What is circular economy?
Have you ever heard of the term circular economy? Yes? Then you belong to 25% of the Dutch people who’ve heard about this. It’s a term that is being used more and more and yet only 9% can tell you exactly what it means. To cut right through the chase; circular economy focuses on the preservation of the value of raw materials, which have been brought into the economic cycle for sustainable use or reuse.
Circular economy is gaining ground in the Netherlands. For example, the Dutch government has the ambition to make the Netherlands completely circular by 2050. This is a process that won’t happen overnight. It will require a lot of innovation, time and flexibility from Dutch companies. However, it won’t be possible to stay within the Netherlands. If this goal is achieved, this concept will also have to be broadly embraced internationally. A circular economy can be a single container term, or it can fall within a sector specific context.
What exactly do we mean by the term ‘Circular Economy’? TNO gives the following definition in 2013 to the concept:
“The circular economy is an economic and industrial system that takes the reusability of products and raw materials and the restoring capacity of natural resources as the starting point and minimizes value destruction in the total system and strives for value creation in every link of the system “.
Circular economy isn’t just recycling
Is it only recycling? Partly, but it is more than that. According to ABN AMRO, a circular system means that you:
- Can use packaging longer;
- Make optimum use of your current resources;
- Continue to use packaging and other materials in an endless cycle.
The crux of the matter means the reusability of raw materials, in order to replace them in a system, so that it’s ultimately an iterative process. The transition from the process can be seen in the figure below of the national government, where the three phases are described.
Where the Linear phase mainly represents the traditional supply chain. The Reuse economy is the transition model, which many organizations are currently in, one recycles a part, other parts are not included here.
The benefits of circular economy
Circular economy brings several benefits. ABN AMRO lists five different revenue models for circularity in the organization.
– Circular inputs: creation of circular raw materials
This involves creating raw materials that are fully renewable, biodegradable or reusable. For example, packaging within the logistics sector is covered here, when plastic pallets are repaired, washed and then taken into use.
– Product service systems: from owner to tenant
This form focuses on renting the goods / products instead of purchasing them. As a result, the pressure for both parties is higher to keep the leased goods in possession only for the required period. The hiring of carts and plates within the floriculture and transport sector is an example of this.
– Lifetime extension: do not throw away but repair
Although this concept seems simple, it is applied less than one would expect. This often happens now in so-called ‘closed-loops’, where a fixed pool of packaging makes a fixed round between parties. However, it is essential to know well where your packaging is at what time and how many percent of it can be used. To realize this, you need a registration system, such as TrackOnline.
– Sub-platforms: sharing under-utilization or overcapacity
A well-known example is the taxi service Uber, or Airbnb. But also shared cars for the city center, such as Snapp car. A shared pool of packaging within the logistics, which everyone can use and is responsible for.
– Value recovery: from waste to value
In the construction sector this may be where raw materials from an old building can be processed in a new construction project.
How can you apply circular economy now?
The goal of the Dutch government is to have a circular economy by 2050. Rigorous changes do not have to take place, but start slowly. Take the first step with your company and together with others try to reach the goal of the Dutch government. Extend the lifespan of your assets, always and wherever they are with TrackOnline. Do you want to know how TrackOnline optimizes your logistics processes or supply chain? Feel free to contact us.