Welcoming the “Circular Revolution”


There is an interesting post by Frans van Houten (CEO of Royal Philips) on ProjectSyndicate on what he calls “The Circular Economy.” Van Houten makes the point that the world has to move from a “linear” economy in which products are produced, consumed and then discarded to a circular model in which the full lifecycle of a good is managed from start to finish.

Writes Van Houten:

Just as ecosystems reuse everything in an efficient and purposeful cycle, a “circular” economic system would ensure that products were designed to be part of a value network, within which the reuse and refurbishment of products, components, and materials would ensure the continual re-exploitation of resources.

Of course, building a circular economy would require a fundamental restructuring of global value chains. Instead of selling products, businesses would retain ownership, selling the use of the goods they make as a service. Selling a product’s benefits instead of the product itself would create a powerful incentive for producers to design for longevity, repeated reuse, and eventual recycling, which would enable them to optimize their use of resources.

This requires a new generation of materials, as well as innovative development and production processes. It also demands new business models, a redefined concept of legal ownership and use, new public-tendering rules, and novel financing strategies. Finally, a circular economy calls for adaptive logistics and a leadership culture that embraces the new system and rewards progress toward establishing it.

The world Van Houten describes has already started to arrive, with companies such as BMW and Nike leading the way. But his point is a good one to make and is, without a doubt, a future that all product companies should embrace.
Read more at http://www.project-syndicate.org/commentary/frans-v–houten-calls-for-a-shift-toward-a-new-economic-model–based-on-the-use-of-goods-that-consumers-do-not-own#3Jy8HaZm1mOxdcYA.99

Carlos Alvarenga

Founder and CEO at KatalystNet and Adjunct Professor in the Logistics, Business and Public Policy Department at the University of Maryland’s Robert E. Smith School of Business.

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