The principles of circularity

The circular economy is built upon several schools of thought that have been around since the late 20th _{century. In essence, the circular economy offers no fundamentally} new approach to sustainable development. Instead, it adds value through synergy: combining multiple approaches to one coherent strategy. Concepts most influential to the foundation of circular economy include the Cradle to Cradle® _{philosophy by} McDonough and Braungart (2002), the performance economy of Stahel (2006), the design principles of biomimicry as introduced by Benyus (1997), the industrial ecology of Lifset and Graedel (2002), the blue economy systems approach by Pauli (2010), and the natural capitalism view by Lovins, Lovins, and Hawken (1999). These schools of thought have been researched to identify their fundamental thoughts. Combined with contemporary interpretations of the circular economy, this analysis has led to the identification of five key principles that are fundamental to a circular economy. These are:

• organise reverse cycles; • be resource effective; • think in systems; • prioritise the future; • create mutual benefit.

While each of these principles is distinctly characteristic to the circular economy, there are strong interrelations between principles. A true circular economy embodies all five principles in coherence and acknowledges their relatedness. From a reverse perspective, these principles can be adopted by a company, such as Remeha, to organise its processes for a circular transition. Below, the five principles are further elaborated. Additionally, figure 3.2 shows a one-page framework that comprises the five key principles, each including three subordinate principles for elaboration.

Organise reverse cycles

In a circular economy, resources should be used in circular flows. This is one of the most essential principles of the concept and presents an obvious contrast compared with the contemporary economic system. In order to close the loop, so to speak, collection and treatment systems should be organised to recover and restore value from end-of-life products. These treatment systems include processes like refurbishment and recycling that return resources back to the value chain. These are the missing links that transform the current linear economy into a circular one. Then, the output (waste) of one process becomes the input (food) for another process, which effectively eliminates the concept of waste. Ideally, a circular value chain functions as a symbiotic network of different actors. Therefore, collaboration is needed across the supply chain. The development of reverse cycles primarily relates to logistics and process innovation, but can be greatly supported by product development strategies that promote resource recovery.

54!!!Chapter 3 Be resource effective

The circular economy aims to increase the effectivity with which resources are used in the economy. This includes, but exceeds using resources in closed loops, as covered by the preceding principle. The essence of resource effectiveness is to use resources to their full potential to create a positive impact. This suggests a focus on a desirable outcome instead of pursuing less undesirable results. By example, from this perspective the ideal would be to use resources in a way that repairs damage to the ecosystem instead of causing less additional damage. Utilising full resource potential means that resources should be applied such that they actively create value. First of all, a product or service needs to address a relevant societal need to give it right of existence. Second, the product must be constructed to use only suitable and necessary energy, materials, and components. The intensity with which the product is used by the consumer is also relevant here. A product that lies idle could be interpreted as wasted resources. This closely relates to user behaviour and to business models. For instance, a private car spends most of its time parked, serving no purpose. Sharing and leasing structures could increase the intensity of use by making one car available to multiple users. Besides considering if and how to use resources, the question of what resources to use is also relevant for effectiveness.

Think in systems

Systems are constructed from many interrelated parts whose actions influence the overall system’s behaviour. Systems thinking is an approach that aids in understanding how parts of a system interact and how they relate to the system as a whole. In terms of circular economy, the global system, in its broadest sense, is constituted from the cooperating environmental, social, and economic dimensions. Within this system, sub- systems – like NGOs, businesses, governments, and consumers – operate in non-linear and interdependent ways. Sectors, companies, and processes influence each other through complex relations, which makes the outcome of actions difficult to predict. Circular economy aims to optimise the total system performance rather than that of a single component. In order to do so, it is essential to recognise the existence of complex dependencies and to adopt a holistic perspective to assessing and optimising the impact of corporate activity. For instance, by considering the complete product lifecycle in the development process or by promoting interdisciplinary problem-solving.

Prioritise the future

The circular economy offers an approach that is fundamentally different from the contemporary status quo in economy and industry. These fundamental changes need time to be properly implemented in established processes and in most cases they also need time to bear fruit. Designing a product to increase its end-of-life value, only starts to repay when the product becomes obsolete, commonly after several years. Also on the business side, changes, like shifting from one-time sales to a product lease

model, can require high initial investments that only start to return after some years. Often, long-term objectives are subordinate to short-term gains. This tendency is also observed in Remeha’s business and product strategies, which commonly consider a future no further than three years. However, in order to realise and benefit from the circular economy, opportunities and consequences of actions should be considered from a more long-term perspective. Also the assessment and anticipation of risk, which is an equally relevant driver for change, should adopt long-term views. Only then can imminent future issues be affectively avoided, rather than addressing just the issues that manifest today. At this moment in time, the increasing risks imposed by the prevailing linear economy motivate and necessitate a swift transition to a different, circular system. Especially in this state of transition, a long-term perspective is required to anticipate risks, to envision a desired future, and to seize advantage. But as systems continue to change, a future-oriented approach continues to be relevant when the circular economy becomes more established. Organising processes with flexibility and diver sity creates a resilience that helps to anticipate constant change in the cor- porate environment.

Create mutual benefit

Like a linear economy, a circular economy exists to meet society’s needs for goods and development. The fundamental principles of supply and demand and the free market mechanism remain unchanged. Only the methods for using resources and the ways to create benefit change. When changing these methods, it is essential to organise every activity to create mutual benefit for different stakeholders. It is vital to a healthy economic system that there is no conflict of interest. Increasing resource effectivity by extending a product lifespan, but increasing revenue by selling more products could present a conflict. Business model innovation can offer new value propositions and revenue models that align the principles of the circular economy with an organisation’s profit-oriented strategies. In essence, all company processes should be organised to benefit from the transition to the circular economy. This also extends to the supply chain level. Collaboration between different actors within or across supply chains is essential in a circular economy. Such collaborations should be organised in a way that benefits all parties involved.