news Published on April 16, 2021

The Importance of Circular Economy in Times of Recovery

It is well-known that the globe is facing economical changes as a result of overpopulation, overconsumption, and depletion of natural resources. In addition to climate change, there are concerns for the well-being of future generations as a result of current business practices that have not yet redirected the focus toward sustainability.  

One rebuttal that is often heard against transitioning into sustainable practices is the assumption that being more sustainable will result in higher costs. What if there are existing cases of companies that have successfully implemented sustainable practices that resulted in lower costs, increased efficiency, and improved brand image that attracts consumers and investors?

The Emphasis of Circular Economy

In short, Circular Economy is the concept of a product being manufactured to be recyclable so that the product or the materials of a product can be reused instead of ending up in the landfill. One phrase that goes hand-in-hand with circular economy is “closing the loop”, or having a “closed-loop “ supply chain. As opposed to the traditional linear model (take, make, dispose), the circular model implies that the materials of that product can be reused, hence closing the loop. Circular Economy can also refer to using finite natural resources efficiently in order to minimize waste.

Why Should More Industries Close the Loop?

One example of a global concern that affects the Mexican economy is the shortage of semi-conductors and plastic resins. According to Mexico Business Publishing, there is a higher demand for technical and computer equipment due to the rise in demand for at-home office equipment in 2020, leaving few materials for the production of semiconductors. Additionally, the power outages of Texas in March of 2021 caused plastic resins manufacturing sites to close down. The higher demand for these necessary materials has resulted in a shortage that leaves little for the automotive and auto parts industry. Restructuring a supply chain in order to be able to extract, reuse and repurpose materials from used products may be a solution to the issue of material shortages for many industries outside of the automotive sector.

Aside from the scarceness of many materials that will inevitably be in higher demand, Mexico faces the issue of having a shortage of fresh water and timber. A closed-loop supply chain involves rationing finite materials, which in result saves new material costs and prevents more resources from being depleted.  

Leading Examples of Companies That Have Taken the Initiative

Dutch company and HHM member Phillips have implemented a zero-waste supply chain for the manufacturing of their medical equipment in order to expand the end-life of their products and minimize the number of used products that end up in landfills. Additionally, for their sustainability goals of 2025, Phillips has pledged to generate sales by 25% on their circular products, offer a trade-in on their medical equipment to be repurposed, and send zero waste to landfills. This initiative implies that all medical equipment can be inspected to be either repaired or to have the materials extracted to create a new product.

Another company that has been continuously making efforts to conserve natural resources is the business case of ECOR, a company that has implemented a closed-loop supply chain to manufacture green building and furniture materials such as wood, cardboard, foam and particleboard. All materials are able to be made completely from recycled parts and are 100% recyclable. ECOR had even partnered up with the Dutch paper manufacturing company Van Houtum in 2017 to create construction material out of cellulose fibre waste that is leftover from recycled beverage containers. 

Resources to help your Company Close the Loop

Sustainable initiatives are easier said than done. Redirecting the entire focus of a company toward sustainability involves the effort from the entire organizational structure, the implementation of change management, and most likely investments that need to be made for training employees and restructuring manufacturing sites. The following foundations and institutions are a select few out of many that can provide resources to help guide businesses and organizations:

The Ellen Macarthur Foundation

The Ellen MacArthur Foundation is a registered charity in the UK that promotes the awareness of Circular Economy to businesses, academic institutions and other organizations through workshops, training, books and publications. Members of the Ellen Macarthur Foundation include well-known corporations such as Google, Ikea, Unilever and Philips

Cradle to Cradle Institute 

The Cradle to Cradle Institute provides frameworks for companies to meet a set list of criteria. Globally recognized certifications can be achieved for products of a numerous list of sectors that are in line with the Cradle to Cradle standards.

Closed Loop Partners

Closed Loop Partners is a North American institution that can provide equity and finance assistance to companies of any stage of circular economy to modify their products, services and infrastructure.

Sources: 1, 2, 3, 4