Inside the Closed Circle: The Art of Optimising Production in Europe

"When you visit nature, don't do anything you would find indecent to do as a guest." D.L. Armand

Imagine a world where waste is transformed into wealth, where every discarded item has the potential to be reborn into something new and valuable. Welcome to the innovative realm of closed-loop manufacturing, where sustainability meets creativity in a harmonious blend of ingenuity and resourcefulness.

According to Our World in Data, China and the United States are the largest emitters of carbon dioxide. These two countries alone account for over 40% of global CO2 emissions. Europe, consisting of 27 countries, is in third place. (Roser, 2020)

Closed-loop manufacturing in Europe

Closed-loop manufacturing, also known as closed-loop production or closed-loop systems, is a concept aimed at minimizing waste and maximizing resource efficiency by reusing materials and products within a circular economy. This green approach in the business sector is becoming more popular and fashionable every year.

The term circular economy entails that commodities and the materials they are made of are valued highly unlike the traditional linear model based on a “take-make-consume-throw away pattern (Urbinati & Rosa, 2020).” An example of a company that utilizes this model is IKEA, with its closed loops for remanufacturing.

The company utilizes four different loops:

Reuse: Once a customer acquires a product, it enters the first circular reuse loop. This involves using the product in various ways, maintaining its condition, and adapting it to changing needs. It also includes passing on products for second-hand use (IKEA).

Refurbishment: Refurbishment refers to restoring used, damaged, or non-compliant products to a "like-new" condition. This process may involve repairs, upgrades, and cleaning either by customers themselves or through after-market services. Refurbished products are evaluated, repaired, and potentially recertified for release back into the market (IKEA).

Remanufacturing: Remanufacturing involves using usable parts from dismantled products to create new products. This process maximizes resource recovery and may reduce the cost of the final product by utilizing existing components (IKEA).

Recycling: Recycling is the final step in the product lifecycle. It involves transforming product parts into new raw materials, which can then be used within IKEA or external supply chains. Recycling occurs only after considering all options for reuse, refurbishment, or remanufacturing (IKEA).

Which are the differences between the US & Europe?

When it comes to sustainability, Europe and the United States have significant contrasts in their approaches and progress. Europe has been at the forefront of implementing rigorous sustainability legislation, as seen by measures such as the EU Taxonomy Regulation and the Sustainable Finance Disclosure Regulation (SFDR). These standards seek to standardize environmental, social, and governance (ESG) reporting while also encouraging sustainable investment. Furthermore, Europe has aggressive climate policies stated in the European Green Deal, which prioritizes carbon reduction objectives and renewable energy projects.

In comparison, while the United States has made achievements in implementing ESG practices and standards, its progress has been more fragmented and less complete than in Europe. The United States has obstacles such as a split policy environment, with differing perspectives on ESG issues, and a lack of strong government rules. Despite these disparities, both regions are moving towards greener economies, albeit at different paces and with varying degrees of commitment.

How does SMS benefit from following those policies?

Expectations from consumers, employees and new generations

Small and medium-sized enterprises (SMEs) that prioritise sustainability can acquire a competitive edge, attract new clients, and ensure long-term success (Ecopreneur, 2023).

Consumers are increasingly considering both sustainability and price when making purchasing selections. Companies are expected to perform responsibly and sustainably, while also being accountable (Ecopreneur, 2023).

According to Eurobarometer surveys, 94% of citizens across EU Member States prioritise environmental protection. 91% of citizens believe climate change is a major issue. In comparison, 83% agree that European law is vital to protect the environment (Ecopreneur, 2023).

Access to finance

SMS that value sustainability and social responsibility can have access to several financing options. Financial institutions, investors, and stakeholders are increasingly recognising the long-term value of sustainable enterprises. SMEs that include sustainable practices demonstrate resilience, creativity, and risk management, increasing their appeal to lenders and investors. In addition, Sustainable SMEs can access finance options such as loans, impact investments, and grants designed for sustainable initiatives (Ecopreneur, 2023).

What's the future in cooperation for North American and European manufacturers?

As the tendency shows, sustainability has not only beneficial aspects but also financially favorable indicators for a company: it shows that a company has the opportunity to be not only profitable but also environmentally sustainable to maintain an image in the business world where sustainable organizations succeed. Closed-loop manufacturing is an innovative response to the challenge of environmental sustainability by converting waste into wealth and increasing resource efficiency within the circular economy. While both Europe and the US are making progress on sustainability, European policy measures are broad and ambitious. But beyond all this, organizations that embrace sustainability will benefit from increased consumer confidence, access to finance, and long-term success.

Think of sustainability not as an end point, but as a journey where innovation, sustainability and awareness come together to shape a brighter and more sustainable future for business and beyond.