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  • Wendy Cevallos

Circular Economy: a business opportunity?



The world is facing natural, social and economic pressures which have been exacerbated with the current pandemic. Governments, businesses, and society are looking for innovative solutions that include more circular and sustainable strategies in food systems and related sectors. Circular economy offers an alternative to the lineal economic model, by reducing food waste, preserving resources, reusing and recycling existing food products. The implementation of circular economy is not easy and requires the commitment and collaboration at different scales of the supply chain, from producer to consumer.


Still, there exist barriers in the supply chain related to the capabilities, awareness, and resources required by the system. However, the influence and efforts made by businesses, and governments at the moment show the willingness of actors involved towards a more circular economy. Additionally, the interconnections between the food sector and related sectors may foster now and in the future more innovation, resource efficiency and efficacy in the processes. Actions that will require more support, and investments in order to generate impactful cases which can be promoted wider in all phases and stages of the food supply chain.



The current situation


The growth of the world population has increased the demand of food and natural resources [1], [2]. Our current food systems are already facing inefficiencies of energy, productivity and resources such as water, energy and land. The unsustainable scenarios within the whole food supply chain and its stages call for more sustainable practices [3], [4].


There is an aim to find potential solutions to all these issues by applying more circular food systems. Many national governments worldwide, especially European nations, including China, the Netherlands, France, Sweden, UK, Finland and others, adopted and promoted Circular Economy (CE) as the approach to economic growth and sustainable development [4]. The European Commission has estimated that CE will create around €650 million economic benefits to the EU manufacturing sector [4], [5]. The Commission is aware that to achieve their target of Climate neutrality by 2050, the transition towards a more regenerative and circular model needs to accelerate [6].


Organizations and companies are also becoming interested in circular business models and are willing to include circular strategies into their business. However, less than 10% of the global economy is following CE principles [6]. The food sector is in the spotlight due to its contribution to the world pollution and resource depletion. It represents a key sector to the implementation of CE practices. There is a sign of will within this sector towards circularity. However, still exist barriers which are related to the lack of awareness, lack of capacities, insufficient market demand for CE products and services etc. [6].


Focus and principles


Circular Economy is a "model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible" [15]. From an industrial ecology perspective, circular economy provides an alternative to the traditional lineal economic model: extract-produce-consume/use-discard. It offers a cyclical model which allows closing loops of materials, energy and substances [3], [4].


Ellen MacArthur Foundation pointed three main principles of circular economy: 1) preservation and enhancing of natural capital by selecting our resources wisely and generating production out of waste; 2) optimization of resource yields by generating circularity within biological and of technical cycles. For example, variables as product life can be analysed in order to maintain the value of the product for a longer time within the supply chain, and 3) fostering effectiveness within the system. This principle incentives us to recognize the damages in the studied system (e.g. food system) and manage its externalities [7].

Circular econmy approach offers practical tools to optimize the sustainability of the food which implies the reduction of food waste and surplus at different food stages. At the same time, it promotes the reduction of resource consumption and the impact into the environment [3]. The transition towards circular economy needs collaboration at supply chain level in order to reach a system development [8]. At food production level is required to evaluate and review designs of the system [8]. The food processing industry relies on raw material, specialized equipment, chemical products and knowledge inputs. The market guides the adaptation of the industry in order to respond to the consumers. Research on circular economy might bring development of innovation and an increase of resource efficiency in the agri-food sector [6], and the incorporation of technology can enable the development of the food system [8].


Food systems show how producers, industry and academics need to collaborate to enhance innovation in the system and produce food potential successful products [6]. The transition towards a circular economy also requires coordination across multiple levels and actors, including the governments, businesses, society and consumers. The consumers influence the supply chain by accepting a product or taking action [9].


Rebound effect


Zink and Geyer (2017) argue that circular economy can also have an effect rebound, this means that circular economy can increase the production and reduce its benefits when secondary products (e.g. Reuse, recycled products) have a limited ability to substitute, reduce or displace primary products. Circular economy refers to secondary production when these 3 activities are developed [10]:


  • Reuse at product level: reuse

  • Reuse at component level: remanufacturing

  • Reuse at material level: recycling.


The interconnectedness in a circular economic system exists. Therefore, when a part of the system is changed, it may affect others [11]. Secondary production prevent primary production. Its positive impact in the environment can be measure whether this type of production actually complies with its role of substituting, displacing or reducing primary products [10]. Addressing the rebound effect is crucial when the efficiency in the system creates a higher resource use and there exist opportunities costs in the system that may reflect an imperfect circularity [11]. This resource flows become more interconnected and decision makers may need to acknowledge the limitations that rebound represents in the efficacy of resources. Moreover, both analysis and understanding of producer – consumer and producer –producer relationships might increase in practice the efficacy of circular economy [11].



How can businesses contribute?


Businesses can make a true impact by adopting a more holistic pivot across the value chain [16]. They require circular and innovative strategies to scale new opportunities without dropping out their core business. Most companies with a vision for expansion to new businesses will continuously transform their business and rotate their products and conditions in order to build their investment capacity. By fostering innovation strategies, businesses can create opportunities that trigger change in the future. The choices made by executive leaders may allow business to create successful cases in the future [12].


The connection between business models and the Fourth Industrial Revolution Technologies may accelerate the impact within the digital, physical and biological dimensions [16]. A real example of CE adoption related to the Digital dimension is Winnow Company which uses advanced technology tools to improve the food waste in the hospitality sector. This business helps chefs to reduce food waste, improve their margins and reduce food costs by 3 – 8 % [17]. Latin America also shows clear interest in the implementation of circular economy concept [13]. For example, Food for the Future (F4F) is a Chilean Company that applies cultivation innovative technologies to produce protein and nutritional animal products from insects. The company inserts organic waste again in the chain as food for their larvae [18].


During the pandemic, Circular Economy has also offered solutions to the issues faced by the industry. Business which follow CE guidance may accelerate their regenerative agriculture and develop food surplus prevention and redistribution [14]. In Ecuador, Sustainable Herbal and Fruit Infusions project developed by Expocorza Company aims to apply a more inclusive business model inspired by circular economy. Women associations implement CE when adopting regenerative agricultural practices in land use. Part of these practices are the avoidance of herbicides and pesticides, and diversification of products generating lower environmental impact in the country, economic benefits and increase of the producers welfare. Moreover, the diversification of products and raw material promoted in this project and the coupling of customers with their desired product will increase the profitability and impact of the project in a long term. These efforts will guide to a more holistic approach that permit the analysis of social, economic, and natural factors at different phases and levels of the herbal and fruit infusions value chain [19].



Author


Wendy Cevallos

Commercial Head

Expocorza Cia. Ltda.

The Netherlands


 

Bibliography



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