By: Alper D. Karakas
Sustainability and economic prosperity make the world spin.
Most companies presently follow a linear economic business model which, in short, extracts natural resources, creates products with them, and then sells said products to consumers. After the consumer maximizes her usage, the product is thrown away as waste and pollutes the environment. In this way, this economic model continually affects Earth’s environment in a negative fashion. As more and more natural resources near depletion, the amount of toxins from product waste entering the environment increases and sustainability is minimized while pollution is maximized.
A circular economic model, on the other hand, allows companies to supply products and maximize sustainability while minimizing pollution. The simple, yet powerful theory behind such a model revolves around a flow of raw materials in which the end of a product’s life becomes the start of another’s. In a circular economy, a certain product’s materials are either completely reused or go back into the Earth and biodegrade with no negative effect. When disposed, these natural materials function either as new resources for the next product or as replenishments for the environment. In this way, resources remain 100% efficient and products made from them remain environmentally efficient and healthy.
An example of a commonly used but linear resource is plastic. The issue in plastic lies in the consequence of its deconstruction which is not suitable to biodegrade. Plastic’s polymers are synthetic (made with chemicals that are not associated with living systems) and every time plastic gets melted and reconstructed to be recycled, the bonds between the polymers become weaker and weaker. This property does not allow plastic to be 100% recyclable.
Take for example that most tech products contain non-biodegradable plastic hardware such as ABS plastics or silicone plastics. When they degrade, they emit butadienes, carbon monoxide and hydrogen cyanide into the air and soil and any product waste using them cannot be the source of another product. But if these plastics were to be substituted with a material that does biodegrade, the soil and air would not be polluted and their destruction would enrich the growth of natural resources required to make headphones, or any product with these plastics.
This substitution could be something called mycelium. Mycelium is a cell in fungal organisms, such as mushrooms, which consumes the biological and agricultural waste in its surrounding, makes up root-like fibers that grow underground, and then grows like a network of filaments. This network of branching fibers creates a compact solid which can take on any shape. Depending on the environment that the mycelium grows in and the biological waste that it consumes, mycelium growth can form into a greatly diverse set of materials. Moreover, mycelium-based plastic substitutes can be used for both the hard shell and soft wire exterior in things such as rubber-like materials, hard plastic-substitutes, or even leather. With any desired shape and an infinite variety of textures and flexibilities, it is easy to say that mycelium can substitute synthetic polymers and shows that the circular economic model is environmentally efficient and healthy.
Aside from the environmental benefits, a circular economic model can seriously affect a nation’s GDP. Let’s begin with consumption which makes up 70% of America’s GDP. When a firm follows this model, resources are essentially limitless because the disposal of the old product results in the raw foundation of the new product. This way, a firm does not need to extract new resources for every new product it wants to manufacture. To produce the same quantity of the product, the firm’s cost for resources essentially limits to zero, and their main cost is the assembly of said products. In this way, firms’ earnings will see continued positive growth and extend down to the individual level in terms of wages and salaries, and increase national consumption.
This increase in consumption occurred in South Africa in 2013 when a wood pallet company transitioned their supply chain of timber from being linear to circular. According to a report delivered by the United Nations Environment Programme and the World Economic Forum, positive consequences included improvements in wood waste as well as financial gain. Because this company’s waste became their supply, it was able to sell more wood. With increased revenue and decreased costs, more jobs were created and employees were paid higher salaries. The reports stated that the provincial businesses experienced an increase of around $200,000 in revenues within one year from consumption’s multiplying effect.
Now onto investment. For a firm to become circular, it would first need to inject money into creating physical capital that would allow a firm to have departments that reconstruct used materials and maintain the use of biodegradable resources. Second, firms would need to develop departments to collect old products to use them as resources for the new ones. Lastly, firms would need to hire more workers due to the previously mentioned capital expansions.
The clothing manufacturer H&M, has been attempting to become completely circular in recent years. It invested and expanded its plant by creating capital to “completely recycle unwanted clothes” by breaking down the old clothes into fabric that can be reused. H&M then launched an advertisement campaign to promote consumers to return old products, highlighting how firms must invest money to develop a solid marketing team.
Finally, a circular economy will incentivize a nation’s government to invest as well via the positive externalities it creates. A more productive society will translate to more societal knowhow and an increase of production per worker. Therefore, a more productive society will lead to a more robust and healthier economy. The value of these externalities should be recognized, and a nation’s government should inject money to help firms become circular, thus investing in a better environment, society, and economy. The World Bank expressed its efforts in Brazil and Bangladesh to improve environmental conditions because its benefits are “less pollution, improved quality of life and opportunity, more efficient production.”
So in review, if firms are able to supply products by completely reusing the same materials in a circular fashion, such as a mycelium based plastic substitute or the work H&M has pioneered, then that would be a step in the right direction for the environment and nations’ economies. Environmentally, if the disposal of a product could become the starting point of its production, then the resource efficiency would positively impact sustainability and decrease pollution. To take it one step further, this process is iterative. As more and more firms transition to a circular economic business model, it can inspire other markets of production to do so as well, eventually resulting in a healthy and sustainable environment and a growing world economy.
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