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Circular economy and linear value chain – what is better for manufacturing sector?

09 June 2022

The value chain illustrates the sequence of different actions taken by companies to increase the value or extension of a product. It is one of the most essential management concepts that has been widely used since the 1980s and is prevalent until this day. The value chain provides a broader view of a given enterprise – it is a combination of all the activities carried out by a particular business unit. We distinguish primarily between linear and closed value chain models – what are the differences between these approaches?     

What is a circular economy?

The concept of a circular economy is a topic increasingly being discussed by entrepreneurs. The possibility of reusing materials is an extremely attractive prospect – not only in financial terms, but also in terms of environmental protection. It's a significant shift from the norm that characterized the early days of manufacturing, when a linear model prevailed – the first step was to collect the right raw materials, then transform them into a product, distribute and exploit them, and finally throw them away.    

The linear approach, while very simple to implement, has little benefit. Many materials that could be reused are simply wasted, which entails considerable financial losses and an extensive impact of production on the environment. Today, more and more companies are opting for more cost-effective and responsible solutions – primarily the so-called closed-loop economy, or a "circular" value chain.

See also: What is Lean SCM? Benefits in the automotive industry

The circular economy – definition & practices which support a circular economy
Circular economy is a concept that emerged in the late 1980s, but gained its greatest popularity only after the year 2000. In recent years, this approach largely guides the vision of development of various organizations and businesses – it is worth noting that in 2014 the European Union new plan focused precisely on this model, which has been implemented since 2020.

How to implement circular economy principles?

The closed loop economy or circular economy is based primarily on the rational use of resources and limiting the harmful effects of manufactured products on the environment. The most important assumption is to leave the used raw materials in circulation as long as possible – until they completely lose their properties. With this approach, the amount of waste generated can be reduced to a minimum. Once a product's life cycle has come to an end, all of its residuals should remain within the economy because there is a good chance that they can be reused.

See also: Sustainability of expanded plastics processing with Knauf Automotive

Circular economy vs. linear value chain 

Circular economy contrasts with the approach that has dominated management until recently. The traditional, linear economic model does not take into account the reuse of raw materials and waste. As a result, it requires the use of considerable amounts of cheap materials, as well as introduction of so-called planned obsolescence – designing products so that they simply stop working after a certain period of time.

Companies that rely on the closed value chain model restore used parts or re-melt materials to restore them to their raw form instead of manufa,cturing disposable products. This makes them reusable – in some cases, even in a completely different industry. It's worth noting that the circular economy model offers many benefits to today's businesses. Once such a model is implemented, companies can spend less money on individual raw materials, contribute to environmental protection and reduce the impact of price volatility in the market.

See also: Logistics in the automotive industry – efficient solutions and innovations

How is the circular economy changing the automotive sector?

The use of the circular economy is also becoming increasingly common in the automotive sector. Many elements manufactured in automotive companies are made of universal materials, which can be successfully reused in the future. It is worth noting that the manufacturing industry, including the automotive industry, is responsible for the emission of about 19% of all greenhouse gasses into the atmosphere. Therefore, in addition to energy efficiency, automotive companies must also focus on the possibility of reusing parts and waste generated in the course of production processes. 

Results of circular carbon economy

According to the analysis performed by Accenture, the automotive industry has only begun its journey towards complete implementation of the circular economy, however by 2035 the largest companies should meet the assumptions of this concept. As a result carbon dioxide emission in this sector may be reduced by as much as 75%.

See also: How to reduce the carbon footprint?

Plastic circular economy solutions with Reusable EPP Packaging from Knauf Industries
Knauf Industries is a network of companies that supplies plastic products including expanded polystyrene (EPS) and polypropylene (EPP) to a variety of industries. These types of materials offer a range of unique properties that allow for versatile use in industry. The company is particularly committed to the principles of the circular economy and reverse logistics – one example is Knauf's ultra-lightweight reusable EPP packaging for the automotive industry. Customized returnable foam packaging as well as standard Komebac® containers have excellent insulation properties, can be reused many times and are 100% recyclable. 

The use of returnable packaging is one of the most effective ways to reduce the production of unnecessary waste – this type of solution is also worth implementing in the automotive industry.

Contact us for more solutions of custom manufactured sustainable packaging for your company.

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