Introduction
Wherever you are sitting and reading this article, just stop reading and have a look around you. You might see lots of products. Don’t you? Each one of them is serving a purpose. Similarly, each one of them has a different lifespan too. What do we do with those products after the end of their useful life? Be it a mobile phone or a laptop or a spectacle or a pen or a dress, etc. etc. The harsh reality is most of the products go to garbage after its useful life. This system of “take-make-use-dispose” is called Linear Economy.
In Linear Economy model raw material is extracted from the earth, undergoes various manufacturing processes to produce a product and it reaches our hands through distribution channels. After its effective usage, it’s discarded into landfills. This economic system ignores the critical factor that natural resources are scarce and fast depleting. It is becoming increasingly obvious that this linear model of the economy has slim chances of effectively adapting to sustainable development principles.
In contrast, in a Circular Economy system, the waste becomes a resource again. In other words, the reusable elements of a product after its consumption is extracted and used again as a raw material for the same product or for some other product/s. Just imagine how wonderful it is to find meaningful usage for tons and tons of discarded product wastes being dumped in landfills across the planet. In Mother Nature, everything is designed to follow a circular system and nothing goes as a waste. All elements play a role continuously and are reused in different stages. Unfortunately, man did not learn from nature and created and used linear systems to very alarming levels. Now we have reached a stage that there are no other options other than moving to circular systems. Now learning from the cyclical nature pattern, the circular economy is seen as a system of resources being utilized where reducing, reusing and recycling of all elements prevails.
Reduction means reducing the production to a very minimum level and producing only when it is necessary. It also means a reduction of non-biodegradable material as much as possible in products. Use material which can go get back to nature without causing environmental damage at the end of the effective usage of life. Reuse means the elements that cannot go back to the environment is reused. Recycling means when it is not possible to use eco-friendly materials, for example, electronics, hardware, battery, the objective is to facilitate simple uncoupling process to give them a new life by reintroducing them into production cycle and compose a new product.
Transformation Potential
It is estimated that hardly 9% of the products are currently falling under the circular economy globally. It means there is more than 90% potential for transforming the linear economies into circular economies.
Every product that we consume needs to be transformed into a circular economy. Besides saving the mother planet for the future, the circular economy has the potential to save an enormous amount of energy and efforts and cost. For our country, where we already have habituated to the circular economy in many of the households in a smaller way, adapting to this economy for large scale operations is a great opportunity.
Research by Ellen MacArthur Foundation says circular economy development path in India could create an annual value of ₹14 lakh crore (US$ 218 billion) in 2030 and ₹40 lakh crore (US$ 624 billion) in 2050 compared with the current development scenario. This conclusion emerges from a comparison of costs in the three focus areas. The analysis indicates that costs to provide the same level of utility would be significantly lower in the circular development scenario. Cost savings amount to 11% of current Indian GDP in 2030 and 30% in 2050. As per the research, the three areas of focus are 1. Mobility and Vehicle Manufacturing, 2. Food and Agriculture 3. Cities and Construction. Household expenditure in these three areas taken together (housing, food, and mobility) accounts for more than two-thirds of the average household spend in India, both in urban and rural areas. They cover the two largest industrial sectors in terms of employment (agriculture and construction) and growth expectations (construction and vehicle manufacturing).
Manufacturing Industries – Automotive & Textile
In this article, we would briefly see how manufacturing industries, especially Automotive and Textile industries can look for transforming into sustainable development models
In order to move to a circular economy model, we need to explore how we can make it as a closed loop for the products which we manufacture. Find ways how recycling can be done and raw material can be extracted from that. More than the physical changes in the system, it calls for change in our mindset to accept a fact that closed loop economy or circular economy helps not only mother earth, but it also helps improving productivity too. The circular economy model helps in reducing the raw material cost to a great extent. Similarly, by moving to reusable energy sources for conversion processes, businesses are expected to gain huge cost reduction. While significant progress has already been done in reusable energy front, the focus is required on R&D towards converting or recycling the products which have completed the life as a raw material again or as a part of raw material.
In the automobile industry, instead of manufacturing and selling the vehicles as products, can they think of providing vehicles for hiring or group sharing?. Automotive companies now need to look at balanced business models where they can create such new revenue streams and capture the value of more intensive use of each product. This calls for Innovative vehicle design to make maintenance easier and boost fuel efficiency. Start-up internet companies like Zoom cars are trying out this model of car ownership sharing in India.
Thousands of parts go into making one final automotive product like scooters, bike, cars, vans, trucks, buses, etc. However, not all of them have the same life span. When a vehicle reaches its discarding stage, there are so many parts which are having 1000s of km life left in them. What will happen if those parts are identified, disassembled and reused in other vehicles that are requiring such parts?. Though these kinds of practices are happening in small volumes as an unorganized industry, the OEMs should come forward to streamline them as a robust standard process.
Many of the OEM automobile companies strategize making revenue through selling spare parts as one of the major sources of income and this has to be changed in order to move into to circular economy. I remember when I wanted to replace a damaged rearview mirror of my car; I was told by the car company that they don’t sell single mirror but both the mirrors as a set. They replaced both the mirrors with new ones and the old mirror which was still in perfect working condition was just kept aside. I still don’t know what would have happened to that mirror and millions of similar good condition spare parts which are left unusable due to revenue strategies followed by automotive OEMs? Time has come to change such strategies and it is the responsibility of the manufacturers to eliminate such wastes completely.
Textile and Garments Industry is one of the largest manufacturing industries where there is huge potential for transformation into the circular economy model. Textile waste can be generally divided into three main types:
- Post-industrial waste – a side-effect of clothing manufacturing processes;
- Pre-consumer waste – inferior quality garments at the manufacturing site or a retailer’s distribution center, unsold merchandise at the retail store;
- Post-consumer waste – generated by consumers themselves: worn out, damaged or unwanted clothing.
Initiatives like Reverse logistics to collect pre-consumer waste and schemes like buy-back from end customers, followed by recycling, reusing and repairing at manufacturers end would close the loop and dramatically reduce the textile wastes. It is estimated that only 20% of clothing waste is collected globally for reuse or recycling. The remaining 80% is landfilled or incinerated, which results in a great loss of energy and raw materials.
MUD Jeans International is following a closed-loop business model where they “lease” their product Jeans to their customers. Customers can choose to use Jean for a specific period and return back to the company where it is reused or repaired or recycled according to the condition of the product.
Benefits of a circular economy
On the one hand, thanks to the reuse of resources, the circular economy reduces the extraction of raw materials. Therefore, it also causes a reduction in the environmental impact suffered by the countries from which these resources are extracted. This reuse also favors the reduction or elimination of the polluting discharges that derive from the economic activities of the companies.
On the other hand, the value that is created from labor, from capital invested in production processes and technology are maintained for long periods in the economy. This means that being a circular model, everything that is invested in economic activities does not disappear in the short term, but remains in the economic system.
In a closed cycle of production and consumption, as is characteristic of the circular economy, the net productivity of activities is increasing while the ecological impact is decreasing. This increase in productivity also implies an increase in social productivity, that is, an increase in the quality and quantity of employment, which is very beneficial to the current economic situation in most countries.
In terms of innovation and new entrepreneurs, the circular economy offers many possibilities as it promotes the reuse and recycling of the components of the products, offering a great opportunity and a competitive advantage to those entrepreneurs or innovators who know how to anticipate themselves to the demand and the new environmental needs of the productive processes.
The consumer benefit is far more durable and repairable products that are able to reduce the cost of living by around 11%, according to the Ellen MacArthur Foundation, which allows them to have a greater purchasing power. All this combined with the benefits of social and environmental welfare, would also generate improvements in human health and quality of life
Conclusion
To sum up briefly, circular economics is a new economic paradigm in which goods are reused and recycled in a continuous circle that in turn creates new jobs, contributes to improving the quality of soil, water, and air, and ultimately the planet and consequently also improves the living conditions of people.
It is apparent that Liner economy model (take-make-use-dispose) is nearing its end. It is imperative that business heads need to realize this and take the following actions in a structured way: 1. Build circular economy knowledge and capacity, 2. Innovate to create new products and business models and demonstrate their success, 3. Integrate circular economy principles into strategy and processes. 4. Collaborate with other businesses, policymakers, and the informal economy (unorganized industries), 5. Invest in circular economy opportunities. Government policies and regulations should be facilitating and enabling the transformation in a focussed and smooth manner.
Prabhakaran Kuralnidhi
Consultant, Trainer & Coach