By Rekha Menon-Varma (WG ’06), Managing Partner, Vertaeon LLC
Recent discussions, white papers and seminars on the benefits of the circular economy, as opposed to the traditional “cradle-to-grave” linear economy, serve to increase awareness of this issue and challenge industries to rethink the status-quo. The timing is right – one could point to the need to conserve natural resources, the ever-increasing impacts of climate change, growing population, increasing urbanization, more efficient waste management and a whole host of other reasons to make the case. For instance, The Ellen MacArthur Foundation’s report titled Towards the Circular Economy provides staggering numbers that illustrate the broad-based impacts. 82 billion tonnes of raw materials expected to enter the economic system in 2020, highest ever price volatility levels for food and non-food agricultural outputs, opportunities to save $billions by segregating food waste from other wastes, to name a few. Multiple business models are emerging including product lifecycle extensions and sharing platforms.
Multi-faceted approach to implementation
Moving from thought leadership to practice on a larger scale would require a multi-pronged approach – one that forces a holistic view of product and byproduct lifecycles, leverages the interconnectivity of value chains, and spawns innovative companies. Even resource optimization, manufacturing footprints, and pollution prevention would be completely revamped in this new paradigm. At Vertaeon, we envision this multi-pronged strategy would add yet another dimension to growth and expansion opportunity assessments and can eventually create truly integrated, global conglomerates. The seemingly endless scope and scale of opportunities and related challenges make this task seem daunting. So, how do we move past the hype to operationalizing the circular economy?
The key would be to aim high while not losing sight of opportunities at the smaller scale/level – and create success stories that help fuel the discussion by delivering economic returns. From a manufacturer’s perspective, we believe ongoing strategic assessments that include analyses of (a) data on market trends and potentials, (b) waste/byproduct value chains that intersect your primary value chain, (c) improved KPIs both for opportunity assessment and implementation, and (d) effective product innovation are the key to operationalize the circular economy. From a corporate strategy point of view, growth option assessments will take on new dimensions via evaluating multiple value chains and new product-technology roadmaps including environmental as well as economic considerations.
Another key aspect is to leverage technology in developing transparency in information for collaborating partners as well as developing insights for individual company opportunities. If we think that the current volume and variety of data within a company is complicated enough to aggregate and analyze, imagine the level of complexity a circular economy business model can bring about to the types and scope of data.
Vertaeon is uniquely positioned as a specialized strategy advisory and data analytics firm to address these planning and implementation challenges. Our manufacturing and strategy experiences have given us an in-depth look at supply chains both from sustainability as well as from business strategy points of view. Our data analytics offerings concentrate on operational and market aspects, including resource optimization as well as supply chain analytics. Our goal is to bring in an easy to deploy solution to complex business operations while synthesizing the data to give clear, actionable insights to decision makers.
The concept of circular economy has given industrialized economies a wonderful opportunity to create additional value in environmental, market and social dimensions. Effective implementation with strong organizational commitment will be the key to realizing that value.
Vertaeon (www.vertaeon.com) participates in Wharton IGEL activities and Co-founder Dr. Vipin Varma (WG ’11) serves on the alumni advisory board of IGEL.