Turning the linear circular

Published on Thursday, 27 July 2017

Institutions, both in the private and public sector, can always reap the public relations benefits of doing good, even while still accomplishing their goals. As resources become scarcer, a major way to enhance social performance is through resource conservation.

Although the traditional model of the linear economy has worked forever, and will never be fully replaced, it is essentially wasteful. The circular economy, in comparison, which involves resources and capital goods reentering the system for reuse instead of being discarded, saves on production costs, promotes recycling, decreases waste, and enhances social performance. When CE models are combined with IoT, internet connected devices that gather and relay data to central computers, efficiency skyrockets. As a result of finite resource depletion, the future economy is destined to become more circular. The economic shift toward CE will undoubtedly be hastened by the already ubiquitous presence of IoT, its profitability, and the positive public response it yields.

Unlike the linear economy which is a “take, make, dispose” model, the circular economy is an industrial economy that increases resource productivity with the intention of reducing waste and pollution. The main value drivers of CE are (1) extending use cycles lengths of an asset (2) increasing utilization of an asset (3) looping/cascading assets through additional use cycles (4) regeneration of nutrients to the biosphere.

The Internet of Things is the inter-networking of physical devices through electronics and sensors which are used to collect and exchange data. The main value drivers of IoT are the ability to define (1) location (2) condition (3) availability of the assets they monitor. By 2020 there are expected to be at least 20 million IoT connected devices worldwide.

The nexus between CE’s and IoT’s values drivers greatly enhances CE. If an institution’s goals are profitability and conservation, IoT enables those goals with data big data and analysis. By automatically and remotely monitoring the efficiency of a resource during harvesting, production, and at the end of its use cycle; all parts of the value chain can become more efficient.

When examining the value chain as a whole, the greatest uses for IoT is at its end. One way in which this is accomplished is through reverse logistics. Once the time comes for a user to discard their asset, IoT can aid in the retrieval of the asset so that it can be recycled into its components. With efficient reverse logistics, goods gain second life, less biological nutrients are extracted from the environment, and the looping/cascading of assets is enabled.

Estimates are that the potential profits from institutions adopting CE models could decrease costs by 20%, along with waste. The increase in efficiency combined with the goodwill generated by conservation is a win-win proposition for innovation, even with costs implementation, future monetary profitability will make it a no-brainer.

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