Welcome back! Building on my previous *blog*, I’ll explore in more detail the circular economy and the numbers by *Bob Willard,* a leading expert on the business value of corporate sustainability strategies.
Using two hypothetical companies, one small service company and one large manufacturing company, I’ll show you the costs of the linear economy and potential savings when zero waste measures are in place. I’ll also give you examples of zero-waste companies that will get you thinking!
In This Blog
- Linear Economy vs. Circular Economy
- The Cost of the Linear Economy and Potential Savings
- What zero-waste companies have implemented to realize savings
Linear Economy vs. Circular Economy
To illustrate these two concepts, I’ll use a great framework created by the *Board of Innovation*, a business design and innovation strategy firm.
In the linear economy, which is what we have today, organizations take resources from the environment, make products that are distributed for sale, and are usually used for a limited amount of time before they end up as waste.
In the circular economy, which is where we all should go, organizations limit what they take and waste while creating value for all through better design that allows for repair, reuse, recycle, and return of materials.
With this overview, let’s look at some calculations that show how costly the linear economy can be by focusing on the cost of waste of purchased materials, which is the highest contributor to the total cost of waste. The calculations also illustrate the potential savings that come from avoiding expenses when zero waste measures are in place.
The Cost of the Linear Economy
I’ll use Bob Willard’s open-source, free online *spreadsheet,* which contains calculations, descriptions, and assumptions based on his book The New Sustainability Advantage. The spreadsheet helps estimate the potential business benefits that result from improved environmental and social practices.
For this blog, I’ll focus on the benefits associated with waste prevention for two hypothetical companies, one small service company and one large manufacturing company (Table 1).
Table 1. benefits associated with waste prevention for two hypothetical companies, one small service company and one large manufacturing company.
|Small Service Company||Large Manufacturing Company|
|Number of employees||<10||>3,000|
|Materials and water expenses||$50,000|
(5% of revenue)
(30% of revenue)
To calculate waste cost savings for both cases (see Table 2), Willard assumes the following based on his research:
- Between 60 and 90% of materials companies buy are wasted. The value on the table is very conservative and assumes that only 30% is wasted. Materials include raw materials, water, auxiliary materials, and packaging materials.
- For a typical company, the total cost of waste involves four contributors:
- the cost of wasted materials (60%),
- the cost of resources used to process those materials (20%),
- the cost of waste prevention and environmental management (10%), and
- downstream management (10%).
The total cost of waste is calculated using the highest proportion (60%) and the cost of the wasted materials (30%) calculated for both companies on bullet point (1)
- When designing waste out of the system (even partially), the table uses a very conservative 20% to calculate net savings on waste.
Table 2. Waste cost savings for two hypothetical companies, one small service company and one large manufacturing company
|Waste cost savings||Percentage||Small Service Company||Large Manufacturing Company|
|1) Cost of purchased materials that are |
later wasted (i.e. not in final products
|2) Total cost of waste = (Value of |
purchased materials that are wasted) ÷ 60%
|3) Total potential waste costs savings|
when expenses are avoided through zero waste initiatives
Annually, a small company with a revenue of $1,000,000, that spends $50,000 (5% of revenue) in materials and waste, can potentially save at least $5,000 when implementing zero waste initiatives.
On the other hand, a large company with a revenue of $500,000,000, which spends $150,000 (30% of revenue) in materials and waste, can potentially save at least $15,000,000 when implementing zero waste initiatives.
Those savings above are based on a conservative 20% net savings. If we increase to 50%, savings can increase to up to $12,500 and $37,500,000 for the small and large companies respectively.
The lesson? Paying attention to waste and quantifying it will give you insights into how your company, small or large, can find weak spots and start figuring out how to make them your strength. Reinvesting part of the savings in pilot sustainability projects can help you move further and faster.
I hope this framework got you thinking and you’re excited to discover the savings for your business. I encourage you to download Willard’s *open-source, free online* spreadsheet and plug in your numbers. *Contact me* if you need any help.
Paying attention to waste and quantifying it will give you insights into how your company can find weak spots and make them your strength
What zero-waste initiatives have companies implemented to realize these savings?
We just learned that small or large, any company has the potential to save on waste expenses when implementing zero-waste strategies. Now, let’s look at some examples of real companies that have reduced the amount of materials they purchase through a variety of waste reduction initiatives.
These are companies that have gone through the zero-waste certification process for their facilities, which have enabled them to map the route with clear objectives, metrics, and ways to improve continuously.
I’ve grouped the initiatives by stage of the circular business loops and rephrased them for readability. The initiatives aren’t comparable to each other in terms of time, resources invested or saved. But they will get you thinking!
Eliminating the use of glue in production, which saves more than $250k per year and furthers the company’s sustainability efforts (Beverage manufacturing. *Milo’s Tea Company, US*).
Reducing paper usage and expenses by 57%, in a year, by going entirely paperless in the payroll department, conducting processes electronically as often as possible, and programmed each computer to print double-sided. (Beverage manufacturing. *Milo’s Tea Company, US*).
Developing take-back options for secondary packaging and introducing re-usable containers for certain products (Food manufacturing. *Nature’s Path, US*).
After a full hotel renovation, refurbishing over 350 cast iron tubs; recycling to the local metals recycling company all the metal parts from the air conditioner units, aluminum railings, and the aluminum on sliding glass doors; salvaging copper piping by a local commercial plumbing company. In total, over 2500 tons of waste were diverted from the landfill. (Hotel. *Hyatt Regency Maui, Hawaii, US*).
Contracting with local pig farms to pick up food waste since Maui [a remote island] does not have a commercial composting facility (Hotel. *Hyatt Regency Maui, Hawaii, US*).
Deploying reuse programs to extend the life of office supplies, furnishings and computer equipment. (Office. *HP, US*).
Moving to bulk storage of raw materials and reusable drums. (Home, Dish Fabric and Personal Care products *Ecover NV, Belgium*).
Inventing an oil bottle draining device that allowed the plastic bottles to be recycled. The used oil is then used to heat the mechanic shop (Forklift Dealership. *The Bailey Company, US*).
Conducting multiple physical waste audits to better understand the composition of the waste stream. (Hotel. *Hyatt Regency Maui, Hawaii, US*).
These are great examples of how companies in any sector can realize savings through reduce, reuse, recycle, and return practices, and even eliminating unnecessary materials.
Did you notice that some companies work with their suppliers and other companies for their downstream materials (e.g. organics)? It’s teamwork with those along the value chain. Visit *TRUE projects* to learn more about these and other companies.
Have you implemented any of these practices? Have you thought about implementing one or more? Please share your thoughts in the comments box.
The linear economy is costly, not only financially but also environmentally and socially. Circularity provides a different direction that benefits businesses, people, and the planet.
In this blog, we’ve learned how any company, small or large and in any sector, can start moving towards circularity by implementing zero-waste initiatives that close loops, cut costs, and drastically shrink carbon footprint.
To uncover your own opportunities, start with a zero-waste audit, then run pilot projects targeting low-hanging fruit, and take it from there. If you’re still unsure how to go about it, *contact me*.
In my next blog, I’ll look at the role of leadership and cultural change. That’s one thing companies often mention as both a motivator to achieve their goals and as a gain during the zero-waste journey.