At Impact Labs, we engineer business to scale nature positive impact.
To reach nature positivity, businesses need to reduce their environmental impact and increase their impact investing. This journey has to consider and embrace the principles of circularity whenever it is possible. Business models can be re-engineered to embed circularity in all business operations, allowing for a more comprehensive view rather than solely sustainability.
Our vision for circularity involves integrating social and environmental considerations into every aspect of the supply chain. By reshaping traditional practices, we aim to minimize waste, maximize resource efficiency, and create regenerative systems that benefit both people and the planet.
Circularity is also one of the multiple ways to explore post-growth models for the companies and to reduce over-production and over-consumption.
Adopting circular economy principles could, by 2030*:
- generate up to $4.5 trillion in economic benefits
- save up to $600 billion in material costs
- reduce material consumption by 35% compared to the linear model
- help reduce waste by 50%
- reduce greenhouse gas emissions by up to 45%
*according to the Ellen MacArthur foundation
Source: Ellen Macarthur Foundation.
However, on the road to circularity, we are not headed in the right direction. The circularity gap reports released by the Circle Economy Foundation yearly since 2018, show that our world is suffering a circularity gap.
The world was 9.1% circular in 2018, and fell to 7.1% in 2023. While discussions and debates around circularity have significantly developed to guide citizens, states, and businesses, global circularity is still in decline and consumption continues to accelerate.
⦿ Between 2018 and 2023, circularity has dropped by 21%.
⦿ Between 2018 and 2023, we have consumed 28% of all the materials humanity has consumed since 1900.
⦿ As HDI rises, so does material consumption, and consequently pressure on the environment.
⦿ 6/9 planetary boundaries have been broken largely due to the impacts of the linear economy.
Achieving circularity is thus crucial for our planet, and it is the responsibility of all stakeholders: states, citizens, and businesses. Our position at Impact Labs is to guide businesses to find their way towards circularity.
Let’s first look at the key principles of this concept before diving into the main frameworks that businesses can follow to reach circularity.
WHAT IS CIRCULARITY?
Our current economic system is linear: we take materials from the earth, make products from them, and eventually throw them as waste. Circularity is a shift from this traditional linear economy to a regenerative model where materials are either safely returned to the earth, or shared, maintained, reused, redistributed, refurbished, remanufactured, and recycled.
The Ellen MacArthur Foundation is a pioneer in circularity. Its butterfly diagram shows two main cycles in a circular economy system: technical and biological.
Biological Cycle
It returns biodegradable materials to the earth to regenerate nature.
example
Patagonia’s Regenerative Organic Certification promotes and supports farming practices that enhance soil health, biodiversity, and ecosystem resilience.
Their ROC aims to go beyond sustainable farming by focusing on soil health, animal welfare, and social fairness. Patagonia also uses organic cotton and recycled wool in their products, ensuring these materials can be safely returned to the earth at the end of their lifecycle.
Technical Cycle
It relates to products that are used rather than consumed. This cycle keeps products and materials in circulation through loops, emphasising that inner loops are where the most value can be captured by keeping the product as a whole.
Before they reach the stage of recycling, products should be designed to be remanufactured, reused, shared, or maintained.
example
Fairphone designs smartphones with a modular architecture, allowing users to easily replace or upgrade individual components like the battery, camera, and screen. This extends the lifespan of the products and reduces waste.
There are three key principles around circularity, which can be classified at the design level, use level, and system level.
1
Eliminate waste and pollution: involves designing products for reuse, repurpose, and remanufacture. This is where the power of regulation comes into play to push companies to eco-design products. However, eco-design is not enough; products should be designed with durability at their core.
2
Circulate products and materials at their highest value: focus on increasing the durability and lifespan of products and materials, ensuring they remain in use for as long as possible and retain their value throughout their lifecycle.
3
Regenerate nature: emphasises the shift from extraction to regeneration, supporting natural processes, and allowing ecosystems to thrive. This system-level approach involves practices that enhance biodiversity and restore ecological health.
Now that we have seen the main concepts behind circularity, let’s dive into two existing frameworks.
RESOLVE FRAMEWORK (2015)
At the business level, Airup and the Ellen MacArthur foundation identified six actions that businesses can put in place towards achieving circular business models.
Impact Labs uses this tool as a basis to guide clients towards circularity. ReSOLVE is a tool for businesses to create circular strategies and generate growth. These actions increase the use of physical assets, increase their life, and shift resource use from finit to renewable sources. Each action reinforces the others.
Regenerate Focusing on restoring and enhancing biodiversity. It involves returning biological resources to the biosphere and aligning consumption and production processes with natural systems to support ecological health.
Companies following such principle include Nespresso with its AAA Program that promotes practices to protect and restore ecosystems on coffee farms.
Share Emphasising the sharing of assets like cars and apartments and reusing resources among multiple users. By broadening and lengthening the consumption cycle, products are shared to prolong their longevity and reduce waste. This is the case of BlaBlaCar which encourages the sharing of cars rather than ownership of one.
Optimise Aiming to increase performance, improve efficiency, and reduce costs through the use of data and digitization. It also seeks to lower carbon footprints, reduce commute times, and enable business activities to be conducted from desired locations, all contributing to circularity. This is the case of companies like Cisco which uses high-tech to increase efficiency.
Loop Creating closed-loop systems where materials and products are reused, repurposed, and recycled. This approach ensures that resources are continually cycled back into use, minimizing waste. For instance, Patagonia remanufactures damaged products and recycle them.
Virtualise Transitioning physical activities to virtual formats. For instance, delivering online lectures, conducting meetings via apps such as Skype, and replacing traditional video stores with over-the-top platforms (OTT) such as Netflix. This shift reduces the need for physical resources and lowers environmental impacts.
Exchange Promoting the adoption of new technologies such as additive manufacturing (3D printing), to create innovative products and solutions. By embracing advanced technologies, businesses can reduce material usage and waste while increasing customization and efficiency. This is the case of Tesla which is promoting the use of a new technology on the market.
These six actions can act as the roadmap to circularity for businesses. Moreover, with increasing regulation on circularity, it is in businesses’ interest to uphold circularity principles such as the ones part of the ReSOLVE framework.
Deep dive into the Product as a Service model
Now that we have seen the key principles of circularity and frameworks that can be used to reach it, let’s dive into the Product as a Service (PasS) model that shifts the focus from selling a product to providing a service from a product, emphasising use over ownership.
Services can be offered through leasing of subscription models. The PaaS model upholds the principles of circularity by encouraging companies to design durable, maintainable products that can be reused, refurbished, thus minimising waste and maximising resource efficiency.
Left: Linear model: manufacturers sell their product and the customer takes ownership.
Right: Circular model: manufacturers offer products and services but retain ownership of the product.
Source: Health Food Chain Safety Environment.
Interface, a best-in-class in circularity, is a flooring company. Instead of selling carpets, Interface leases them to customers in the form of multiple carpet tiles. This ensures that carpets are returned to interface at the end of their lifecucle, allowing for easier remanufacture and recycling, thus closing the loop and reudicng waste.
As part of their circular strategy, Interface operates the ReEntry recycling program, a third party certified system that facilitates the collection and recycling of old carpet tiles, converting them into new products. The ReEntry program reduces the need for virgin raw materials, closing the loop on carpet materials.
Interface’s commitment to circularity is evident in their achievements:
- Each year, they divert millions of pounds of post-consumer carpet from landfills through their ReEntry program.
- As of the latest reports, 52% of materials in their flooring products are recycled or biobased.
- They have achieved a 97% reduction in market-based greenhouse gas emissions at carpet manufacturing sites since 1996 (Interface Investors).
Interface’s PaaS model guides them to reaching their carbon-negative objective by 2040 through reducing waste and promoting the efficient use of resources. The PaaS model is supported by digital solutions. Data is used to optimize the performance and lifespan of their products, including monitoring usage patterns and maintaining carpets proactively. This ensures they remain in good condition for longer periods. Such digital tools also help with more efficient product management.
Interface’s PaaS model offers significant economic benefits both for the company and their customers. The latter benefit from lower upfront costs and access to high-quality, well-maintained products without the burden of ownership. Interface benefits from a steady revenue stream and the ability to innovate and improve their products continuously.
Interface’s benchmark demonstrates that the adoption of the PaaS model can help businesses transform their operations to align with circularity principles.
Regulation timeline (EU)
Regulation at the state level is crucial for businesses to engage in circularity. At the European level, the circularity timeline is as follows:
The Ecodesign for Sustainable Products Regulation came into effect on July 18th 2024 to replace the 2009 Ecodesign Directive. It aims to significantly improve the circularity of products placed in the EU market by setting ecological standards on a broad range of products. The ESPR is part of the European Green Deal, which is a policy package aimed at making the EU carbon neutral by 2050. The circular economy action plan has different policies, and the ESPD aims to make sustainable products the norm.
The ESPR wants to cover the broadest possible range of products, aligning with the EU “Right to Repair” (obligation for companies to repair damaged products), and boost circularity, durability, reusability, upgradability, and repairability.
In addition to the criteria, the ESPR introduces a digital product passport for all regulated products to make sustainability information instantly available to supply chain actors, regulators, and consumers.
Green Deal policy framework around ESPR (green) and the ESPR’s relationship to the Ecodesign directive (blue).
Source: Ecochain.
The road to circularity is an emergency for businesses seeking to have a nature-positive impact. At Impact Labs, we are committed to guiding enterprises through this transformation by embedding circularity into every aspect of their operations. As highlighted by the Ellen MacArthur Foundation, the potential economic, environmental, and societal benefits of adopting circular economy principles are substantial, promising reductions in material costs, waste, and greenhouse gas emissions.
However, the path to circularity is challenging. Despite increased awareness and discussions around circular economy principles, the global circularity rate has been in decline, demonstrating the urgent need for action from all stakeholders, including businesses, governments, and citizens. The statistics are clear: our current trajectory is unsustainable, and immediate efforts are required to reverse the trend.
Impact Labs’ approach involves leveraging frameworks like the ReSOLVE model and adhering to evolving regulations such as the EU’s Ecodesign for Sustainable Products Regulation. By doing so, we help businesses comply with regulatory standards and thrive in a circular economy. Examples from industry leaders like Patagonia and Interface illustrate the benefits and viability of circular business models, such as the innovative PaaS model.
At Impact Labs, we are dedicated to engineering solutions that drive this transformation, ensuring that businesses not only contribute to but lead the way in creating a regenerative and resilient economy. But, what are the steps for businesses to reach circularity? What technological innovations can they use to facilitate this transition? Stay tuned for our next article!
Emma Warter
Junior Sustainability Consultant
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