This post was originally published in consultation with Donald Matthew, who retired from KPMG in Canada in October 2022.
It's an oft-repeated buzzword in manufacturing, yet the concepts behind the "circular economy" are as old as the industry itself. For decades, if not centuries, makers of every stripe have sought ways to reduce or eliminate waste from their productions through a mix of strategies. But while sustainable practices can be spotted throughout Canada's manufacturing community, more work can be done to complete the loop.
First, a primer. The "circular economy" describes a production and consumption model designed to have a restorative and regenerative impact on the environment, thereby responding to modern-day pollution and climate change challenges, rather than adding to them—while also providing commercial benefits and advantage. More than an updated catchword for recycling, circular-economy models entail a broad mix of activities at all manufacturing stages, from material selection to procurement, product assembly to refurbishment, waste diversion to reuse, and so on.
You don’t have to look far to see the circular economy in action. Consider, for example, aircraft component manufacturers who have long been in the practice of collecting every last piece of aluminium waste and melting it down for future reuse. Or greenhouse clients who have shifted their entire production schedules to the daytime in order to make the most efficient use of solar energy. We’ve also seen aggregate industry players adopt leasing models that see their pit materials applied, recovered, and reapplied to different jobsites, stopping only to remove more product from their pits when demand demands.
We can look even further back than this. In a recent conference with Indigenous leaders, our team was reminded that the idea of a fully sustainable production model has been embraced by Indigenous communities for generations on end. They may not have used the term circular economy, but the concept was in effect all the same.
This is all to say that the circular economy is nothing new. Neither is it something that requires large-scale transformation or investments to realize today. As we’ll examine in this and future posts, there are simple and accessible steps that manufacturers can take now that will have lasting financial, workforce, and reputational benefits.
The need in Canada
Immediate climate change challenges have pushed circular production models to the top of the agenda. As a result, the circular economy is coming of age worldwide. Even still, a recent study indicates that Canada is only 6.1 per cent circular and has much to learn from more mature countries (e.g., the Netherlands, Germany, France) when it comes to fashioning the mindsets, facilities, and supports to go further.
Canada, in other words, has much to gain from pursuing a more circular economy. Among the most motivating reasons include:
- Prosperity: KPMG research shows that the circular economy has the potential to unlock $4.5 trillion of economic growth by 2030 and $25 trillion by 2050, as well as to create over a million jobs in the next ten years—not necessarily all in core functions or fields but inclusive of enabling and indirectly circular jobs.
- Environmental stewardship: It’s been estimated that as much as 45 per cent of global emissions come from product manufacturing related to embodied carbon. The ability to divert waste, preserve resources, and eliminate harmful emissions—and do so permanently—is critical to addressing very real environmental challenges. Manufacturers play no small part in moving the needle, and those that do will be seen as leaders in their respective fields.
- Supply chain positioning: Consumers and investors are giving more weight to Environmental, Social & Governance (ESG) factors when choosing where to spend their money. This is placing downward pressure on all players in the manufacturing supply chain to embrace more environmentally-conscious processes and materials to keep their position in the chain.
- Controlling costs: The ability to repurpose or reallocate materials helps to control costs, streamline processes, and maintain a steady flow of resources, among other benefits.
- Workforce attraction and retention: Today's talent is placing a higher value on employers who share their desire to make positive environmental changes. Companies that can demonstrate a meaningful commitment to making those changes are more likely to be "employers of choice."
- Regulatory compliance: Many countries are moving toward net-zero goals and climate change initiatives. In the process, they’ll continue to roll out industry-specific rules and regulations concerning the elimination of various materials, reduction of emissions, use of recycled materials, and so on.
The need is real, and the advantages are clear. For Canada’s circular economy to truly take hold, however, we must look beyond the buzzwords and misconceptions to go further with a model that has already proven beneficial for centuries.
In our next post, we'll break down the five elements of a circular model and explore how these can be easily adopted within the manufacturing space.
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