Ever increasing circles
Entrepreneur James Chin Moody says the logistics gap needs to be addressed to encourage more businesses to change their linear model.
Is the circular economy all it’s cracked up to be? It is, because it has to be.
Just look at the way we’ve operated as a society. We dig something out of the ground, we make something with it, we throw it back – 95 percent of what we make ends up as landfill. Forty percent of all food we produce doesn’t end up in people’s mouths. The cars we buy remain idle for 80 percent of the time.
In short, there’s a lot of waste. Surely that’s reason enough for smart businesses to look at what the opportunities may be from shifting away from this linear model. Waste equals opportunity. The circular model takes the traditional concept of ‘waste’ and converts it into feedstock for other projects, creating additional value.
Every diagram I’ve seen to try to explain the circular economy has two things in common – it has circles and arrows. The circles represent the change in the business model and the arrows demonstrate the logistics – the stocks and flows.
The world has plenty of stocks and there are huge piles of materials sitting dormant, and getting these materials to where they need to be is difficult because the transportation of materials has historically been hard. If you think about it, often the only difference between waste and feedstock is the flow, or movement, of these materials from where they are to where they need to be transformed into something new. Clearly we need to improve the flows.
And that’s where the logistics gap comes in. One example where all of our innovations have not kept up with the pace of change, is the flow of materials from one area to another or, more accurately, one person to another. The big end of town can ship from a big factory to a warehouse, and from a warehouse to a consumer, quite easily because the economies of scale are at work. The poor cousin of delivery, and where much of the opportunity lies, is in small business or consumer to consumer, and consumer to business logistics.
“We have the right ideas but not the mechanics; we need to level the playing field so that good, small business can get their logistics right and compete with big business.
Now there are a lot of exciting things happening in this waste recovery space; large companies that are looking to do things differently can achieve a lot with technology if they have the optimum scale. But there are a lot of businesses out there that can’t get the logistics right because they don’t have that scale. If the flows are too expensive or too hard, they don’t work – and the result is that perfectly useable and recyclable products go to landfill.
We have the right ideas but not the mechanics; we need to level the playing field so that good, small business can get their logistics right and compete with big business. We have circles, we have arrows, but we don’t have the pipes. A circular economy thrives on materials. We need to be the pipes.
That’s why we decided to create Sendle. Sendle exists to allow good business to take on big business by making delivery simple, affordable and reliable.
Sendle can ship 25 kilograms door-to-door in any capital city for less than $10. So, anything that people own weighing less than that, with a residual value over $10, suddenly becomes an attractive prospect. It’s material that can be obtained by a clever entrepreneur for them to figure out what to do with it. Lots of things can be imagined if the logistics are cost-effective and frictionless.
From the largest corporate to individual consumers, we know we can and should get more utility from the resources around us. We recognise that it’s not a good idea to spend money putting something into a waste stream when it could represent an opportunity for growth somewhere else. Terming this the circular economy, and demonstrating how it can improve the resource efficiency of the country, has changed the language. It strikes at the heart of the business model.
The linear approach is just going to get too expensive – on several levels. Whether a litre of water or a kilogram of metal, they’re going to cost more. Companies may be able to manage their assets effectively and reduce their contingent liabilities, but there are still a lot of questions they need to ask themselves. What’s the shadow price of water? What will happen if and when we put a price on carbon? Companies that can embrace a circular model reduce their risk.
These concepts are gaining increased recognition, but perhaps not yet at the decision-maker level within a lot of big organisations. When this happens, and companies incorporate it successfully, it will be a term that doesn’t need to exist, because the circular economy will just be the economy – the businesses with the most efficient models will thrive and win.
If you talk to people on the street, they don’t say they want a circular economy. They want things to be cheaper, or they don’t want to leave behind waste for their children. The term is not yet mainstream, but there’s a continuum there – it’s moving from obscurity to knowledge to curiosity, to experimentation to embracing all-out change. Every person, business leader or politician will be at a different spot on that continuum.
James Chin Moody is the CEO of Sendle. This article also appears in Issue 1 of Corporate Waste Solutions.