The Circular Economy: Its challenges and impact across frontiers

The Circular Economy: Its challenges and impact across frontiers. Have we reached the point of no return in the fight against climate change? Or does mankind still have a few tricks up its sleeve? Professors Susana Pereira, and Alexandre Bittar, FGV-EAESP, together with their fellow researchers explore how the circular economy – the process of extending a product’s life by reusing, sharing, upcycling – can be an answer to our problems.

Have we reached the point of no return in the fight against climate change? Or does mankind still have a few tricks up its sleeve? Professor Susana Pereira, and Researcher Alexandre Bittar, FGV-EAESP, explore how the circular economy – the process of extending a product’s life by reusing, sharing, upcycling – can be an answer to our problems.

The Circular Economy: Its challenges and impact across frontiers by CoBS Editor Pavan Jambai. Related research: Circular supply chains in emerging economies – a comparative study of packaging recovery ecosystems in China and Brazil, Luciano Batista, Aston Business School, Yu Gong, Southampton Business School, Susana Pereira, FGV-EAESP, Fu Jia, York Management School, & Alexandre Bittar, FGV-EAESP.

Through an unlikely global alliance, mankind has fixed the problem of ozone layer depletion over the last few years. However, before celebrating this monumental feat, we have another task with odds stacked against us: Climate change. Awareness, interest, and actions pertaining to climate change are increasing exponentially and the fear among the scientific community is that it still might not be enough. 

Circular Economy: The saviour?

Switching from a linear flow to a circular flow of products is a critical tool in the fight against climate change. Along with climate change, the rising costs of raw material acquisition and the environmental impact of disposal processes are also strong reasons to advocate for a circular economy. The objective of a circular economy is to extend the life cycle of products, by-products, and useful waste outputs.

One particularly important economic sector that places a high priority on the circular economy agenda is the packaging industry. Most one-way packaging, commonly referred to as single-use packaging, is discarded after its use and enters the waste stream in less than one year. On a global scale, this is a huge problem and could be the perfect use case for a circular economy approach.

Despite the growing recognition of the benefits of adopting a circular model rather than the traditional linear model, little is currently understood about the circular supply chain models and their replicability in different emerging economies around the world. What constitutes a ‘circular supply chain’, the practical implementation of supply chain process circularities, and the wider configuration of other actors in the network are some issues to be addressed.

Circular economy in action

Tetra Pak, a premier provider of food packaging, has operations in several countries including China and Brazil. In an effort to steer its model and to understand the difficulties of shifting from linear to circular, Tetra Pak decided to implement the change in Brazil and China. 

Although both countries are culturally and linguistically very different, the company’s circular supply chain in both countries is fairly similar in design. Similar to many MNCs that have established successful global footprints by standardizing their design and culture, Tetra Pak has effectively standardized supply chain management practices across different international contexts.

While it is a good idea to standardize processes and use similarities among different international contexts, it would be naive to assume that there won’t be differences. While processes are standardized, the actors who perform these processes are different in the two countries across the supply chain.

A noticeable example among the differences is that customers return the packaging to the retailers in Brazil while such a loop is non-existent in China. Knowing such differences, Tetra Pak capitalized on the strengths of the local players to implement standardized supply chain sustainability practices, which played a key role in their successful transition.

(Pre-)Requisites for circular model success

The Circular Economy: Its challenges and impact across frontiers. Have we reached the point of no return in the fight against climate change? Or does mankind still have a few tricks up its sleeve? Professors Susana Pereira, and Alexandre Bittar, FGV-EAESP, together with their fellow researchers explore how the circular economy – the process of extending a product’s life by reusing, sharing, upcycling – can be an answer to our problems.

In any successful project, it is seldom about one or even two factors taking centre stage but usually a myriad of different factors working in combination to contribute to the success. However, there are key factors to be considered when implementing a novel idea, especially in areas where stakeholders are instilled with the ‘that’s how things work’ attitude.

Collaboration and Education were the most important factors that contributed to the success of Tetra Pak in China and Brazil. Since supply chain management in both countries relies heavily on third-party players, Tetra Pak needed to provide them with technical advice, training, and equipment. Along with collaboration, Tetra Pak also formally acknowledged outstanding performance through award systems.

Novelty without educating the relevant stakeholders and the public is a guaranteed recipe for failure. Since people are not used to recycling, developing public awareness through a series of partnerships with retailers, schools, and food processing companies to educate end-consumers and other key stakeholders in the circular supply chain becomes an indispensable responsibility.

No one-size-fits-all solution

The scientific community has warned us that we have already crossed the point of no return on the issue of climate change and even that has not pushed the issue to the global spotlight. This initiative by Tetra Pak has busted many myths surrounding the implementation of a circular economy. These include the presumption that collaboration among stakeholders is hard or counter-productive, that people won’t take the effort to recycle things, and that a circular economy is not a good business move.  

Overall, Tetra Pak’s initiatives in both countries have led to fairly similar recycling rates (28% in China and 23.3% in Brazil). Much has been achieved in both countries. Yet, the recycling rates under 30% indicate that much work still remains to be done considering the large volume of single-use wastes generated by the populations in both countries

There is no one-size-fits-all solution when it comes to implementing a circular economy and especially in two different cultural and economic contexts like China and Brazil. Along with the cultural and systemic differences, there are also differences in the legal framework of the two countries. In the end run, irrespective of the country, support from governments is non-negotiable in the successful implementation of something as beneficial to people and planet as the circular economy.

Susana Pereira and Alexandre Bittar research the circular economy
Susana Pereira and Alexandre Bittar

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The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.  

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