Why your circular business may not be as sustainable as you think

Photo by Kelly Sikkema on Unsplash

Decoupling circularity and sustainability: why your circular business may not be sustainable

Becoming circular is an increasingly popular business idea — and while this is a positive development, companies wrongfully advertising themselves as contributors to a circular economy — ‘circular-washing’ — must be avoided. Nonetheless, companies that truly incorporate more circular practices can both economically and socially profit from such a sustainable business model, including a spark in GDP growth and an increase in job availability, as well as contributing to climate breakdown prevention. Keeping materials in use and closing loops can also mitigate pressing issues such as the use of conflict minerals — minerals mined in circumstances that violate human rights — and critical materials — high-demand materials used in many different products with hidden risks in supply and few substitutes. The benefits are clear — and while companies looking to ‘go circular’ is certainly progress, adopting only one circular strategy — such as recycling — will provide limited environmental benefits. When companies put their efforts solely on increasing their circularity — without the equally-important priority of cutting environmental impacts — they enter the territory of so-called ‘circularity for circularity’s sake’.

Like green washing, ‘circular washing’ is on the rise. Photo by Brian Yurasits on Unsplash

Metrics matter — yet metrics for circularity remain clouded by ambiguity

How can businesses ensure their circular actions benefit the planet and people in addition to their reputations? There are a number of things to keep in mind. First of all, to recognise the value of clear metrics for circularity that help chart a course for change. Secondly, tackling the challenges posed by — often still missing — social metrics and avoiding tunnel vision on ‘reduce, reuse, recycle’. And lastly, prioritising tighter loop strategies over looser options and embracing a more holistic view. Circular economy methodology is still in its development phase: companies are taking different actions with scattered approaches. The result: metrics for circularity — methods to assess circularity — take varying approaches, have varying levels of detail and disparate connections to sustainability. Yet, metrics are key for a company’s transition towards a circular economy.

What gets measured, gets managed: why we need metrics

Between 1970 and 2010, resource extraction has tripled globally: growing from 22 billion to 70 billion tonnes. If the linear way of doing business continues, humankind will need three earths to support its wants and needs in 2050. As the additional threats of climate change and biodiversity loss increasingly come to the fore, companies face pressure to change their traditional ways of production. Along with environmental concerns, social issues, from poor working conditions to inequality and poverty, are gaining attention as well.

Social metrics (summarised in the image) are crucial for sustainability — and circularity by extension — yet these are often missing in business action.

Our goal is an ecologically safe and socially just world — yet the latter proves hard to measure

The negligence of the social sphere in business’s circular transitions is gaining traction as a topic, but acceptance of social metrics remains low. The main barrier to social assessments in a circular economy is that companies lack knowledge on how to apply social metrics. The scattered landscape of social metrics poses more problems. Like environmental metrics, varying approaches are present but there is no standardised method yet. On top of that, the social metrics developed so far are too complicated for application: they are either too complex, too academic or not maturely developed enough. One of the challenges for measuring social aspects is that they are difficult to quantify or calculate mathematically — and as we know from our recent Coalition Circular Accounting white paper, only what is measured is managed.

R-strategies aren’t the holistic solution the circular economy needs

Reduce, reuse, recycle: the holy grail of the circular economy — and in many cases, the extent of its public perception. The R-strategies are known tools that summarise circular strategies. These methods can help create circular business models and slash a company’s carbon footprint. They are catchy, but in practice they are often not fully utilised. Most Dutch circular initiatives in 2018, for example, overly focused on recycling. Neglecting Reduce and Reuse strategies — which retain more value — can inhibit potential environmental benefits. Least attention is given to the Reduce principle. Instead of looking at the preservation of materials, one could also look at the preservation of functions: the use of circular business models such as product-as-a-service systems, systems encouraging product multifunctionality or sharing platforms. Pieter Pot sells food in glass jars with a deposit to encourage users to return them, enabling them to reuse the jars and avoid waste. And furniture by Ahrend is designed to be modular, enhancing ease of disassembly and adaptability. Also, it leases its furniture as a service, increasing its lifetime through maintenance and repairing.

Recycling isn’t the be all end all. Photo by Jilbert Ebrahimi on Unsplash

Tighter loops trump recycling

Recycling is often misconstrued by the public to be the core tenet of circularity, despite it being the least sustainable circular strategy. The recycling rate of materials is never 100%, which means it creates waste, and material downcycling dampens value. Next to Reduce, Reuse is considered the most sustainable strategy for a circular economy. Reusing products or materials prevents raw material extraction — thereby slashing potential energy use from this extraction or from recirculation processes. In contrast to recycling, it prevents waste, which is in line with the vision of circularity. Additionally, preventing waste by reducing raw material use and minimising a product’s weight — as less weight means less material — is also one of the most effective strategies.

‘Circular washing’ is on the rise — so how can businesses truly integrate sustainability into their circularity?

To support businesses in becoming circular and sustainable, the following lists strategies that ensure both have been developed.

The road to circularity: one foot in front of the other

As you can see, shows of ‘circularity’ aren’t necessarily enough to truly contribute to sustainability, especially if the metrics given above are underexplored in companies’ plans. However, each step forward is better than standing still. Recycling, while less impactful than Reducing or Reusing, still trumps following traditional linear business models. But don’t stop there, and rather take a critical — and holistic — view of how your business can become increasingly circular ánd sustainable.

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Circle Economy

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