The process of transition to circular economy cannot be realised quickly due to different obstacles and structures that are not open to change. Although the duties and responsibilities of stakeholders are critical for the acceleration of this transformation process, some structures that exist with a common consciousness and do not have a direct interlocutor seem to be the biggest obstacles.
The current market dynamics that have developed over the years in accordance with the current structure of linear economy and the main topics that they bring into question with circular economy constitute the main point of our discussion this week.
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What challenges do market dynamics pose against transformation?
Market dynamics: private property, planned obsolescence, appraisal
When circular economy is considered as a mindset that requires all systems to be designed from scratch, it is also subject to criticism on many issues due to its motivation to change the existing order. Of course, the aim of changing the existing economic and social structures from top to bottom is not a process that a single stakeholder can decide and realise alone. However, since circular economy is a concept that has not yet been properly understood as a concept and is not addressed at the macro level, not all stakeholders have this holistic systemic transformation motivation yet. This causes the transition to a circular economy, which prioritises environmental and social welfare but also puts economic welfare at the centre of transformation, to be hampered.
In the process of transition to circular economy, as we have mentioned many times in our previous articles, the main stakeholders that make up the social and economic structures, namely governments, private sector, academia, NGOs and individuals, have duties and responsibilities. Since these stakeholders are considered as legal or real persons, they have to be involved in the transformation within certain metrics or roadmaps. However, there are also different stakeholders who carry critical importance in the transformation but do not have a clear interlocutor.
The 'market', which is the most fundamental part of economic systems, where all stakeholders come together and trade is carried out, appears as a stakeholder without a direct interlocutor. The market, which can be considered as the environment where buyers and sellers meet in its simplest definition, can be named as the biggest obstacle in front of the transition to circular economy or most basic sustainability issues today.
Although all stakeholders that make up the market have started to attach importance to welfare-enhancing activities on environmental and social issues in recent years, financial expectations, profit-oriented structures that do not like change are seen as the main reason for the loss of momentum in the process of transition to circular economy.
So at what points do the expectations of the market and circular economy conflict?
🧰 Private property
Today, private property is no longer limited to commodities such as land or real estate. With the development of mass production and technology, all products and services we use in our daily lives are handled within a system organised under the ownership of consumers or sellers/manufacturers.
All products and services purchased in daily life (except for rental services) are completely owned by the buyers. Private property, which has a critical place in circular economy, is handled differently compared to its current setup. Circular economy advocates that product ownership should be taken from consumers and given to manufacturers/sellers in order to use resources efficiently.
The instinct to own a car, a house, a smartphone, which is encoded in our mindset, inevitably opposes this idea. However, the basic motivation underlying the idea is as follows: In order to extend the lifespan of any product produced using many resources, the product needs to be included in the maintenance and repair processes. This can only be possible if the consumer who owns the product carries out these processes correctly. Thanks to mass production, the fact that everyone can access the desired product at any time, with alternatives suitable for their own budget, prevents the processes of preserving the value of the products. Of course, it is not realistic to expect a consumer who can access the same product at any time to carry out such maintenance and repair processes efficiently.
At this point, the circular economy argues that the ownership of products and services should be left to the manufacturers and that all maintenance and repair processes should be carried out by the manufacturers . This would extend the life cycle of a manufactured product, while preserving the value of all utilized resources as long as possible. In addition, the fact that consumers can access products and services only when they need them has a positive impact on both cost and utilisation efficiency. Here, as an alternative to increasing profitability by selling more products, which is the expectation of the market, circular economy actually introduces innovative business models by suggesting the rental of products and services. Thanks to innovative business models such as rental, maintenance, repair, etc., consumers can have the product they want only when they need it. While purchasing costs are reduced, manufacturers can diversify their revenue models thanks to innovative business models.
🗑️ Planned obsolescence
Planned obsolescence, which emerged in the early 20th century, means that products are deliberately and intentionally designed to cause them to lose their function.
For our readers who want to get detailed information about planned obsolescence, we invite you to read our previous issue titled 'How do we stop planned obsolescence?'
Planned obsolescence is another critical practice where the market is at odds with circular economy. The main application method of planned obsolescence is the use of products and services for a limited period of time determined by the manufacturers, after which they completely lose their function and are considered as 'waste'.
Aside from preserving the value of resources, planned obsolescence, which causes them to be considered as waste in a shorter period than they should be, is used in many products today. This type of design, which aims to compress the lifespan of products to a certain period of time by reducing their durability, aims to make consumers buy the same or similar products continuously.
Circular economy, on the contrary, aims to design products and services with the most durable technical and hardware features at the initial design stage and to maximise the value of resources by using them for a long time. This is, of course, the biggest indicator of why market dynamics do not accept the circular economy as it is. Current market dynamics cannot naturally accept products and services that offer long-term use and durability. Products with a longer life span, which create obstacles to more sales, cannot exist in a profitability-oriented system. However, extending the product life cycle and designing durable products can reveal different business models for manufacturers as mentioned above.
Although the products are durable, they may need to be renewed at any time due to new technologies, user errors, etc. In addition to maintenance and repair processes, designing modular products that can be improved in parallel with updated technologies and with the replacement of a few minor parts, are alternatives that can contribute to the increase in profitability, which is at the centre of the business as the main motivation.
To summarise, market dynamics unknowingly create much bigger obstacles in the process of transition to circular economy. The examples in this article are just a few of these obstacles. Many factors such as labour rights, product valuation and pricing, technical efficiency and market efficiency stand as obstacles to the systemic change proposed by circular economy because they have typical structures.
The transformation of market dynamics is considered to be a very challenging process as there is no clear interlocutor. However, there is a point that should not be forgotten; those who determine the dynamics of the market are also the main stakeholders that make up our social and economic structures. For this reason, in a future where all stakeholders know their duties and responsibilities and adopt the circular economy as a mindset that will ensure prosperity in every field, the market may change the stereotypes that we say 'would never change' today.
In which other areas might market dynamics slow down the transformation process in the transition to circular economy? Share your opinions and suggestions and let's continue our discussion together.
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