Why the New Model of Business is Regenerative by Design
By: Lu Ying
Tags: Circulareconomy, Regenerative Business, Business Model Innovation, Circular Design, Business Strategy

One month ago today, we celebrated the World Population Day. How big is the number exactly? 7.8 billion, none less. We have tripled our population in the past 70 years and we are expected to grow more than 2 billion people stronger in the next 30 years.

The pressure this puts on our planet is wild. If the entire world would live the same lifestyle I personally do, it’d require 3.8 Earths to sustain it. If you eat meat, do any long haul travel, live comfortably in a developed nation and drive around a private car, there’s a good chance your lifestyle racks up the number even higher. It doesn’t exactly take a genius to add up 1+1 = this won’t to last.

As developing regions rise to the middle class and higher, the widening gap between resource availability and growing demand will not just be an environmental debate. It’s an economic, societal and moral imperative. While those who see this push for change and those who don’t resist, it’s about time we shift the focus from ideological rights and wrongs towards a model where the battle isn’t about a trade-off between environment and economy, but rather one that is advantageous for both at the same time.

What got us here

To understand the problem is to understand how we got here in the first place. Business, the activity of exchanging goods and services for money, has traveled a long journey from privatization of ownership to first paper money and through four Industrial Revolutions that form the base of our modern economy today. The first two Industrial Revolutions solved a huge problem by making goods accessible and affordable through mass production. The third used information technology to automate production and now the fourth, occurring since the middle of last century, is blurring the lines between physical, digital and biological spheres.

In just 200 years, we evolved from being at the mercy of nature to shaping our entire planet. Industrialization meant improved access to food, urbanization and significant growth in population. This all led to a heavy increase in demand for raw materials. Professions became more specialized. Industries formed. Geographic expansion enabled a wider selection of goods, along with a wider range of prices and terms.

By the late 1800’s, a teapot that used to be handmade by a local artisan was now divided into small parts produced by multiple companies. Fast forward a few centuries, that tea pot is now a smart kettle — and it’s shipped to your home door from China through a global network of value chains. Why? Because this is how most market economies work when the operative measure is price. When economic value is determined by the mechanics of demand and supply, the lines between actual value and what we’re paying for (perceived value) gets blurred — resulting in metrics that incentivize short-termism, extractive behavior and inequality.

Ethics aside, the way this smart kettle is being operated today is economically efficient and effective: cheaper for the buyer, cheaper for the producer and it employs those who make it. Everyone wins, except for the environment.

This is the base of our modern markets, the linear economy.

The problem of 8.6%

While economic growth has brought us a higher quality of living and lifted entire nations out of extreme poverty, using resources without boundaries has a price. In 2019 alone, more than 92 billion tonnes of materials were extracted and processed, contributing to about half of our global CO2 emissions and over 90% of biodiversity loss and water stress.

This may be hard to put into perspective but a sobering figure is to understand that from the 100% of all resources extracted today, only 8.6% of that material use is cycled back into the system — and it’s mostly food products that are biodegradable by default.

The point of this?

The 91.4% of all extracted resources is the opportunity cost we leave on the table when we operate in linear, transactional system.

This simply makes no sense, environmentally nor financially.

The reason this is such a big deal especially in 2020–21 is because if we don’t change our actions drastically today, irreversible damage will be done within the next 10 years of time. Quite simply, we wouldn’t have enough stability in the world to be worrying about economic growth if this happens. In fact, the latest UN report argues that even if we did meet the commitments made under the 2015 Paris Agreement, the world is still heading for a 3.2 degrees Celsius global temperature rise over pre-industrial levels. This would make our planet barely inhabitable for humans by 2100.

In response to this, we’re seeing systems level changes already starting to shift from policy makers and consumers. What this means for companies, then, is an urgent need to rethink their role in the society at large.

Going exclusively for profit is no longer a model where the math adds up.

Therefore those who have the guts to reimagine entirely new ways of doing business will be the ones who lead us towards the next era, the Sustainable Revolution.