Creating and capturing value in the circular economy

In our latest post, Dr Roberta De Angelis discusses her latest research on business models in circular economy organisations.

Now that we’ve entered what Paul J. Crutzen calls the Anthropocene, a new geological epoch marked by an unprecedented human impact upon planet Earth, how can we shift towards a global economy that builds prosperity within ecological boundaries?

To begin with, let’s look at some of the most pressing environmental concerns.

Current production and consumption systems are extremely wasteful. It’s estimated that every second one garbage truck full of textile is sent to landfill or incineration around the world. We’re consuming natural resources as if we have more than one planet at our disposal. Annual demand for natural resources has trespassed what planet Earth can regenerate in just eight months with Earth Overshoot Day occurring on 22 August this year.

“Viewing our natural environment as an endless reservoir of resources with infinite absorptive capacity has been taken for granted for far too long.”

Instead, how would a thriving, more resource efficient and resilient economy look? Can the mechanisms behind our economy be completely retuned on the basis of ecological connection and awareness?

Imagine moving away from the current linear-operating, dissipative industrial systems, where products, once manufactured taking into valuable resources, are sent to landfill at the end of their useful life, to recuperative systems where the concept of waste no longer exists. Products made of synthetic, mineral materials, would be designed for longevity, re-use and re-purpose so that the waste of one cycle of production and consumption equals to food for another cycle. Products made of biological, renewable materials would be designed to do no harm and safely decompose into the natural environment to build and restore natural capital.

You may be thinking how wonderful, waste equals food but also, is this attainable or is it just a distant, utopian vision of how an economy integrated within ecology could work?

Let me surprise you.

This is not science fiction and it’s been taking shape in what’s become known as the circular economy – as an economy offering multiple value creation mechanisms decoupled from the consumption of finite resources, circular economy initiatives are sprouting across different quarters including the business arena. And, this is because the circular economy doesn’t only address contemporary environmental and societal challenges but also enables companies to achieve competitive advantage by producing innovative products, becoming more resource efficient and enhancing reputation.

“It is estimated that a global economic opportunity worth $4.5 trillion exists if the principles of the circular economy are put into practice.”

So, what does it take for such an economy to emerge? Well, it certainly requires business model innovation, a topic I’ve been researching since 2012.

More recently, I investigated circular entrepreneurship, i.e. the exploration and exploitation of opportunities within a circular economy context. This recent project focused on Wasted Apple, a small, born-circular, Cornish business, producing handcrafted apple cider and juice from local apples that otherwise would have gone to waste.

At Wasted Apple, I investigated entrepreneurship from the angles of process and orientation. In addition to innovativeness, risk-taking and proactiveness I found that entrepreneurial orientation in a circular economy is qualified by embeddedness – creating value for the broader system an organisation is part of.

In terms of entrepreneurial process, Wasted Apple all started with recognising an ecological problem, i.e. to prevent apples from being wasted, and turning it into an opportunity. Whilst navigating through a range of difficulties and sticking to the centrality of ecological and social value creation, the organisation has managed to enter the market and to expand the range of traditional yet innovative products without losing sight of the circular logic – fruit that would otherwise go to waste is always in the loop!

Richard Buckminster Fuller, a renowned scientist for his ground-breaking work on renewable energies and innovative design, once said: “You never change things by fighting the existing reality. To change something build a new model that makes the existing model obsolete.”

It goes without saying that building a circular model is a complex endeavour involving multiple innovations across different levels including but not limited to the corporate sector. Encouragingly, business pioneers like Wasted Apple are putting Fuller’s ethos into practice and taking the steps necessary to make existing, linear-operating industrial systems obsolete.

Dr Roberta De Angelis is a Lecturer in Marketing and Strategy at Cardiff Business School.

Find out more about her research on circular entrepreneurship in Resources, Conservation & Recycling published by Elsevier.