White Paper
Nature has complex and efficient nutrient cycles of consumption and decomposition which result in a lack of waste. Conversely, human society predominantly follows a linear pattern of take, make, and waste. The negative impacts of this waste producing product life cycle on humanity and the ecosystem are well documented (see Appendix A) and projected to become increasingly catastrophic:
"Looking at today’s consumption levels, sustaining our current growth trajectory would require the ecological resources of 2.3 planets by 2050. This number is significantly higher for mature markets. The U.S. would need five planets to sustain present-day consumption levels." (1)
Society at large, therefore, is at a critical inflexion point. We need to take a different approach, and businesses need to help drive the shift to a more sustainable model.
Consumer preferences have shifted, with socially conscious consumers now holding a massive share of national buying power. The supply chain for most industries has also been impacted by diminishing resources, the impacts of the global pandemic, and geopolitical conflicts. Countries around the world are passing additional protective regulations, with more on the horizon. For example, right-to-repair laws enable users to extend their use of a product for years. With all of these changes, plus the dire
consequences facing the planet, many companies are looking for impactful actions that can be taken today to help them get ahead of the curve. The first step is to rethink the way items are designed in the first place; treating waste and pollution as design flaws. It is a process of re-engineering products so that everything can be either safely circulated back into nature or reused to make equally high-quality products. This is the circular economy or Cradle to Cradle design. Materials are no longer used in the traditional sense, rather they are borrowed. (2, 3) This is not only better for the planet but can offer increased returns to businesses who invest in the change.
In a circular economy, there are two types of “nutrients” used in manufacturing:
Materials that can be disposed of in the natural environment without causing any harm to people or the ecosystem. Examples would include packaging that can be completely decomposed, or water used in
factory processes that leaves clean enough to drink.
Materials used in production that can be returned to the vendor, disassembled, and reused. Examples would include carpets with infinitely recyclable fibers, or pure metals which can be melted down and remade into objects of equally high quality.
Designing for a clean disassembly is key to the circular business model. If a biological nutrient is contaminated by a technical one, it cannot properly decompose. If a technical nutrient is contaminated by a biological nutrient, or in some cases, another technical nutrient, it cannot be reused at the same level of quality. Metals in cars and machinery are often crushed and melted down together, resulting in lower quality alloys. This is also common in plastic recycling. By keeping materials separate, technical materials retain their value and are “upcycled” rather than “downcycled” and biological materials can be safely disposed of. (2) It also means that less cost and energy are expended in the recycling process.
There may be situations where materials cannot be reused at the same level of quality due to the degradation of material over use. There are also materials that cost more money to recycle than to produce virgin products. Rather than facing the costs of disposing of the material, waste marketplaces have developed where companies sell their discarded materials to other industries where they can be used. Plastics, textiles, wood, metals, chemicals, glass, and other materials find new life and the companies who sell them obtain an additional revenue stream. Key findings in the EPA's 2020 Recycling Economic Information (REI) report found that in 2012 the recycling and reuse industry accounted for 681,000 jobs, $37.8 billion in wages, and $5.5 billion in tax revenues. For every ton (imperial, 1000 lbs.) of recycled materials, a national average of 1.17 jobs and $65,230 in wages was added to the economy. (4)
Just as important as the product itself is the energy source used to make it. Non-renewable energies create waste and pollution, conflicting with the ideas of endless use and doing no harm. Producing goods with clean energy also has the benefit of security. Non-renewable energy sources are finite and often come from tumultuous parts of the world, making them a poor strategic choice. Renewable energies are limitless and have the biggest impact in local environments.
In deciding on how to best transition to a circular business model, organizational leaders must make sure they are able to meet the criteria established in the “Triple Top Line”. (5)
Products that adhere to these principles are referred to as eco-effective, working with nature instead of against it. (2)
Products do not harm the environment.
Products to not harm people. Business practices treat people fairly, avoiding racism, sexism, homophobia, or discrimination by socioeconomic status.
The products will be profitable. The goal is to grow the business, just not at the expense of the other two points.
Buildings can be certified as regenerative and self-sufficient through programs such as the Living Future Institute or LEED. In the same way, products can be certified through the Cradle-to-Cradle Products Innovation Institute, which offers an actionable framework for redesigning products for the circular economy.
If there are any materials in the product that are known to cause harm to people or the environment, phase them out and replace them with safe materials.
Source from socially responsible vendors. Even if there is not 100% transparency on how a product is made, if it is labeled as “free of” something, or carries a positive endorsement, chances are that product is better than one without credentials.
Make a complete list of all the “ingredients” that go into the product. Include any substances that may be given off during the manufacture or use of the product. Place all substances on three lists:
Redesign the product focusing on using only materials from the P list. Find substitutions for materials on the X and gray lists. This is where the design challenge starts.
In the redesign process, bigger questions will present themselves. Think about if the old product itself is even still valid or if something new could accomplish the same thing, but in an eco-effective way. (2)
Another path to a closed economy is to radically rethink the concept of ownership. Rather than the consumer paying for the raw materials and being responsible for their disposal, companies could offer goods as products of service.2 At the end of the use period, the product would go back to the manufacturer for disassembly and be remade into new products. For example, a customer could pay for a set number of cycles on a dishwasher. With the company maintaining ownership of the materials, customer cost and liability is diminished, and the manufacturer saves money on raw materials. Not having to deal with disposal and being able to upgrade products more frequently also has potential to increase brand loyalty among customers.
A firm may have engineers who are proficient in designing products for ultimate and yield strength, elasticity, and other mechanical properties, but lack expertise pertaining to long-term degradation, biodegradability, or chemical leaching. This requires partnership with other companies, or perhaps academic or research institutions for their expertise. (6, 7) Companies also do not typically engage with parties at the end of the product life cycle, such as recycling centers. Collaboration with outside parties is essential to close knowledge gaps and connect a linear supply chain into a circular one.
The concept of retrieving old products to harvest materials for new products may seem simple enough, but it requires complex logistical execution. Whether the customer sends the product back or the company picks it up, companies must have take-back systems in place before beginning closed loop manufacturing.
"A closed loop manufacturing system is faced with a greater degree of uncertainty and complexity than a traditional manufacturing system due to high fluctuation of the quality, amount, and return timing of post-use products."(8) The quantity of returned materials may vary from the amount needed to support demand. Companies must be willing to carry higher levels of inventory and have robust systems set up to sort the incoming materials by usability level. Manufacturing processes will need to have more flexibility in material routing, allowing different build times based on the amount of rework performed on used parts. To completely close the loop, manufacturers could work with component suppliers to develop their own take back systems which would benefit both partners. Another challenge is making sure the energy used to build closed economy goods is clean. The reality is that most energy today still comes from fossil fuels, and it may be several more decades before humanity has switched to renewables entirely. It should be noted that renewable systems themselves (wind turbines, solar panels) are not circular designs; a problem that manufacturers are working to mitigate. (9)
Changing from a linear to a circular business model requires buy in and support from executive leadership. Here are ways leadership teams can best support the effort.
Making the important choice to move to a circular business model is a big step for any business. At Pepper Foster Consulting, we value sustainability and are well quipped to help with this transition. Our team offers expertise in change management, supply chain transformations, software transitions, project management, and lean manufacturing practices. Though the challenges of reengineering products or entire work systems can be daunting, the rewards that come from circular systems are great. Consumers are becoming choosier about the companies that they buy from. Being socially responsible is now a selling point and helps to establish goodwill and a healthy public image. Employees are also more motivated to stay at socially responsible companies who emphasize the well-being of their staff and communities. Even though there is a cost for collection and disassembly of used goods, it is miniscule compared to having to purchase new raw materials indefinitely. This becomes an even bigger factor with the rising costs of metals and oil (the main component in plastics). By “feeding itself” with reusable material, a company removes reliance on outside vendors, which are subject to environmental supply chain factors. Fees for disposal and traditional recycling are eliminated. Government regulations are not a hindrance for companies operating under a circular economy. Time and paperwork devoted to regulatory processes can instead be used to grow the business. Spaces that housed harmful substances can be repurposed. In some cases, the need for employee PPE may be removed, saving on costs, space, and adding to employee comfort. (2) Outside of the company, society and nature benefit from circular models. They create more jobs than traditional linear models. Additional work is required for taking back, harvesting, and sorting materials. The bright minds of designers, engineers, and scientists are put to work in creating new, eco-effective products. Businesses built around sharing or repairing create even more jobs. (1) Less land is destroyed in the mining of raw materials and animal habitats are spared.
"Transitioning to renewable energy alone will only tackle 55% of global greenhouse gas emissions. The rest comes from the way we make and use products and food, and manage land – this is where the circular economy comes in." (3)
A circular economy is an intelligent choice for businesses that yields positive results for organizations willing to put in the work and investment. But more importantly, a circular economy is the only sustainable option for all people and creatures that live on planet Earth.
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