- Strategy & Partners
- News & Views
- My IIRSM
Concept of the circular economy
Date of Issue: Wednesday, 22 June, 2022
As risk managers, environmental risk can be part and parcel of our role. Here, partner Barbour takes a look at what we need to navigate if we are to achieve a circular economy.
Today’s throwaway economy is fuelling climate change.
Mass production techniques and a consumer lifestyle of short-life disposable products such as mobile phones, trainers, clothes, white goods and cars has produced an enormously wasteful ‘take, make, throw away’ society – a linear economy. Indeed, resource extraction and processing are the source of half of all greenhouse gas (GHG) emissions and more than 90% of biodiversity loss and water stress.
Despite world leaders committing to limit climate change to 1.5°C at the 2021 COP26 summit in Glasgow, global consumption of materials such as fossil fuels, metals, minerals and biomass is expected to double in the next 40 years, while annual waste generation is projected to increase by 70% by 2050.
In a linear economy, raw materials are extracted and processed and transformed into products that consumers use until discarding them as waste, with little concern for the consequences or their ecological footprint. It prioritises profit over sustainability.
A circular economy decouples economic activity from the consumption of finite resources and is based on three principles:
The linear economy focuses on profitability, irrespective of the product life cycle, whereas the circular economy targets sustainability.
Underpinned by transitioning to renewable energy and materials, the circular economy entails redesigning products to be more durable, reusable, repairable, and recyclable, and therefore kept in circulation for as long as possible. It also means changing the way goods and services are used and rethinking consumerism.
The UK’s ambition to move to a circular economy is reflected in the government’s Circular Economy Package (CEP) and the approach of the UK to transpose the CEP measures. And the Environment Act 2021 will transition the UK to a more circular economy, encouraging - amongst other things - businesses to create sustainable packaging and stopping the export of polluting plastic. These changes are driven by new legally binding environmental targets, and enforced by a new, independent Office for Environmental Protection (OEP).
Circular initiatives can create tangible business and social benefits: more efficient processes, compelling new products and services, growth, and enhanced brand equity. Sharing this information can attract new customers, strengthen existing relationships, and satisfy investors.
Shifting towards a circular economy requires planning. See it as a journey. Decide with key team members what you want to achieve and draft a roadmap of how you are going to get there.
The circular economy is not idealistic or unrealistic – there are already many successful businesses operating on practical circular principles. See examples and find more guidance about what you need to do to join them from Barbour’s Directors Briefing, which you can download for free here.