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ESG and Discussion about Circular Economy

Updated: Jun 6, 2023

The ESG conversation needs to move from the boardroom to a level of operational transformation it is critical to embrace circularity across operations while appreciating how the circular economy is becoming beyond reporting consideration. Every product should move towards Reduce-Reuse- Recycle (circular model) instead of the current model of take-make-dispose to achieve higher ESG performance.

Traditionally, manufacturing companies follow a linear model of work which involves extracting natural resources to make products. Such products are used for a limited period of time before being discarded as waste. The idea of Circular Economy is to unburden manufacturers, lessen the waste stream and shrink the community’s carbon footprint as the way to innovate a practice for businesses to adopt.

Increased environmental degradation and impending resource scarcity has made it imperative for businesses to adopt a ‘circular’ model. This involves

i) using resources efficiently and prioritising renewable inputs

ii) maximising a product’s usage and longevity to extract the maximum value,

iii) recovering and reusing by-products and waste to manufacture new materials or products.

Circular Model thus involves 4 important stages:

Purchase: The circular economy starts with purchase, and the appeal is in a product’s design. Everything that undergoes a circular lifecycle is “designed for dis-assembly,” according to the Ellen MacArthur Foundation, and this makes the next product valuable in some way to the next user.

Use: Next stop is use. Materials in the circular economy don’t just age out as time passes; they’re consumed for exactly what they were designed to offer. This is a terrific guidepost for our behaviour not just at home, but in many industrial processes as well, because it makes sure we deplete a resource before discarding it.

Repurpose: Repurposing is the hallmark of a circular operation. It gives resources another life, and often lowers a business’s overhead when redistributing a product. At this stage, however, you may not be repurposing the same product you started with. You can also repurpose a byproduct.

Redistribute: Redistribution is critical to making sure a circular solution is sustainable from end to end; communities need a way of capturing the repurposed product and delivering it to the next customer.

Businesses would need to review their entire value chain to start identifying opportunities for innovation in each of the above stages. The Indian recycling industry is ahead of many western countries when it comes mining processes, with significant levels of reuse, repair, refurbishment, and resale of discarded electrical and electronic equipment in the informal sector.

The circular economy may go beyond the blue recycling bin, but it isn’t an exclusive class of sustainability. From a water bottle to the water itself, most of our finite resources are candidates for a less wasteful world. Integrating such circular principles in business models would enable businesses to respond with agility to investors, regulators and consumers who are increasingly expecting them to contribute to the common good.

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