Making Circles Pay

Environmental and social good has also got to lead to prosperity

Last week, we talked about the circular economy, which is an alternative approach to the more linear ‘take-make-consume-dispose’ value chain. We try to minimise the take and dispose elements, and repeat the ‘make’ element through things like reuse, recycle, and repurpose, while extending the ‘consume value’ element. It creates a more continuous cycle of value - contributing to long-term prosperity while minimizing environmental harm.

However, while many business owners and CEOs like the idea of doing good for the environment, and society, the reality is that the business has to be prosperous - and the more prosperous it is, then the more opportunity there is for undertaking further projects that contribute to the triple bottom line (PPP or ESG).

The challenge is to monetise circular economy practices, and that can require a strategic approach that aligns environmental responsibility with business growth. It may entail changes to:

The product - either its design or composition.
The channel and logistics - it's no longer a straight line.
Marketing and brand management which can be used to change customer's perspectives, expectations, and experience.

And monetising the circular economy is just as much about removing cost and improving the bottom line through becoming more efficient, as it is about finding new or different ways to generate revenue.

It is certainly not a shift that can be made overnight, and in the short term you may merely stretch out the value chain - explain to customers:

How to extend the life of a product.
How to get more value out of it (use more of its functionality - different ways of using it)
How to best dispose of it.

And over time develop a road map that will ultimately get you and your customer going round in circles.

So, if you want to incorporate the circular economy into your sustainability development goals, here are some ideas that you may be able to start building into your overall product/service mix:

Product as a Service (PaaS) - instead of selling products outright, offer them as a service that generates recurring revenue. This encourages longer term relationships with customers and can keep the product in use longer - and you can track the product as it gets to the end of its life. Office machinery and office coffee services quite often operate on this model. Or, bike share schemes that area appearing in various cities.

Design for Repair. It is inevitable that some parts of an item wear out quite quickly - while other parts are good for years. Make sure that those parts can be easily replaced. This keeps your logo'd item in use much longer, instead of the customer looking for a longer lasting alternative when they have to scrap the whole item when one part wears out. Eg a snow shovel with a replaceable blade; the plastic could even be recycled.

Refurbish and remanufacture - take or buy back used products, refurbish, and resell. This can increase your customer base: refurbished items go to lower budget buyers, original purchasers buy newer models earlier. Eg an electronics retailer may buy back used smartphones and resell them in a like-new condition but lower cost. Apple does this for most of its phones and computers.

Recycling and material recovery. Collect used products and components to recover valuable materials and sell to other manufacturers. This is a growing trend in the clothing industry where fibres can be extracted from old garments to be used for new textiles. Tires increasingly have a recycled component, many paper and card products do too.

Value add services. Don't just sell the product, create a community, perhaps with paid options, that provide coaching, educate on how to best use and maintain the equipment, and help customers succeed with the equipment so they continue to want to use it - and replace it when the time is right.

Build a coalition - Increasingly, individual companies don't compete with other, but their value chains do. Start building complementary services from other specialists into your overall value stream. How crucial is the delivery service to the direct to customer (D2C) model? and how often do customers base their buying decision on the cost of delivery rather than the cost of the item itself?

Take no-cost good-will options. A group of food stores or restaurants could work with local agencies to ensure surplus meals go to the needy, and waste food goes for community farm composting or feedstock.

Branding and Marketing. Let the world in general, and your customers in particular, know about your activity in transitioning to a circular economy and your commitment to sustainability. Your customers brand you - give them the information to brand you with, and let them feel that they have also contributed to creating a more sustainable future through their being a customer (beware of greenwashing though).

These are just a few ideas of more strategic initiatives; there are many things that could be done at a more tactical / immediate level (that'll be in another blog). Going circular is a journey and a commitment. The wheel is starting to turn and there is already some great work being done; however, it needs more of us to be onboard to truly build the circular momentum we need.

Here are some great resources to give you more information about being part of the circular economy:

Give me a call if you want to start going round in circles too.

Graham