Circular Startups

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Growth is vital to the survival of any startup, without growth a startup ceases to exist.

Given its critical role the question arises: can a startup succeed if its growth is decoupled from the consumption of finite resources?

The Problem – A Linear Economic Model

The majority of the world still relies on a linear economic model that functions on the basis of ‘take, make, and dispose.’ Such a linear economic model assumes infinite supplies of cheap, easily accessible raw materials and energy, with no boundary on the amount of generated waste.

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However, the existing linear economic model cannot continue indefinitely.

The global population quadrupled over the past 100 years to over 7.4 billion people; another 1.1 billion more people expected worldwide by 2030. The impact of this population boom will be amplified by a dramatic increase in the number of middle-class consumers with disposable incomes.

The reality is that non-renewable resources are finite and will become exhausted within a linear economic model that tries to meet the needs of billions. The earth simply cannot supply infinite amounts of raw materials and absorb waste without hitting the environmental boundaries of the atmosphere, land, and oceans.

The Solution – A Circular Economic Model

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Startups are the perfect catalysts to spark the shift towards a circular economy.

Successful startups like Uber, Airbnb and Netflix have embraced business models that leverage sharing, virtualization and other mechanisms that decouple growth from the consumption of finite resources.

But sharing and virtualization are just the start. The world needs to shift to a circular economy that keeps products, components, and materials at their highest value at all times while ensuring:

1) All materials are cycled infinitely

2) All energy is derived from renewable sources

3) Multiple forms of value are generated

4) Biodiversity is supported

Upon first glance these four guiding principles may seem impossible to implement. But startups are in a unique position; they can leverage their agility and innovative business models to start driving circular growth and bridge the gap between today’s linear take-make-dispose model and a future closed-loop model that regenerates and restores.

Before diving into opportunities we need to better understand where the idea of a circular economy originated.

A Brief History of Circular Economic Theory

Sustainability concepts exploring different ways of reducing waste from linear economic models have been around for almost 30 years. Each idea is unique in its approach but all require thinking in terms of systems and feedback loops. Numerous theories and design philosophies have contributed to the development of a circular economic model, including:

1) Industrial Ecology (1989)
An approach that aims to create closed-loop industrial systems that rely on waste from one process as an input for another.

2) Biomimicry (1997)
An approach that looks to nature for design principles and inspiration.

3) Cradle-to-Cradle (2002)
A design philosophy that considers all materials as nutrients, either technical or biological. The cradle-to-cradle design principles revolve around material health, material reutilization, renewable energy, water stewardship, and social fairness.

4) Performance Economy (2006)
An economic model that revolves around product-life extension, long-life goods, reconditioning activities, and waste prevention.

The most recent and influential work within the sphere of circular economics has come from the Ellen MacArthur Foundation. Since its establishment in 2010 the charity has published dozens of critical reports that have been instrumental in educating the public and supporting a shift towards a circular economy.

Circular Economic Framework

The first step in decoupling startup growth from finite resource consumption is to understand the circular economic framework and the mechanisms available to create innovative circular business models.

In collaboration with philanthropic partners and the McKinsey Center for Business and Environment, the Ellen MacArthur Foundation established the ReSOLVE framework as outlined in Growth Within: A Circular Economy Vision for a Competitive Europe (2015). The framework identifies six different ways that organizations can think about applying circularity:

REgenerate

• Reclaim, retain, and restore health of ecosystems
• Return biological nutrients safely to the biosphere

Share

• Coordinate usage of assets through sharing or exchange platforms
• Reuse assets through resell or redistribution

Optimize

• Prolong product use through repair, maintenance, design for durability and upgradability
• Decrease resource usage by increasing efficiency and designing out waste
• Leverage big data, automation, and remote sensing to optimize reverse logistics

Loop

• Remanufacture and refurbish products and components through design for disassembly
• Recycle materials by making the right material choices in the design process to ensure recyclability

Virtualize

• Replace physical products with virtual services (e.g. ebooks)
• Replace physical with virtual locations (e.g. online shopping)
• Deliver services remotely (e.g. cloud computing)

Exchange

• Shift to renewable energy
• Use alternative material inputs by extracting feedstock from biological nutrients
• Replace traditional processes with advanced technical solutions
• Replace product-centric delivery models with new service-centric ones

Startup Opportunities

The ReSOLVE framework identifies numerous opportunities for startups looking to decouple growth from finite resource consumption. Startup teams can use the framework to explore new business models that redefine value generation; replacing ownership with access.

The framework can be coupled with concepts from biomimicry, cradle-to-cradle, and the performance economy in order to drive innovation in product design and materials selection.

Having gained some insight into the circular economy, can the question of decoupling growth from finite resource consumption be answered? Check out the next article to explore opportunities to sustain growth with circulated resources in hardware startups.

Credits – Icons used in infographics designed by Freepik from Flaticon.

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