Wake up and smell the Circular Economy! In his latest column Yogesh Patel argues that the linear business model of take, make and dispose isn't just bad for the planet, it's bad business.
One of my key takeaways from Netflix’s Our Planet: Our Business was there is no such thing as waste, only resources in the wrong place. This, fundamentally, is the basis of what's called the ‘Circular Economy’.
I recently talked to over a dozen of my peers in the accountancy world and found many were unfamiliar with the ‘Circular Economy’, so I wanted to discuss this topic and highlight businesses who are benefiting from thinking differently.
Currently businesses and the global economy generally operates a linear model of take, make, and dispose. In contrast, the circular model is one of regenerate, repurpose, and reuse. It aims to redefine growth by decoupling economic activity from the consumption of finite resources whilst creating value for all of society. This is done by adopting the following three key principles:
- Design to entirely remove waste and pollution.
- Keep products and materials in use until they cannot be used anymore.
- Regenerate natural systems.
When laid out clearly like that, it sounds like we should all be operating in this way. Afterall, moving to this system is not just required for the survival of the planet but it makes good business sense too. A report by SystemIQ and the Ellen MacArthur Foundation identified new market opportunities of €320bn for Europe, mainly in the mobility, food and build environment value chains, which together represent 60% of consumer expenditure and 80% of resource use.
Unsurprisingly, the food industry is a significant generator of waste. According to the United Nations, if food waste was a country, it would be the third largest emitter of CO2 globally, and livestock factory farming uses 30% of the Earth’s land surface and contributes to more than 18% of global green gasses. There are huge opportunities to do the right thing while being rewarded for it.
Indeed the numbers speak for themselves. If you asked anyone five years ago, do you think they would have predicted the era of plant-based food or lab-grown meat? In just the last few months:
- Burger King launched the Impossible Burger (plant-based burger) across all its 7,200 restaurants in the US. Compared to a traditional burger, Impossible Foods can produce a burger using 75% less water, 10% of the greenhouse gases, and less than 4% of the land.
- Beyond Meat’s 2 May IPO was one of the largest first-day gains in recent memory, shares rose by 163% from the IPO price of $25 per share. The current share price stands at a whopping $167.29, with a market cap of $10bn. (Compare that to Tyson - the world's second largest processor of chicken, beef and pork - which has a market cap of $25bn).
In the UK, we have a string of companies who are embracing the Circular Economy - all of them show how much stronger a business can be when it brings the big picture into every part of its strategy.
Winnow – Helps the hospitality sector run a more efficient and sustainable kitchen by reducing food waste using AI.
Bio Bean – A clean tech company which recycles used coffee grounds to make biofuels.
LettUsGrow – Building the farms of the future, using tech to build vertical farms and empowering businesses to grow food near its point of consumption.
EnvoPap – Sustainable packaging manufacture
Bulb - the UK’s biggest green energy supplier, provide its members 100% renewable electricity from solar, wind and hydro and its gas is 100% carbon neutral.
The business case is huge. New innovation and revenue streams from existing waste, reduced input and operational costs through re-use, more motivated employees and customers, an ability to think differently and do more with what you already have. What’s not to like? How do we, as accountants, think all of this through and work out the business case?
Changing to this type of economy will take time as it will need political, corporate and consumer-led behavioural change. If we, as finance leaders, are more aware of the positive impact moving towards this model can have to both the bottom line and the planet, we can help our businesses too.
Want to read more about the circular economy? Have a look at some great work that the Ellen MacArthur Foundation has published. And of course, if you want to discuss this further, don’t hesitate to get in touch!