Vulnerable business models and challenges in a circular economy
Is the circular economy the right path to solve the climate, environmental and resource crisis we're facing? Wisdom Kanda, senior lecturer of environmental technology at Linköping University, explains that sustainability is a dynamic end-goal that can be reached in many ways and with various approaches, one of them being the circular economy.
– The circular economy offers an opportunity for resources, effectiveness, and the ability to do business simultaneously. The circular economy is one way of doing it, says Wisdom Kanda.
However, It is not the only way, and we should also be cautious of the potential adverse side effects, according to Kanda.
– For example, if a company's process cycles are based on toxic chemicals or fossil-based resources, then sustainability effects that you might want to generate might not be achieved. These cycles that we are trying to promote should not create more problems than before we started.
In this sense, the design and systems thinking is essential to avoid causing more harm than good.
– It all starts with how you design your products or services before you bring them to the market. Every product has a production phase, a use phase and an end of life. So when you design your product or service, you should be thinking about how this product can be repaired? How can it be remanufactured? How can it be shared? Essentially, how can your product be used more resource efficiently and effectively?
– Many "born circular" start-ups are very vulnerable because they exploit opportunities in a failed system in the linear economy. This makes some companies dependent on waste resources or other discarded products, i.e. the failures of the current economic system. This means that if large companies can start thinking systematically and can manage their products and services in a circular way, these start-ups might go out of business. Similarly, I could envisage that if these start-ups are able to scale up and grow quite large, the established companies would be at risk of being out-competed. So, established companies should keep in mind that the circular economy sometimes means opening up their black box and thinking about their side-streams and waste flows beyond their core business.
The circular economy is neither a social innovation nor is it only about doing good for the environment. It is also about making money and making a business out of solving a problem. Wisdom shares his advice on building a sustainable business in the circular economy.
– Entrepreneurs have to factor in that they need to get paid. So they need to make a reasonable profit and not only focus on doing good for the environment.