What are the biggest misunderstandings about business

The 7 biggest myths about the circular economy

A common thesis is that the concerns of environmentalists and companies are incompatible: one side wants to preserve and protect the environment, the other is only interested in profit. What is less well known is that the circular economy takes all of these goals into account. Although there is now a lot of talk about the circular economy, there are many misunderstandings about the model. We dispel the biggest myths.

Myth 1: circular economy is just another term for recycling

Misunderstanding: the circular economy is an instrument that can only be used to reduce the ecological footprint.

Reality: The circular economy is a holistic and dynamic system that requires the change of an entire business or economic model. While we produce materials in the linear economic system, use them and then dispose of them, these are reused in the circular economy. The durability and repairability of products are taken into account right from the start. The circular economy also promotes the emergence of new business models, which can include sharing models and trade-ins, for example.

Myth 2: A circular business model slows down sales and is expensive

Misunderstanding: A circular business model throttles sales and costs companies dearly. Because if customers use their products longer, they buy less in the long term.

Reality: Long-lasting products not only reduce costs that arise from product returns, they also increase customer loyalty. The model opens up new business opportunities for service packages such as repair and maintenance services.

The costs of a circular system are discussed again and again, especially in procurement. However, there are various models with which procurement can be carried out innovatively and at the current market price level. One example is The Vested Way framework. It is based on the award of contracts on a zero basis, with the price limit at the level of current market prices. This procurement model creates incentives for all parties to improve costs and results.

Myth 3: The circular economy has a negative impact on producers

Misunderstanding: By reusing materials, producers in particular suffer from the negative effects.

Reality: If companies use existing resources and materials and do not have to produce them from scratch, they are less dependent on suppliers and manage resources that they already own. The Swiss Walter Stahel has been researching the circular economy for over 40 years. He recommends seeing resources as a service and selling them as a service.

Large companies are already using this knowledge for themselves. Jaguar Land Rover has built circularity into its design and assembly process and uses 50% recycled materials in some of its car models, including scrap aluminum from its own manufacturing facility. In view of the dependence of the automotive companies on this high-quality material, the model gives the company security and makes economic sense.

Myth 4: circular economy harms economic growth

Misunderstanding: The circular economy does not create any new jobs and offers no advantages over the linear economic model.

Reality: The circular economy has the potential to create jobs. A report by the World Economic Forum in collaboration with the Ellen MacArthur Foundation and McKinsey shows that the transition to the circular economy can create more than half a million jobs: and not only in emerging industries, it also makes existing companies sustainable and secure in the long term the company's success. The earlier a company knows how to adapt to the current situation, the lower the risk of being superfluous or being replaced.

Myth 5: The circular economy does not address climate change

Misunderstanding: Although the circular economy is dedicated to environmental issues, climate change is not at the top of the agenda.

Reality: The circular economy has the potential to make a significant contribution to reducing carbon emissions. According to a report by the Carbon Trust, the Knowledge Transfer Network, and Coventry University, recycling materials uses 85 percent less energy than producing new ones. This means that there is a global potential of more than 800,000 tons of CO2-Compensate for emissions per year. The overall potential is even greater, because reprocessing is only one component of the circular economy.

Myth 6: Circular economy stands for perfectly closed cycles

Misunderstanding: The circular economy is a perfectly circular economic system with closed cycles.

Reality: The term circular economy does not mean that the economic system is 100 percent circular. In contrast to the linear economy, however, it should become clear how things behave in a natural bio and atmosphere. The human being is embedded in cycles.

Strictly speaking, a linear economy is not entirely linear either. Many things come back in a messy and polluting way. The linear economy is also in part “circular”, but with significant negative effects at every stage of the process.

The term «circular economy» is intended to evoke the idea that feedback loops create added value. They enable renewal and restoration rather than deterioration and wear and tear. It adapts the economy to nature, not nature to the economy.

Myth 7: Change will happen instantly

Misunderstanding: The change to a circular economy happens overnight.

Reality: the circular economy is not an “off the shelf” solution. Many companies are used to quick solutions and want immediate results. They also expect the same from the circular economy. However, change takes time. The circular economy cannot be consumed as a ready-made solution. It requires evolution. In all of this, we are both an active participant and a consumer.