Scalable Consumption + Supply Chain + Circular Economy = Hope for Sustainable Economies

Consumers have unprecedented opportunity to be active shapers of the products and services they buy and use, rather than passive receivers, taking whatever companies provide. Apples most recent litmus test on corporate social responsibility with its key Chinese supply chain manufacturing partner, Foxconn, and resulting consumer outcry is but just one example of the power that consumers have to sway products manufacturers to alter their business patterns.

At the recent World Economic Forum (WEF) in Davos, Aron Cramer (CEO and President of Business for Social Responsibility or BSR) observed at one workshop the “fast-changing relationship between businesses and consumers. The question on the minds of many of the business executives in the room was “is this good or bad for business”. The answer to this particular either/or question is undoubtedly both. Companies that stay ahead of this curve by involving consumers in product design; providing transparent information about the social and environmental content of these products, and looking at new models to provide value in new ways will prosper. Those that don’t will find growth hard to come by.”

Scaling Consumption in a Smart and Sustainable Way

The WEF has devoted a great deal of attention to the issue of scaling consumption sustainably as the world economy shifts both demographically and economically. WEF examines these issues in a report entitled: More with Less: Scaling Sustainable Consumption and Resource Efficiency. The study properly takes a “systems view” of sustainable consumption.  In other words, rather than focusing just on the demand side, WEF looks at the challenges and possible solutions through a value-chain centric lens of what they describe as:

  • consumer engagement (demand)
  • value chains and upstream action (supply)
  • policies and an enabling environment to accelerate change (rules of the game).

“Making your business sustainable in today’s world is an absolute imperative. The business case for sustainable growth is clearer than ever and the urgency of the issues we face means that business leaders have no choice but to act. ” Paul Polman. Chief Executive Officer, Unilever

As WEF explains, “The main outcome is the identification of key focus areas for business leadership through concrete goals and collaboration across industries”.  For this report, WEF engaged with chief executive officers, business leaders and experts worldwide, seeking answers and thoughts centered six key questions:

  1. What are the key trends in sustainable consumption?
  2. What is the size of the opportunity for countries, companies and consumers?
  3. What are the barriers to scaling existing models of sustainable consumption?
  4. What does getting to scale look like?
  5. What new solutions are needed to get to scale in sustainable consumption?
  6. How can we achieve scale by working collectively and creating action on new fronts?

Barriers, Mind Sets and Complexities- Oh My!

To no surprise, the report identified a number of internal and external barriers to staving and influencing scalable and sustainable consumption, notably (according to the report):

  • Consumers lack incentives for sustainable consumption and are confused by mixed messages. The study noted that one survey of British consumers indicated that 70% were uncertain about the environmental performance of the products they buy.  I have seen similar surveys here in the United States that compare with the British results
  • Supply chains are complex, opaque and interconnected. Deep supply chains, like Apples or the textile industry, create many complexities that place  limits to in certainties sustainable sourcing
  • Technology remains costly and inadequately deployed.   The study notes that “Fewer than 20 facilities in the world are certified to melt down and recycle the cathode ray tubes of old television sets, and all are in Asia. E-waste, which at present largely originates in the US and Europe will travel across multiple countries and continents for recycling – putting the environmental benefits into question and causing additional social concerns”.  That being said, more collaborative enterprises across industries and economies can replace the linear economies that characterize western industrial nations, and create more opportunities to expand technologies further and wider.
  • Policy incentives remain weak. The report notes that “trade systems and tariffs rarely differentiate between unsustainable and more sustainable alternatives, preventing a potential increase of 7–13% in the traded volumes of sustainable products
  • Short-termism dominates the landscape, and traction in fast-growing markets remains low. Typical of capitalism and free enterprise, most companies growth targets rarely look out father than a few years, and seek short term gains to keep shareholders happy.  The WEF report noted that “55% of FTSE 100 company sustainability targets were to be achieved within 1–2 year timeframe’s, while only 18% looked out to 2018–2020”.

The graphic below suggests some strategies in the report to overcome these barriers along the three key value-chain points as described above.

Moving Toward a Circular Economy

Something else also happened “on the way to the Forum” (well actually at the Forum) that may offer some insights and solutions that are discussed in the WEF report.  At Davos, Ellen MacArthur, head of the non-profit Ellen MacArthur Foundation, suggested that while” rapid technological evolution across all major industry sectors,{was taking place] … very little change within the economic model itself {has been occurring]. The economy is still based on a linear “take, make and dispose” model.”  A new report Towards the Circular Economy, analyzes the international business case behind the idea of shifting from a linear to a more circular economy.

“The essence of the circular economy lies in designing goods using technical materials to facilitate disassembly and re-use, and structuring business models so manufacturers can reap rewards from collecting and refurbishing, remanufacturing, or redistributing products they make. In this model all things are made to be made again, ultimately using energy from renewable sources[and in a less toxic manner]. Companies shift to focusing on selling performance in the place of product, and consumers now become users.” – Ellen MacArthur

Make sense?  Well if Ms. MacArthurs numbers are correct, “embracing the circular economy model could lead to an annual economic opportunity of up to $630bn a year towards 2025.”  Where do I sign up!!??  Still interested?  Read more about the circular economy, ways to leverage the entire supply chain and build sustainable, scalable consumption here and view a fascinating video here. .

As Aron Cramer mentioned in a GreenBiz article in January, the time for sustainable consumption is now.  “The need to develop new consumption patterns is the mother of all innovation challenges. The race to dematerialize is on. Some of this will come from the digital revolution, as newspapers can now be delivered wirelessly to e-readers instead of plopping dead trees on the doorstep. But some of the innovation will come from redesigning business models.”

Perhaps Mr. Cramer and Ms. MacArthur are onto something. Are you, as consumer, as manufacturer, product designer or corporate executive, or even as fellow Planet-eer, ready to help make that change?  We can change the rules of the game together, for a stronger, more circular economy. As Captain Planet says, “The Power is Yours”.

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Dave Meyer is Founder/Principal of ValueStream Performance Advisors and now works fulltime as Associate Director-Environment, Health & Safety at a major neuroscience focused biotechnology company in the San Francisco Bay Area.  You can read his blog at valuestream2009.wordpress.com and you can also follow Dave on Twitter @DRMeyer1

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