Building a Sustainable Future with Circular Economy Standards

Exploring how the International Organization of Standardization (ISO) helps businesses transition from wasteful practices to sustainable growth with Sunil Thawani.

Materials and metals like iron, copper, lithium, and sand are central to humanity. Material extraction contributes to about 60-70% of emissions, which in turn contributes to global warming and the climate crisis.

The world extracts about 100 billion tonnes of materials annually, with 90% of the materials being wasted, lost, or unavailable for future reuse.

Today’s manufacturing system takes raw materials from the Earth, turns them into new products, then discards them into the environment after use. It’s a linear process with a beginning and end. The linear economic model of “Take-Make-Use-Throw” is no longer sustainable.

In a circular economy, products are designed for durability, reuse, and recyclability. As much as possible, everything is reused, remanufactured, and recycled back into a raw material which can be used to manufacture other products or, as a last resort, disposed of.

Many organisations are concerned about the climate crisis and want to become more environmentally sustainable. Based on my conversations with many leaders and managers, however, they are looking for a systematic and structured approach to transition from the current linear way of working to a more circular way. But they do not know where and how to start. Second, leaders also want the circular economy initiatives and programmes to be integrated into routine work and ensure continuity. Third, they want to build a robust foundation of circular economy policies and processes to continue to build on and improve their sustainability performance. 

This is where standards come in and play an important role. Standards can be termed as the best way of doing things. A standard is a document, established by consensus and approved by a recognised body that provides, for common and repeated use, rules and guidelines aimed at the achievement of an optimum and consistent outcome. Standards also help develop systems thinking and build a foundation for consistency and continual improvement.

Recognising the pressing needs and challenges faced by organisations in the transition from a linear to a circular economy, the International Organization for Standardization (ISO), based in Geneva, developed a series of circular economy standards. 

There are many ways ISO 59000 has helped simplify this complex subject of circular economy.

The ISO 59000 series provides a comprehensive framework and step-by-step approach for organisations to develop, implement, institutionalise, and improve circular economy principles to transition from the current unsustainable model of “Take-Make-Use-Waste.” Organisations can implement it in a phased manner, establish appropriate performance measures, and track their progress towards it.

There are many ways ISO 59000 has helped simplify this complex subject of circular economy. First, ISO 59004 defines terms commonly associated with circular economy and sustainability. For example, I learned that there were more than 100 definitions of circular economy. Now ISO 59004 clearly defines circular economy to help develop a shared common understanding and a basis of conversation among employees in the organisation and work towards it.

Circularity requires setting appropriate Key Performance Indicators, measuring:

1. Circular Inputs: product and packaging materials that are non-virgin, or virgin materials that are produced sustainably (total weight and percentage)
2. Circular Revenues: revenue from circular products, services, and solutions (total monetary value and percentage)
3. Circular Outputs: post-use waste recovered for re-use, upcycling, or downcycling (total weight and percentage)

ISO 59020 “Circular economy — Measuring and assessing circularity performance” guides organisations in collecting the necessary information and calculations to enable circular economy practices that minimise resource use and optimise the circular flow of resources, while contributing to sustainable development.

In yet another example, ISO 59010 “Circular economy — Guidance on the transition of business models and value networks” provides a holistic framework for organisations to transition from a linear to a circular economy. It integrates circular economy principles and provides guidance for developing strategy, setting goals, objectives, governance, and measuring circularity.

ISO 59000 is a generic management system standard. Organisations of all types and sizes can benefit from implementing these standards, such as construction, manufacturing, aviation, food, finance, and mining, to name a few. Users will need to adapt it to their context, operating environment, customer and other stakeholder needs, regulatory requirements, and resources needed. The standard is quite flexible and adaptable.

Standards usually contain lots of technical jargon and are often complex. For example, the ISO 9000 standard defines ‘quality’ as “the degree to which a set of inherent characteristics of an object fulfils requirements.” How many professionals, managers, and leaders will relate to this definition of ‘quality,’ interpret, and implement it in their routine work? Not many.

Surprisingly, ISO 59000 is different. The ISO Technical Committee 323, who developed the standard, has made it user-friendly using simple business language directed towards organisations and their people for everyday use.

In ISO 59004, a standard is structured into “Streams” incorporating the key concepts of circular economy and aligned with the way a business is designed, operated, and managed.

For example:

1. Stream 1: Creating added value: design for circularity, circular sourcing, circular procurement
2. Stream 2: Recovering value: reverse logistics, recycling, waste management, energy recovery
3. Stream 3: Transitioning to circular economy: helping users change their behaviour, innovation, collaboration, and education (benefits of the circular economy)

Circular economy, the new paradigm, requires organisations to rethink and innovate the way they are organised, do business, evaluate suppliers, manage supply chains, design products, and treat select materials to use.

Challenges are plenty – internal within the businesses and external business environment. I will focus on internal challenges as the ISO 59000 standard can help address those. Some of the internal challenges are:

1. Lack of leadership commitment to creating organisation culture to support circularity
2. Policies do not favour procurement and use of used materials.
3. People lack competencies in designing products for ease of repair.
4. Current processes support linear operations.
5. Technologies such as Digital Product Passport which help to identify and trace material flows in their life cycle and make it known to all concerned are still to be fully developed and scaled up.
6. Balancing profits (return on investment) with the cost of buying environmentally friendly materials which may be of higher cost

ISO 59000 has several requirements, guidance points, and actionable items businesses can consider implementing within their organisation and covering their entire value chain or value network, such as:

1. Design for product durability and long-use
2. Switch from buying virgin resources to a take-back scheme to collect their products or materials for internal repurposing
3. Provide a product and agree to repurchase the product after a certain amount of time
4. Supplant ownership of products by the option to purchase services that focus on the function provided by the product
5. Provide circular economy training programmes to relevant stakeholders to foster awareness in users, employees, and other suppliers

Effective implementation of the standard can provide several benefits to organisations and the environment, such as:

1. Mitigating environment-related risks
2. Reducing extraction and depletion of natural resources
3. Reducing cost by utilising used materials. This benefit can either be passed on to consumers or increase profit margins
4. Improving resource efficiency and waste reduction
5. Alignment with the UN Sustainable Development Goals, especially Goal No. 12 “Responsible Consumption and Production”
6. Compliance with applicable regulatory and consumer pressures for sustainability

All businesses should exist to provide value to their stakeholders including customers. Failing to do so is not sustainable. Same goes for businesses adopting circular economy strategies. However, what makes the ISO 59000 series interesting is the focus given to value.

ISO 59004 defines ‘value’ as “Gain(s) or benefit(s) from satisfying needs and expectations, in relation to the use and conservation of resources.” Value can be financial or non-financial. Some examples of value can be savings, productivity, satisfaction, empowerment, and experience.

ISO 59010 has a dedicated section on understanding the organisation’s current value creation model and provides elaborate guidance on typical business elements an organisation needs to focus on, such as defining value proposition for which customer segments and other interested parties and the needed key activities, resources, costs, and key partners an organisation needs to consider.

In my 30 years of experience using several management systems standards issued by the ISO, like Quality (9001), Environment (14001), Health and Safety (45001), and Enterprise Risk Management (31000), I have not seen any of them focus explicitly on value.

ISO 59010 is vital as it guides organisations in transforming their linear value creation models to circular ones, which is crucial for sustainable development.

There is an increasing segment of the population like youth and various customer segments demanding organisations, especially from high-polluting industries such as food, construction, manufacturing, transportation, oil and gas to be more sustainable and demonstrate their commitment and performance without greenwashing. This will influence buyer behaviour and decisions. Recently I chose to buy refurbished earbuds from BOSE instead of new ones.

Organisations implementing circular economy principles and models will surely have increased competitive advantage, brand advantage, and stakeholder trust.