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Business leaders in Davos keen to mainstream circular economy

Indium Touchscreen

Rare earth metals such as Indium needed for touch screens are due to be exhausted in 5-10 years. The current economic model must fundamentally change. Photograph: Lorenzo Rossi/Alamy


Powered by article titled “Business leaders in Davos keen to mainstream circular economy” was written by Jo Confino, for on Monday 27th January 2014 14.36 UTC

The concept of the circular economy is so simple and attractive that if we were now building our society from scratch, we would integrate it into everything we do. But unfortunately, because the economy has been built on the false notion that there is an endless supply of cheap materials, moving towards a cradle to cradle system is proving fiendishly difficult.

Meetings of the world’s experts at Davos highlighted the many reasons why the circular economy has not moved beyond only a few initiatives. They all agree the biggest problem is the established mainstream business mentality, which is still locked into the idea of manufacture, use and dispose.

As Kingfisher chief executive Sir Ian Cheshire said: “The biggest barrier is the mindset of re-imagining your business. Companies tend to concentrate on optimising the current business model with incremental improvements.

“Changing to a circular model is uncomfortable and not an easy process, although there are examples of moving from product to service; Rolls Royce for example does not sell engines but flying hours.”

Chris Dedicoat, president Europe, Middle East, Africa, and Russia at technology giant Cisco, said that it was important to bring young talent into businesses, who are not constrained by the thinking of the past.

“If you ask a group of engineers for a 100% recyclable product, they will think you are mad,” he said. “But if you mix up student designers with engineers, they soon come to believe it is possible.”

Feike Sijbesma, chief executive of Dutch life sciences and material sciences company DSM, agreed that there needs to be a fundamental move away from selling products to offering the benefits those products can offer.

“The mind thinks it’s totally impossible until it is done – our own brain is the limit,” he said. “If you actually stop to think, there are no scarce materials; what we do is we take them and we put them somewhere else – nothing leaves the planet except for a small amount of helium. Rare metals still exist but they are spread in polluted waste products.”

Several chief executives in Davos were keen to show that the circular economy is not about corporate social responsibility but about good business sense as a scarcity of raw materials, combined with a rapidly growing global middle class, puts pressure on the current linear model.

Not only does it offer the possibility to reduce costs as the price of raw materials rise, but also to grow and increase profit margins.

Dame Ellen MacArthur, the former round the world yachtswoman, who is a key figure driving the circular economy movement, gave the example of Renault’s engine re-manufacturing plant outside of Paris.

“When Renault looked at it, they realised it is their most profitable factory in the world,” she said. “The engines that come out have the same warranty as a new one but the embedded energy that goes into the re-manufactured engines is only 20% that of a new engine.”

Moving towards a circular economy allows companies to maintain control over their stock of raw materials. Alexander Collot d’Escury, chief executive of Desso, which makes carpets and artificial grass, is already experiencing the benefits of this through a combination of leasing out its products and making them easily recyclable, and predicts “we will see this happening much more often”.

The circular economy also provides an incentive to create products that last longer, thereby offering the possibility of eradicating built-in obsolescence. Frans van Houten, chief executive of Royal Philips, the healthcare, consumer lifestyle and lighting multinational, pointed out that “because we sell light as a service, we design for longevity. We are starting to apply this concept to our 40 businesses but we need to take it to the next level”.

Like other transformational ideas, business leaders were quick to point out that there needs to be a systems-based approach if there is any hope of the circular economy reaching scale. This is because relying on toxins being eradicated from products, and complex global supply chains combined with a mind-boggling number of materials, makes this extremely difficult.


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