I often talk to my friend Magnus about sustainability. When it comes to circular economy, things become particularly interesting as Magnus is one of those few who are developing new circular business models in the sports and outdoor industry.
Circular economy can be explained as an economy based on closed material flows, where nothing becomes waste, but all materials and all nutrition is cared for to become useful and valuable again once the product/service has served its purpose. It is also an economy where all energy is taken from renewable sources, and where all this is applied in a modern industry and a modern society.
A challenging task? Definitely. But while you read this, industry, regulators, and scientists are focused on making it work, simply because there is no good alternative. During the emergence of modern society, we have built ourselves into a linear mindset, where we extract raw materials at one end, process them into benefits that are used for a while and then turn them into waste at the other end. The waste is concentrated in large quantities and materials and nutrients are mixed so that they cannot be separated and come to use again.
What about recycling? Yes, it is an important element of circularity, but today only a small proportion is still recycled. Metals that can easily be re-melted, such as steel and aluminum, currently have very good opportunities for recycling. Yet a report from 2018 says that the most common materials are only recycled at 25 percent of their material value after first use. This means annual losses of €4 billion in Sweden – my home country – alone for the five most common materials; steel, aluminum, cement, plastic, and paper. It also drives extraction of new materials to manufacture new products. The waste created by the low-grade, mixed scrap materials is either burned or land-filled.
Circular Economy is not just about recycling
But if we are to achieve a true circular economy on a large scale, it is not enough to add recycling and solar energy to today’s industry and trade. We need to find new business models that do not link increased turnover and profitability to increased extraction of raw materials. These business models include services like rental, second-hand trading, repairs, maintenance, and upgrades.
Returning to my discussions with Magnus, this is where things become interesting because he currently runs Sweden’s only full-service “rental retailer” for outdoor clothing and equipment. In his world, it is possible to get an 800 percent margin on a pair of black ski pants after three years of rental, and the margin increases throughout the life of the product.
A product is most profitable in his rental business if it is made for a long service life and circularity. A durable product with long lifespan and low failure rate, that stays attractive over time, that is easily maintained and repaired, and which can even be upgraded for longevity. We have yet to see a product designed specifically for rental, repairs, or re-sale, even if we now are witnessing more brands including repairability again in their design briefs and more frequently marketing their repair services towards consumers. Companies like Patagonia and Bergans of Norway have even run their own repair vans around in Europe and North America to help customers get their old, loved garments back into use.
Recycling is still a crucial part of circular economy — when the leased products can no longer be repaired or upgraded, the materials must be taken care of and become new products as a final solution. And it needs to be designed for full recyclability.
But until the function is completely lost, to use the product as long as possible is the best we can do to reduce resource extraction.