Robert H. Goddard, the rocket pioneer, after whom the Goddard Space Flight Center was named once wrote about long-duration interstellar journeys in his essay “The Last Migration”. He speculated that human race will send out expeditions into the regions of thickly distributed stars, taking a condensed form of all the knowledge of the human race. Pondering on the concept, I was attending the class of Prof. Sergio Chayet at WashU, where he introduced us to the concept of Just-in-time production. In the class, I realized that the business supply chains of the modern era work in a linear fashion. We produce and consume in endless supply chains. The business mantra that runs our traditional economics is the extraction of maximum profit from existing resources.
To support the model of sustainable profitability, we rely on a linear approach. We take, we make and we dispose of. To achieve profit overtimes (we do not bother whether it is sustainable or not) we transformed our economy into a cowboy economy. Since the time we settled in civilisations, the cowboy economics created the rich and poor divide in the society. The cowboy economic principle is centred on taming and exploiting a seemingly endless resource frontier. This resulted in an exorbitant appetite for resources. According to International Resource Panel, a UN body that consists of scientists and policymakers, estimates that primary materials extracted from earth rose from 22 Bn tonnes in 1970 to 70 Bn tonnes in 2010 and by 2050 the planet will need 180 Bn tonnes of material a year if the trends continue.
Is this a sustainable use of resources? It is a good time for every corporate citizen to think before it gets too late and the changes become irreversible. If we could portray the human civilization on a spaceship earth travelling to a ‘destination’, can this economics survive till we reach our destination? Is this the time to rethink our business models? We cannot allow modern business to become Ouroboros – the serpent that eats itself.
Based on the simple concepts of waste reduction, reusing and redesigning product and process flows, there is a possibility that we could still reach our ‘destination’ in a sustainable manner. We can preserve and enhance natural capital available for future generations. This is the concept of Circular Economics. According to Ellen Macarthur Foundation, a circular economy is restorative and regenerative by design and aims to keep products, components, and materials at their highest utility and value at all times.
The concept is congruent to the living world. There is no waste. It is just the flow of material from one form to the other. Energy is provided by the sun, things grow, then die and nutrients return to the soil and the system circulates. It is a system that has evolved over 4 Bn years. But what about human technology that runs our businesses? In the modern era when the new technology comes up, we ditch the old one. Let it be our mobile phones, Televisions, refrigerators, washing machines and the list is endless. When the iPhone X is launched no one needs the old one and Apple stops the support of the older models. Each time we use and discard, we are eating into a finite supply of resources. As an output of this process, we produce toxic waste. Technology is evolving at a much faster pace. So is the waste that is generated as part of these business ecosystems. By 2030, 3 Bn more middle class consumers will have access to latest technology. This is fantastic, but at what cost? Can the current way of consumerism be transformed by circular economics? If yes, firms can recirculate their products without any waste in their production, distribution and consumption supply chains. If companies stop selling products and start selling services, we will see this change. For example, if Apple starts selling its smartphone as a service instead of a product, the firm will have a motivation to circulate its older models within the supply chain and reduce the push of newer versions to the market. In such a scenario, the customers can enjoy the latest technology without creating a perceivable dent on resources. Consumers will be more interested in services and performance of such offerings rather than the product. This change in the business mantra can motivate firms to consume resources in a sustainable way and we could reach our ‘destination’.