Circular economy means a rethink for business

By | June 13, 2012

BUSoM-Circular-economyI recently presented a keynote speech in Amsterdam at  the launch of a circular economy study tour for Business Schools, organised by the Ellen MacArthur Foundation. The circular economy is a generic term for a new industrial economy that is restorative and in which materials flows are closed loop. Instead of consuming scarce resources, that either end up as carbon dioxide in the atmosphere or as waste in landfill, the circular economy envisages a virtuous circle which utilises renewable energy and which produces goods which are recyclable and generate no waste. A recent study by McKinsey and company commissioned by the Foundation used detailed product level modelling and estimated that European manufacturers could save $320 Billion pa in the transition phase and up to $630 Billion in an advanced Scenario.

The circular economy requires us to rethink all aspects of business, for example:

  • Rethink supply chains – can we manufacture locally more efficiently than overseas? Can we recover used products on a local scale even if initial manufacture is centralised?
  • Rethink design so that products are more durable and capable of recovery or remanufacture
  • Rethink manufacturing and operations management – how can we secure renewable energy and what new technology and processes do we need to build in recycling potential in our products?
  • Rethink financial models and accounting systems – how can we demonstrate the economic viability of our new systems? At which point does economic viability tip in favour of product recovery?
  • Rethink sales and marketing – should we move to a leasing model, with the manufacturer retaining product title and responsibility for its recycling? How can you break the kudos of “ownership”?

The study tour showcased some companies in the Netherlands that are already implementing circular economy approaches. In and around Bradford there are also several companies engaging with new ways of business which fit the circular economy concept. With its strong tradition of innovation and enterprise I am sure Bradford and the Leeds City Region have the potential to be leaders in this arena.

The purpose of the Ellen MacArthur Foundation study tour was to attract the interest of more business schools to teach the concepts of the circular economy, so I am sure businesses will be hearing much more on this topic. The Foundation is also working closely with Schools, to educate our young citizens about new economic models.  Bradford University School of Management will be launching its own distance learning MBA in Enterprise, Innovation and Circular Economy next year. For the School engaging with the ideas of the circular economy means keeping ahead of the game in terms of new economic developments, and for the city the circular economy has major implications for economic regeneration.

About Dr Sarah Dixon

Dr Sarah Dixon, Dean of Bradford University School of Management, completed her MBA at Kingston University, subsequently joining them where she held a variety of roles, culminating in director of postgraduate programmes for the Faculty of Business and Law. Gaining a DBA from Henley Business School in the interim, she went on to research activity at the University of Bath taking on the role of head of MSc programmes.

Her business career at Royal Dutch Shell Group included petrochemicals business management in Vienna and Moscow and later positions in strategic planning and mergers and acquisitions in London. She moved into business consulting as director of the strategy consultancy, Albany Dixon Ltd before joining the School in September 2010.

Specialties: Strategy, Organizational change, Dynamic capabilities, Organisational learning