It’s quite easy for those fighting towards a circular economy to paint an overly-optimistic picture of how easy it is to transition and how well it would run. Among discussion of how disrupting the value chain and closing material loops can bring unique benefits to businesses and consumers alike, it is important to address the side of circular economies that isn’t green and sunny, aka the many barriers that stand in the way of a fully functioning circular economy.
To start, having a viable business case is the essential first step in going circular. It doesn’t matter how ingenious your intended circular practices are if in the end your business model isn’t profitable or possible. Needless to say, this is easier said than done, for a great number of reasons.
Stuck in the rut of a linear economy
It is almost redundant to mention, as the entire essence of transitioning to a circular economy lies in breaking out of a linear economy – nonetheless it isn’t any less valid. Current business models, supply chains, systems of consumption, and the entire economic system are designed to function in the take-make-dispose process of a linear economy. When the entire world is running this way, it becomes exceedingly hard to break out of such a deeply ingrained cycle.
Transitioning is a complex and unclear process
Breaking out of this cycle is truly an incredibly complex process involving many different factors and requiring implementation on a massive scale. Thus it is difficult to know where and how to start. The primary barrier to creating a viable circular business case is the lack of knowledge on a practical level of exactly how to do so – a single straightforward or all-encompassing answer simply does not exist.
The pains of changing operations
Particularly in the age of globalization, multiple countries around the world are involved in the supply, manufacture, and consumption of products and materials. Hence, closing the loop and ensuring the reuse and re-manufacture of products becomes even harder and more complex.
Additionally, businesses will need to tweak their operations: new partnerships may need to be formed, supply chains and manufacturing processes adjusted, and distribution and logistics systems rethought. None of which are an easy task.
For instance, retrieving products from customers for recycling or managing a product lease system is costly and complicated even on a local scale. And at surface value it certainly seems less appealing than simply ending your business’s involvement upon sale of the product.
Rewards don’t yet match costs
Although a business may successfully implement a viable business case that delivers circular products or services, there is currently not enough demand for such products in the general market. Take for instance Philip’s concept of leasing rather than selling their lighting. Clever idea as it is, the majority of people will likely still go to the simplicity of buying their lighting at their local department store.
Furthermore, especially while the circular economy is still getting started, other costs of transitioning like working against certain legislation and the actual monetary costs incurred will likely not yet be equaled by the benefits they fight to achieve.
Nonetheless this is no reason to get discouraged, but rather is all the more reason to work towards the transition to a circular economy to eventually make these barriers obsolete.
3 Replies to “Barriers to the Circular Economy: The Pains of Changing Operations”
Indeed, I would personally say that the circular economy is still in the very early ‘innovators’ phase of adoption, so what we really need right now is more entrepreneurial efforts to innovate circular business practices.
Nice opinion and so true, Meilani. I can’t stop think of the similarity this barrier shows to Crossing the chasm (Geoffrey Moore) theory of adoption by the early majority. We will cross and overcome the barriers!