The next wave in Innovation is to design new Circular Economy challenges
Circular Economy is increasingly part of the Innovation opportunities to design a new business landscape with a customer-centric focus. What is Circular Economy? It means reusing, repairing, re-manufacturing and re-marketing goods and components in an industrial context. These smallest loops of economy can generate the biggest financial benefit as well as the lowest price for the consumer or the highest profit margin for the manufacturer. Finally, considering the sustainability impact, the Circular Economy aims to optimize three factors: economic, ecological and social.
A successful example is Patagonia that designs clothing products in the U.S., outsources manufacturing to external suppliers in emerging markets with cheaper labor, and ships finished goods to developed markets for sale. The company screens suppliers through a “4-fold approach”: ethical sourcing, product quality, social responsibility, and environmental compliance. “All 4 areas have equal veto power” says Patagonia. The business model’s credibility (adherence to ethical and environmental business practices) rests on adherence to these commitments within its operating model. Patagonia is one, maybe more the one, step ahead in re-thinking the role and the impact of Corporate Social Responsibility.
Social responsibility (environmental and labor initiatives, primarily) has become a greater competitive advantage for Patagonia than even product quality. Environmental commitments include sustainably grazed wool, 100% organic cotton, 100% traceable down, environmental audits of factories, and waste management technology.
The environmental responsibility is the very heart of the Patagonia business vision and this is why deservedly they received the Accenture Strategy Award for Circular Economy Multinational at the World Economic Forum in Davos, Switzerland.
Puma is another example with its new Financing Program to Reward Suppliers for Sustainability Performance. It started last September.
Puma joined other few companies as the first time such investment on innovation has been made in Sport industry to generate a return. As Puma says “…a great example of cross-functional internal collaboration of PUMA’s finance functions and operations, which underlines our ambition to implement fast and efficient processes.” The systematic approach and the inspiration underpin an organizational cultural change scenario which is very challenging and therefore could unleash innovative practices in the business design landscape.