A hundred billion tons of materials enter the global economy every year. Only 8.6% of the total amount of the materials are cycled back into the economy. This is the result of the linear economic model. In a case study written by Thibaut Wautelet, he refers to the linear economic model as a production and consumption model based on the “take-make-waste” scheme. He explained that raw materials are collected, then transformed into goods that are used and finally discarded in landfills or incinerated as waste. This approach turned out to be broken, enabling overconsumption to the detriment of planetary health.
Governments and businesses are looking to adopt the circular economy model and start repairing the damage created by unsustainable production and consumption. According to published research in “Cleaner Environmental Systems Journal”, authors define the circular economy as a catalyst for sustainable business. Moreover, the circular model promotes “…the use of resources within closed-loop systems, reducing pollution or avoiding resource leakage while sustaining economic growth.”
The pressure to adopt sustainability compels companies to implement the “reduce, reuse, and recycle” practices from the design stage to post-sales activities. Based on the same research, “Circular economy as a driver to sustainable businesses”, the influence of the circular economy can be seen in many business areas:
Cost management – The circular model leads to the transformation of products at the end-of-life cycles into resources for new products. Integrating material recycling into new component production can close the loop, reducing waste and the usage of more expensive raw materials.
Supply chain – The circular management of the supply chain is based on the coordination across the different members in closing, slowing, or narrowing energy and material flows. Additionally, the packaging system is an important aspect of the distribution process circularity.
Process management – The business processes are rebuilt to make them more circular, facilitating the reusing and recycling out of the desire to extend product life and reduce environmental impact.
Service management – The Product-Service system is considered an enabler of the circular economy by offering services instead of products aiming at pro-environmental outcomes.
Research and development – The achievement of circular goals relies heavily on design, which determines the circular potential. The life-cycle-based research and development allows the selection of the type and quantity of materials and determining how they are combined – a process that affects the product’s life and the possibility of repairing and recycling it.
Figure 1. Product Lifecycle in Circular Economy Model | News European Parliament
Companies embrace the concept of circularity in response to the growing interest of customers in green practices and concerns about the global waste problem. Philips is one of the companies that are successfully paving the way toward the circular economy in their industry.
Philipswas one of the largest electronics companies in the world. But it has changed its focus on health technology, looking to improve people’s health and well-being. Its products include large-scale and small medical equipment and home care products. The company developed new business models to adapt to the circular principles organized on seven strategic pillars:
Close the loop with current products through take-back, refurbishment, and recycling
Further circular practices across Philips sites, including zero waste to landfill policy
The circular design of products and business models
Technical competence building
Driving change with external coalitions and supply chain
Embedding in the Philips Business System
In 2016, the company set goals to generate 15% of revenues from circular products and services and send zero waste to landfills in internal operations. At the end of 2020, Philips achieved their circular goals. Therefore, they set three greater targets for 2025: to generate 25% of revenue from circular solutions, send no waste to landfills, and close the loop by offering a trade-in on all professional medical equipment.
The Benefits of Adopting the Circular Model
The Circular Model and its principles are still new to the business ecosystem, and the market penetration of circular business models remains limited. However, the potential to scale up the model is considerable in many industries.
Besides the environmental impact that the circular model creates through the reduction of greenhouse gas emissions or the use of fewer nonrenewable resources, or achieving zero waste, shifting toward circularity can help companies secure a competitive advantage and create long-term value.
The circular model enables new revenue streams by accessing new markets or cutting off costs from waste generation. It reduces the dependency on raw material suppliers and increases resilience in the face of supply chain disruption.
Additionally, by implementing a circular model, businesses can attract new clients and improve the retention of old ones, as sustainable practices are becoming an influencing factor in customers’ buying decisions. Also, customer loyalty is favored due to servitization, product-as-a-service offerings, or take-back programs.
Based on the survey conducted by Deloitte, more consumers this year are pursuing a better sustainable lifestyle. Results show that 40% of consumers choose brands that promote sustainable values and practices, which increased by six points compared to 2021. The number of consumers who stopped purchasing from a specific brand due to their ethical or sustainable issues and concerns towards the company has also increased by six points in 2022, which is 34%.
Going in circles is the way forward. It is time for companies to rethink how they do business, considering industrialization’s impact on the environment, relevant international initiatives, such as the UN Sustainable Development Goals and the EU Circular Economy Action Plan, and the increasing importance of sustainability to everyday customers. The change may be difficult for organizations used to operating in the linear economy but not impossible as seen in the above examples. In order to thrive in the market, companies must establish circular business models and adapt their strategies to the circular economy.
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Editor’s Note: This article was first published on May 26, 2022 and last updated on September 16, 2024.
The Global Reporting Initiative (GRI) will introduce new sustainability reporting standards focusing on the mining and textile and apparel industries as part of the GRI Sector Program. The move follows the approval by the Global Sustainability Standards Board (GSSB), the independent body responsible for GRI Standards.
The GRI Sector Standard for Mining covers the impacts of mining organizations on environmental, social, and economic aspects. It is consistent with the Environmental, Social, and Governance (ESG) and disclosure frameworks used in the sector. Judy Kuszewski, Chair of the GSSB, told MINING.com that the standard includes metrics that reflect the information required by stakeholders and emphasizes the duties of mining organizations concerning smaller entities and their involvement in the supply chain. This standard will be published in Q3 2023.
Meanwhile, the GRI Textiles and Apparel Standard aims to guide clothing, footwear, fabrics, and other textile manufacturers and retailers on sustainability reporting by setting global best practices. The GRI identified this sector as another top priority due to its adverse effects on the environment and concerns related to labor and human rights. This standard is set for release in Q1 2025.
The GRI Sector Program will produce standards for 40 sectors, prioritizing those with the highest impact on the environment. The Sector Standards “describe the sustainability context for a sector, outline organizations’ likely material topics based on the sector’s most significant impacts, and list disclosures that are relevant for the sector to report on.” For more information, visit https://www.globalreporting.org/standards/sector-program/
Learn more about sustainability reporting through our cover story featuring Eelco van der Enden, the CEO of the Global Reporting Initiative, on PERFORMANCE Magazine Issue No. 25, 2023 – Sustainability Edition. Download a free digital copy through the TKI Marketplace. Printed copies are also available through Amazon (The price may vary depending on location).
Across the globe, many governments and corporations are seeking cleaner and greener alternatives. It is becoming clear that sustainability should be an integral part of any organization’s strategic plan. Samirkumar Pathak, head of sustainability and ESG for Almarai, explains why this is the case and how this can be achieved.
In an interview with The KPI Institute (TKI) Publishing Team, Ihab Ibrahim Mohamed Alsakkti, a Strategy and Performance Manager at Alkifah Contracting Company, shares his insights and expertise in organizational performance management for the next issue of Performance Magazine – Print Edition.
On the one hand, investing in sustainability is no longer a nice-to-have strategy. But it is absolutely a need-to-have strategy to ensure compliance with governmental and regulatory requirements.
Here is an excerpt of the interview, where Ihab highlights the effect of sustainability in strategy planning and performance management.
An understanding of global business trends is essential these days. Changing international market structures and integrations can affect decision-making and strategies in the corporate environment.
New trends are percolating at the grassroots level. The role of trends may influence larger organizations over the coming years. Nowadays, adapting to new ways of working and workplaces is no longer a challenge for innovators and early adopters. Innovations in working style and work setup quickly become mainstream and rudimentary for most companies. Get ready to embrace these new approaches, or you may find that most other organizations already got it and moved on.
As suggested by Nobel Prize laureate Paul Krugman, ”Let us just consider climate change as the root of the whole problem lies in the carbon-dominated industry. To change it may give a strong impetus to the research and development of carbon-free energy resources and may open an era of new technological development.”
New trends come with several driving forces, such as the integration of corporate, economic liberalization, free trade, transfer of technology, corporate financial flows, and transnational companies.
All trends are affected by technology and vice-versa. Technological developments are and will be affected by social, economic, and marketing trends.
The rate of change in work and the workplace is shifting into a much higher gear. Today, work is conducted across an increasingly broad range of settings, geographies, and time frames propelled by four major trends. These trends can impact how sustainability is managed and the fulfillment of a sustainable corporate environment:
Image Source: Md Ahbabur Rahman
The availability of enabling technologies and social collaboration tools. Technologies for collaborating with co-workers continue to become cheaper, easier to use, and ubiquitous. They are already being combined and synthesized into platforms that feature a wide range of tools to collaborate asynchronously and synchronously.
On the other hand, it becomes more difficult for workers to stay engaged and connected as they are more dispersed physically. So planners need to link conscious workplace strategies with social technologies and work policies to encourage socialization.
The shortage of knowledge workers. There will be a shortage of younger knowledge workers in the coming years. The Baby Boomer generation retires and younger workers take their place. Organizations will have to compete for workers who are more comfortable with and seek flexible work and alternative workplaces.
As for the solution, there’s a need for cultural change. The hardest part of changing the workplace is not the physical environment or technology but changing the people.
Knowledge workers are the core of an organization. They possess a high level of creativity and productivity. These workers are described as people who “think for a living.” Knowledge workers invent new products. They create and develop ideas and strategies rather than doing manual labor.
To sustain knowledge workers, they should be given platforms where they can nurture ideas and create. Also, knowledge workers need to have a working environment where voices and opinions can be shared during the planning process.
Knowledge workers are technology-dependent. So keeping up with the trends is a must for them. Allow them the choice of when, where, and how they are comfortable working. Let knowledge workers choose what working style and setup is beneficial as learning and growing are valuable for them while working.
The demand for more work flexibility. Workers will demand more work flexibility—the ability to decide how they should define and tackle specific problems and tasks and when and where work is done.
To develop a solution, corporations can adopt new workplace practices. With workers increasingly scattered geographically, work practices need to adapt because it is no longer possible to communicate casually with a distributed work team. Leaders need to formalize good work practices for the team.
The World Economic Forum predicts that we are on the cusp of a fourth industrial revolution. Technological, socioeconomic, and demographic shifts are transforming the way we work. These shifts have made flexibility important in the way individuals, teams, and organizations work.
There are many ways to incorporate flexibility into the corporate environment. These are the ability of employees to include the opportunity to change their working hours, work remotely, learn new software, and take on new roles. Flexibility also concerns employers as they need to assess strategy quickly according to the working style and personal needs of their employees.
Some companies are switching to a hybrid work setup. This means that employees will report to the office on specific days and work from home for the rest of the weeks. This system comes with challenges and inconveniences, such as communication issues, coordination in terms of schedule, and the availability of resources in both types of workstations.
Some companies are also configuring the office layout in response to the hybrid work setup. One of the drawbacks is not everyone will have their own desks in the office anymore. This change means that employees may encounter problems with accessing and moving the resources they need for work or making sure they have a spot each time they return to the office.
Before making any modifications to how work is done, organizations should establish a system that will harmonize the time, tasks, and resources of employees. It would help ensure that everyone’s goals are aligned and the workplace remains a happy and productive environment.
Pressure for more sustainable organizations and workstyles. Perhaps the 800-pound gorilla is the push for organizations to drastically reduce their carbon footprint, whether through regulations or market-driven incentives and disincentives.
Organizations will have to examine all major sources of greenhouse gas emissions, in relation to how, where, and when people work. Group locations, building efficiencies, commute patterns, and air travel practices must be observed.
Employees have different workstyles also. Some feel comfortable when working independently, and some are more productive when collaborating. Some employees are emotionally aware and create supportive work environments. Some are ideal and detailed-oriented workers.
Edelman Data x Intelligence, an independent research firm, conducted a survey among 31,092 full-time employed and self-employed workers across 31 markets between January 12, 2021 and January 25, 2021.
In 2021, some employees were given the freedom to choose where and when they work. While 67% of employees chose in-person work collaboration, 73% of 31,092 full-time and self-employed people decided to stay at home and continue to work remotely.
Sixty-six percent (66%) of leaders considered redesigning their office spaces to accommodate employees. The same study shows that leaders faced challenges and implemented changes just to give the best of both worlds to their employees.
Across the globe, many governments and corporations are seeking cleaner and greener alternati
In an interview with The KPI Institute (TKI) Publishing Team
