Circular Economy

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"For a sustainable world, the transition from
a linear to a circular economy is essential" (cit. Frans van Houten CEO & Chairman of Philips).


 

A circular economy aims to decouple economic growth from the use of natural resources and ecosystems by using those resources more effectively. By definition it is a driver for innovation in the areas of material, component and product reuse, as well as new business models such as solutions and services. In a circular economy, the more effective use of materials enables to create more value, both by cost savings and by developing new markets or growing existing ones.

 

Challenges?

1) Resource availability & Pricing

We are at the end of the era of cheap oil and materials. A lack of fossil fuels and finite natural resources across the spectrum, coupled with an increased consumer demand results in challenges to manage our commodities. Simply using less is no longer enough. And with this, increased resource price volatility dampens economic growth, discouraging businesses from taking resource-related risks.

2) Increase of middle class consumers

The world has experienced two great expansions of the middle class since 1800 and we are living through the third. In Asia alone, 525 million people can already count themselves as middle class; more than the total population of the European Union*. Over the next two decades, it is estimated that the middle class will expand by another three billion people, coming almost exclusively from the emerging world, driving demand and ultimately waste.

circular-linear-economy

Opportunities?

1) Big Data

The emergence of big data has shifted the manner and scale in which problems can be solved, providing deeper market knowledge and increasing consumer-focused solutions. It also offers the intelligence of knowing where things are within the economy, what they are made from and what status they are in, making refining, and optimizing possible and enabling additive rather than subtractive manufacturing.

2) Changing Legislation and Governance

More and more companies are responding to sharpened, new legislation and governance models by introducing new innovative designs for their products. These are increasingly inspired and triggered by topics which were previously seen as challenges: such as toxicity levels in different materials or landfill.

3) Changing Model of Consumer Consumption

We have seen the emergence of a different type of consumer, who is interested in different ownership and business models for example Airbnb, Zipcar, Spotify. These consumers are more driven by access and performance rather than ownership. Services and not goods are helping to redefine the relationship between objects and consumers.

4) Moving from Transaction to Relationship

The multi-channel world has also led to new levels of engagement and connectivity with consumers looking for relationships with brands that go beyond the transactional. Online interaction via Facebook, Twitter, and YouTube and brand websites is a growing global phenomenon that will be the new path to relationship for both empowered customers and companies. Companies such as Dell and Starbucks help turn consumer ideas into reality through on-line platforms to generate ideas. Airline company KLM maintains a constant Twitter dialogue with its consumers, providing 24/7 service in ten languages.

Source: http://www.philips.com/a-w/about/sustainability/sustainable-planet/circular-economy.html