Discussing the Potential of the Circular Economy on Earth Day

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How can we add $1 trillion to the global economy by 2025 and create 100,000 new jobs within the next five years? By progressing into a circular economy (CE), according to an analysis by McKinsey, an American multinational management consulting firm. A CE revolves around making, collecting, recovering and reusing as opposed to the linear economy’s standard taking, making and disposing.

A CE could help curb the planet’s depleting resources by reducing waste through a restorative industrial system. Recycling helps, but its processes require energy use, and material properties may be downgraded so that they are unsuitable for many applications. Instead, a rising trend has consumers paying for the use of products such as washers, dryers, TVs and even clothing instead of buying them. Mud Jeans, Ricoh and Philips are among companies piloting product-as-service models.

Frans van Houten, CEO of Philips, says: “For business customers, we now sell lighting as a service: customers only pay us for the light, and we take care of the technology risk and the investment. In many cases, we also take the equipment back when it’s the right moment to recycle the materials or upgrade them for reuse.” He also believes that “by using materials more effectively, economic growth will be decoupled from the use of natural resources…to create more value.”

With the world population expected to grow to about 9.6 billion people by 2050, this seems to make perfect sense in dealing with increased product consumption. McKinsey estimates that annual consumption in emerging markets alone will increase to $30 trillion by 2025 and account for nearly 50 percent of the world’s total.

Large corporations, too, are piloting innovative business models based on leasing, product performance and extending lifecycles to help clients move toward a CE. IBM’s business model aims to keep industrial products in continuous loops to maximize residual value. Our Global Asset Recovery Services (GARS) division helps ensure that end-of-lease and client-owned IT equipment is refurbished, resold, disassembled or sold as parts, to be used for repair and maintenance work.

Unusable equipment and parts are recycled to recover materials. Since 2002, GARS has processed more than 1 billion pounds of machines, parts and material, and harvested and sold nearly 49 million parts. For 2015, GARS remanufacturing operations processed just over 332,000 laptops, which when stacked would reach approximately 3/4 of a mile higher than the height of Mount Everest. Since 2004, GARS has processed more than 3 million laptops, which if laid end-to-end and extended into the atmosphere would be more than 400 miles higher than the average orbit altitude of the International Space Station.

IBM is also teaming with the Ellen MacArthur Foundation and companies, cities and regions around the world to develop innovative solutions to help build the case for a CE and provide specific steps companies can take to join the journey. IBM has introduced a new CE Consulting Offering that gives companies a first maturity assessment on where they are and helps them develop and implement accelerated steps to a target process.

The true partners to helping a CE succeed are empowered consumers. Through social media especially, consumers are gaining more information about the environmental impact of products and urging and teaming with brands to create products and services designed to minimize waste. Many are also trying to meet their own product needs, as evidenced by the increase in farmers’ markets and community gardens.

CE thinking is giving new meaning to the old proverb “Waste not, want not.” If you use a commodity or resource carefully and without extravagance, you will never be in need.

Related Coverage:

Citizen IBM – Sustaining IBM’s Environmental Leadership, Wayne Balta

Global Program Manager, Cloud Communications; Managing Editor, IBM THINK Blog

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