How to Bust the Biggest Myths about the Circular Economy

Tired of being told the circular economy is just a fancy term for recycling that will cause profits to slump? Here’s how to fight back.

When China began to emerge as one of the major global economies, the dominance of English as a global business language was challenged by Mandarin. Would this lead to barriers? Apparently not. The reality is, it does not matter what language you speak, as long as it is the universal language of business.

Some say that the premise of the circular economy gets lost in translation and is misunderstood. There is a perception that it is an ongoing battle between environmentalists and corporations – that one side wants to see the environment preserved and protected, and that the other prioritizes profits. But the circular economy connects both, in fact, delivering economic as well as environmental gains.

Despite the growing case for the circular economy, barriers still exist. As former CEO of Kingfisher, Sir Ian Cheshire, recently wrote, there are “examples of deliberate blocking of progressive business policies by dinosaur corporates that claim they cannot adapt to the new economy.” So, if you are confronted with this attitude, here is a basic translation reference for the circular economy – a handy rebuttal guide.

Perception: The circular economy is just another way to describe recycling

Reality: The circular economy is much more than recycling. A linear economy makes, uses, and disposes of materials. The circular economy looks at all the options across the chain to use as few resources as possible in the first place, keep resources in circulation for as long as possible, extract the maximum value from them while in use, then recover and regenerate products at the end of service life. This means designing products for longevity with reparability in mind so that materials can be easily dismantled and recycled, not to mention the alternative business models that encompass trade-ins, sharing models, and service packages.

Perception: Encouraging people to reuse or keep products for longer does not encourage sales, so profits would slump

Reality: In the United Kingdom, there is a saying: “The customer is always right.” In France, they say: ‘‘Le client n’a jamais tort,” meaning the customer is never wrong. In Germany the saying is: “Der Kunde ist König,” the customer is king. There is a clear status quo to prioritize customer satisfaction. Currently, we are being shortsighted and building products without longevity in mind, which costs UK businesses some £400 million a year in product returns. A circular economy encourages people to keep products in circulation for longer, which creates business opportunities for service packages that include repairs and maintenance services and drives customer loyalty.

A colleague recently returned from South Korea, where he was exploring LG Electronic’s approach. Like a doctor’s surgery practice for electronics, customers can take their broken products to LG’s service-repair center, where they are issued with a ticket and seen by a technician, who fixes it on the spot.

Perception: The circular economy might be an opportunity for some, but it will have a negative impact on manufacturers

Reality: Natural resource and materials prices are rising, and they are also volatile. Refurbishment and remanufacturing offers are sheltered from these fluctuations. Walter Stahel, originator of the circular economy concept, recently said that if a businessman suggests opening a manufacturing plant to make money, you should counter that they can make five times as much from opening a remanufacturing plant.

Greater circularity can also benefit existing manufacturers. Rolls-Royce, for example, is known for the “power by the hour” service model, and Caterpillar is known for its remanufacturing arm, Cat Reman. More recently, Jaguar Land Rover embedded circularity into its design and assembly process and is using 50 percent recycled aluminum in some of its latest car models. Considering that cars are so reliant on aluminum, a high-value material, it makes economic sense to use recycled content.

Perception: The circular economy may be the latest buzzword, but my business has been steady for years, why change now?

Reality: It was only 10 years ago that we would happily rent a video and turn pages of a newspaper. Now online streaming and internet news prevail. Many businesses that were once leaders have disappeared as new trends have emerged, such as internet shopping and digital technologies. Business as usual is not always the safest path. The companies that prioritized short-term profits rather than future-proofing themselves ultimately paid the price. The sooner that businesses understand ways in which to adapt to change, the less is the risk of a hard blow.

Perception: The top priority is the economy and jobs, especially in times of austerity

Reality: The president of the European Commission, Jean-Claude Juncker, has said he wants to focus on jobs and growth, and rightly so. There are a number of routes to get to a destination, but the end result will be the same. Jobs and economic growth are no exception, and one possible route to achieve this ambition is growth of the circular economy.

Globally, Innovate UK claims resource efficiency measures could add $2.9 trillion to the economy by 2030, with returns on investment of more than 10 percent. There are also major job opportunities. WRAP and Green Alliance recently identified that more than 200,000 jobs could be created in the United Kingdom if circular economy activities continued to grow. In a recent report, the World Economic Forum and the Ellen MacArthur Foundation also identified that a shift in reusing, remanufacturing, and recycling products could lead to more than half a million jobs being created in the recycling industry across Europe.

Perception: If the environment is on the agenda, shouldn’t the top priority be climate change?

Reality: The circular economy could go a long way toward helping reduce carbon emissions. According to a recent report by the Carbon Trust, Innovate UK’s Knowledge Transfer Network, and Coventry University, remanufacturing typically uses 85 percent less energy than manufacturing; on a global scale, it has the potential to offset more than 800,000 tons of CO2 emissions per annum.

And remanufacturing is just one component of the circular economy. In its first phase between 2005 and 2009, WRAP’s Courtauld commitment – a voluntary agreement aimed at improving resource efficiency within the UK grocery sector – avoided 3.3 million tons of CO2-equivalent emissions, equal to an airplane flying around the world half a million times.

Originally published in the Sustainable Business section of The Guardian.