Kaizen Institute’s CEO, António Costa, reinforces his conviction that KAIZEN™ can play a major role in supporting organizations implement a Circular Economical model. Circular Economy is present today in media, political agendas, several incentive global programs and almost all main agendas of corporate companies.
What is Circular Economy?
The linear economy model was established in the first industrial revolution, which still exists today, and follows the flow commonly described as, “Take, Make, Use, Waste”. Since ancient times, humans have depended on resources available in the natural environment. The earth provides us with raw materials that make quality living possible. Technological advancement has made it possible for humans to extract resources from the planet swiftly, in large quantities. This has resulted in a robust economy, but there are downsides. The prevailing system of production and consumption operates on a linear economy. In this kind of system, products travel along the supply chain once and end up in the rubbish heap. Linear processes lead to waste of natural resources. Some of these resources are not renewable, but those that are cannot keep up with the rate of human consumption.
The evolution from the linear economic model to the circular economy calls for a shift in paradigm. Circular Economy is described as, “Take, Make, Use, Recycle, Remanufacture, Reuse, Repair, Share”. It can be defined as a regenerative system in which the entry of resources and the production of waste, emissions, and energy losses are minimized by the deceleration of material and energy cycles. The magnitude of material and energy flowing between the environment and the economy should be minimized and replaced with a more continuous circulation within the economy. This reduces the current dependence on the environment.
Recycle; products such as metals, paper, glass or plastics can be recycled as a source of secondary raw materials. Remanufacture; products such as electronic goods can be rebuilt to the original manufacturer specifications by using a combination of reused, repaired, and new parts. Reuse; products such as glass bottles can be reused a large number of times before being recycled. Repair; products are generally less durable and repairable than they were in the past. Enabling and promoting repair can bring old products back to life. For instance, making spare parts and information more accessible. Share; with a shift from ownership of products to their accessibility, more efficient consumption is possible. Sharing of goods (e.g. car-sharing or car-pooling) makes their use more efficient and reduces their environmental impact. The circular economy model is a system of production and consumption that aims to reduce waste by innovative design and reusing.
Some statistics show that we are far from embracing the new paradigm. For example, in Europe, on average each material is used only one time. Each European car is out of circulation 92% of the time. 31 % of food is wasted along the value chain. In 2019, only 10% of raw materials were reused (minerals, biomass and fossil fuels). Now, the Earth takes almost 1.5 years to regenerate what we use in one year. Just about 5% of the remaining value of material goods is recaptured and used when we dispose of the products. Our world economy is only 9.1% circular, leading to a massive gap. Mega cities, population growth, climate change, changes in economic power, and technological advances are changing the way organisations and society interact. Therefore, it is necessary to change the economic model if we intend to leave the next generations with a better planet than the one we were given. But, is there potential for the economy?
The circular economy is the greatest opportunity to transform the production and consumption of goods. 1.8 trillion € per year in 2030 is an estimated benefit by increasing productivity of raw materials and reduction of energy and resource consumption. Material productivity is expressed as the amount of economic output generated (in terms of GDP) per unit of materials consumed. Advocates of the circular economy argue that it offers a major opportunity to increase resource productivity, decrease resource dependence and waste, and increase employment and growth. They suggest that a circular system would improve competitiveness and unleash innovation and they see abundant circular opportunities that are inherently profitable, but remain uncaptured. The concept of the circular economy isn’t widely understood by business. Mobilizing this opportunity will remain a challenge until many more business leaders adopt a “circular mindset.” This is the biggest opportunity to transform production and consumption since the first industrial revolution 250 years ago. By unleashing circular innovation, we can boost the global economy’s resilience, support people and communities around the world, and help fulfill the Paris Agreement and the UN Sustainable Development Goals. The circular economy is a new way of looking at relationships between markets, customers, and natural resources.
In short, it is about time for society to resume its responsibility as a global community to create supply chains that support circular business models for the sake of future generations. It is time for Kaizen Institute to draw and implement the solution for this new paradigm of supply chains.