The shift from linear to circular thinking is one of the major challenges of our era. This is fascinating as most of the time humans walked the earth, we too, were a circular species. At one point when humans settled down and stayed in one location, we started to produce waste. It’s now time to go back to our circular roots. Fortunately, circularity is not something abstract and conceptual, but quite tangible in its application. And, it offers lots of exciting new opportunities once you shift to a circular way of thinking! Wins all around!
A circular economy is based on the principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural systems.
Ellen MacArthur Foundation
The Circular Economy is based on three core principles:
- Design out waste and pollution
- Keep products and materials in use
- Regenerate natural systems
We can’t uphold these core principles without sufficient information about the way we currently produce, use and dispose of products. This is where Life Cycle Analysis, Traceability and Extended Producer Responsibility come into play. You can see them as some of the building blocks of circular systems.
Life Cycle Analysis
Life Cycle Assessment / Analysis (LCA) is a method of quantifying the environmental impact of a product at every stage, from the production to the end of life stage.
The insights from LCA’s serve as input for decision making and sustainable development. The data gives organizations insights into areas of improvement.
A life cycle is made up out of five or six main stages; resources, (in processing and/or manufacturing, distribution, use and end of life.
The main question a life cycle analysis is trying to answer is; What environmental impact does this product have on the world? Knowing this from a wide range of products gives producers and consumers the possibility to make better informed and more environmentally friendly purchases.
To be able to answer this one seemingly “simple” question a wide range of other questions needs to be answered. Which Raw materials are used in the production, how are they grown and harvested, where do they come from, how are they transported? What are the impacts on biodiversity? Ocean acidification? What impact did it have on the soil? Are fertilizers used and where are those produced? How are the raw materials processed? Which kind of energy is used during processing? How much water is used during the production? What is the impact on the local environment of the factory?
You can see where this is going… We can go on for quite a while. Luckily many technical consultancies around the world are specialized in conducting thorough life cycle analyses of products and services. (e.g. ecoinvent)
Traceability
The black box situation of certain supply chains is making it almost impossible to push for social and sustainable development in certain sectors. Untransparent and complex systems, long supply chains and globalization in many cases lead to the untraceable distribution of raw materials and products.
Traceability or in other words, Supply Chain Traceability is the ability to track the impact of a product from raw material to the last moment at the end of life stage.
“It is the capacity to verify the history, location and status of any item by means of documented identification”.
Tracing a product throughout its life opens up a wide range of opportunities for improvement; identify areas of sustainable action like decreasing waste, shortening supply chains by eliminating unnecessary steps, educating consumers on the most sustainable end of life actions, improving circularity of products and raw materials, minimizing overproduction and optimizing distribution routes. Digital traceability technologies give us the opportunity to get a better more holistic understanding of our supply chain and consumer systems. Tony chocolonely’s for example is the first chocolate producer that is able to track and trace its complete supply chain from bean to bar. Through tracing they can fight child labour in the supply chain and ensure fair wages.
Traceability is crucial, we simply cannot tackle social and sustainable challenges in our production and consumptions systems without having a deep understanding of these supply chains and systems.
Besides that many products can’t be tracked throughout their supply chain we have a global issue of closing the gap between the end of life stage of a product and the raw material stage.
A product flows through five stages during its full Life Cycle; Raw Materials, Production, Distribution, Final Consumer and Waste and Recycling. In most life cycles the moment a product goes from the distribution to the final consumer stage the producer loses the ability to trace the product. Not having proper data about what happens to products in stages of consumerism and waste and recycling makes it harder to efficiently set up circular systems.
“In addition to optimizing available resources, facilitating the reuse of materials, authenticating products, and ensuring fair and sustainable trade, traceability allows companies to take control of their products’ carbon footprints. End-to-end traceability is the key to product life-cycle analysis, which leads to understanding and controlling the environmental and social impact of any type of product.”
Extended Producer responsibility (ERP)
“Extended Producer Responsibility is a concept where manufacturers and importers of products should bear a significant degree of responsibility for the environmental impacts of their products throughout the product life-cycle, including upstream impacts; the selection of materials, impacts from manufacturers’ production process itself, and downstream impacts from the use and disposal of the products. Producers accept their responsibility when designing their products to minimise life-cycle environmental impacts, and when accepting legal, physical or socio-economic responsibility for environmental impacts that cannot be eliminated by design. “
Ways producers can uphold responsibility
Designing for longevity
Designing for longevity, meaning that the product is produced to sustain as long as possible, minimizing the environmental footprint and optimizing efficient use of resources. Many products are still produced with the intention to break down within a certain period of time, this forces consumers to buy new products more frequently, which of course creates financial gains for the producers. This type of profit only thinking belongs to the past.
Managing or paying for end of life stages of a product
When a product eventually gets to the end of life stage after being through the stages of the waste hierarchy (The six r’s) it needs to be properly recycled. Or when recycling, unfortunately, isn’t possible and the product turns into waste, this waste needs to be properly disposed of and paid for. This is especially important for hazardous waste like toxic plastics, cleaning products, batteries and tech products.
True Pricing
The prices we pay for products and services is known as the market price or retail price. And since most people haven’t studied economics, we’ll go ahead and say that most people will assume that the market price equals the production cost of something plus a profit margin for the seller.
At the moment, you can buy a Big Mac in the US for $5.65. However, back in 2013, the true cost of a Big Mac was calculated at $12,00. The true cost? Yes, because there are other expenses that are not reflected in the market price of a Big Mac. A true price is built on five capitals, manufactured capital, financial capital, social capital, human capital and natural capital. In many cases only. True cost accounting is only possible when companies trace their product throughout the supply chain, uphold extended producer responsibility in all stages and have proper insights into the direct and indirect social and environmental impact of their products.
Do you want to dive deeper into true pricing and true cost accounting? It’s your lucky day. Pamela wrote an in-depth piece on the topic that will provide you will all the info you need, you can hop over and read it here.
Happy Sprinting
Minou & Pamela
