Dr Khaled Soufani
Director of the Circular Economy Centre (CEC), Cambridge Judge Business School
Few days go by without references in the media to sustainable business and the circular economy, but what’s meant by these concepts, how do we implement them and are there tensions implicit in doing so?
Who better to ask than Dr Khaled Soufani, Director of the Circular Economy Centre (CEC) at Cambridge Judge Business School and fellow at Clare Hall College, University of Cambridge.
In addition to his work on the circular economy, Khaled’s research interests include a wide range of economic, financial and business topics including financial management, corporate restructuring, mergers and acquisitions, private equity, venture capital, family businesses, small and medium-sized enterprises (SMEs).
His research is widely published in top journals such as The Harvard Business Review, California Management Review, Thunderbird International Business Review and the Stanford Social Innovation Review.
The World Economic Forum, EU, The Organisation for Economic Co-operation and Development (OECD) and the Institute of Directors have all cited, published or included his work in their reports.
The circular economy
“There are different definitions to a circular economy model, but they all relate to using as little resource as possible for as long as possible, and to extract as much value from these materials, components, and elements by implementing innovative approaches in reusing, recycling, remanufacturing, and repurposing.
“I define the circular economy in the context of economics: the efficient and optimal allocation of scarce resources in a way that economic and business value can still be extracted by using as little natural capital, resource or material as possible for a longer period.
“It is important to establish that a circular economy model contributes to achieving sustainability, where the latter is about avoiding overusing or depleting natural resources in order to maintain a healthy and naturally vibrant ecosystem.
“We need to think about the air we breathe, the water we drink, the soil we use to grow our food and the energy we consume. All of these are or will be over-utilised by using a linear economic and business model of extracting, manufacturing, consuming, and then disposing of waste in landfills or the oceans. It is time to think about a more sustainable economic and business growth model that takes into consideration natural capital and the planet’s scarce resources.”
“A sustainable business is one that includes in its mission a commitment to achieve an overall strategy that produces a product or service which minimises the negative impact on society and the environment. The point is to contribute to avoiding the depletion of natural resources and produce environmentally friendly products and services.
“We can differentiate between a sustainable and a non-sustainable business through their impact on society and the environment. The more positive the impact is, the more sustainable the business is considered and perceived.
“There are tensions implicit in our implementation of these concepts, when procuring locally isn’t consistent with resource efficiency, or when buying a supply that is more sustainable or green may involve a long journey. In order to deal with such tensions, it is important that all businesses in the supply chain subscribe to the concept of a sustainable business model, as this will help identify the suppliers with the most sustainable solutions locally or internationally. Once the concept of sustainable business is part of the supply chain and the value chain, it then becomes the norm for business practices and conduct.
“The first priority of a business is to create value for all the stakeholders of the business and not only the shareholders. Businesses, in general, are interested in attaining more growth, development, profitability and financial value. These are achieved when the market and customers are creating demand for the product or service produced by the business.
“We are seeing that customers and the market are increasingly interested in the environment, and thus are demanding products and services that are environmentally friendly and will have a less negative impact on the ecosystem.”
The role of innovation
“It is important for businesses to explore adopting a circular economy model, by investing in innovation and new ideas that follow a ‘circularity by design’ approach. It is important for businesses to increase their awareness about sustainability in general and a circular economy model, and then inform themselves more on the implementation and impact of such a model.
“Businesses should continuously update their understanding of the market in which they operate in by innovating on product, service, and process. The market is increasingly aware of the need to have sustainable solutions and output, so not considering such circularity would be a mistake.”
“We’ve made significant progress in making businesses and individuals think about the circular economy, but we have a lot of work to do over the next decade and beyond. Recent research estimates that over the next 15 years the circular economy is likely to be worth $4.5 trillion, and the European Union has already pledged 5.5 billion euros in funding for waste management alone.
“So how do we further raise awareness of this exciting new model? Research projects and conferences are one way, as shown by the excellent reception of the InnoFrugal UK conference held this spring at Cambridge Judge Business School, which brought together managers, entrepreneurs and academics from throughout Europe to share best practice and discuss new innovations. There are also joint projects such as the Creative Circular Economy Approaches to Eliminate Plastics Waste initiative, which the Circular Economy Centre at Cambridge Judge is taking part in as part of a wider Cambridge consortium.
“While there is plenty of published research with relevance to the circular economy, but it is scattered among individual fields such as macroeconomics, microeconomics, climate change and other disciplines. So we need to do a better job of coordinating this research into a more disciplined approach linked directly to the circular economy, as this will create the greatest impact. Areas ripe for such a coordinated approach include the impact on consumers, and how the circular economy will affect regulatory policy in decades to come. We are proud of what we’re doing at the business school on the circular economy, but we need to link more closely with other departments such as economics, engineering and industrial design, in Cambridge and beyond.
“I’ll end it there, but the circular economy – as reflected in its name – really has no beginning and no end: our need to reduce, remake and recycle is a continuous journey that will define our relationship with the planet forever.”