"Transitioning to the circular economy may be the biggest revolution and opportunity for how we organize production and consumption in our global economy in 250 years," reads the introduction to an Accenture strategy paper, which introduces a recently released book called "Waste to Wealth."
That's right - the renowned management consultancy has identified a $4.5 trillion business opportunity in changing how we think about waste - from a problem to a resource - and suspects the shift will be as momentous as the Industrial Revolution.
I will try to keep this in mind as I continue my daily habits of wasting resources (leaving the lights on), wasting the embedded value of my stuff (throwing plastic bottles into the garbage instead of the recycling bin), wasting capacity (keeping my car parked all day and not in use), and wasting lifecycles (when I throw out an old computer instead of having someone make a new one from its parts).
We are on a collision course in our linear, growth-focused economy. As we add 2.5 billion additional consumers to the middle class by 2030, resource use will skyrocket proportionally. Significantly, Accenture found that we reached a tipping point in natural resource availability around the year 2000: in the 40 years before 2000, commodity prices fell as demand rose, because natural resources were abundant and innovation meant it cost less to extract them. But between 2000 and 2015, for every 1% increase in global GDP, commodity prices rose 0.6%. Scarcity has driven prices up faster than technological innovation drives them down. In addition, there is uncertainty and volatility in prices of raw materials such as fossil fuels.
Rather than continue along our merry linear path and allow ourselves to be wiped out by resource scarcity and steep price increases, Accenture suggests putting waste to good use. A team of analysts hunted for opportunity in waste, looking at sourcing, manufacturing, logistics, marketing and sales, product use, end-of-life product disposal, and reverse logistics in more than 120 innovative companies. They identified 5 business models to leverage the value of waste identified in those areas:
1. Circular supply chain
2. Recovery and recycling
3. Product life extension
4. Sharing platform
5. Product as a service
The circular supply chain refers to innovation where resources are substituted through the use of materials that are renewable, recyclable or biodegradable, reducing costs and giving the manufacturer greater control over supply.
Recovery and recycling is a business model where all waste is recovered and used to create energy or new products or materials. Companies applying this model can claim zero waste.
Product life extension means repairing or upgrading rather than throwing out your phone or other product as soon as the newest version comes out. This might be the hardest habit to kick. It has become easier and cheaper to buy a new toaster than to repair an old one.
We are all by now familiar with sharing platforms because of Airbnb, but imagine putting all your things to use, and renting an electric drill (or a toaster) from a neighbor when you need one.
Product as a service is an interesting new business model. Instead of buying individual lightbulbs, we might one day purchase kilowatts of light from a lightbulb manufacturer. This would incentivize the manufacturer to make lightbulbs that last. Instead of a car rental company or a truck fleet owner buying individual tires, they might buy a service where they get all the tires they need to go a certain number of miles, maintenance included.
The Accenture researchers went on to list 10 digital, engineering and hybrid technologies for disruption of our current linear economy to bring in the new circular economy. Here they are (see this link for more detail):
1. Mobile technology, which reduces the need for physical resources such as paper
2. Machine-to-machine communication
3. Cloud computing
4. Social media for business
5. Big data analytics
6. Modular design technology, so that when a product breaks you only need to replace the one defective part
7. Advanced recycling technology
8. Life and material sciences technology
9. Trace and return systems, which make it cost-effective to collect used products to service
10. 3D printing.
The circular economy contributes to decoupling economic growth from resource scarcity, and all these technologies help. But an enormous, revolutionary, cultural shift is required too. Accenture has identified 5 new business capabilities that will be needed to make such a shift.
The first is to stop focusing on maximizing sales margins and to focus instead on creating value throughout the supply chain, engaging suppliers, manufacturers and customers and participating in collaborative networks. The second is designing products differently, for multiple lifecycles. Next is diversifying sourcing to many small-scale suppliers and making sure no resources are lost. The fourth is engaging customers to use and dispose of products in more efficient ways, and the fifth is creating post-sales services and product lifecycle management.
None of this will be easy. But the alternative, spiraling into expensive dependency on dwindling resources, could be disastrous. It's time to wake up to the next industrial revolution.
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