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Benefits of a Circular Economy

Our previous post talked about why move from a linear to a circular economy right now. This time, we’ll focus on the benefits that accompany a circular economy.

Circular Over a Linear Economy

The linear way is manufacturing and consuming products and getting rid of them for good. We have been depleting resources in a linear economy for too long. The majority of products don’t get another chance in the secondary market. We lack viable and convenient models in many industries affecting our daily lives from electronics, home appliances, micromobility, gardening, or even fashion and baby products.

A circular economy breaks the traditional consumption cycle by introducing an alternative: producing, consuming, and reusing products.

Circular Economy Extends Products’ Lifetime Value

In a circular economy, products' lifetime value is increased, which means that the demand for new products is lower and production volumes are decreased.

The key in a circular economy is keeping products in circulation for a longer time.

According to research, a new smartphone’s average life cycle is two years. Now, imagine that every two years a new smartphone is bought by the same user. But what happens to the old one? Where does it end up? That’s where a circular economy creates repeatable consumption cycles to extend products’ lifetime value by giving them a new life in the secondary market or recycling them in an eco-friendly way.

Circular Economy = Zero Waste Economy

If the first usage cycle of a product is over, it will get a new owner. If a product is broken, it will be repaired. This cycle is repeated up to the point where a product no longer brings value and experience to the user, it is dismantled and recycled. In other words, new products are made out of it.

Also, consumers will be provided with more durable and innovative products that will help increase the quality of life and save money in the long run.

Circular Economy Uses Waste as Raw Material

Extracting and using raw materials has a major impact on the environment. Let’s take an example. Production is the most energy-consuming phase in a smartphone’s life cycle - up to 95%. Continuously producing new products increases energy consumption and CO2 emissions.

In fact, producing one smartphone requires 82.3 m3 of water and 281 kg of raw material, while generating 86 kg of CO2 and 199 g of e-waste. However, a smarter use of raw materials can lower these figures.

Actually, in the EU, roughly 0.7 gigatonne per year (Gt/y) of waste materials is recycled. This is nothing compared to the 7.4 Gt/y of materials processed and 4.7 Gt/y of outputs. And, if you didn’t know, 1 gigaton equals about 7 million blue whales - the largest animal on earth.

In a circular economy, raw materials and products are reused over and over again.

In fact, products are initially designed to be reusable and waste is the new raw material. For example, electronic devices are already built in a way that makes it easier to repair them or use as spare parts. In addition, products and raw materials are reused as much as possible. This applies well to recycling plastic into pellets for making new products or using components of broken phones as spare parts to fix or produce new ones.

Circular Economy Redefines Consumption Models

As more and more refurbished products are pushed back into the market in a circular economy, the demand for new products sheds.

After launching product subscription models, the demand will be split more specifically between different consumer segments. So far, consumers have just yearned for new products, since these were the only ones on offer. But with subscription models, new types of offerings emerge: for new products and for used products (aka the second round of subscription).

Product subscriptions drive the shift towards a circular economy.

This drives a new kind of demand from merchants’ current customers, but also from consumers who have been shopping elsewhere until now. These consumers leave the brands they’ve been loyal to, because they're left empty-handed when it comes to subscription offerings. They can't pursue their wish of using products instead of owning them. Also, consumers who haven’t been able to afford new products now get a chance to use second-hand products.

Brands and retailers who offer subscriptions fuel a new kind of demand that redefines and redistributes the market.

Producing new products decreases as merchants using outdated models lose so much sales volume. On the other hand, brands and retailers offering product subscriptions will scale their business by giving old products a new life, refurbishing, and recycling them.

Circular Economy Reduces CO2 Emissions

Circular economy principles such as waste prevention, ecodesign, and reuse can save businesses money while reducing total annual greenhouse gas emissions.

Currently, the production of materials we use every day account for 45% of the CO2 emissions in the EU. Collecting products and pushing them back into circularity helps reduce this massively as products’ life cycle is extended and there is less need for new products.

Now, consider that a smartphone’s average life cycle is 2 years and CO2 needed for producing it is 86 kg. If this smartphone’s life cycle is extended by at least 2 years through recirculation, it adds up to 4 years of useful life cycle and cuts the annual CO2 emissions by half.

An upside of a circular economy is that products which tend to get less “working hours” and are more in a standby mode, such as cars, are used more intensively. This is endorsed by a sharing economy and stronger communities. That translates also into reduced C02 emissions by producing less products and requiring fewer raw materials.

Time to Act Is Now

Circular economy is exactly what drives Fairown’s business model. This is why we help brands, retailers, and banks offer products as a service through subscriptions and manage sustainable product renewal cycles to extend products’ lifetime value.

Businesses understand this. Consumers understand this. Aware and eco-friendly consumption is on its way to top, supported by a generation of conscious consumers. Speaking of the demand for sustainable subscriptions, our customer Komplett experienced mind-blowing success by launching Fairown’s subscription service in Q2 2021. In just a few months, product subscriptions already accounted for 10% of their B2C sales.

If you want to be the next one, we are here for you!

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