Navigating the Circular Transition - by Ander Eizaguirre, OECD
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Testimonial
Ander Eizaguirre,
Policy Analyst at Centre for Entrepreneurship, SMEs, Regions and Cities, OECD
The transition to a circular economy is pivotal for sustainable development, requiring businesses to adopt innovative models that redefine traditional resource usage. At the forefront of this transformation are several key approaches that businesses can integrate into their operations.
For me, Circular Supply Models aim to replace conventional material inputs derived from virgin resources with bio-based, renewable, or recovered materials. By doing so, businesses can reduce dependency on finite resources and promote environmental sustainability.
Resource Recovery Models focus on transforming waste into secondary raw materials. This approach diverts waste from disposal and decreases the need for virgin resource extraction, fostering a more sustainable resource loop.
Product Life Extension Models seek to prolong the useful life of products, thereby slowing the flow of materials through the economy and mitigating resource extraction and waste generation.
Sharing Models encourage the use of under-utilised products, reducing the demand for new products and the raw materials required to produce them. This model supports efficient utilisation of resources and minimises waste.
In my view, Product Service System Models (PSS) involve marketing services rather than products. This shift enhances incentives for green product design and promotes the efficient use of products, aligning business practices with sustainability goals.
However, implementing circular business models is not without challenges. Businesses face both external and internal obstacles.
Externally, inconsistent policies and messages can create confusion and hinder progress. There is often a lack of clear pricing signals, which may discourage investments in circular practices. Consumer demand for circular products is often insufficient, and supply chain constraints, as well as technology limitations, can impede the adoption of circular models. Additionally, infrastructure capacity may not be adequate to support circular processes, and physical limitations can restrict the feasibility of certain circular practices.
Internally, businesses may lack incentives to invest in circular models due to high costs and low ROI. Access to capital is a significant barrier, and there may be a lack of targets and benchmarks to guide circular initiatives. Knowledge and expertise in circular practices are often limited. Competing priorities can divert attention and resources from circular efforts, and internal capacity and resources may be insufficient to support circular transitions. Habitual behaviour within organisations can resist change.
The OECD framework indicates that the broader transition to a circular economy faces additional obstacles, such as insufficient financial resources, inadequate regulatory frameworks, cultural barriers, and a lack of holistic vision. There is limited awareness and human resources dedicated to these efforts, issues with achieving critical scale, and accessing necessary information. Incoherent regulation across government levels and a lack of political will and technical solutions further complicate the transition.
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