Embracing the Circular Economy: How Companies Can “Do Well by Doing Good”
The circular economy involves designing products with an eye toward their reuse, repair, remanufacturing, or recycling. A study by Accenture estimates that a transition toward the global economy represents a $4.3 trillion growth opportunity by 2030.
Since the Industrial Revolution, businesses have used raw materials to make a product that eventually becomes obsolete and is disposed as waste. What if this cycle were reimagined to reduce materials consumption, increase product lifespans, and regenerate the composed elements making up these goods?
Imagine no more. A framework has been erected for a sustainable economic system that optimizes our planet’s finite natural resources and minimizes waste. It’s called the circular economy and involves designing products with an eye toward their reuse, repair, remanufacturing, or recycling.
While certainly good for the planet, a circular economy achieves these aims without loss of income for manufacturers or decreased product quality for customers. In other words, companies can do well financially by doing good environmentally. In fact, Accenture estimates that the transition toward a circular economy represents a $4.3 trillion global growth opportunity by 2030. Circular business models have been embraced in many industries in Europe and are increasingly of interest to U.S.-based companies.
The concept’s positive society-wide value, as described by the Ellen MacArthur Foundation,stems from three principles—to reduce or eliminate waste and pollution, keep products and their composed materials in continual use, and regenerate natural systems.
It’s a powerful idea, one that has captured the attention of major global companies like DuPont, Cisco, Coca-Cola, Google, Walmart, Microsoft, and Nike. All are members of the foundation’s CE100 Network, created to provide a pre-competitive space for members to advance their sustainability agendas through collective approaches.
This is certainly the case at new member HPE (Hewlett Packard Enterprise), which is well underway in considering the entire lifecycle of its products—from resource extraction through end-of-use management—to minimize energy consumption and overall waste. The San Jose, California-based global IT company has set an ambitious target to increase the energy performance of its product portfolio 30 times by 2030, by purposefully designing products for easy repair, upgrade, or reuse.
“In a resource-constrained world, `business as usual’ is not a sustainable practice,” says Christopher Wellise, HPE Chief Sustainability Officer. He is referring to meteoric increases in the speed and capability of computers, which is fueling an explosion in the number of technology devices and data volumes, resulting in product obsolescence on a grand scale. According to Wellise, “In 2020, there will be more than 50 billion devices, up from 18 billion in 2015, and every couple of days we generate more data than since the beginning of history.”
At the same time, 30 percentof the servers in data centers are either unused or underutilized by more than 80 percent. “Most organizations are over-provisioning, buying more capacity and storage than they’ll ever need or use in their data centers,” says Wellise. “This results in `zombie servers’ that eat up energy but don’t do any work. We’re redesigning servers for customers to use these resources as they need them, eliminating idle capacity.”
Products also are now being designed to have more robust lifespans, durability, and residual value at the end of their use. For example, the company has launched a series of HPE Technology Renewal Centersthat buy back HPE and all other tech companies’ IT equipment. The facilities processed 58 million pounds of IT equipment last year, of which 89 percent was refurbished and remarketed. “We’re not only eliminating e-waste, we’re effectively decreasing the quantity of new manufactured products, thereby eliminating associated resource extractions and the emissions typical in a manufacturing process,” Wellise said.
Other CE100 Network members like The Enel Group are making similar strides. The Rome, Italy-based multinational energy company, which employs more than 69,000 people in 30 countries, has been a leader in the transition toward a zero-emission energy sector, with an ambitious target of fully decarbonizing its energy generation mix by 2050. To achieve this goal, Enel is gradually transitioning to renewable sources of energy—and this is just part of its circular economy story. “We are actively promoting the adoption of circular economy principles in all phases of our projects, starting with systematically measuring the circularity of procurement and suppliers,” says Luca Meini, Head of Circular Economy at Enel.
Circularity also is evident in Enel’s construction activities. For example, the company is offsetting the carbon dioxide emitted by machinery, using environmentally friendly paint and flooring, biodegradable machine oils, and recyclable materials. “We’re leveraging systems for concrete washing and recycling and using plant-based abrasives for sanding operations,” Meini notes. “Our business models also promote material and equipment ‘second lives’ and recycling.”
A company subsidiary, Boston-based Enel X, is the world’s largest provider of so-called demand response, which involves modulating their customers’ power consumption to balance the energy supply and demand on networks. “At times of peak demand, customers are paid to reduce energy consumption,” Meini explains.
The efforts of both companies have positively impacted their bottom lines. “There is business value in sustainability,” says Wellise. “In 2018, more than $312 million in revenue was associated with our sustainability-related practices and energy efficiency. The number will be even bigger this year, as more customers demand sustainability solutions and the focus of responsible investors continues to shift toward companies with sustainable practices.”
Russ Banham is a Pulitzer-nominated financial journalist and best-selling author.