What the Circular Economy Means for the Industrial Sector

The circular economy is a term you will increasingly hear bandied about in the boardrooms of leading companies. It's based on the idea that finite resources should be re-used rather than thrown away.

In a linear economy, resources are extracted, turned into products, and then, eventually, disposed of. In a circular system, resources are extracted, turned into products, and then recycled and made into new products.

Danish manufacturer Re-Match, for instance, recycles worn-out artificial turf. At its facilities in Herning, Denmark, the company says that it reduces, dries, and separates the turf into sand, rubber, backing and fibre so that components may be reused.

The company says that it achieves this without water, which reduces resource use. Further, by saving old turf materials from the incinerator, the company claims it achieves a net reduction of emissions of 398 metric tons CO2 per recycled field.

Belgian science company, Solvay, is another industrial manufacturer taking a lead in this space. The company provides the raw ingredients for thousands of other companies. It is trying to make its products and waste streams circular by design.

Solvay has partnered with Veolia and car maker Renault to create a closed loop cycle for Electric Vehicle batteries. Solvay is working on new chemical processes that will allow metals such as cobalt, nickel and lithium to be extracted, purified, and reused in new batteries. 

The concept of the circular economy is gaining momentum as sustainability moves up the priority list at industrial manufacturers. Environmental records are under increasing scrutiny as consumers and investors demand sustainable products and high ESG standards.

Reducing emissions and improving sustainable credentials is no longer an altruistic PR exercise. The market is now rewarding those manufacturers who are getting out front of this.

The Ellen MacArthur Foundation and Italy’s Bocconi University, for instance, studied more than two hundred listed European companies and found that companies that took a circular approach to its products and services had higher risk-adjusted returns on its stock and a lower risks of debt default. 

Leading manufacturers are realizing that sustainability initiatives are not only good from a market point of view, but they also translate into operational improvements.

Eco-efficiency is one of the pillars of the Global Lighthouse Network, an initiative run jointly by the World Economic Forum and McKinsey. The initiative seeks to highlight the practices and manufacturers that are driving the future of the industry by adopting leading edge technology and practices.

The forum says that “sustainability and competitive excellence are not only compatible, but, in fact, interwoven” adding that “transformations that leverage digital and analytics tools can augment not only green technology but also current production methods by bolstering efficiency.” 

Even small improvements multiplied globally can help the industrial sector dramatically reduce its carbon footprint. By extending the lifespan of products and design reuse into them, manufacturers can reduce critical material inputs, reduce energy use, and eliminate unnecessary waste.

Approximately 45% of greenhouse gas emissions are related to the products we use and the food we eat, according to the Ellen MacArthur foundation.

The foundation says that moving to a more circular economy will result in a more sustainable future by “[decoupling] economic growth from virgin resource inputs.”

This will have the benefit of not only reducing waste and emissions, but also encouraging the development of innovative new products and services and creating new jobs.