A circular economy is a system in which producers and consumers continuously reuse, repair, refurbish, and recycle materials for as long as possible. It rests on the core principles of designing out waste, keeping quality products in use, and restorative environmental practices. The circular economy will have a tremendous positive impact on the environment, but here are some other compelling benefits you may not have considered.
The Product as a Service Model Will Revolutionize Ownership
The circular economy will re-frame the idea of purchasing and ownership. Customers will no longer pay for material objects but outcomes. For example, a homeowner will pay a drill manufacturer to use a drill and then return it when the project is finished instead of buying a drill.
The manufacturer will then perform maintenance of the drill before letting it out again. This model could apply to all consumer goods. As consumers stop paying for cars, washing machines, and comfy mattresses, they will start paying for transportation, clean clothes, and a good night's sleep.
A Circular Model Will Advance Social Equity
As waste, pollution, and congestion decrease, residents of densely populated urban areas will enjoy greater access to services previously denied to them.
For example, they will have access to nearby in-demand recycling and remanufacturing jobs, safe and affordable housing, healthier food from vertical and urban farming facilities, and affordable transportation from public and shared vehicles. This access to fundamental rights can revolutionize the lives of historically disadvantaged communities.
The Economy Will Grow for Businesses and Consumers
The product as a service aspect of a circular economy will lead to economic growth and more disposable income for consumers. According to a McKinsey report, using products and materials that are easy to disassemble and reuse will lead to over €1.8 trillion in economic benefits by 2030 in the EU alone.
Moreover, a report by the Ellen MacArthur Foundation found that families would enjoy 11% more disposable income, which would lead to an increase in spending of at least 7% by the same year.
Companies Will Explore New Opportunities for Expansion
As companies adapt to the circular economic model, they will phase out jobs that depend on nonrenewable resources and instead create new jobs to serve circular functions. The opportunities for companies to refurbish old items or collect used resources will increase.
Material costs will decrease due to the lower demand, which will lead to an increase in purchasing because of the lower prices. In addition, because circularity encourages leasing and renting items, it will increase the number of touchpoints between businesses and customers. This increase in interactions will improve customer satisfaction and lead to customer loyalty.
A Circular Economy Is Not Just for the Environment
The benefits of a circular economy are clear from an environmental, social, and economic standpoint. Achieving a circular economy will require all parts of society to work together - individuals, businesses, and governments.
Now more than ever, it is crucial for us to protect our resources by eliminating waste and reusing our products. By doing so, we will not only help the environment, but we will improve the lives of consumers and businesses and advance the causes of economic and social equity.
- Businesses interested in embracing the circular model should explore the product as a service model, leasing or renting their products to reduce manufacturing costs. Repair, remanufacture, and maintenance are less expensive than ground-up manufacture, and businesses can pocket the difference while providing higher-quality outcomes for their customers.
- Businesses can take advantage of new opportunities for growth by offering to collect used products and setting up in-house repair or remanufacturing facilities. They could also explore partnerships with new businesses offering these services.
- Disadvantaged urban areas are an untapped source of human capital that businesses can cultivate to help them grow their circular practices. They should consider outreach in these communities to recruit labor for their new jobs that perform collection, repair, and remanufacturing.