As the urgency for sustainability continues to escalate, one theme that has received increasing attention, first in Europe and now increasingly internationally, is that of the Circular Economy (in spite of recent setbacks at the EU.) The Circular Economy is being embraced by policymakers and industry alike as a sustainable template for economic growth. It is, I believe, an approach that should expand existing opportunities and create new ones for reusable packaging, although that is ultimately of secondary importance to the overall success of sustainability.
So what exactly is the Circular Economy? Let’s start with a basic definition of an economy, as follows: The wealth and resources of a country or region, especially with regard to production and consumption of goods and services. That brings us to the Circular Economy. According to the Ellen MacArthur Foundation, a leading proponent of the Circular Economy, “A circular economy is one that is restorative and regenerative by design, and which aims to keep products, components and materials at their highest utility and value at all times, distinguishing between technical and biological cycles.” In the technical cycle, materials and goods created by humans remain circulating in a high-quality condition, without entering the biosphere. In the biological cycle, renewable materials derived from the biosphere are safely reintroduced to it.
Sustainability has often been associated with a decrease in economic activity. Not only is economic constraint a tough sell to profit-centric businesses, it also constitutes an impractical approach for meeting the needs of the many. It is estimated that the Earth will have to shoulder the demands of 3 billion new middle-class inhabitants for goods and services by 2020, at a time when the total population will be approaching 9 billion.
One of the exciting aspects of the Circular Economy approach is that it is seen as an opportunity to allow for economic growth in a sustainable fashion, rather than achieving sustainability through decreasing production and consumption. Instead, the Circular Economy looks to find ways to produce needed goods, but in a manner that is disassociated from resource depletion and negative environmental impacts.
The Circular approach requires a shift in thinking away from the production of disposable products that are recycled at best, and trashed at worst, to other models that provide better value to consumers, while maintaining the value of materials. Some of the relevant strategies include:
Product as a Service and Extended Product Life: A product as a service approach is a notion very familiar to users of rental pallets and containers, and is one that is rapidly expanding to other categories, offering advantages to consumers in the form of better quality, longer lasting goods at a lower cost per use. For asset owners, the service approach translates into an ongoing revenue stream from service and retained control of products for refurbishment and eventual remanufacturing or recycling.
Creative examples are springing up everywhere, ranging from lease and pay-per-use models for household washing machines and household carpeting to subscription-based children’s clothing. In Europe, Philips has begun offering lighting as a service, while maintaining ownership of the lighting fixtures. In the garment sector, businesses are offering leasing arrangements for clothing. One Danish company as one of a growing number offering high-quality children’s clothing as a subscription service. When the children outgrow their outfits, they are returned for a larger size. According to the company, the approach reduces the amount of clothing needed by seven times, while replacing clothing manufacturing jobs with service jobs related to the mending, inventorying and distribution of the garments. The rationale behind all of this is that manufacturers could create more durable goods that conserve material value, generate revenue from servicing the products, and retain control for eventual refurbishing or remanufacturing.
Sharing Platform: Another strategy of choice in the Circular Economy is related to increasing the utilization rate of idle assets. For example, the automobile has a utilization rate of only 5 to 10 percent, creating opportunities for sharing platforms such as Zipcar, or ridesharing services such as Uber. Airbnb used the sharing platform approach to tap into underutilized accommodation opportunities for travelers. In the realm of manufacturing, opportunities for sharing unused resources are being developed through exploration of online materials marketplaces.
Emphasis on Maintaining Material Value and the Role for Reusable Packaging
Ultimately, the Circular Economy model is one that celebrates a diversity of approaches that are successful in retaining material value while generating economic growth through approaches that support reuse, sharing, upgrading, repair and remanufacturing as higher value activities than recycling – where much value is lost. (This conversation has centered around goods that are durable or potentially durable. For a discussion of consumer goods and the Circular approach, here is one discussion.
For reusable packaging and pallets, successful models already abound of extremely durable pallets and containers built for long lasting solutions, as well as pay-per-use and sharing models, in several industries. At a broader level, a growing Circular Economy will advantage from reusable packaging utilized for activities such as recovery of old assets and materials, as well as in helping to facilitate what supporters hope will be an emerging renaissance for remanufacturing. It’s anyone’s guess, but my hunch is that a worldview which increasingly embraces the importance of material conservation and circular thinking will be more likely to recognize the value of deploying reusables more aggressively, as well as in ways that many have probably not yet considered.