Circular economy: still a long way to go

Europeans throw away most of what they use. Only 40% of the discarded materials in European households are recycled or reused. In addition, many products aren’t used efficiently. Smartphones, for example, are on average replaced by new ones in less than two years.

The consequences for the environment are huge: according to a EU study, 62% of global greenhouse gas emissions are created during the extraction, the processing and the producing of goods.

To tackle this issue, the EU launched, in 2015, an action plan to incentivise member states to adopt principles of circular economy. The goal is to switch to a system, where products are recycled, repaired or reused. Sharing products should be much more important than possessing them and the industry should produce goods with longer life-cycles. The plan promises not only to address environmental concerns but also foresees the creation of new jobs as well as new business models which could dynamise the economy.

An example for such new business models are platforms like the French Back Market and the Austrian Refurbed. Both platforms offer refurbished electronic devices to particulars. The refurbishment of the products itself is done by local companies (Back Market is working with about 200, Refurbed with about 40): these companies, for example, recover used smartphones or notebooks, restore them (for instance, they change the battery) and resell them on Back Market or Refurbed. The platforms then take a commission on every transaction done on their websites. The advantage for the consumers? Not only would they support sustainable consumption, as the life cycle of the products is extended – the products are also cheaper – up to 40% compared to a new device. In addition, clients benefit from a one-year warranty on these products.

Sustainable growth

Refurbed was founded in 2017. Besides Austria and Germany, its two main markets, the start-up has recently set up webshops in Poland and Italy. “In the medium term, we want to become Europe’s leading platform for refurbished electronic products”, tells CEO Kilian Kaminski. For this, the company is currently conducting a second round of financing (the first one brought in €500,000).

However, the young entrepreneur also recognises the limits of the sustainability of his business model. “We naturally depend on other companies that continue manufacturing new products. But, Refurbed is, for many of our clients, their first contact with the circular economy.”

How realistic is a wide-spread implementation of this concept? The potential is high: only 9% of all the global economic processes are currently circular. But, according to Magnus Fröhling, professor for circular economy at the Technical University of Munich, several steps are necessary to make the shift: “Product design has to be rethought in order to facilitate reusing and recycling of the materials. For example, components of smartphones should be easy to replace. Then, technologies and infrastructure are needed to recover discarded materials efficiently. And last but not least, the consumers must be convinced that refurbished products can be as good as new ones.”

Daniela C.A. Pigosso, a professor from the Technical University of Denmark, shows how companies can switch to a circular business model. “They shouldn’t only focus on selling their products, but also on offering product-service solutions. By designing and providing goods with longer lifetimes, they can make a profit out of several product life cycles” she says. A recent McKinsey report confirms that Europe can link a more resource-friendly economy with economic growth: the analysts say that European countries can make about €1.8 trillion of annual benefits by 2030 compared with today.