Sustainability 101: What is the circular economy?

Do you feel a bit lost when people refer to certain environmental sustainability topics and aren’t sure where to start when it comes to learning more? Sustainability 101 is a blog series that you can turn to for information about different environmental terms that may come up at work, during discussions with friends, and even at your annual holiday gathering.

Products have a lifecycle that starts before they’re made and goes beyond their use – including what they’re made of and how they’re manufactured, shipped and eventually disposed of. Many companies talk about how the “circular economy” can reduce environmental impact – but what does that mean, in general and in practice?

The circular economy: where design thinking saves both cost and the environment

The concept of a circular economy is not new. In the 1970s, architect and economist Walter Stahl shared a vision of an economy in loops (now known as the circular economy) in a research report to the European Commission. In a circular economy, companies tune their processes to enable the reuse and regeneration of materials or products, as a pathway to making products with the smallest environmental impact and resource use possible.

In practice, this involves applying circular design principles across a product’s lifecycle. Take for example a wireless access point.

To engineer an access point for circularity, a company would start with two key areas:

• first, selecting what materials are used in making that new access point, such as incorporating recycled (versus virgin) content, reducing the use of nonrenewable materials, and considering resource scarcity risks as part of material selection;
• second, designing the access point for repurpose, remanufacture, or recycle at its end of life, for example not requiring shredding or radical disassembly for recycling, or enabling streamlined disassembly to support harvesting individual parts from the end-of-use product.

Companies should aim to design products for circularity and sustainability the same way they design products for user experience – by making it an inherent part of the process. This circular thinking extends to other areas of a product’s life as well. This includes waste reduction and the environmental impact of packaging, such as using recycled paper and cardboard. Manufacturing processes should reclaim material left over from each access point (e.g., cut metal, etc.) and recycle that material for other products.

In addition, when we use less material to make products, we also reduce the amount of energy used for mining and production of materials, not to mention reducing the additional environmental impacts of mining. And when we reduce how much of them end up in landfills, we protect groundwater supplies, avoid emissions from landfill gas from biodegradable items, and avoid filling valuable landfill space.

An increasing circularity gap

When old electronics are simply discarded, they often contain hazardous materials like lead or mercury that may travel through a landfill and back out into water supplies or soil. The more electronics can be recycled, reused or otherwise repurposed instead, the less our environment is impacted by those products breaking down and by the virgin materials we must mine or create to make new products.

But research shows our society is not taking enough of these steps.  The 2023 edition of the Circularity Gap Report, an annual study of circularity adoption worldwide by Circle Economy, states that the global economy increasingly relies on materials from virgin sources. This is due to growing demand for materials needed for buildings, infrastructure, and other durable goods – like electronics. The authors estimate that the global economy is only about 7.2% circular, down from 9.1% in 2018.

This increasing gap is also evident in the European Environmental Bureau findings that more than 13 million tonnes of electrical and electronic equipment were sold in the EU in 2021 – an increase of over 85% since 2013. In that same year, 4.9 million tonnes of e-waste were registered – just over 37% of the volume sold.

And other parts of the world fare worse on e-waste—a report published by the United Nations in 2020 estimated that, based on 2019 data, the global collection rate for e-waste is only 17 percent, leaving a tremendous amount of valuable materials that could be recovered and reused.

The missed opportunity for recycling and reuse isn’t simply an environmental issue, it’s also an economic one. Global e-waste means billions of U.S. dollars’ worth of raw materials, including copper, iron and tin, and more valuable metals like gold, silver, and palladium are being discarded and are no longer available for use. Not recovering those materials means that manufacturers must source fresh supplies of them.

If companies can close this gap, they can deliver benefits to the bottom line while also protecting the planet.

Evolving from linear to circular models at Cisco

Circular economy principles have been around for decades, but in order to fully realize the benefits, companies must transform many of their practices. This includes engineering principles, supplier engagement, manufacturing and logistics processes, and even their business models. As a part of Cisco’s transformation, we aim to transition more of our business from  one-time transactions to ongoing services. This includes adopting business models that serve to extend the value of our products and reduce their environmental impacts.

And we’ve already started to evolve our practices and programs. For example, we set a goal to incorporate Circular Design Principles into 100% percent of our  products and packaging by 2025, and in 2021, we launched a circular design evaluation methodology and tool to help us track progress toward that goal.

In addition, we offer a range of programs to help close the loop on our products:

• Through the Cisco Takeback and Reuse Program, Cisco facilitates product returns for end-of-use gear at no cost so that it can go to its next best use. Cisco reuses or recycles nearly 100% of the equipment that is returned to us.
• The Cisco Refresh program offers Cisco certified remanufactured equipment, available for most of the portfolio, providing a second life to products and reducing waste. Cisco Refresh has been part of Cisco’s offerings for more than 20 years.
• Cisco offers IT payment solutions that support circularity and make it easier for customers to build a technology strategy to support their sustainability goals. For example, through the Cisco Lifecycle Pay with Trade-In Incentive, customers can realize up to 10% off their monthly payments by trading in legacy Cisco or third-party equipment.
• And lastly, Cisco offers as-a-service and subscription models across many products and solutions, allowing customers to move to recurring revenue models that support circular consumption and responsible takeback, recycle and reuse of hardware.

Circular transformation is a foundational requirement for a regenerative future, and it is therefore one of three key priorities in Cisco’s environmental strategy. To learn more about these initiatives and other Cisco efforts, check out our ESG (environmental, social, and governance) Reporting Hub.

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