Unlocking $4.5 trillion in revenue by 2030: How adopting circular design can revolutionize businesses
The circular design process is a method of creating products and services that are sustainable, ethical, and socially responsible by using the principles of the circular economy that considers reuse, remanufacturing, refurbishing, and recycling.
The circular design focuses on using fewer resources for raw material extraction, processing, manufacturing, and distribution
Adopting circular strategies has huge financial benefits for businesses
Mature companies could reduce their exposure to volatile virgin resource markets, while startups could prioritize the use of new services that keep products longer in the value chain
Europe could generate a net economic benefit of €1.8 trillion and the world up to $4.5 trillion by 2030 by adopting a circular economy
In February 2023, The Circularity Gap Report stated that the amount of materials being reintroduced back into the global economy has decreased from 9.1% in 2018 to 7.2% in 2023. The report compared material extraction in different years— 1972, 2000, 2016, and 2021, and projected numbers for this year (2023) and 2050.
Raw material extraction is often influenced by the country's politics and natural disasters. In the EU, current recycling and waste recovery efforts only retain about 5% of all raw material value. Total material extraction has tripled since 1970 and almost doubled since 2000 as shown in Figure 1.
Design for Circularity
The surrounding materials are shaped according to our needs and desires to create products, services, and systems. Therefore, it's hard to find one single way that designs a product or service without waste. Currently, companies are deeply embedded in a linear economy approach.
This means when something is designed, the impact of the operation and the product's destiny at the end of its life is barely considered. This makes it difficult to go back and undo the effects of those decisions if they are later found to produce undesirable consequences.
Read: Cradle-to-grave: waste generation due to the linear economy
The three principles of the circular economy provide general guidelines with the open door to countless strategies to test and refine as the product fits within the circular system. Circular design teaches us to use resources more efficiently, so they can be reused again instead of being thrown away or recycled into something else entirely.
How much money does circular design save?
According to McKinsey, savings on material costs and innovation through a circular economy could generate a net economic benefit of €1.8 trillion by 2030 in Europe. The World Economic Forum says the world could save up to $4.5 trillion by 2030.
Figure 2 compares the cost-saving opportunity based on current development and circular scenario in the EU, published by McKinsey. See Figure 3 for the graph explanation.
Today’s total cost of ownership for mobility, food, and the built environment amounts to €7.2 trillion, which is around 55% of European GDP – €1.8 trillion in primary resource costs, €3.4 trillion, and €2.0 trillion in other cash-out costs and externalities, respectively.
By 2030 technology improvements and new business models could boost productivity and reduce the total cost of ownership by up to 15% on the current development path, but rebound effects could offset 20% of these savings (See Figure 3).
The net societal result could be approximately €0.9 trillion. By the end of this decade, the total cost of ownership would reach the total of €6.3 trillion – that includes €1.4 trillion in primary resource costs, €3.0 trillion, and €1.9 trillion in other cash-out costs and externalities, respectively.
Alternatively, a circular development path could make the system €0.9 trillion better than in the current development path. Annual primary resource cost could be €1.2 trillion, which is 32% less than today.
The analysis looked at the primary resource costs that represented major resources in – primary car and construction materials; real estate land; agricultural use of water and land, synthetic fertilizer, and pesticides; fuels; and non-renewable electricity. Other resource costs were included in other cash-out costs.
What are the strategies for circular design?
The circular design process comprises four stages:
Understand the user and the system
Define the challenge and your intention as the designer
Make as many iterations as you can with the idea, design, and prototype
Release your design into the wild and build your narrative
So, how do you ensure recycled materials remain free of harmful contaminants? The circular design requires the following strategies:
Safe & circular material choice is very crucial to make a very careful decision because once it's designed, it's very hard to reverse. We have to choose material that is not hazardous to humans or the environment. In the chemical industry, additives are most commonly used for different reasons, mostly to enhance performance. But there should be ways to design them out and replace them with safer and circular materials. The whole idea is to ensure the products and services we create fit within the circular economy.
Dematerialization is the strategy to minimize the use of raw materials and maximize the product as much as possible. We can reduce it by carefully thinking about how much we need in the first place.
Product life extension means keeping the materials and resources in the value chain for as long as possible. This means we have to design the products to be physically durable. We do this by introducing innovative approaches that allow the product to adapt to a user’s needs with time and circumstances. Products that are not easily damaged can be redistributed to be remanufactured or reused multiple times by the same or many different users. Second-hand furniture and clothing shops are great examples in this category, which takes care of repairing old unwanted products and finding new owners.
From products to services is one of the ways we can reduce the use of material by switching our business to service. Customers can have access to a product for a short period, such as by renting, after which they can return it to the service provider for a new user to be used.
Modularity looks into the section where the products are manufactured in a way that they are easier to repair, remanufacture, and reassemble. That means when the product is damaged, part of it can be used somewhere else.
Designing for inner loops considers sharing, reusing, remanufacturing, and refurbishing. The rule of thumb says the closer the loop is to the centre of the diagram in the butterfly diagram of the circular economy, the more valuable is the approach. So, the product is recommended to be designed for inner loops.
Why does measuring Circularity matter?
Design is the most important part of any project, and it has to be done very carefully with huge attention to detail. In design, Circularity is the method to eliminate waste in the first place so that we don't have to deal with them later.
A circular business model is an excellent way to give the company a great reputation and decrease material loss, energy consumption, and raw materials inputs. Closing a loop at the end gives the business a sustainable competitive advantage and greater trust and responsibility in the eyes of the investors. Not only that, it generates more value with fewer resources and energy and makes better relationships with clients and users.
Climate News Around
Global: Climate Scientists believe clean energy and technology are the 'survival guide' to avert climate disaster (BBC)
Global: By 2040, 60% of meat will be vegan or lab-grown (Veg News)
Global: Billions of people lack access to clean drinking water (npr)
Global: Wind energy is recovering from a 2022 slump (The Verge)
Global: Etihad accused of misleading customers with greenwashing in ‘net zero’ ads (The Guardian)
China: An oil tanker leaks fuel into the water into Color (Reuters)
USA: Elon Musk’s The Boring Company is facing criticism over its plans to dump treated wastewater into the Colorado River (Business insider)
India: Solar and wind dominate the country’s capacity additions in 2022 (Ember)
EU: Consumer and environmental groups have criticized European Commission's new vague rules for preventing greenwashing (Financial Times)
New Zealand: Cyclone Gabrielle displaced at least 10,000 people last month. Now the flood victims are too scared to go home (BBC)
UK: Hundreds of trees will be sacrificed for building Cambridge bus route to tackle climate change (The Guardian)
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