One of the hardest challenges business leadership faces when they have set their big hairy audacious goal to ‘circularize their company’, is how to make this real and tangible. Rome was not built in a day, and certainly the integration of circularity into the company and its strategy was not either. However, from our experience, we have three messages which we would like to share, perhaps not buildable in a day, but hopefully giving you results fairly quickly.
1. Aim high, but start with a pilot
We see a lot of companies these days with ‘circularity’ or ‘circular economy’ as one of their strategic pillars. The associated ambitions aim high with for instance 50% circular inflow of materials or 100% design for disassembly. Great ambitions, that need an iconic pilot project to make it tangible for key stakeholder groups like your customers and employees. A good example is Auping with its circular matrass. This iconic project has elements in it which we deem essential for a good pilot, like:
1. a clearly defined product and/or business unit, with an opportunity to enter a new consumer market;
2. learning as a company about: ‘what does this mean in terms of skillset of my people?’, ‘how do we need to adjust our operational processes?’ and ‘how do we optimize the return logistics of the circular matrasses?’.
After a circular pilot project, the next step is to take these learnings and scale up circularity in the broader company.
Generating revenue is essential
We deliberately put generating revenue, not profit in the message. A circular business model should generate revenue, which in essence proves that customers want to pay for your circular product or service. However, after a while, the financial business case should be a positive one, with revenues exceeding the costs and investments made. How long this period lasts depends on some variables, such as:
1. the appetite of the company to invest;
2. which (circular) revenue model is chosen.
With ‘pay-per-use’ and ‘rent’ models, a manufacturing company bears the costs of manufacturing a product, but revenues slowly rise when using the product or service (for more information, follow this link). When a company decides to use the revenue model of ‘sell-and-buy-back’, revenues come in more quickly, but create a future legacy. This requires clear choices with important implications to think about, before taking a circular product or service to the market. A company like Mitsubishi created the successful concept of M-Use, in which the customer pays for ‘vertical mobility’ of an elevator. Mitsubishi uses a mix of circular revenue models to optimize its market position.
What gets measured, gets managed
Ambitions generally include a concrete number to work towards, e.g. KPN has the ambition is to become ~100% circular by 2025. The first challenge here is how to measure your baseline/starting point, and then how to measure progress towards the goal. Together with the World Business Council for Sustainable Development (WBCSD) we developed an open source, sector agnostic framework to measure circularity on a product, business unit or company level. The adoption of this framework called Circular Transition Indicators (CTI) is rapidly increasing, as it is a framework for business, by business. One of the main reasons is that it provides companies an opportunity to measure their circular performance, but also analyze where opportunities lie to improve circularity and steer the business. One example is Dutch Railways, which indicated the following:
1. “By measuring circularity, we can perform sensitivity analyses on the impact of our decisions.”
2. Furthermore, they indicated that measuring circularity “enables us to steer decision making on different levels: from business unit level to operational procurement”.
Do not wait, start or accelerate now
Integrating circularity is a longer-term strategy, which takes time to materialize, like Rome... However, that does not mean you cannot start today! The best way to walk the path is to start now and accelerate immediately, so that your company is ready to seize the opportunities ahead. The future is bright and circular…