The transition to circular economy requires the simultaneous transformation of different dynamics. Circular economy, which basically aims to change social structures, actively uses all resources that enable innovative thinking in this process.
In this week's article, we discuss some of the elements that are critical in the process of transition to circular economy, and discuss their importance and impact on the process.
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What are the key elements of circular transformation?
🧩 Data analysis, digitalisation, experience, measuring impact, standardisation
Unlike the concept of sustainability, circular economy is a concept that aims to redesign existing systems, not improve them. This makes the transition to circular economy a much slower, and more challenging process. However, since circular economy not only has positive environmental and social impacts but also the potential for economic growth, it does not matter how challenging this transformation process is.
Improvements in existing systems, repairing faulty areas or reducing negative impacts, unfortunately, do not have the expected impact in combating the climate crisis nor in issues such as social justice and equality. One of the most important reasons for this is that the private sector and governments want to keep their financial situation under control in this transformation process. The fact that making improvements to reduce environmental impacts is seen as costly actually sheds a light on our current situation in the fight against the climate crisis, which is progressing slowly based on scientific data.
In circular economy, it is the opposite. Circular economy is a concept that differs from sustainability in that it creates new businesses, redesigns faulty systems and allows for the avoidance of mistakes that were previously made in the redesign process. In doing so, it also brings an innovative perspective to the cost part, which is actually ignored but, as mentioned above, is the biggest obstacle to the concept of sustainability. Economic growth is one of the most important benefits of circular economy. It provides this return with the new income and consumption models it embodies.
In order for this transformation to proceed smoothly, all stakeholders need to act for the same purpose and fulfil their duties and responsibilities by adopting the principles of circular economy. However, in addition to this unity, different practices must also be implemented for the transformation that constitutes the main discussion of this week's article. These practices should be considered a part of social transformation as they affect the way we think and do business.
🧩 Data analysis and digitalisation
Data science is now an indispensable part of our lives. In our daily lives, we interact with data science at every moment of the day, whether we are aware of it or not. Although this situation is handled under 'marketing activities', especially for consumers, it can be said that data science actually facilitates or streamlines our daily lives in many different areas. Data science, which has become more popular with the introduction of Industry 4.0 technologies into our lives, is also critical for circular economy.
Circular economy basically aims to use resources efficiently. The main goal is to create less waste by consuming fewer resources. Although it seems very simple, this goal is very difficult to achieve due to the current linear economy. Data analyses come into play to achieve this goal.
With innovative data analysis systems, we can use resources more efficiently, consume only when we really need to, and prevent waste generation. But this is of course an application that brings with it the digitalisation of all processes (in professional and private life) that you can think of today. Therefore, the first step towards the realisation of circular economy is the digitalisation of all processes and the inclusion of data science in this process.
There is research on how circular economy has potential environmental, social and economic impacts. The most striking of these is, of course, how it has a positive economic impact. The potential of circular economy can be overestimated on paper, but this does not necessarily make it a 'profitable' concept. A process that is favourable on paper, in theory, may not have the expected effect in real life.
For this reason, in order to complete the transition to circular economy with minimal damage, innovative circular business models should be implemented quickly and tested with pilot studies. It is critical to pay much more attention to initiatives with circular business models, especially at the point of providing financing, and to in-house circular pilot studies in the private sector.
By correctly testing circular strategies and business models with high potential in these trial processes, the transition process of all stakeholders to circular economy will accelerate, while the abovementioned potential for economic growth will be tested.
🧩 Measuring impact
In the current, linear economic system, especially financial data are of critical importance. Companies' balance sheets, debts, receivables, turnover, etc. are still among the most important indicators today. But this situation is the main reason for the establishment of the faulty system we are in. To avoid misunderstanding, it should be noted that we are not criticising the 'capitalist/socialist' systems.
Systems designed in the light of financial metrics naturally put profitability at the centre of business models and mindsets. This causes the impact of the work done, regardless of the sector, company, country or region, to be ignored. As long as an X product brings the expected profitability, gender equality is not sought in the production process of this product, or how much natural water resources it pollutes is ignored.
Although the situation in linear economy is unfortunately as depressing as we have mentioned above, of course, this situation is changing with the increasing awareness in recent years. Stakeholders in the value chain (especially investors and consumers) now demand that the private sector, and in some cases governments, share not only financial returns but also environmental and social impact analyses. This situation now makes it mandatory to measure not only the economic but also the environmental and social impacts of the work done, the step taken, and the decision made.
This critical process, which is also very important in the transition to circular economy, should actually be addressed in the process of designing the systems from the beginning. In this way, possible impacts can be determined at the very beginning, at the design stage, and the negatives can be identified and prevented in advance.
Since circular economy does not have a specific framework for the time being, its potential remains uncertain. This uncertainty can be seen as positive, especially as it paves the way for innovation and allows the potential to grow further. However, the uncertainty also leads to a misunderstanding of circular economy as a waste management system and therefore its potential is lost before it can be realised.
Especially within sustainability, there are metrics used to measure the performance of the private sector in the areas of environmental, social and governance (ESG). This allows companies to make their sustainability journey in a controlled manner with continuous improvements.
From this point of view, it is critical that the transition to circular economy is also monitored with some globally recognised standard metrics. However, it is useful to remind the distinction of innovation. Transformation within a certain framework will of course be limited and insufficient. For this reason, while preparing metrics for performance monitoring (or circularity rate) for circular economy, circular economy principles should not be limited and business models should not be handled within a certain framework. In this way, while the transformation process can have a specific roadmap, innovation, which is the most valuable building block of circular economy, may not be prevented.
Circular economy is first and foremost a way of thinking that requires us to change the way we do business and our ways of thinking. Circular economy is a system that will enable us to live in touch with nature by changing our view of life and will allow us to redesign our systems in this direction. In doing so, it is a much more inclusive and broad concept as it focuses on economic development as well as environmental and social welfare.
Even if we design all the applications that come to mind during the transition to the circular economy with circular economy principles, we will not be able to achieve the transformation we expect if we do not update our mindset as humanity in a way that adopts the circular economy.
For this very reason, circular economy should be understood and adopted not only by waste management units of companies, but also by each stakeholder of social structures in a way to cover their own spheres of influence. Not only resource utilisation, waste management or responsible consumption, but also education systems need to be designed from the ground up to ensure that future generations continue their lives with circular mindsets. In order to get rid of the roots of linear economy in every aspect of life, we need to do more research, learn the right information and experience more circular business models.
What is your roadmap for experiencing circular economy in all areas of your life and adopting its mindset? Share your experiences with us and let's continue our discussion together.
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