Why your organisation should embrace circular economy business models

Wednesday, 01 April 2020


    The circular economy aims to reduce the environmental impact of business by incorporating reuse and recycling into business models. Here's the lowdown on expectations, state and federal policies and emerging regulatory schemes.

    Following the banking Royal Commission, directors need to sharpen their diligence and be much more aware of a broader range of operational and reputational risks, including emerging environmental and climate change-related risks as well as those associated with meeting and managing community expectations. For businesses operating across global supply chains, China’s “National Sword” policy, new practices by sophisticated international corporations and a generally escalating global regulatory environment foretell new risks that can upset business models. For some, the changes will create significant new growth opportunities.

    In 2019, the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal expanded to ban mixed or contaminated plastics shipments to developing economies, and later the Council of Australian Governments agreed to set a timeline to phase out all such Australian waste exports. These unilateral and multilateral changes have forced governments around the world — including Australian governments at Commonwealth, state/territory and local levels — to support the urgent development and implementation of “circular economy” (CE) policies and networks.

    Circular economy

    The primary concept of the circular economy is simple — one person’s waste becomes another person’s resource. This contrasts to the “linear economy” comprising the take-make-use-dispose sequence of extracting natural resources to build products with relatively short life cycles and then landfilling goods at the end of their usefulness. In the linear economy, increased revenues are linearly correlated to increased resource extraction and increased landfill waste.

    The cornerstone of the circular economy is recycling, but in addition, several other business methods keep goods at maximum use and value. Remanufacturing, refurbishment, the share economy (such as GoGet), the on-demand economy (such as Uber), and the performance economy demonstrate how corporations are rethinking value-creation business models. Industrial symbiosis (a model that brings companies together to use the waste from one as raw materials for the other) and biomimicry (creating solutions to human challenges by emulating designs and ideas found in nature) are more advanced design principles. The circular economy has been variously described as a better way to manage resources to minimise waste and to reduce environmental impact; a better operating environment for manufacturers, retailers and consumers; and a way to encourage innovation, create jobs and boost the economy.

    Circular economy initiatives and outcomes are almost certain to become part of the broader company reporting regime and are expected in the near future to drive R&D and feature in government and private sector procurement and decision-making.

    In Australia, the NSW government led the way in February 2019 by releasing a NSW Circular Economy Policy Statement, Too Good to Waste. The statement defines a circular economy as follows: valuing resources by keeping products and materials in use for as long as possible; maximising the use and value of resources to bring major economic, social and environmental benefits; and contributing to innovation, growth and job creation, while reducing our impact on the environment.

    Domestic promotion of CE follows overseas initiatives that already have significant global momentum. China adopted its first formal laws promoting CE in 2008. In January 2020, the country announced bans on plastic bags and a sweeping reduction in single use plastics.

    Europe’s first policies were strongly influenced by the Ellen MacArthur Foundation beginning in 2012, and the EU formalised its approach in the 2015 Circular Economy Action Plan. European corporations such as Daimler and BMW are driving CE programs with sophisticated requirements that facilitate recycling and remanufacturing of used components throughout their complex global supply chains.

    The primary concept of the circular economy is simple — one person’s waste becomes another person’s resource… Its cornerstone is recycling.

    In California, a Circular Economy and Plastic Pollution Reduction Act passed the Senate in 2019, but has not yet been passed by the Legislative Assembly. Even without regulatory requirements, Silicon Valley leaders such as Apple are driving CE initiatives.

    The NSW policy aligns to an expanding global trend among advanced economies and leading global brands. The NSW policy statement identifies seven key principles for the transition to a CE: sustainable management of all resources; valuing resource productivity; designing out waste and pollution; maintaining the value of products and materials; innovating new solutions for resource efficiency; creating new CE jobs; and fostering behavioural change through education and engagement.

    The NSW government — through the Office of the NSW Chief Scientist and Engineer — has funded the creation of a Circular Economy Innovation Network (NSW Circular). Hosted by UNSW, NSW Circular was officially launched in October 2019. It has three key goals: to bring together industry, government, local councils, researchers and the community; to act as a clearing house of ideas to create a community of best practice; and to commission a small number of pilot and demonstration projects funded through the NSW government.

    NSW Circular has been involved in several initiatives and projects, engaging across all its stakeholder groups through activities including workshops, invited presentations and media outreach. A number of collaborative pilot projects are underway across focus waste streams of plastics, glass, textiles and metals. These span regional and urban sectors and include:

    • Interior design and materials for the property development sector (Mirvac), SME enterprise, community groups and research organisations.
    • Reuse of waste plastics integrated in production of insulation materials for SMEs, local government and research organisations.
    • Textile and glass waste materials integrated into tiles and feature panels for exterior/internal applications for local government, SMEs and research organisations.

    Some of these pilot projects may develop into larger demonstrations, potentially replicable across NSW, and may be subject to initial “grand challenge” funding to accelerate progress.

    Other states are also taking CE action. Victoria has released a discussion paper and is expected soon to release a CE policy and action plan. Queensland has announced a Circular Economy Lab initiative. The Commonwealth is supporting CE via CSIRO. Commonwealth and state governments intend to coordinate their activities and policies.

    Warren Centre for Advanced Engineering executive director Ashley Brinson and UNSW Scientia Professor Veena Sahajwalla are co-directors of NSW Circular; Trevor Danos AM MAICD is a board member at NSW Circular.

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