The Circular Economy: A possible solution for small businesses struggling with lockdown?
Author: Max Leighton
University of Exeter (BSc Business, Year 2)
Small businesses across the UK face significant long-term barriers to recovery from lockdown. However, the current crisis provides an opportunity for SMEs to adopt Circular Economy principles which may enable their recovery and provide better resilience and flexibility in future crises.
The Circular Economy is seen as an alternative approach to the current wasteful linear economy. Ultimately, it’s aim is to close resource loops by ‘reducing, reusing and recycling’ materials used in products.
Lockdown and social distancing measures have created a harsh environment for businesses of all sizes to operate in. High street businesses and others that rely on face to face customer interaction are unable to function, severing revenue streams. The financial impact of the health crisis is widely shared across other sectors because of the collapse in consumer confidence and spending, resulting in us being “in the middle of an extremely deep recession”, according to an article in The Telegraph written by Tim Wallace. Disruption to global supply chains is also a major concern. An article published by the Financial Times cites Gabriella Dickens, an economist, as expecting a reduction of world trade volumes this year of one fifth.
Moreover, this pandemic may have set new precedents for consumer behaviour that will have a greater impact on businesses in the long run. It is uncertain for how long social distancing measures will remain in place. Recent changes to people’s behaviour caused by social distancing measures are likely to have a long-lasting effect. This will impact how businesses can engage with their customers. One of a number of issues caused by this crisis that can be addressed by the Circular Economy.
In a TEDx talk, Harald Friedl describes an interconnected web of businesses that purchase each other’s waste from one another to be made into new products, mimicking nature’s eco-system. This requires extensive cooperation and communication between local businesses, eventually shortening supply chains and transport expenses and reducing dependency on international supply chains. According to the Ellen MacArthur Foundation, this diverse network of businesses will build resilience and reduce the need to purchase new raw materials. Consequently, Circular Economy principles could provide a solution to small businesses struggling in this period of lockdown, whilst building resilience for the future.
Small businesses have the opportunity to build long-term relationships with customers by engaging with the Circular Economy. It is often discussed that purchasers need to become users of products by agreeing to leasing or renting arrangements with businesses. Aside from creating a new revenue stream for a business, an idea mentioned in a report by the Ellen MacArthur Foundation, it can also help businesses retain the value of their products. In the course of his TEDx talk, Cillian Lohan uses a hypothetical example of how value can be retained. He discusses how a smart phone can be designed with ‘eco-design’ principles so once it is fully used it can be returned to the business to be either repaired and rented again, or to be disassembled and the materials reused in a new product. These design and business model principles could be applied to any manufacturing business, together with the use of an online platform for communicating with customers to alleviate any fears over social distancing, whilst maintaining local customer relations and revenue.
Businesses transitioning to relying on renewable energy sources is also necessary to enable the Circular Economy. As suggested by the Ellen MacArthur Foundation, it would also improve businesses’ resilience by making them less susceptible to fluctuations in oil prices. This is a task that is associated with being expensive but could be made more affordable for small businesses if they collaborate for example on installing shared solar panels. Benefits of this would include: Reduced utility expenses and greater interconnectivity between businesses.
Despite the downturn of the UK’s economy hopefully this article has shown an opportunity for businesses to engage with the Circular Economy and recover from lockdown, whilst building resilience for the future.
For further information on the Circular Economy see the Ellen MacArthur Foundation’s website for a wealth of resources, ranging from case studies and publications:
Also use the Tevi website to see how SMEs in Cornwall and the Isles of Scilly are able to access support to transition to the circular economy and environmental growth: https://tevi.co.uk/
Cillian Lohan – https://www.youtube.com/watch?v=cbm1MCTobVc
Ellen MacArthur Foundation – https://www.ellenmacarthurfoundation.org/assets/downloads/TCE_Ellen-MacArthur-Foundation_9-Dec-2015.pdf
Financial Times – https://www.ft.com/content/db3427f5-5394-4661-8e52-6447fd3d9ae9
Harald Friedl – https://www.youtube.com/watch?v=_PKbUFJ3Iu4&t=829s