The circular economy is not for the faint hearted

The circular economy (CE), so effectively promoted by the Ellen McArthur Foundation , the Waste Resource and Action Program (WRAP) and high-profile academic organizations, is a concept which presents opportunities for reducing waste and pollution which damage the environment and reutilising previously wasted resources. Therefore, the CE presents numerous environmental, economic and social benefits. Indeed, the circular economy is an economic and business opportunity: Khan et al 2022 claim that the CE is expected to generate £1,800 Bn in the EU alone, with the global economy gaining $4.5 trillion the end of 2030. The business benefits are therefore compelling, including lower costs, additional income and security of supply. Examples of how companies can adopt CE practices to create business opportunities include companies that recover excess steel from the automotive and other industries and market the recovered steel to other companies manufacturing products such as rat traps and ironing boards and those who recover plastic casing, lithium and other rare elements from mobile phones. 

However, the CE concept encounters issues of implementation which prevent these environmental and economic benefits to be achieved. Companies who implemented circular economy practices seem to keep these endeavours within the boundaries of their organization and rarely extend their practices outside these boundaries, for example by implementing these practices with their customers or suppliers. This forgoes opportunities to “make of a company’s waste another company’s resource.” 

The CE is underpinned by processes such as reusing, recycling, refurbishing and remanufacturing products after recovering resources and materials from product at the end of their life cycle. These processes had traditionally been labour intensive and required specialist skills, which meant that the costs of remanufacturing and refurbishing often outstripped the benefits of circular economy practices. To fully implement these circular economy principles, organizations need to invest in innovative technologies and therefore innovate. These technologies include automation to address the costs represented by the labour intensiveness of the process. 

Companies are struggling to partner up in networks with other companies to design circular economy practices and processes. Extending these practices across multiple companies requires management efforts. Corporations need to establish bonds between their management layers to generate the trust necessary to share the information and data required to achieve forecasts and predictability. Furthermore, businesses need to engage in joint activities such as research and generate resource ties, for example mutual investments in those activities and resources necessary to create circular flows of resources as recommended by the Ellen McArthur Foundation. These mutual investments need to embrace digital technologies. Digital resources are necessary to assure the predictability of what resources originated from waste are available, in what quantities and quality. Other functions such as sorting and classify waste streams, which traditionally were labour intensive, need to be supported by digital technologies and the same is with tracking and tracing components, quality control and more.

These functions can be supported by a range of digital technologies such as blockchain, robotics, radio frequency identification (RFID), the Internet of Things (IoT), Big Data Analytics and Artificial Intelligence. These technologies require investment but also an important level of reciprocal trust between businesses to embrace technologies that rely on data and information sharing. 

The transition from a linear to a circular economy is needed and the Ellen McArthur Foundation, WRAP and many other organizations play a vital role in promoting the diffusion of these practices. However, the transition requires integrated management and digital innovation which the corporate sector is failing to implement, especially in the SME sector. Government and organizations must take note of the fact that the circular economy and the attending digital technologies are associated with a disruptive and risky transition. A successful implementation needs organizations to implement innovative ways to network with each other and embrace innovative technologies, which in turn require large scale investments. The rewards in case of success are worth the risk, encompassing both the implementation of responsible consumption and production and the gain of economic and financial benefits which as exposed in the opening of this article may run into £ billions.