Circular enterprise takes on a commercial twist

Would your company like to be successful in circular enterprise, with the highest possible re-use of materials and commodities? This is possible, but it is complicated and it takes time. That is the experience gained during one year of the Circular Economy Challenge. Circular enterprise requires a completely new attitude from companies, consumers and the bank.

A company can only really create a circuit if it has partners

Automobile dashboards that are made out of surplus tomato skins instead of petroleum. Working clothes that can be used and re-used endlessly. Second-quality vegetables that are still fit for consumption. Only paying for the use of lighting and not for ownership. There is no lack of ideas for circular enterprise. This is a broad term for looking for better use and re-use of products and materials everywhere in the economy and the production process.

And this is a different approach than the traditional production process and ownership, which results in a huge amount of waste. But circular enterprise goes a step further than recycling waste.

‘Sooner or later, every sector will face a shortage of commodities. This means it is sensible to look at how you as a company can be less dependent.’

Richard Piechocki, expert in circular enterprise at Rabobank.

Turning circular ideas into business opportunities

How can you turn motivation and ideas for circular enterprise into business opportunities? Three companies in the Dutch food sector and five from the automotive sector have been working on the issues and commercial possibilities for lower use of commodities, less waste, lower costs and new products for a year since July 2014. They did this together under the flag of the ‘Circular Economy Challenge’. Rabobank initiated this challenge.

Cooperation between companies

Companies looking to move into circular business operation have to cope with a raft of practical issues. These are some learnings of the CE Challenge. Piechocki explains that the basis of circular enterprise lies in the materials that companies choose for their products: these must be suitable for re-use. To reduce waste flows, it is also important that companies design products so that they last for a long time and are easy to repair, and also that they can be dismantled. But a business can only really create a circuit if it has partners that also see a benefit in collecting, recycling and re-applying materials. Willing consumers are also needed. ‘Regarding re-use, longer use and lower consumption, consumers will have to change their behaviour’, says Rabobank economist Stegeman. Many consumers are still focused on possession and consequently on the purchase of products. When these products are no longer adequate, they are discarded.

‘Regarding re-use, longer use and lower consumption, consumers will have to change their behaviour.’

Hans Stegeman, economist at Rabobank.

Sharing of profits and costs in the circuit

It is not only the creation of a circuit of goods that is complex and takes time. The same applies to funding, as shown by the CE Challenge. In a traditional business model, finance flows through the route of procurement-production-sale. But if the circuit of materials becomes the key issue, what is waste and what is a commodity? Who owns what, and in which phase of the circuit? How is cash flow created, and who funds working capital? Piechocki: ‘There is no standard funding solution. Circular enterprise means a different system and thus requires a new attitude from the bank, the business and the other partners. Coordinators are needed to ensure trust between the parties and appropriate allocation of profits and costs in the circuit.’ Several local Rabobanks are already taking on this role: together with business owners, they are looking at the possibilities for circular enterprise and regional circuits in their own working areas.

Circular economy as an export product

Businesses therefore have to devote much time and energy before they will have a functioning circular business model. But this has other benefits as well. Piechocki: ‘It turns out that companies with a circular business are better prepared for changes in their environment and markets. They have more resilience, since their attitudes and ways of thinking are new.’

And this also applies to the Netherlands as a whole, as shown by the study carried out by Stegeman into the potential of the circular economy. A circular Dutch economy would not necessarily be larger, but it would be better and more sustainable. And there will be new opportunities: has anyone thought about exporting expertise with respect to circular enterprise? Stegeman: ‘In the future, this could generate exports worth 3.5 billion euros and more than 80,000 new jobs in the next 15 years.’

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