Circular economy creates competitiveness: 4 enablers for the transition to circular economy
The vast majority of materials used in the world are not recycled in the traditional linear economic model. The global circular economy rate is low, with only 7.2% of the materials used currently being recycled. Finland has set an ambitious target: to double its circular economy rate by 2035. What exactly does the transition to a circular economy require from businesses?
The circular economy and the green transition are key to solving many of the challenges facing modern society, such as depletion of the natural resources, climate change, biodiversity loss, and waste accumulation.
A sustainable economic model can lay the foundations for prosperity, promote environmental regeneration, and at the same time support economic growth. This requires companies to invest in new business models that increase their competitiveness and enable renewal.
1. Renewal to circular economy requires commitment
Sustainable business in a circular economy mindset starts at the core of the enterprise. Once management has embraced the importance of the circular economy at the heart of its strategy, it can commit to renewal. The key question for companies is what kind of added value they want to create in the future, both within the production and supply chain and for their customers. Increasing the competitiveness of a company can be achieved by using materials more efficiently and for a longer period of time, and by creating new value through customer-driven business models.
As many as 77% of the technology industry's member companies have adopted or are in the process of adopting the circular economy as part of their strategy.
A good example is Nokia, which plans to recycle 95% of the waste it produces by 2030, including old equipment. Such commitments from companies are a step in the right direction towards a more sustainable future.
The Green Deal for the Circular Economy, which supports society's transition towards a circular economy, is the answer to sustainable development. The Green Deal rules are being prepared by the Ministry of the Environment and the Ministry of Employment and the Economy. The actors' commitments will be based on scenario work carried out by research institutes – Syke, GTK, Luke, VTT, Aalto University and Statistics Finland. The commitment to the agreement is voluntary and will encourage companies to identify the most relevant circular economy activities for their operations.
2. Co-operation is the key in circular economy
In the transition to circular economy, traditional value chains change and the need for new forms of co-operation arises. Customer insight and value chain thinking will become vital to building a sustainable economic model and innovating new, sustainable products and services.
The different parts of a company's value chain need to work in line with circular economy principles – no one can do it alone, but co-operation and transparency across sectors is needed.
The circular economy will be implemented using an ecosystem approach and in co-operation with different partners, such as research institutes or other companies. The most important stakeholder is the company's customers. By developing solutions in partnership with different customer groups, customer needs can be better taken into account at the design phase and scaled up more quickly to fit the market.
It is also possible to make the transition to circular economy a reality in partnership with Business Finland. With our innovation funding, for example, you can accelerate product development, innovate or develop entirely new products, services, production methods or business models. Co-operation between companies and research institutes and research-based knowledge will bring new perspectives and boost competitiveness. Business Finland plans to launch a new program in 2024 on the circular economy of industrial material flows, for which we are currently looking for research institute partners.
3. Data and ai boost the circular economy
There is now room for new ways of working. Business transformation in challenging times can be the key to success, and we at Business Finland are here to help along the way. It's a good time to explore how you can leverage digitalization, optimize processes and find new ways to meet customer needs.
Artificial intelligence and data are creating opportunities to harness the principles of the circular economy. For example, by using smart technologies, you can monitor the life cycle of products and better optimize the use of resources. This also helps to reduce waste, as the use of technology helps to make production more efficient.
Customer understanding is the key. Customer data provides important information that can be used to meet customer needs.
In 2022, the European Commission has published the so-called Digital Product Passport (DPP). It is a part of the Circular Economy Package, which will provide transparent information about the safety, sustainability and raw materials used in a company's products during their life cycle. For example, so that customers can make more informed decisions about which products or services they want to use in the future.
4. Make the circular economy the core of your company's profitability and success
The benefits of the circular economy and sustainable economic model go much further than may appear at first glance. When a company adopts circular economy principles and a sustainable economic model into its business, it has a number of positive effects on its profitability.
The circular economy allows for more efficient use and recycling of raw materials, which can reduce the costs of purchasing and processing new raw materials and thus also translate into cost savings.
Uncertainties in production chains and material availability eat into efficiency and predictability. Data and technology have the potential to improve material efficiency and extend product lifetime. Recycling and reuse can, for example, improve a company's adaptability to sudden changes in the business environment. A sustainable economic model also aims to reduce energy consumption and energy costs.
By promoting a circular economy, a company can strengthen biodiversity, improve its reputation, brand, business profitability and competitiveness.
Can finland become a pioneer for the circular economy?
Progress is being made in the circular economy, but we need more momentum to add value to the circular economy. Preliminary results from the Finnish Environment Institute's scenario work on Finland's use of natural resources show that a more sustainable use of natural resources will slightly strengthen GDP.
Business Finland is also investing in the circular economy for the long term, with the aim of making Finnish circular economy experts the most impactful partners and solution providers in the world. A joint effort between businesses and the rest of society is key to creating a sustainable and competitive future through the circular economy.
For Finnish companies, the circular economy offers the opportunity to be at the forefront of sustainable business, if only we rise to the challenge.
The circular economy is not only a responsible business, it is also both profitable and opens up new markets. It is time to take a leap towards a more sustainable tomorrow!