Evolving our thinking towards a human-centred circular economy

The principles of the circular economy are to eliminate waste and pollution, conserve used materials and regenerate natural systems. Applying these principles to everyday business applications is more vital than ever, especially as organizations move toward new economic models. But approaching it without clarity is also where some of today’s challenges begin to settle.

Collectively, business and society excelled in the debate why it is important to make these changes. But to date, no one has cracked holistically how. The economic case for a circular economy is largely anchored in the ecological elements of systems change rather than risk mitigation and proactive sustainability, and certainly does not include the social impact of system change. But it is crucial that local communities and their endorsement of the Social License to Work (SLO) are placed at the heart of the economic argument.

What would a circular economy with fair access at the center look like?

As climate challenges mount, consumers are noticing and demanding change, and investors are demanding more transparent environmental and social management practices from companies. People are changing their behavior towards more sustainable living and working. Business talks a lot about “just transition” and “economic justice.” But this has so far not translated into significant action. Why does progress feel so slow?

The role of society in systems change

So far, sustainability decisions have mainly talked about environmental protection and profitability, as described in a report by the Institute for Business Value (IBV), Balancing sustainability and profitability. As we attempt to change “systems,” many have overlooked the social dynamics of systems change. In doing so, they have created only partial solutions that focus on economic growth at any cost, with incremental and insignificant environmental benefits.

The supply chain crisis has limited our ability to produce and distribute ‘stuff’. Empty shelves and delivery delays crystallized the realization of the complexity of supply chains and how important they are to communities and economies. At the same time, supply chain leaders face increasing demands for resilience, adaptability and value creation – all of which present new risks and new opportunities for transparency, visibility and sustainability.

Some of supply chain’s greatest thinkers talk about resilience and the ability to bounce back quickly from adversity. Resilience planning is a future-proofing method that not only provides short-term disaster recovery, but also reduces long-term disaster risk.

The next decade will see greater and greater disruptions to global supply chains due to climate change and poor systems design in an economic model that externalizes the total cost of ownership. According to the IBV report, The Resilient Digital Supply Chain, extreme volatility has led to dramatic performance and financial impacts on supply chains over the past three years. 67% of supply chain executives (CSCOs) report significant negative effects on demand forecasting. 66% report greater volatility in order cycle times, and 47% report that order levels are worsening.

We will see higher levels of climate migration – people forced to leave their homes due to climate-related conditions – and disruption of communities. Typically, these communities are on the poverty line and therefore have lower levels of resilience in times of upheaval and change.

In the 21st century, businesses are built on distributed, long supply chains that prioritize a low-cost model and in many ways externalize environmental, social and governance (ESG) risks. This paradigm hits the communities at the core of our supply chains—where our clothes are woven, our food is harvested, and the materials for our products are created or extracted—first and worst.

But what if the connection and cooperation between communities and corporations were closer and could increase sustainability?

As the global population and middle class grow, so does climate migration and the widening economic divide. Threats such as climate change and the collapse of biodiversity will permeate every aspect of our access to clean energy, goods, clean water and healthy and nutritious food. Elections will only continue to exacerbate these problems. Is the concept of shared value enough to bridge the gap? We must require regenerative, restorative disruption and investment to reach far and deep for progress.

During a COP26 panel, Philip Hildebrand commented that “25% of global GDP is at risk in the next 20 years.” If we do nothing or move too slowly, it will affect us all. It will occupy our entire lives and choices.

Therefore, if business wants to create future sustainability, we need to put social impact and community, not just the environment or the economy, at the heart of all business decisions. We need holistic change and new models of success that are fair and inclusive and that generate shared value for people and the planet. This often means abandoning the use of traditional key performance indicators (KPIs).

Future economic planning must be seen through a social lens and is fully compatible with current circular economy thinking. The circular economy is about accessibility, ingenuity and resourcefulness. It is about growth in a regenerative and restorative economy. It can’t just be for the rich or those who decide to spend an extra “green premium” to offset the environmental impact.

The circular economy is a model of economic sustainability where materials are available and people are also consumers of eco-services. A social circular economy is simply the next evolutionary stage of discovering and solving the complexities we face.

If you are a business with a distributed supply chain, crossing borders, industry verticals and communities, why not consider the sustainability of this community that supports the beginning of your supply chain as an area where you can create the best level of mitigation business risk and building resilience?

It’s about building resilience within a community to weather all the storms to come: in climate, health, education, nutrition and all the other issues and pressures the community faces now and in the future. When we consider what systems we need to create for the future, what role does business play in ensuring sustainability? And most importantly, what is stopping this change?

As business leaders, how do we ensure the community that supports our workforce and bottom line is our workforce, have access to fresh clean water, to healthy and nutritious food, and to the education needed to meet the needs of supply chains? How does business create direct community resilience to ensure future economic sustainability and long-term risk reduction?

In an Institute for Business Value (IBV) survey of CSCOs and other C-suite executives, 32 percent of organizations cited increasing sustainable operations among their top business priorities. This focus has forced supply chain leaders to become serial innovators, connecting social and environmental issues to business solutions. Many business leaders are using the circular economy approach to mitigate short-term cost concerns and focus on long-term customer value.

The transition to a circular economy requires supply chain leaders to adopt a new mindset and develop an appetite for business unusual. Emerging technologies help organizations address these complex challenges: Data incorporated from multiple sources—internal, public, scientific, market—can be fed into business processes and decision-making to improve environmental performance. Virtualization can support the circular economy by implementing the 9 Rs of circularity: refuse, reduce, reuse, repair, renew, rework, repurpose, recycle and restore.

A new paradigm linking social permission to work with human-centered circularity and sustainability

“You can’t do business on a dead planet.” More importantly, you can’t move forward without treating the causes.

Our paradigm shift and new approach requires us to think more about replicability than scale. Solutions to the challenges facing communities today – bridging the digital divide, securing access to education, arable land, clean energy and healthcare – will be complex, specific and socio-economically bound. We are drawn to simple solutions because they create visible action. But complex problems require complex solutions, and this complexity can only be understood by adopting a community-first approach, placing the challenges and nuances of geography at the heart of the solution, be it social, cultural or economic. This is the lens we need to put into our thinking. How do we put people at the center of our decisions?

Any solution framework will also need to use data and technology to help redesign how the local system works and how it creates equitable access. We have the tools to make this change happen. We just need to get them into the hands of the people who need them to thrive. And we must co-create these solutions with them.

To achieve this, IBM is working with Pyxera, a global organization dedicated to addressing challenges at the community level. Pyxera emphasizes creating and sustaining inclusive, equitable and regenerative systems. The organization participates with IBM Impact Initiatives to support organizations committed to building stronger communities through economic sustainability.

Businesses can create resilience by solving challenges at the community level, engaging with employees and community members. This allows them to predict and mitigate the risk associated with some of these meta-challenges that they face collectively and that individual businesses cannot stop or influence on their own. So this is an opportunity to bring together the right stakeholders, the right organizations and the right community members to solve for the long term. We can help preserve economic resilience by creating community resilience. It’s a concept of shared value made possible by putting community at the heart of the conversation.


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