This piece was originally published in the April 2017 issue of electroindustry.
Mark Kohorst, Senior Manager, Environment, Health, and Safety, NEMA
In recent years, regulatory policy in the United States and elsewhere has been influenced to a broad extent by philosophical concepts such as product stewardship, the precautionary principle, and zero waste.
At the same time, another model has risen to become the conceptual framework for environmental activists and lawmakers: the circular economy. According to its chief proponent, the UK-based Ellen MacArthur Foundation, this framework is restorative and regenerative by design and aims to keep products, components, and materials at their highest utility and value at all times, distinguishing between technical and biological cycles.”
In simple terms, its proponents seek to move beyond the linear “take, make, dispose” approach that characterizes most economic systems. To the extent that it emphasizes obtaining more value from materials for cost and environmental reasons, the circular economy doesn’t really represent new thinking. Rather, as GreenBiz noted in 2015, it is a growing influence in corporate sustainability circles as a response to “more urgent recognition of commodity risks in supply chains, an increase in zero-waste regulations and a pursuit of the financial opportunities that come with more efficient reuse strategies.”
Not surprisingly, governments provide motivation in the form of statutory initiatives and policy strategies aimed at capturing the benefits that are expected to accrue from essentially designing waste out of the system, which the circular economy purports to do. In the forefront as usual, the European Commission adopted a circular economy package in 2015 that included legislative proposals on waste, in addition to an action plan to support the circular economy in each step of the value chain. Early this year, the commission touted the progress made in implementing the key elements of this action plan.
Lawmakers in Ontario, Canada, last year produced the Resource Recovery and Circular Economy Act, which established a new producer responsibility regime. Its groundwork was laid several years earlier when the Canadian Council of Ministers of the Environment adopted the Canada-wide Action Plan for Extended Producer Responsibility (EPR). The linkage between the circular economy and EPR is clear, as many advocates view the latter as a key element of circular economy policy because it shifts the financial burden of waste onto manufacturers.
It appears that much of the burden (and expense) of constructing circular economies will fall on the manufacturing sector. Rather than bemoaning that prospect, some analysts are bullish and view it as an extraordinary opportunity for industry. The basic concept of buying less and reusing more, thereby increasing resource productivity, is business common sense and increasingly attractive to manufacturers striving to reduce costs and expand their market appeal.
Philips, a NEMA member, states on its website, “In a circular economy, the more effective use of materials enables to create more value, both by cost savings and by developing new markets or growing existing ones.”
So how does circular economy thinking take hold? According to “5 Business Models that Are Driving the Circular Economy,” in the April 24, 2014, edition of FastCompany magazine, companies need to start asking questions like, “How can we design our products with asset recovery in mind? How can we source material in regenerative loops rather than linear flows? How can we develop a revenue model that protects value up and down the chain,” and “How can we get our customers to cooperate with us?”
The underlying premise of the circular economy is that societies can rethink how things are made and used to a far greater and more productive extent than in the past. For manufacturers it’s a direction that, while not without risk, provides fertile ground for innovation and opportunity for leadership.