Circular Economy

Why the circular economy is a business imperative

A competitive circular economy adopts a closed-loop system where nothing is wasted.

A competitive circular economy adopts a closed-loop system where nothing is wasted. Image: Sarah Mutter/Unsplash

Henrik Hvid Jensen
Chief Technology Strategist NEE, DXC Technology
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Circular Economy

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  • The circular economy is a paradigm shift in how we do business, focusing on minimizing waste and maximizing resource efficiency.
  • Born-circular companies are leading the way, while born-linear companies must pivot to survive.
  • The circular economy is not just an option; it’s an imperative for both business and planetary survival.

Imagine this: you’re a manufacturer at the end of the 19th century. Electric power has just burst onto the scene, and it’s revolutionary. You can send power directly to workstations — no more need for bulky steam engines. Miss this electric train, and you’re committing business suicide.

And speaking of trains, let’s dive deeper into railroads. They didn’t just replace steamships; they annihilated them. They helped completely reshape industry structures and paved the way for mass production. Suddenly, big factories churned out goods at unprecedented scale, making it impossible for small artisans and local manufacturers to compete. It was like watching a horde of giants trampling over a village. If you weren’t onboard, you were left in the dust.


What is the World Economic Forum doing about the circular economy?

Then, two centuries later, came the digital disruptors: Uber, Airbnb and Amazon. Born in the digital playground, these companies have thrown conventional wisdom and traditional business models out of the window. They’ve shattered norms, created new markets, and scared the living daylights out of established players. If you thought transitions like the steam engine and the railroad were monumental, you haven’t seen anything yet. The digital age is rewriting the rulebook in real-time, setting the stage for the next grand transition: the circular economy.

The next big transition

What exactly is the circular economy, and why should you care? At its core, the circular economy is a transformative approach that goes beyond incremental changes in waste reduction and recycling. It represents a seismic shift in the way we conceptualize the entire life cycle of a product, designed to benefit businesses, society and the environment.

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In a traditional, linear economy, we follow a “take, make, dispose” model. Raw materials are extracted, manufactured into products, and then discarded once they reach the end of their useful life. This model relies on a constant influx of new resources, perpetuating a cycle that’s inherently unsustainable, as it depletes Earth’s finite resources and produces waste.

In stark contrast, a competitive circular economy adopts a closed-loop system where nothing is wasted. It focuses on three main principles:

1. Design for longevity: Products are designed to last as long as possible. Right from the drawing board, designers consider how each product can be repaired, upgraded or remanufactured.

2. Extend product use: In this phase, products go through multiple cycles of use — either by the same consumer or through sharing, reselling or refurbishing — before they reach their end of life.

3. Recycle and regenerate: Once the product can no longer be used, it is disassembled, and its materials are recovered for reuse, thus creating new value in an endless cycle.

The circular economy is way more than recycling; it is about transitioning to zero-waste products and business models.
The circular economy is way more than recycling; it is about transitioning to zero-waste products and business models.

The circular economy is more than just a buzzword; it’s a paradigm shift in how we operate and interact with our world. It’s not merely the future of sustainable economic development; it’s a powerful business strategy that can drive innovation, resilience, and ultimately, long-term success.

The showdown of the century: born-circular vs. born-linear companies

But this story has a twist with a showdown between two main characters: born-circular and born-linear companies. Think of it as the heavyweight championship of the business world, reminiscent of how steam-powered factories disrupted artisanal shops, how railroads dethroned steamships, or how digital pioneers like Uber and Airbnb sent tremors through traditional industries.

Born-circular companies aren’t just adapting to new rules; they are the architects of this burgeoning economic model. Just like the digital disruptors who came before them, these businesses are in the driver’s seat, dictating the pace and nature of the transition to a circular economy. They’re born with an innate advantage, as their business models, from the ground up, are designed to minimize waste and maximize resource efficiency. These companies are not only creating sustainable solutions but are also setting industry standards, influencing consumer behaviour, and even affecting regulatory changes.

Then you have the born-linear companies, the ones still entrenched in the “take, make, dispose” mindset. These are the companies facing the same existential questions that manufacturers faced at the advent of electric power or that traditional retailers faced with the rise of Amazon. Do they risk becoming the footnotes in history books, cautionary tales for businesses that failed to adapt? Or do they pivot, investing in circular innovations, perhaps even collaborating with or acquiring born-circular companies to fast-track their transition?

The challenge for born-linear companies isn’t just about adopting new technologies or processes; it’s about a fundamental shift in business philosophy. This isn’t a cosmetic change; it’s reconstructive surgery on the business model itself. And just like in previous economic transitions, the market will be unforgiving to those who hesitate or make half-hearted attempts at change. The born-circular wave is surging, and it’s rapidly altering the business landscape. Companies must decide where they stand: on the cutting edge of innovation and sustainability or on the precipice of obsolescence.

Time to join the circular revolution

As we’ve navigated through the past, present and future of economic transitions, one thing is overwhelmingly clear: standing still is moving backwards. With each leap — from steam to electricity, from railroads to the digital cloud — there was a line in the sand that separated the pioneers from the laggards. Today, that line is drawn around the circular economy.

Unlike previous transitions, however, this isn’t just about business survival; it’s also about planetary survival. The stakes have never been higher, and the rewards promise to be immense for those who dare to lead. Companies embracing circularity stand to not only revolutionize industries but also to become heroes of a world desperately in need of them.

Businesses must seize this moment, for it’s not just an industrial transition — it’s a transformation of our collective conscience, a redefining of what’s possible, and a reimagination of the world as we know it.

The circular economy is not an option; it’s an imperative. And the time to act is not tomorrow; it’s today.

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