Circular Economy is the big game-changer we need to reach the Paris agreement and has the potential to lower the global carbon emissions by up to 35%. Circular products are designed to minimize the use of virgin materials and are many times a more competitive product.
WHERE TO START?
- Know your product from an environmental perspective – lifecycle assessment of the product will provide not only a carbon footprint but also give valuable insight into the design, materials, manufacturing process, energy usage, logistics, and recycling. My company, ReFlow, is currently looking for testers of a new digital tool that does exactly that – sign up as a tester here: https://aern1wza543.typeform.com/to/fYir2rJ8
- Time to review your business model and product value proposition – this part is very complex and there are no easy recipes here. It depends on many different factors! Here are some of the questions that we normally ask: How do I currently generate revenue? “New sales” or spare parts and maintenance? How is my product positioned low-cost (price as main competition parameter) or premium (with a service/quality mix)? Do I already offer any servitization-based products (product-as-a-service)? The goal here is to map any areas that align with a circular concept.
- Digitalization – Circular Economy and digitalization is a match made in heaven. Digital businesses can handle more complex business models and are many times more scalable. A digital approach is many times needed in order to make circular business models profitable. Return of used products requires an assessment of the product state and many times result in different processes for each return-unit based on the received condition. A digital business can keep the cost down by utilizing smart planning and resource utilization tools.
- Back to the drawing board – time to rethink your business – Culture eats strategy for breakfast (Peter Drucker) Make no mistake – the shift from a linear production business to a modern circular business requires more than fancy assessments, numbers, and models. The change from “produce the optimal product to the lowest cost” to “create value by supplying the optimal solution”. The missing part here is the product – a shift to a circular model is also a shift away from the “transactional mindset” towards a solution-based mindset. A successful supplier of circular products no longer sells a product in the traditional sense but has a focus on what needs the product fulfills.
- Partnerships – this is a multiple stakeholders journey – Circular business models require partnerships with many new stakeholders. Time to map your value-chain for new activities and identify potential stakeholders. Logistics is one of the crucial areas and a solid return-logistics setup is crucial for the success of any circular setup. The return of used products from the users can be complex and expensive – luckily several logistics providers are now offering this service. Other new partnerships can be within condition monitoring services, transport packaging designed for circular use, unique IDs for products, etc.
The above is just some of the areas I find important – I always recommend consulting with a circular economy professional that can assist in the process.