Time to go circular: Circular Economy as a new industrial paradigm

Ever heard of Circular Economy? Read the interview with Professor Davide Chiaroni, Vice Director & Co-Founder of the Energy & Strategy Group at Politecnico di Milano, and learn more about one of the most important challenges of our time.

1. Why are we talking about Circular Economy today?

 The traditional “linear” process for our everyday products (phones, PCs, cars, houses,…) based on the sequence “producing, consuming and disposing” is increasingly becoming no longer sustainable, not only from an environmental but also from an economic point of view, with the scarcity of input resources and the constraints connected to pollution and emissions strongly reducing the profitability of companies. A potential answer to this issue is to consume less, changing our lifestyle and coming back to a more responsible usage of resources… Do you think this will be possible? Circular Economy is gaining attention because it offers a different, and equally effective, answer: change the whole paradigm, sustain the consumption but reduce the usage of resources. How? By creating a virtuous “circle” where products are purposively designed for being easily disassembled after their use (exactly the opposite of the current most trendy smartphones…), producers are not selling but renting (on a pay per use basis) the products to the end user and then they call back the products after the use and re-insert most of the valuable resources (critical components) in the production chain. Think for example of a washing machine whose engine is designed for being easily disassembled and that comes on a pay per use basis to the customer. Thanks to a certain maintenance program the engine is periodically substituted by the producer and replaced with a new engine, the key components are collected and re-manufactured or regenerated thus allowing the producer to strongly reduce the material costs for its products. It is already a reality and many cases can be found here.

2. According to an article by McKinsey & Company, “some businesses are using circular-economy principles to create products that are durable, easy to reuse or recycle—and profitable”. In your opinion, which are the main challenges of this process?

Becoming “circular” is not that easy as it requires to significantly change the business model of companies.

The first main challenge is to pass from a brick&mortar model to a pay per use model that forces companies to establish trustworthy and long term relations with the customers. It is a model that is already well known due to the emergence of the sharing economy, however there is still a long way to make it the mainstream model: we are already used to finding car sharing services in our big cities … but how many of us have a pay per use car as their family car?

The second main challenge is that in a traditional linear model you have to deal with a long chain of actors, somehow independent from one another. In the car market, for example, you have the used car dealers, the independent mechanics services, etc. and these actors will be displaced by the advent of a pure circular model, with car makers taking care of collecting used cars and re-inserting them (or their main components) in the market. The transition towards a circular model requires a deep redesign of the whole value chain.

The third main challenge, strongly related with the second one, is that you need policies to support the transition of value chains and of customers towards a circular model. You need the public support to ignite the transition.

 

3. MIP and Ellen MacArthur Foundation, an important and enduring partnership. What is the fil rouge?

The mission of MIP is to create and share knowledge at the intersection between management, technology and policy. Circular Economy, as a new industrial paradigm, requires to manage all these three dimensions according to the challenges we mentioned before. Ellen MacArthur Foundation is selecting pioneers among Universities and Business Schools for studying and supporting this transition process. From the very beginning, MIP has been part of this process and we are constantly working to bring Circular Economy into our education programs.

Eager to discover more on Circular Economy? Join the MBA Day Time to Go Circular on Saturday, April 8^th: you will have the chance to meet Prof. Davide Chiaroni in person, dive deep in the topic and put in practice what you will learn during the round table through a circular game!