Centre for Building Sustainable Value · Jury Gualandris & Matthew Lynch

Could a circular economy be closer than we think?

Jul 16, 2020

The circular economy avoids waste and connects firms within and across supply chains, so the waste of one organization becomes the feedstock for another. It is the embodiment of sustainable development, because business production and consumption are contained within the Earth’s planetary limits.

A shift to a circular economy would undoubtedly be a monumental transformation to our current economic system, built on taking resources, using them and throwing them away. Systems transformation is highly complex and challenging, with many forces acting to resist change. And we have a long way to go – by one estimate the global economy is currently only 9 percent circular[1].

This is disheartening. It implies that we will need heroic innovation and/or massive policy interventions to enable a transformation that is essential for the earth’s future.

But what if change in key parts of the system is not as hard as we think? What if many firms already have the inherent capabilities to become circular?

Ivey’s research is studying firms – in-depth case studies of a dozen small and medium sized enterprises (SMEs) so far – that have been able to build successful products and services by taking and processing the waste of other firms. These are not firms that set out to be circular businesses – they were operating in a ‘traditional’ manner when they spotted and realized the opportunity in waste.

One firm, a producer of processed meat products, for example, started out by exploring using their own (relatively-small) waste streams. They found there was a much larger opportunity in purchasing and utilizing the waste of others. 5 to 10 percent of their business is now generated from sourced waste from meat and duck processors, including a new line of meatballs. They are currently exploring a further opportunity linked to cheese particles.

Why is this important? It shows that firms may not need to completely re-structure their business model, operations and supply chain. They can become circular by drawing on their existing operational agility.

Operational agility - the ability of a firm to adjust sourcing, production and distribution processes in a manner that is quick and productive compared to their competitors - is a capability that many firms need to survive and grow in a competitive business environment.

Yes, taking waste which is often a highly-variable and contaminated flow and turning it into a sustained opportunity that attracts customers does require a fair amount of flexibility and effort. But if you have already honed your agility in order to succeed, becoming circular may not actually be much different from normal operations, requiring seamless adjustments rather than expensive, architectural adaptation.

So what does this mean? It appears that many SMEs, which make up the majority of the modern supply chains, could actually be poised to shift their businesses to be part of a circular system. Oftentimes, they simply lack awareness of what is already within reach.

How can we increase ‘awareness’ across firms? Building the set of case studies of how ‘normal’ firms have succeeded in becoming circular through leveraging their existing agility will help others overcome the fear of the unknown. In addition, categorizing diverse waste streams based on their economic value potential and making this information readily available can help firms overcome their biases against ‘waste’ and efficiently exploit currently-hidden opportunities.

Building this library of successful cases and working to close the information gap is a big focus of Ivey’s research going forward. We are working with ‘circularity brokers’ such as CTTEI[2] and NISP[3] in Canada and large eco-systems like the Guelph/Wellington ‘Our Food Future’ project[4], which are playing an active role in helping to connect firms with waste opportunities. The rapid explosion of big data and connected information systems will also make finding opportunities easier and quicker.

Let’s now return to the big picture. Does this give us hope for changing the highly-complicated but wasteful economic system that underpins our entire modern society? Well, we know from systems dynamics that systems change is non-linear and sometimes small changes can tip the system to a whole new state. If many of the firms in our production systems begin to leverage their agility more fully to move towards circularity, even if in an ad hoc manner, we could see the momentum for change in the rest of the system become compelling. This is an exciting thought.