Episode 4 (EN): BusinessShift – Circularity: From Linear Thinking to a Circular Economy

00:00:00: Business shift.

00:00:05: Business shift.

00:00:06: The podcast for decision makers and executives who want to deal with the topic of sustainability

00:00:11: in a sustainable way.

00:00:14: Welcome to business shift.

00:00:15: The podcast that changes perspectives and explores the question of how to make more

00:00:20: out of business, namely sustainable and future proof.

00:00:24: I'm Tobias Kershov from Tovrheinland, your host and today it's about how movers and

00:00:29: shakers can be economically successful and how they can make the world a little bit better

00:00:33: every day.

00:00:34: We want companies not to adapt to the future, but to actively shape this future in such

00:00:39: a way that we all benefit from it.

00:00:41: And today we have a topic that is really exciting once you have penetrated it.

00:00:45: Namely circularity in good German circular economy.

00:00:48: Sounds technical at first, but in my view it is the key to real sustainable business.

00:00:52: But before you think, oh no, now comes the next environmental podcast about waste separation,

00:00:58: don't worry, we're not talking about the yellow bag.

00:01:01: Circularity is not only good for your conscience, but above all good for business.

00:01:04: And as always, I have an expert at the start who can explain it much better.

00:01:08: Our Dr. Baha Chad Krauser from Tovrheinland.

00:01:10: Baha, it's nice to have you back.

00:01:13: Thank you very much Tobias.

00:01:14: I'm also happy to be part of it again.

00:01:16: So we're not talking about my cycle, not yours, but circularity.

00:01:20: What does the circular economy mean?

00:01:22: Circular economy basically means moving from a linear economy to a circular economy.

00:01:26: Okay, so far understood, from straight to round.

00:01:29: But what does a linear economy or also called a growth economy mean in the first place?

00:01:33: What is that?

00:01:34: Yes, it's basically everything that you produce and which in the end of course also produces

00:01:38: a lot of waste and ultimately raw materials that could be recycled are simply no longer

00:01:42: used and new natural resources are always used for new products, new processes, which

00:01:47: is actually the key to a linear economy.

00:01:50: And our natural resources are finite, so the key is circularity, namely to bring waste

00:01:54: recyclables back into the cycle.

00:01:56: So if you think in terms of traffic, get out of the one way street into the roundabout.

00:02:00: Exactly.

00:02:01: How does this circular economy work very roughly?

00:02:04: Yes, there is no such thing as a circular economy in general, if you ask me.

00:02:07: So circularity, it has many, many facets.

00:02:10: It always depends a bit on where you look from.

00:02:12: So one thing of course is to return recyclable raw materials to processes.

00:02:16: However, the circular economy is also about developing products that can be easily disassembled,

00:02:21: for example, where individual parts can be recycled.

00:02:24: However, circularity also means being able to repair products, which is not always the

00:02:27: case or even to think about new business models.

00:02:30: In other words, to rent out, lease, take back and refurbish products and thus bring them

00:02:33: back into circulation.

00:02:35: That's a great idea at first.

00:02:37: No one will say no to it.

00:02:38: But from the idea to the realization, it's still a piece.

00:02:41: Yes, it's a play.

00:02:42: It's also a process.

00:02:43: So of course, it is not possible to transfer ongoing processes directly to the circular

00:02:48: economy.

00:02:49: Of course, and there are various reasons for this.

00:02:51: On the one hand, you have products that you want to sell.

00:02:54: On the other hand, you work with materials that may not always be very, very easy to

00:02:57: replace.

00:02:58: On the other hand, supply chains have already grown so historically that even suppliers

00:03:02: who might be able to use more recyclable materials are not directly there.

00:03:06: So the demand for recycled materials, for example, is relatively high and these needs cannot

00:03:10: be met directly everywhere in the same way.

00:03:12: So in my opinion, it's really a step-by-step process that you have to give a little time.

00:03:17: Let's make it a little more concrete.

00:03:18: Take the smartphone, for example.

00:03:20: How could I imagine that?

00:03:22: Because that's exactly the kind of issue where you have to get a new one every two

00:03:25: years because the old one is out of date.

00:03:28: As a rule, you can't rebuild it.

00:03:30: But what would something like a circular economy look like, especially with a device like the

00:03:35: smartphone?

00:03:36: You actually say it right.

00:03:37: We are used to getting a brand new mobile phone every two years.

00:03:40: Although the other smartphone can actually still do everything.

00:03:43: It may have a few scratches at most.

00:03:44: What do we do with it?

00:03:45: Off to the drawer, get a new smartphone and that's it.

00:03:48: I don't know.

00:03:49: How many smartphones do you have in your drawer?

00:03:50: That's a good question.

00:03:51: I think six or seven already.

00:03:52: Yes, yes.

00:03:53: And you can't use the old ones anymore either because there's no software for them anymore.

00:03:57: Yes, exactly.

00:03:58: On top of that, the nice thing, however, is that the big smartphone manufacturers are

00:04:02: also slowly moving in one direction.

00:04:04: For example, to take back old devices, then you get a small remuneration.

00:04:08: You can order a new one.

00:04:09: You can send the old smartphone back so that it may be disassembled again somehow.

00:04:13: But there are also smartphones that can be easily disassembled from the outset.

00:04:17: For example, Fairphone is a provider where you can return the phone.

00:04:21: It is disassembled.

00:04:23: Things like rare earths, which are simply really important resources of our earth and

00:04:26: are simply finite can be used again.

00:04:28: Or if something doesn't work, you don't have to throw the smartphone away.

00:04:31: You can just do it.

00:04:32: Repair.

00:04:33: This repairability also increases the product life of a smartphone.

00:04:37: Something that we may have to think about in our daily lives from time to time or even

00:04:40: more often, whether this might not be an alternative for us than holding a new mobile phone in our

00:04:45: hands every two years.

00:04:46: And yes, and what is true for mobile phones is basically true for all things that we

00:04:50: hold in our hand, right?

00:04:52: Yes, of course, durability is of course a big aspect of sustainability.

00:04:56: But of course, you also need durable materials to go with it.

00:04:59: You may also need new business models that allow you to take back exactly these products.

00:05:03: But that also means that you have to adapt logistical processes.

00:05:06: You have to take the customer with you.

00:05:08: You also have to say where or have to give a long sensitize.

00:05:11: Where can I actually hand in the products?

00:05:13: Where can I return them?

00:05:14: Everything has to come into a cycle and that simply has very different facets.

00:05:18: Of course, it's not always easy to implement this overnight.

00:05:21: You just mentioned it, longevity.

00:05:23: In preparation for this episode, I found the core principles of the circular economy.

00:05:28: And there is one of five or six core principles.

00:05:31: Just this topic is longevity.

00:05:33: Another is reduction of waste.

00:05:35: Then material efficiency is the third.

00:05:37: What do I mean by that?

00:05:38: Yes, material efficiency means that materials are really stable, that the quality is good,

00:05:42: that they ultimately bring things like durability with them.

00:05:45: So if you use a low quality material now, you can assume that your product simply won't

00:05:50: survive several years, but may break after a few months.

00:05:53: I think this brings us to the fourth core principle.

00:05:55: Reuse, reprocessing.

00:05:57: So only if I have a standardized material and it is also of high quality, I can reuse it

00:06:02: or probably reprocess it.

00:06:05: Such a recyclable smartphone is more or less the opposite of the throwaway mentality at

00:06:09: some point.

00:06:10: You've gotten used to it very, very nicely.

00:06:13: Repairs are done less today.

00:06:14: I'll just buy it new.

00:06:15: But what do companies get out of reversing this trend?

00:06:18: Yes, first and foremost, it is really about using or consuming fewer resources and at

00:06:22: some point reaching the point where we may also be able to save costs by using recycled

00:06:26: materials.

00:06:27: So imagine if you had to buy fewer resources because you can reuse materials.

00:06:31: This not only saves money, but also makes you less dependent on fluctuating commodity

00:06:35: prices.

00:06:36: Well, we can see that there is a very, very lot happening on the market.

00:06:39: The throwaway mentality has led us to a linear economy for decades.

00:06:43: So resources are extracted, products are manufactured, used, and then simply disposed of.

00:06:48: And where we stand, we see with our own eyes.

00:06:50: So littering is an example that we simply have to deal with and what we also see every

00:06:54: day.

00:06:55: And with a circular economy, everything stays in the system, either through reuse, through

00:06:59: recycling, through repair.

00:07:00: And the best thing is that customers really prefer companies these days that take responsibility.

00:07:05: And this can also promote a more sustainable purchase decision, which in turn also leads

00:07:09: to the fact that customers, and I include you and me among them, are also more willing

00:07:13: to maybe bring things back.

00:07:28: in practice. And above all, I already have enough to do with my core business. And to

00:07:32: introduce such things now, it's very, very time consuming.

00:07:35: Yes, of course, it is time consuming and also requires a lot of planning. So as I said, you

00:07:39: can't change everything overnight. And with circularity, you don't always have to turn

00:07:43: all production lines upside down. So that's actually not what it means. You can start with

00:07:47: individual products, take a look at the product range, see what are my main sales products,

00:07:51: where can I change something? Where do I want to change what and which processes can I touch? In

00:07:56: other words, to really start too small and to develop into it. For example, you can also start

00:08:00: with product design. For example, if I want to launch new products on the market, so that I look

00:08:05: at what the eco design of my product is like right from the start, how long can it be used? How can

00:08:10: materials be recycled? How can I perhaps also adapt logistical processes? How can customize a

00:08:15: production line? In other words, to really design products in such a way that they are also

00:08:19: recyclable? Or as I just said, when we talk about logistical processes, you simply analyze the

00:08:24: supply chain and the end of life, the so-called end of life of products. Is there any ways that we

00:08:29: can actively reduce or perhaps actually recyclable materials that can flow back into the production

00:08:34: process? And maybe you can also use materials that are simply more durable and recyclable. It's

00:08:38: really about taking steps. And sometimes a small screw instead of glue is enough. But let's be honest,

00:08:43: is circularity then perhaps more for the big ones who of course also have the market power to use

00:08:49: the screw instead of the glue, since they also have the resources to handle such a huge project in

00:08:55: the first place? Yes, I mean, sure, the big players certainly have more leeway, maybe a little more

00:09:00: budget to invest. But circularity is not just for the big players. So everyone can do something with

00:09:06: it, no matter how big the company is. We have just mentioned Fairphone before. It's a smaller company

00:09:10: and they really implement it consistently as circularity. You don't have to be a huge corporation

00:09:15: to do that. I also know a lot of startups that think about circularity right from the start so

00:09:20: that the corporate mindset is also directly geared towards sustainability. And that helps on the

00:09:25: one hand with the implementation of the whole topic, but also with involving the employees,

00:09:30: which is of course also super important. Do you have another example of this? For a startup. No,

00:09:36: not a startup, but maybe even an established company where you say, man, that's actually a pretty

00:09:42: good showcase model for how you switched from the old economy, from the linear economy to the

00:09:47: circular economy, so to speak. So a cool example is Patagonia. They not only repair their products,

00:09:53: but also encourage their customers to use products longer, but also to send these products back in

00:09:57: if they are broken or need to be repaired, really more the sensitization to repair things again in

00:10:03: order to be able to use them more long lasting and not just get a new part. And Patagonia also

00:10:08: goes to a foundation, which means that it belongs to a foundation that benefits the environment.

00:10:12: So everything that is distributed in corporate profits is invested directly in environmental

00:10:17: projects and other sustainability projects. So really from the basic idea, a sustainability

00:10:22: strategy that goes beyond the product line and really takes the entirety. How can we even deal

00:10:27: with the fact that our linear economy is geared towards profit maximization? So really that I

00:10:32: use all resources, get the best out of it, and if it's cheaper, pull out the profit there as well.

00:10:37: How can we even manage to get out of our ultimately worldwide economic system,

00:10:41: i.e. profit maximization, in order to then come to a sustainable system?

00:10:46: So Tobias, if I had the answer, I would be really happy. I believe, and I said this at the beginning,

00:10:51: that we are simply used to doing many things in the same way to exploit profit to the maximum

00:10:56: and to think primarily, of course, economically. So now we can't tell everyone to stop thinking

00:11:00: about money and just do it sustainably because as soon as you produce, you naturally have an

00:11:04: impact on the environment. I think the key is to develop yourself and actually become aware that

00:11:09: maximum profit means that if you don't do business more sustainably, you won't be around in 10 years.

00:11:14: So alternative could be, okay, I'm going to make money, money, money. But in 10 years,

00:11:18: everyone has overtaken me and I'm just not on the market anymore. What I want to say is that

00:11:22: sustainability, circularity, and profit are not a contradiction in terms. So you can become more

00:11:27: efficient through more sustainable processes, save costs. On the other hand, we can still

00:11:31: distribute attractive profits with sustainable products. So I think we need to rethink things.

00:11:36: And of course, that's not something that can be done globally today. Of course,

00:11:40: it's not always easy to implement this overnight. That's clear. Yes, but it's not new that we know

00:11:45: that for example, the earth's resources are running out. So 50 years ago, the Club of Rome

00:11:50: published its first paper, The Limits to Growth, which warned against further exploitation of the

00:11:55: planet's resources. Nothing has happened in this regard. There was now the 50 year report.

00:12:00: So what gives you hope that precisely this change also occurs in the mindset of decision makers?

00:12:07: Of course, you want this to happen out of your own intrinsic motivation. But let's be honest to

00:12:11: bias. Unfortunately, it's not always like that. We also do things because they are simple, but

00:12:15: they may not be sustainable. We want to go on vacation and don't think about how much CO2 we

00:12:20: emit. I believe that society is also a great lever. And the following generations, our children,

00:12:24: their children, they will of course also feel the effects. And we can already feel it today.

00:12:29: I think that will increase the pressure enormously. And today it is really the regulatory landscape

00:12:33: that creates pressure here. Even if it's not always nice to have to do something with a raised

00:12:37: index finger, regulation helps. And in fact, it is not only the companies that are really subject

00:12:42: to regulation that are directly affected, but the entire supply chain, because of course,

00:12:47: the materials come on the supply chain, the information on CO2, human rights, etc. They

00:12:51: all come from the supply chain. And that can certainly provide a boost. If I look at the

00:12:55: regulations now, I have to comply with my laws or the regulations. If I'm now a medium-sized

00:13:00: entrepreneur, or I'm just a manager with influence in my company and say, "Man, the topic of circular

00:13:05: economy, I find that very exciting. How can I get involved?" So if we now look specifically at

00:13:10: circularity, then I would advise every manufacturing company to take a look at the product range.

00:13:15: So I believe that processes and production facilities are already very efficient. Not always,

00:13:19: but often as far as production scrap is concerned, we are relatively good at it. I would actually

00:13:24: look at new developments, new products. How can I equip the product with which materials,

00:13:29: so that it also meets the criteria of a circular economy? I would actually do that first.

00:13:34: And I think it's also important that we now get out of production a bit and take our colleagues

00:13:38: and employees with us and involve them. Yes, if you look at the ideas of the employees,

00:13:42: especially from the areas of research, especially from the areas of innovation,

00:13:47: I think we have a lot of treasures lying around that you can take with you.

00:13:51: Yes, I'll take that with me and I think our listeners too. And if you, dear listeners,

00:13:55: want to learn more about topics such as circularity and sustainable business, just stay tuned.

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00:14:29: and all information can be found as always under our show notes.

00:14:33: And don't forget, change in business starts with us, with all of us.

00:14:39: So until next time, your business shift. The podcast for decision makers and executives

00:14:47: who want to deal with the topic of sustainability in a sustainable way.

00:14:51: Stay curious. Bye bye.