On the roundabout

The circular economy is coming of age, and the timing is ideal. As pressure builds to make more sustainable use of our planet’s natural resources, manufacturers are increasingly motivated to reduce or eliminate waste from their production lines.

In our first exploration of manufacturing and the circular economy, we looked at how restorative and regenerative production and consumption models have been in motion centuries before circular economy became a boardroom buzzword. We also explored the social, environmental, and business cases driving circularity in all manufacturing stages, be it material sourcing, product assembly, product refurbishment, waste management, and beyond.

Pillars of circularity
All told, there are many reasons why the circular economy is worth pursuing. But not every curve turns 360 degrees. To keep things spinning in the manufacturing space, you need to know what elements actually make the circular economy circular. The “value hill” shown here offers a high-level view. 

Source: KPMG (2019): Circular Revenue Models. Adapted from The Sustainable Finance Lab, 2016. 

Let's take a detailed look:

1. Using waste as a resource: Circularity in manufacturing relies on the use of renewable, reusable, eco-friendly materials. Moreover, it is about incorporating methods to capture leftover materials or waste that would have traditionally been earmarked for the landfill and working them back into production. As noted in a previous post, we already see this happening among aircraft component manufacturers who have long been in the practice of collecting aluminum waste and remelting it for future use.
2. Rethinking the business: Yes, between different revenue- and operating models, circularity can make money and unlock savings. It just takes a bit of clear-eyed thinking around the adaptation of rental-, leasing-, or pay-per-use programs.
3. Preserving and extending what's already been made: This is the old-school stuff—repairs, refurbishments, and proactive maintenance strategies—just done more deliberately and strategically. This, in turn, allows manufacturers to preserve the highest possible value of their products for as long as possible.
4. Incorporating systems thinking: This means looking for opportunities to form interdependencies within (or even outside) your value chain. This is already being done in certain manufacturing sub-sectors, where companies are developing robust internal innovation programs, engaging in collaboration arrangements with academia and the public sector, and establishing online asset-sharing marketplaces.
5. Collaborate to create joint value: The company- and industry silos of old are crumbling. Today, business relations are becoming more dependent. We see this happening in manufacturing, where players are working together more to design things differently, and the circular economy is part of that discussion.
   

Ahead of the curve
The case for circularity is becoming clearer by the day. Even still, we often speak with manufacturing clients who view the transformation as too expensive, too complicated, or too time-consuming.

In reality, embedding circularity in manufacturing does not require large-scale investments or ground-shifting change. Simple and effective practices (e.g., design for disassembly, reverse logistics, engaging with downstream customers on evolving perspectives, material recycling, etc.) have been used for decades, and each can be adopted in small, manageable steps.

Case studies in circular manufacturing are also easy to find. Take, for example, the methods already being used to separate and repurpose materials in the retail and consumer goods space, such as retailers embarking into branded second-hand stores. In these cases, the retailers are building durability into their proprietary manufactured products so that customers can return them at a later date for the retailer to resell. And, as we noted previously, airplane component manufacturers long-ago implemented ways to collect and repurpose leftover aluminum from their processes.

One misconception is the idea that circularity is all about recycling. It’s true that finding a new use for used materials and assets is part of the formula, but it’s only one way of extending the lifecycle of the things we create and reducing overall waste. For the circular economy to take full shape, recycling must be part of a broader strategy that includes repairing, remanufacturing, and sharing resources.

Coming full circle
Ultimately, pursuing circularity in manufacturing won’t be an overnight, game-changing transformation. It will be the result of taking a new look at traditional linear processes and implementing ways to make the best and most continuous use of your resources, much to the benefit of the planet and your bottom line.

You don’t, in other words, have to go around and around on this. Just once around will do.