Circular Economy Business Models PDF

Facultad Economía y Negocios Alejandra Vasquez Delama Welcome to ENNEG310 Negocios I / 01-02 Monday & Wednesday, 11:00 – 12:20/ 12:30 – 13:50 Alejandra Vasquez Delama [email protected] 1 Facultad Economía y Negocios Alejandra Va...

Facultad Economía y Negocios Alejandra Vasquez Delama Welcome to ENNEG310 Negocios I / 01-02 Monday & Wednesday, 11:00 – 12:20/ 12:30 – 13:50 Alejandra Vasquez Delama [email protected] 1 Facultad Economía y Negocios Alejandra Vasquez Delama The circular economy Facultad Economía y Negocios Alejandra Vasquez Delama Overview 1. Introduction 2. Global and economic challenges of the 21st century 3. The circular economy Negocios I 3 Facultad Economía y Negocios Alejandra Vasquez Delama How often do people upgrade their phone? (2023 statistics) https://www.sellcell.com/blog/how-often-do-people-upgrade-their-phone-2023-statistics/ Negocios I 4 Facultad Economía y Negocios Alejandra Vasquez Delama What is a phone upgrade? A phone upgrade refers to the process of replacing your current mobile device with a newer model, typically offering improved features, performance, and technology. This could involve getting the latest version of your existing phone model or switching to an entirely different device from the same or a different manufacturer. Phone upgrades are often driven by advancements in hardware, such as better cameras, faster processors, enhanced battery life, and updated software capabilities. Phone owners can also decide to upgrade based on a desire to access new functionalities, stay current with technology trends, or address the evolving needs of the user. Carriers and manufacturers often provide options for customers to upgrade their phones through trade-in programs or installment plans, making the process accessible and convenient for users looking to stay on the cutting edge of mobile technology. Negocios I 5 Facultad Economía y Negocios Alejandra Vasquez Delama What is the replacement cycle length of Smartphones globally? Negocios I 6 Facultad Economía y Negocios Alejandra Vasquez Delama What is the replacement cycle length of Smartphones in the USA? Negocios I 7 Facultad Economía y Negocios Alejandra Vasquez Delama What is the replacement cycle length of Smartphones in China? Negocios I 8 Facultad Economía y Negocios Alejandra Vasquez Delama Why do people upgrade their Smartphone? Negocios I 9 Facultad Economía y Negocios Alejandra Vasquez Delama Smartphone upgrade frequency by age Negocios I 10 Facultad Economía y Negocios Alejandra Vasquez Delama Smartphone upgrade frequency by device (iPhone vs. Android) Negocios I 11 Facultad Economía y Negocios Alejandra Vasquez Delama What happens to an existing device when a user upgrades? Negocios I 12 Facultad Economía y Negocios Alejandra Vasquez Delama The problem: “planned obsolescence“ “Describes a strategy of deliberately ensuring that the current version of a given product will become out of date or useless within a known time period. This proactive move guarantees that consumers will seek replacements in the future, thus bolstering demand.” (Kenton, 2019) Negocios I 13 Facultad Economía y Negocios Alejandra Vasquez Delama The problem: “planned obsolescence“ contrived durability (parts break down intentionally) software updates perceived obsolescence (fear of missing out) and prevention of repair (e.g., batteries in smartphones) Negocios I 14 Facultad Economía y Negocios Alejandra Vasquez Delama The consequences? Tons of trash and E-waste Plastic pollution (e.g., in oceans and nature) Co² emissions, greenhouse effect and global warming Rising sea levels Missing raw materials Disturbance of ecosystem (e.g., Amazonas) Negocios I 15 Facultad Economía y Negocios Alejandra Vasquez Delama Three kinds of industrial economy Linear turns natural resources into base materials and products for sale through a series of value adding steps driven by “bigger-better-faster-safer” (fashion, emotion, progress) Circular reprocessing of goods and materials generates jobs and saves energy while reducing resource consumption and waste objective is to maximize value at each point in a product’s life Performance selling goods (or molecules) as services through rent, lease and share business models “shared economy” manufacturer retains ownership of the product and its embodied resources and carries the responsibility for the costs of risks and waste (Stahel, 2016) Negocios I 16 Facultad Economía y Negocios Alejandra Vasquez Delama The circular economy “The circular economy is a systems solution framework that tackles global challenges like climate change, biodiversity loss, waste, and pollution.” (Ellen MacArthur Foundation, 2022) https://www.youtube.com/watch?v=zCRKvDyyHmI Negocios I 17 Facultad Economía y Negocios Alejandra Vasquez Delama The circular economy “A ‘circular economy’ would turn goods that are at the end of their service life into resources for others, closing loops in industrial ecosystems and minimizing waste (see ‘Closing loops’). It would change economic logic because it replaces production with sufficiency: reuse what you can, recycle what cannot be reused, repair what is broken, remanufacture what cannot be repaired.” (Stahel, 2016, p. 435) Negocios I 18 Facultad Economía y Negocios Alejandra Vasquez Delama Butterfly diagram Facultad Economía y Negocios Alejandra Vasquez Delama Circular-economy business models Business models that reuse and extend Business models that turn old goods service life through repair, remanufacture, into as-new resources by recycling the upgrades and retrofits materials Greenglass Negocios I 20 Facultad Economía y Negocios Alejandra Vasquez Delama The environmental disaster fuelled by used clothes and fast fashion | Foreign Correspondent Negocios I 21 Facultad Economía y Negocios Alejandra Vasquez Delama H&M and Shein: The real cost of your $4 shirt Negocios I 22 Facultad Economía y Negocios Alejandra Vasquez Delama The challenge Economic models taught at university (yes, also the University of Chile) is based on textbooks of the 1950s (grounded in theories of the 1850s!) (Rational Choice Theory, Solow model, tragedy of the commons, etc.) But: Our reality has changed since then: Increased globalization and migration Global warming and environmental destruction Plastic pollution, etc. 🡪 A circular economy requires a rethinking of economic models and increased systems thinking Negocios I 23 Facultad Economía y Negocios Alejandra Vasquez Delama Needs for a circular economy (Raworth, 2017) 24 Facultad Economía y Negocios Alejandra Vasquez Delama From GDP to Doughnut GDP (Gross Domestic Product) as the first measure of economic progress = Total monetary or market value of all finished goods and services produced within a country’s borders in a specific time period functions as a scorecard of a given country’s economic health GDP = private consumption + gross private investment + government investment + government spending + (exports – imports) Negocios I 25 Facultad Economía y Negocios Alejandra Vasquez Delama From GDP to Doughnut The problem: Growth is better than non-growth 🡪 fosters linear economic model Is growth endless? 🡪 debate! (Raworth, 2017) Negocios I 26 Facultad Economía y Negocios Alejandra Vasquez Delama From a self-contained market to an embedded economy Belief of self-regulation of markets “Spontaneous order“ (F. August von Hayek, 1969) Can markets regulate themselves? How much government intervention is necessary? (Raworth, 2017) Negocios I 27 Facultad Economía y Negocios Alejandra Vasquez Delama From homo oeconomicus to homo socio-oeconomicus full rational thinking rational and emotional thinking and acting purposeful action perfect market transparency and foresight adaptability reciprocity profit and utility maximization (Raworth, 2017) Negocios I 28 Facultad Economía y Negocios Alejandra Vasquez Delama From mechanical equilibrium to dynamic complexity Economists aim to imitate natural sciences as “hard“ sciences that seek for general rules and equilibrium BUT: economy embraces humans - social science Max Weber: value judgment controversy of the social sciences (“Methodenstreit“) Human behavior is unpredictable (crash of 2009!) 21st century economists embrace complexity and evolutionary thinking “Putting dynamic thinking at the heart of economics opens up new insights for understanding the rise of the one percent, and the boom and bust of financial markets alike.” (Raworth, 2017) Negocios I 29 Facultad Economía y Negocios Alejandra Vasquez Delama From endless growth assumption to growth agnosticism (Raworth, 2017) Negocios I 30 Facultad Economía y Negocios Alejandra Vasquez Delama How the Dutch are reshaping their post- pandemic economy - BBC REEL https://www.youtube.com/watch?v=Ziw- wK03TSw&t=55s Negocios I 31 Facultad Economía y Negocios Alejandra Vasquez Delama Sustainable Development Goals Set up in 2015 by the United Nations General Assembly (UN-GA) and are intended to be achieved by 2030 Collection of 17 interlinked global goals designed to be a "blueprint to achieve a better and more sustainable future for all“ Negocios I 32 Facultad Economía y Negocios Alejandra Vasquez Delama The 17 SDGs (1) No Poverty (9) Industry, Innovation and Infrastructure (10) Reduced Inequality (2) Zero Hunger (11) Sustainable Cities and Communities, (3) Good Health and Well-being (12) Responsible Consumption and Production, (4) Quality Education (13) Climate Action, (5) Gender Equality (14) Life Below Water, (15) Life On Land, (6) Clean Water and Sanitation (16) Peace, Justice, and Strong Institutions (7) Affordable and Clean Energy, (17) Partnerships for the Goals. (8) Decent Work and Economic Growth Negocios I 33