Incentria

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Circling Back: The Benefits Of A Closed-Loop Economy

3 min read

Most business owners and managers are already aware of what a circular, or closed-loop economy, model is. But do you truly understand all of the benefits the model could offer to your business? Or how well it could integrate with your existing business strategies? For those unaware, this post will detail the ins-and-outs of a closed-loop economy and how this model can benefit your business. 

If you’re feeling unsure of what a closed-loop economy truly is, don’t fret. More than likely, you’ve heard and witnessed what this model looks like. This strategy has also been referred to as a circular economy model, in addition to a closed-loop supply chain as a result of how it operates. These economic models are all reliant on the fact that they produce little to no waste. Meaning every input in the production process is reused, recycled, shared, or repaired. Rather than producing actual waste, the ‘waste’ that’s produced is considered a resource that will spearhead the next production process. 

This environmentally sound practice has become increasingly popular in recent years. Believe it or not, estimates suggest this model will contribute to nearly $4.5 trillion dollars to the economy by the year 2030. Sure, this is attributed to the global scale, but that isn’t to say your business couldn’t still benefit from adapting this strategy. Typically, businesses under a closed-loop economy model will see increased customer loyalty, an improved public perception, and a great deal of long-term savings; in part as a result of a reduced reliance on external suppliers. 

The greatest overarching benefit, however, comes from the the amount of raw material supplies that can be saved and the impact this model can have on the environment if more companies were to adopt it. Innovation to continue the process is always encouraged, and the savings that companies experience can increase profits and improve the products customers are receiving. 

Crafting The Closed-Loop Economy 

A closed-loop economy is accomplished when companies are able to work together to create a closed-loop supply chain. Meaning all raw material used in any production process will be reused. This may take some time to accomplish, as in most cases it requires a complete rethinking of how products are packaged, manufactured, sold, refurbished and reused. However, this model works in such a way that the more companies that employ it, more raw material can be saved and the greater the benefits to companies and consumers can be. 

Unfortunately, most businesses today employ a linear economy model. These models take the raw materials used by companies to design and craft products and dispose of them. Rather than saving any of the material, it is sacrificed. Thus, in order to begin the production process anew, more raw materials are required. This is inefficient. 

With a closed-loop economy, you avoid these inefficiencies. There is no end or waste. The materials collected from the production process are able to be reprocessed and then reused. The cycle begins to look something like this: consume, collect, process, design, manufacture, and then back to consume to restart the cycle. No raw material exits the cycle. This model reduces manufacturing costs and produces the most sustainable products for consumers. For more information on how a closed-loop economy could benefit your business, be sure to review the accompanying infographic featured alongside this post. Courtesy of Quincy Recycle

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