Why Circular Economy?

Linear Risk in Supply Chain

The Linear Risk report by Circle Economy define Linear Risk as

“The exposure to the effects of linear economic business practices – utilise scarce and non-renewable resources; prioritise sales of virgin products; fail to collaborate; and fail to innovate or adapt – which will negatively impact an organisation’s ability to continue as a going concern”

It is apparent that the current industrial scheme used globally has not shifted their focus on a more environmentally sustainable mindset. The number of natural resource extraction in 2017 already reached 88.6 billion tonnes in 2017, with an estimated doubled upward trend by 2050. 

The business-as-usual scheme has been using linear approach with the characteristics below:

  • ‘Take-make-waste’ approach puts resources as one-time used material. The supply chain would only be repeated in one loop since the finite sources, both materials, labors and energy, will be dumped into waste. Products will be ended in the landfill without any after-sales services or proper waste management system. 
  • The product life time would be relatively short since the business maximizing its product sales
  • There’s no specific strategic business focus in handling business externalities, i.e environmental and social impact. It is implicated in the natural resource price volatility and resource scarcity.

Linear Business Concerns

Business standpoints are being pushed to solve its externalities by certain factors below: 

  • Stronger environmental governance, regulation and standard has been made to drive business to mitigate and manage its linear risk. Some of them started by giving the market incentives to build awareness about linear risk, i.e paid plastic policy. 
  • Natural resource price volatility and resource scarcity led to profitability stakes have urged business to adapt its operational ecosystem in order to stay relevant with market dynamics.  

In the current time, there’s an emerging trend that some businesses have already transitioned from linear economy by including business externalities as one of the factors in financial consideration. 

Consumers Perspective

Consumers also have improved their environmental awareness, specifically in waste issues. Based on Who Cares Who Does from Kantar Indonesia World Panel Division (2020), 86% of respondents are aware of the importance of recycling for resource sustainability. Most of the respondents didn’t have sufficient knowledge to turn their awareness into practice. Therefore, 71% relied on the government and business to mitigate climate change and its linear risk.