice brand. Among Aqualia's main objectives is to transform the current paradigm of wastewater treatment, which currently involves high expenditure on fossil fuels. Its proposal is to convert the treatment plants - currently it manages more than 850 plants - into authentic clean energy and production factories. high added value bio-resources. As a result of this commitment, the company develops different R + D + i projects to transform wastewater from treatment plants into biomethane suitable for vehicle use. This biofuel emits 80% less CO2 emissions than a gasoline-powered vehicle. One of these projects is All-gas, which, led by Aqualia, is in the demonstration phase at the facilities located in the Chiclana (Cádiz) treatment plant.

Ecofactories: reimagining the industry

Ecofactories elevate this model of productive relationshipsThe most famous is in Kalundborg, a city in the north of Denmark that, despite its small size - barely 16,000 inhabitants - has managed to position itself as a European benchmark for industrial eco-park by imitating the dynamics present in natural ecosystems, in the that each industry established in the place constitutes a link and its relationship with those of other sectors is totally symbiotic.

The dynamics is as follows: what for one company is a waste or an excess of energy, another uses it as a product or source for another industrial activity or is destined for the municipal services network. In this way, the industrial ecopark not only allows reductions in energy and raw materials consumption, but also reduces CO2 emissions and waste. In turn, this represents a direct benefit for the conglomerate of companies, saving costs and increasing their added value in terms of innovation.

But is the circular economy really the model to follow to achieve a more sustainable business dynamics? «The key for it to work in the business sector is that it contributes to the income statement, and that is already happening», Asserts Iñaki Ortega, doctor in Economics and director of Deusto Business School in Madrid. In retrospect, Ortega assures that the circular economy has gone from being an option to being a necessity. “Before it was included in the scope of corporate social responsibility and embracing it gave you a reputation. Now it is increasingly included in sustainability lines and in business models as a defining strategy ”.

David Martínez-Simarro: "'Big data' allows the creation of cooperation networks between companies that, through the exchange of information, facilitate circularity"

This substantial change responds to a series of pressures, such as compliance with the 17 Sustainable Development Goals (SDG) agreed by the UN or, in the legislative sphere, the Law on Disclosure of Non-Financial Information and Diversity, which requires European companies to report its environmental and social impacts. For its part, the Spanish Government has joined the implementation of the Strategy for Circular Economy looking forward to 2030.

However, the paradigm of the circular economy is presented as a closed concept: from the input of materials and the shared use of energy and industrial structures to the adaptation of the business model. The planet is in the red. Progress rates must be matched by the availability of its resources. Development and sustainability. In the union of these trajectories, the word ‘waste’ completely loses its meaning.

This article was published in the second special Ethic & Brands with Values. You can download the full issue in PDF for free at this link.

Video: Circular economy: the business case (October 2020).