Jul 23, 2020
In this three-part-serial Tommaso provides a reflection on the concept of the circular economy, aiming to present a complex system in a comprehensive manner.
“Houston we have a problem” became popular after the success of the space expedition with the Apollo 13. Not everybody knows that it’s a wrong quote. The exact sentence was “Houston we’ve had a problem”. The main difference is that the popular version implies that we encounter a problem (present tense) and we don’t foresee a solution yet, while the original version implies that the astronauts already knew the solution (past tense). So for the astronauts, it was a matter of taking action together with the central control.
Today we are facing a very similar situation, but our shuttle is the earth, and we designers want to take action together with the companies. The first one, earth, is the origin of our resources. While the second ones, companies, are the engine of our economic system. In the middle, between the two, we as designers are trying to connect the dots, avoiding that a precise message would become incorrectly popular.
This present moment is exactly the same of that call from the outer space. What happened before the call from the space? We have seen a problem: our current economy is not sustainable for the earth, and not profitable for the companies. Both parts are sustained by their resources: natural finite resources on a side, financial resources on the other side. Still, both are ecosystems.
The basic principle of any “economy” is to give value to a specific good. To put it simply, everything has a price, in the economy. Whether you sell a product or a service, someone would pay for or trait something in exchange, so it has a value in the economy.
The most common model of the modern economy is based on a linear approach, easily summed up in “take-make-waste”. Meaning, you take material from the natural resources of the world, you use it to make a product, then you dispose of that product. And here is the gap. At the moment of discarding a product, it loses its financial value for most companies, and it becomes trash for the economy of the earth. The more materials we extract from our earth, the fewer resources we will have. All raw materials are finite sources, thus sooner or later they will end. And rather than enabling the regeneration of natural resources, we produce more trash that pollutes the environment.
The natural model reuses and recycles everything and anything. No resources are wasted. Just look at the rain forest or even the desert. Whatever lives there has a reason, every disposal is recycled or transformed. And if you remove just one tiny element of the system, you see the immediate effect to the other elements. Life on earth is circular – apart from the modern human models.
Let’s consider mobile phones, cars, furniture, clothes. All of these products have a value at the moment of entering the market. This economic value then decreases after the product is sold (usually, a car’s price drops of a third of its price as soon as you buy it). So those products lose their economic value when they become second-hand, which further decreases by time. That economic value drops to zero when time passes and their owners throw them away.
At the end of the life-time of that product, not the company nor the user gained anything more, they both lost the budget invested at the beginning. So it’s considerable spending for temporary usage.
Think about that old mobile phone that we all have in the drawer. We all have at least one or two mobile phones forgotten there. Now, remember when you bought it. And connect the dots until its life ended in the drawer.
To sum it up: the company gained only the profit of the first purchase, while the user spent that money and consumes its value while using the product, but the earth has been deducted by those finite materials and is given nothing better but trash.
As the astronauts, also designers are on a call to report a problem. And as well as the astronauts, designers know how to fix it.It’s now a matter of taking action together with our counterparts.
When the astronauts called, that precise moment was after 55 hours and 55 minutes from the beginning of the expedition. On the other side of the line, the answer was: “This is Houston. Say again, please.” -like if they couldn’t believe about that final word “problem”. And the commander in charge promptly said “Okay now, let's everybody keep cool. Let's solve the problem but let's not make it any worse by guessing."
The problem was that the tanks vented their resources of oxygen and water in the outer space. So the resources were not unlimited anymore, the astronauts had a limited capacity to live with, which drastically decreased to 4 days only. At this point, together with the central control, they agreed on aborting the mission in favour of the main priority: to bring the astronauts back home.
Our scenario at the present is very similar. Two ecosystems are collapsing because one of them has been taking from the other one, without compensation or regenerating. Hence it’s now time to abort the mission of linear economy, and it’s crucial to reconcile with mother earth by using only what we have taken until now. For doing so, we have to merge the two ecosystems in a circle.
The traditional economy has been based on the linear model, which relies on finite raw materials and energy. Instead, the new economic model is evolving its line and shaping it into a circle: the circular economy.
The circular economy is a model which involves different strategies. Some of them are already existing, and they refer to the materials, like reusing, remanufacturing, refurbishing and recycling. Some other business models are new, and they refer to the products, such as renting, leasing, pay-per-use and sharing. All of these startegies are selected with one common final objective: to extend the life cycle of products for as long as possible. Rather than keep producing waste, this model would enable us to reuse everything. When a product reaches the end of its life, its materials are kept within the economy wherever possible. The objective is to use those materials again and again.
The main difference between the two is that a linear model has limited growth for capacity and for time because it relies on a finite amount of resources. While a circular model aims to create a continuous cycle of materials and businesses, which by logic has no end of time or limits in growth. The connection among all strategies is based on the value of a service over the materials, and here comes the main benefit for current businesses.
As a service-based model, the circular economy lowers cost materials and improves customers retention. It enables action also in the lower markets while making more effective the presence in higher markets. And it’s part of the environmental and digital revolution sustained with funds by most governments.
This model is now being adopted by giant corporates, even though it has been already proved by other minor markets. Here some cases of newer sustainable businesses:
As for the Apollo 13’s mission, benefits are for both parts. Marrying the businesses and environment into one ecosystem is a formidable strategy that allows the two parts to benefit each other. Resulting then in a severe shift that promotes business models that are unlimited in time and not stressed by competition. At this point, it’s crucial to see how to take the first steps.
At 76 hours 42 minutes, Apollo 13 entered the Moon’s shadow and the astronauts could see stars that had been obscured by the cloud of debris. It was a magnificent sight, but with a bitter taste. After temporarily solved the problem, those limited resources of the shuttle forced the crew member to anticipate the return and so to abandon the Moon landing. The Apollo 13’ mission became popular not for reaching the goal of landing on the Moon, but for the enormous power of cooperations between people that has made it possible to save lives.
1970 was not only the year of the Apollo 13’ mission. During that same period, the European academic community started shaping the concept of circular economy as an ancient model from the past, trying to adapt it for today’s society.
In fact, we can learn from the past. Even the Romans and the Phoenicians were following a smart economic model. Once conquered foreign territories, both populations use to melt down the bronze and copper statues, then using those materials for producing weapons. In this way, they saved budgets on the whole process of extracting materials from mines.
Empowered by today’s technology we can transform the entire supply chain. For instance, we can identify the source of materials, how they are used, how long they last, and how to reuse them. Applying the circular mindset for today’s complex needs is feasible by adopting multiple approaches.
Considering all the strategies incorporated by the circular model, it’s possible to define two groups. The first supports the reuse of goods, extending their lives by repairing, re-manufacturing, updating, etc. The second turns the goods into resources through the reuse and recycling of materials. This rich range of opportunities automatically triggers the advent of new, alternative business benefits.
The long-term models generate long-term customer relationships, thus the circular economy relates to business models like rental and leasing, which make the users more loyal and engaged in a longer-term.
An important shift is in expanding through collaboration. So the same materials that you use are taken also by other companies in other industries. By cooperating with them you have the opportunity to offer/creating more services. Both large corporates and startups are already officially moving towards circular models to drive change across value chains and industries. But soon there will be no competition anymore among brands, the real profit will come from cooperation.
All business journeys are unique when starting the transition to circularity. A real shift is not an easy task, especially when traditional metrics are still apparently performing well and hiding the catastrophe in the (not that far) future.
The real cooperation happens when merging in the same network also the policymakers and universities, together with companies, as well as with suppliers and customers. All together in the same ecosystem where the goal is not anymore to do better than others but to do better than ever before. For this, being part of this new economic model implies not being left out of real economic growth.
Here we are now, in the very same scenario as those astronauts, with our call to action for all businesses: we are calling for cooperation.
Same as those astronauts did while having a broader view from the space, we see the bright lights far away and our view is still obscured by the trash we produced on earth. The mission might have changed, but there is no planet B for business, yet.