Circular Economy Practices: Business Growth and Environmental Responsibility

A recent report published by ABB Motion concerns the implementation of circularity practices as a matter of urgency. But what is meant by these ‘circular’ practices, and how are companies actually implementing circular economy principles to increase growth while maintaining responsibility for sustainable business practices?

In the wake of resource scarcity and the unnecessary overflow of production wastes because of improper recycling (which contributes to detrimental environmental pollution), companies across the globe are looking to adopt circularity practices. However, many well-meaning companies still face challenges such as defining and ingesting what circularity actually means, and how to source sustainable materials and manage costs associated with implementing these programs.

 

ABB Motion’s report highlights raw materials, energy, and labor as the three most scarce resources. Image used courtesy of Sapio Research and ABB

 

What is a ‘Circular Economy?’

The circular economy principle is a model that centers on maximizing the longevity of materials and product use by designing them for reuse, recycling, remanufacturing, and recovery. Circulating materials and products (along with their constituent materials) in this way promotes waste reduction and energy savings while preventing/mitigating emissions involved with the refining of new raw materials. While this definition provides a useful basis from which to understand circular practices, no clear consensus definition for the circular economy principle.

Yet, such a definition is imperative to develop and strengthen policymaking so that actionable targets and processes can filter down through different industries, regions/states of the world, and material/product life-cycle stages (such as extraction and end-of-life material recovery).

 

What are Circular Practices?

A universal definition for what constitutes circular practices is also still developing, and this fact is supported by the findings from ABB Motion’s report (“Circularity: No Time to Waste”), where just under 50% of survey respondents did not accept the provided definitions for circularity.

The United Nations Environment Program (UNEP) highlights the need to segregate economic gain from the exploitation of natural resources. In ABB’s survey, only 35% of respondents acknowledged natural resource replenishment and regeneration as a constituent element of what comprises circularity, which of course, plays a significant part, but is only a piece of the puzzle. The majority of respondents (46%) acknowledged the recycling and reuse of materials.

Unsustainable consumption and poor production habits are at the epicenter of increased GHG emissions, biodiversity loss, and pollution. Moving towards a more sustainable, conscientious circular economy requires the implementation of defined circular practices by governments and businesses worldwide. Circular practices can involve how businesses design their products for reuse, make them, use them, and recycle them. Everyone plays a part here, from governmental bodies to businesses and to consumers. According to ABB’s report, only 8% of respondents believe that circularity is part of everyone’s responsibility in the context of their business. In other words, most companies do seem to recognize the importance of their own actions and initiatives to spur progress.

 

UNEP provides an overview of circularity and why it is essential for the future of our planet. Video used courtesy of UNEP

 

The Need for Standardized Circularity Practices

ABB’s recent report underscores the need for effective circularity practices, with 91% of respondents feeling pressure from the negative impacts of resource scarcity.

Initial gleanings from the UNEP’s Global Resources Outlook 2024 report (which is set for publication on March 1st) highlight that if humanity continues to extract raw material resources at its current rate for the next 40 years, an increase of 60% on 2020 levels could be a reality.

While energy comes in as the second most scarce resource (34%) behind raw materials (37%), two-fifths of respondents reported it as their largest source of waste. The top three challenges presented by resource scarcity include increased cost, supply chain disruption, and constrained production capacity.

The report highlighted that only a marginal number of businesses have adopted key circular practices, including the onboarding of energy-saving technologies, applying circular principles across the supply chain, and partnering with waste management professionals.

 

How are Businesses Overcoming Such Challenges?

Schneider Electric has garnered two awards for its efforts in implementing circular practices and continuing to strive to move away from the linear “take, make, and dispose” model. In 2019, the company won The Circulars Accelerator, an initiative that represents the world's leading circular economy award program. Schneider was recognized for the eco-conscious designs of its products with the limited use of raw materials and its efforts to implement a circular supply chain with repair, modernization, and reconditioning centers, as well as to reverse logistics. Schneider also won the 2021 German Sustainability Award in recognition of its ambitious climate pledge, action plans, associated achievements, and circularity practices.

 

Schneider Electric’s remanufacturing facility for its MasterPact circuit breakers provides a prime example of the successful employment of circularity practices. Video used courtesy of Schneider Electric

 

Schneider Electric utilizes several circularity practices within its design, production, and operation phases. For example, the company designed its Galaxy VL uninterrupted power supply (UPS) to reduce its footprint by 50% compared with the industry average. Not only does this maximize space use in a given facility, but it reduces material use as well, enhancing the design phase of circular economics.

Schneider Electric has its own dedicated facility in Grenoble, France, for the remanufacture of its MasterPact circuit breakers. The circuit breakers are re-collected, disassembled, diagnosed, upgraded, and tested before circulating back into the market.

Panasonic’s Eco Technology Center Co., Ltd. (PETEC) is responsible for the extraction, recovery, and reuse of materials from end-of-life home appliances. PETEC extracts and recovers materials like copper, aluminum, steel, and resin from TVs, refrigerators, washing machines, and more. As of the end of the financial year 2022 (31st March 2023), PETEC achieved a material recycling rate of 87% for TVs and 92% for washing machines. Recycling materials reduces raw material sourcing (and, in turn, environmental degradation), saves on production costs, and saves on emissions involved with production.

 

Reframing Cost Management

In ABB Motion’s report, respondents acknowledged several barriers to the adoption of circularity, namely difficulty sourcing sustainable materials (31%), challenges with cost management (30%), and limited circular technologies (27%). When asked which barrier would be the most difficult to overcome, cost management came top of the list. To optimize ongoing financial and environmental benefits, ABB Motion suggested that companies evaluate circular investments using a comprehensive understanding of total cost of ownership (TCO), where future operational expenses are factored in as net present value.

In their report, ABB Motion suggests a reframing of the perceived costs of adopting circularity practices. By investing in such practices, businesses can tackle resource scarcity head-on, minimizing resource use, and mitigating energy-intensive processes, all the while reducing costs of raw material extraction. ABB Motion asserts that by implementing circularity practices, businesses across the worldwide industrial ecosystem will save on costs in the long term and ensure a greener future for our planet.

 

Featured image used courtesy of Adobe Stock