THE ADOPTION OF CIRCULAR ECONOMY
The significance of CE stems from the fact that natural resources are scarce and maximization of the circularity of resources and energy within systems may lead to retention of some value from these resources at the end of their life (Ghisellini et al., 2016). The Natural resources are finite and being depleted ruthlessly, the consumption of resources is more than that can be replaced (Meadows et al., 2004). It is expected that by 2050, the population living on earth and enjoying growing wealth would be around 9 billion (Godfray et al., 2010), which will lead to the demand of resources to almost thrice of what it is currently. CE involves a systems approach where interdependence and holism are of utmost importance to manage the finite resources of the companies (Unal et al., 2018).
In the World Economic Forum (2014) Report, the Ellen MacArthur Foundation and McKinsey & Company have deduced that the adoption of the CE would generate an opportunity of more than a trillion USD for the worldwide economy. Macroeconomically, the adoption of CE model may result in enhancement of resource productivity by 3% resulting in cost-savings of 0.6 trillion euros per year, addition of 1.8 trillion euros to other economic benefits by 2030 (McKinsey & Company, 2015) and net material cost and saving benefits of more than 600 billion USD p.a. by 2025 through this restorative approach (The Ellen MacArthur Foundation, 2013). The World Business Council for Sustainable Development (2017) has asserted that the adoption of the CE can result in increased growth, competitive advantages and innovation along with reduction in costs, energy use and emission leading to a better supply chain and judicious use of resources. Even PricewaterhouseCoopers (2017a) has adjudged that ‘the CE is here to stay’ and the company has elucidated that the CE will open up the avenues to build competitive advantage and create profit pools, develop resilience and address significant issues faced by the businesses today (PricewaterhouseCoopers, 2017b).
In the literature, three levels of initiatives have been identified for the implementation of the principles of CE: the micro level of firms that relates to the initiatives specific to the firms classified on the basis of 3R's - reduce, reuse and recycle (Ying & Li-Jun, 2012), the second level is the meso level that incorporates the execution of eco-industrial parks, networks and inter-firm collaborations for optimum utilization of resources. Finally, at the macro-level, the initiatives undertaken by the government and policy makers are accounted for (Geng & Doberstein, 2008). Today, the countries are becoming self-reliant and aware of the requirement to switch to a newer system based on the principles of circularity (Bonviu, 2014).
According to MacArthur et al. (2015), the three principles that guide the CE cycles are as follows:
- • Strengthening the circularity of resources and energy by increasing the life of the resources either through biological or technical cycles.
- • Decrement in the negative effects of production setup.
- • Conservation of natural resources, i.e. equilibrium between consumption of renewables and the non-renewables.
For implementation of the principles of CE. Ellen MacArthur Foundation (2015) has delineated six business actions - the ReSOLVE Framework:
- • Regenerate - Based on the adoption of renewable resources and energy, reclaim, retain ecosystems wellness and enhance the natural bio capacity.
- • Share - According to the shared economy perspective, the significance of ownership is lost when the resources are shared between individuals. Resultantly, products should be designed such that they can be reused and they last longer.
- • Optimize - It is a technology centered approach. This strategy recommends use of digital manufacturing technologies, like sensors, RFID, big data and remote route to scale down the waste generated in production systems across supply chains in an organization.
- • Loop - This stems from the biological and technical cycles wherein the components and materials are kept in closed loops and emphasized on the inner loops.
- • Virtualize - The focus of this strategy is on the replacement of physical products with virtual products.
- • Exchange - Adoption of new technologies to improve the way in which the goods and services are produced. This implicates replacing obsolete and non-renewable goods with the newer renewable goods.
Apart from the ReSOLVE framework, the principles of CE can be implemented through the 3R’s - Reduce, Reuse, Recycle (Wu et al., 2014) or the 6R's - Reuse, Recycle, Redesign. Remanufacture, Reduce, Recover (Jawahir & Bradley, 2016) (Figure 1.1). The CE concept has altered the policies and innovation in the major
FIGURE 1.1 The different frameworks found in the literature to effectuate the principles of circular economy.
economies of the world, namely China, Germany, Japan and the UK. The extant literature on the circular economies and instances of the successes and breakdowns from the real world necessitate the integration of bottom-up and top-down strategies for implementation and evaluation of CE (Winans et al., 2017).