How to implement a circular economy approach in your business

For businesses, it’s a model that rethinks production processes to maximize resource efficiency and minimize waste. The circular economy is based on a closed-loop economy where generated waste is reintroduced in production processes. It encourages businesses to recognize that everything has value and to keep products, materials and resources in use for as long as possible. 

Entrepreneurs often have more flexibility to innovate and adapt quickly to changes, which could help you adopt circular practices faster than larger corporations. 

The first step to embracing circular principles in your business is often to understand how to evaluate the benefits and risks of implementing this model. This includes careful planning and recognizing factors such as costs, resource availability and regulatory complexity.

Circular economy versus linear economy

The circular economy is often contrasted with the concept of a linear economy. 

In a linear economy, resources are extracted, transformed into products, and disposed of as waste. This model is characterized by a "take-make-dispose" framework, which often leads to significant resource depletion and environmental degradation. 

Conversely, the circular economy seeks to redefine growth by focusing on positive society-wide benefits. The circular economy emphasizes:

• designing out waste and pollution
• keeping products and materials in use
• regenerating natural systems 

The circular economy model aims to create a closed-loop system where products are continuously reused, repaired, remanufactured, and recycled. By doing so, the circular economy reduces the reliance on finite resources and minimizes environmental impact, promoting sustainability and long-term economic resilience.

Advantages of the circular economy for businesses

Adopting a circular economy approach in your business has many benefits. Here are some of the most important ones: 

Cost savings through resource optimization and waste reduction

Implementing a circular economy approach can help reduce costs for your business in a number of ways. 

Some companies use the byproducts of production processes or refurbish previously used products or materials to create new ones. For example, some bike shops take previously used bicycles and repair them to make them usable again. This lowers the cost of building a bike since the shop doesn’t have to buy new parts to build it. It also reduces waste and upcycles an older product.  

Other aspects of a circular economy that can result in cost savings include:

• Reviewing production processes to identify and eliminate sources of waste or activities that do not add value.
• Redesigning products to use less material improves product efficiency and removes waste from production processes—leading to lower costs for the business.
• Reducing waste management and disposal fees by upcycling generated waste. Some businesses are reintroducing their waste products in other production processes. For instance, a coffee shop could try to sell its coffee grounds to a compost manufacturer or a mushroom farmer.
• Reduced spending on raw materials. A company can reduce its exposure to volatile raw material prices by reducing its dependence on virgin materials and increasing the use of recycling materials. 

Smaller environmental footprint

The circular economy can play a crucial role in helping businesses reduce their environmental footprint. Reducing the need for raw inputs, conserving resources, lowering the overall environmental impact of production processes, and reusingproducts and services are at the core of a circular economy approach. Meanwhile, strategies like refurbishment, remanufacturing and improved product design can help businesses extend the lifespan of their products. This reduces the amount of waste generated and promotes a more sustainable consumption pattern among customers.

Enhanced brand reputation

Demonstrating a commitment to sustainability can improve your brand’s image and attract the growing number of consumers who expect businesses to take action on environmental and social issues. Being able to quantify the amount of material, energy and waste you are saving through your actions can can help build brand loyalty while also proving your commitment to sustainability.

Enhanced innovation

Rethinking production processes and the use of materials presents a significant chance for businesses to introduce new ideas and improvements. Innovation in this context could mean the development of more efficient production techniques, discovering cost-effective materials, or the creation of environmentally friendly processes. Moreover, it could also contribute to increased profitability and a stronger market position.

How to integrate circular economy principles in your business

Paul Shorthouse, Managing Director of Circular Economy Leadership Canada says that to fully capture the full benefits offered by a circular economy approach, businesses need to first integrate this model into their strategy. 

“There is an initial assumption that the financial burden will be too great a challenge,” says Shorthouse, who leads the multisector network of leaders aiming to accelerate the transition to a circular economy in Canada. “It really depends on the sector, but we are seeing a lot of success if a business thinks about how they approach their strategy and make this core to their business practice and business model innovation.” 

There are several ways to optimize resource use in your business. However, ensuring a realistic business plan backs your ambitions is essential. 

“Sometimes businesses arrive at a business model or a plan that is maybe too far ahead of where the market is at today,” says Shorthouse. “Make sure your business plan works for today, but also for tomorrow because we're still largely living in a linear economy, so it's important not to get too far out in front of your target market and your customers.”  

He also recommends entrepreneurs try to identify market trends and analyze different business model options to inform their reflection.  

Consider the following strategies to shift from a linear to a circular model in your business:

• Implement processes that minimize waste and maximize the use of materials
  Adopt practices such as recycling and reusing materials within the production process. Using digital tools and platforms to track and manage resource use more effectively will also improve efficiency efforts. Also consider using materials that are easier to recycle or repurpose at the end of their lifecycle
• Collaborate with partners
  Partner with other businesses to create a closed-loop system where one company’s waste becomes another’s resource.
• Design products with a longer lifespan, emphasizing durability
  Think about the ways you integrate an ecodesign approach to create your products and services. This will often involve completing a life cycle analysis to understand the environmental effects of the production and use of your products. You will then want to take action to limit their negative impacts.

Overcoming barriers to circular economy practices in business

There are challenges to operating in a closed-loop environment which can hinder your efforts to adopt circular economy practices.

• Unfamiliarity with circular economy principles
  Training on circular economy practices can help you clearly communicate your business model, story and impact to partners, customers and employees so they can play their part in making your business successful.
• Assess and optimize current production processes
  Evaluating your existing manufacturing processes can help you pinpoint strategies to reduce the amount of materials used and ways to reincorporate waste back into your operations.
• Initial investments in new processes or technologies can be prohibitive
  Grants, subsidies or financing options designed for sustainability initiatives can help with costs. Planning for future retrofits and equipment needs over a five-year-period can be helpful.
• Access to financing can be challenging due to unfamiliar business models
  Building a solid business case and demonstrating potential returns on investment can attract more funding opportunities.
• Implementing circular practices requires changes to existing operations
  Developing a phased implementation and training plan can help manage the transition more smoothly.
• Securing a reliable supply of recycled or sustainable materials can be difficult
  Forming strategic partnerships with suppliers and other businesses, and exploring cross-industry collaborations, can ensure a consistent and high-quality material supply.
• Regulatory complexity and policy changes may be difficult to navigate
  Compliance with evolving regulations and following policy shifts can be difficult without dedicated resources.

Circular economy entrepreneurs in Canada

Recycling Alternative

Entrepreneur Teresa Sanders founded FILL – Vernon’s Refill Store in British Columbia. This small business emphasizes reducing plastic use by encouraging customers to refill their containers. She sells Approximately 90% Canadian-produced household items such as dish and laundry soaps, shampoos, conditioners, toothpaste and deodorant, promoting a reuse system. The effect of a refill store is measurable: After the first month of operation, Sanders diverted 6,000 plastics from the landfill, and by the end of 2021, the store had saved more than 126,936 plastics containers from the landfill.

Propeller Coffee Company

With his diverse professional and personal background, Losel Tethong owns and operates Toronto-based, B Corp certified Propeller Coffee Company. His company sells coffee to independent cafés and restaurants across Canada and the U.S. Tethong embraces sustainability practices in many different ways, from using a coffee roaster that uses about 85% less energy than a traditional machine, to ensuring coffee is sourced from sustainable suppliers, to fully compostable packaging.

A sustainable path to growth

Adopting circular economy principles can offer your business a sustainable path to growth, enhancing your resilience and competitive edge. By optimizing resource use, collaborating across industries and redesigning products for longevity and recyclability, you can reduce your environmental impact and unlock new economic opportunities. Overcoming barriers such as financial constraints, scalability and resource availability requires strategic planning, innovative thinking and support from broader networks.

As the demand for sustainable business practices continues to grow, businesses like yours have a unique opportunity to lead the charge toward a more circular and sustainable economy. Exploring and implementing circular practices can contribute to a more resilient and prosperous future.