Originally published on Bonfire
Elevating the CSO role
Sustainability or ESG (environmental, social and governance) has been elevated to a strategic position in many companies. Especially among large corporations, management teams often have a CSO (Chief Sustainability Officer) or similar role. The role itself has also developed a lot and is no longer just about creating an annual sustainability report, monitoring environmental permits and reacting to possible crises that confront the company. Instead, the CSO is expected to contribute to the strategy, communications, and brand building. In terms of environmental sustainability, the CSO has to deal with major issues concerning the company’s carbon footprint, nature positivity and recycling rates.
Challenges of Linear Optimization
At the same time, high-quality ESG still seems to be a new area of expertise, and the role in question is still finding its shape – and not just the role, but also the strategic understanding within companies of what sustainability could really mean. I often encounter companies that perform well in sustainability work, yet their focus is on reducing the emissions of the current linear business model. Of course, this improves the current state of the company, but it does not make it future proof.
Examples of such goals include “Let’s reduce the amount of plastic used in our packaging by 50 percent” or “Let’s invest in the energy efficiency of our facilities.” Naturally, there is nothing wrong with these goals, but they do not solve the company’s transition from a linear economy to a circular economy. Instead, companies should ask: what would our business model and products look like if we operated according to the principles of the circular economy?
The Imperative of the Circular Economy
So why is the circular economy important? Take, for example, Finland’s use of materials, which amounts to approximately 600 million tonnes (Statistics Finland), including both virgin and recycled materials. It has been estimated that the use of materials in Finland should be reduced by 70% by 2050 in order for our economic activities to be sustainable within planetary limits. If you think about that goal (-70%) even for a moment, you will realise that it is such a massive change to the current state that it is completely impossible to achieve it by means of linear optimisation. The only way that has been identified, at least so far, is the circular economy.
Product Durability and Supportive Business Models
So what does the transition from a linear model to a circular economy mean in practice? The business model should include at least the following elements:
- Are the raw materials used in business operations produced sustainably? For example, are the materials used by the company recycled, produced from sustainable biomass or based on synthetic materials?
- Are the company’s products built to be maintained, and does the business model support service? Can customers easily deliver the products to the service, organised by the company, at a reasonable cost?
- Is the service life of the products optimised to be as long as possible? Is the product made from high-quality raw materials?
- Is the utilisation rate of the products maximised? Can the product be rented or purchased as a service?
- Has the recyclability of the products been considered (both taking it back from the market and the technical possibility of recycling)?
Using electric cars for private transportation is a good example of linear economy optimisation. It is more environmentally friendly than using a car with a combustion engine but still very linear in its operating model: its utilization rate is just as low, and electric cars are also not usually designed to be rebuilt at the end of their life cycle.
Another example is waste incineration plants, which, as a traditional model, are quite in line with the linear economy. An improved linear economy model would be waste incineration equipped with carbon capture and storage (CCS). It would fully comply with the circular economy model if it were equipped with carbon capture and utilisation (CCU) and ash recycling.
In recent years, a lot of thought has been given to digitalisation and to what the “Digital twin” of the process could be. It would be time for decision-makers too to start thinking about what the “Circular twin” of their linear economy business model could be.