Circular Economy and Intangible Assets

March 13th, 2017. Published under Intangibles as strategic assets, Looking Forward, Value Propositions. No Comments.

Michael D. Moberly March 13, 2017 ‘A business blog where attention span really matters’.

When introducing – executing a new business concept, leadership and management teams exhibiting an initial interest, in this instance, to a ‘circular economy’, may also be inclined to recognize obstacles to implementation. One being, of course, converting the new concepts’ principles to practicality, functionality, and return-on-investment.

As for implementing a ‘circular economy’, in the absence of a fully integrated and supportive (circular) ecosystem, obstacles abound. Admittedly, obstacles-impediments, cynical or otherwise, can manifest on multiple levels, e.g., actually applying ‘circularity’ to each facet of their company in terms of product (tangible-physical asset) development, acquisition, production, renovation, and destruction.

On the other hand, through my admittedly, IA (intangible asset) influenced lens, the concept of ‘circularity’ produces a natural relevance for articulating the contributory role and value of IA’s (intangible assets) to a company and/or business vis-a-vis the globally universal economic fact that 80+% of most company’s value, sources of revenue, competitiveness, and sustainability lie in – derive directly from IA’s.

By design, a circular economy (macro) is restorative and regenerative insofar as keeping products, components, and materials, i.e., both tangible and intangible assets, at their highest utility and value throughout their respective value – functionality life cycle. Obviously, restructuring entire economies to become (more) ‘circular’ would, with little, or no challenge, deliver significant environmental benefits. Too, proponents of a circular economy encourage companies to seek ways for retaining more of the value of the materials (tangible asset inputs), energy, and labor (intangible asset inputs) that go into their products. (This was adapted by Michael D. Moberly from the work of McKinsey alumnus Markus Zils.)

Interestingly, the EU (European Union) is characterized as being in the transformational midst of a ‘circular economy’ influenced by numerous actions, one being ‘Cradle to Cradle’ which represents a cross-sectoral socio-economic system which is absent (convential) linearally-based economic principles. Instead, a ‘circular economy’ relies on concepts-princples whose primary purpose is to wholly correct what are characterized as the ‘unfixable errors embedded in linear (economic) systems’. During EU’s period of transformation (to a circular economy) business leadership and management teams are obliged to develop strategies that lead to its ultimate application, among them being, continuing to design high-quality products, but include – address…

• the use of renewable energy and effective water management.
• social equity.

Real innovation and effectiveness, ala application of a circular economy, will, proponents note, lead to increases in (people) prosperity and liveability in Europe. (This was adapted by Michael D. Moberly from the work of Michael Braungart, Academic Chair “Cradle to Cradle for Innovation and Quality” RSM, Erasmus University Rotterdam; Scientific Director, EPEA)

A ‘circular economy’, as it is branded, is comprised of multiple (leadership, management) components, among them being…

• genuinely understanding, conceptually and practically, what sustainability is, its near term relevance, and accompanying mindsets and actions necessary to achieve (sustainability) across industry sectors and environments.

• learning about and from the naturally occuring elements and their individual characteristics, i.e., resources, materials, and products, etc., associated with – embedded in the development and execution of particular processes and/or functions.

• thinking, acting, and executing in contexts of…
– systems and feedback loops between, let’s say, the resources and
methodologies necessary for producing a specific product reflect durable
sustainability.
– recognizing when, where, and how ‘waste’ occurs-exists (within
particular environments), and
– creating distinct circularity (loops) between the biological and
technical materials used within a particular environment.
– ensuring product design methodologies and resources are thoroughly
embedded with (wholly) renewabable (recyclable) and/or repurposed
component

As reported in its ‘Care To Share’ blog, Royal Haskoning DHV (an independent international engineering and project management consultancy, headquartered in Amersfoort, Netherlands) rightfully gives credit to The Ellen MacArthur Foundation (UK) for bringing the ‘circular economy’ concept to the forefront and projecting it globally, through among other venues, their 2012 report titled ‘Towards the Circular Economy’.

Posts in Royal Haskoning DHV’s blog, note the ‘circular economy’ has, at least, some of its roots in earlier sustainability concepts and schools of thought, which include, Industrial Ecology (1989), Biomimicry (1997) and Cradle to Cradle (2002). Each variously include the idea of nature serving as a model to address environmental pollution and continuous growth of consumption.

So, what, in my view, is new-novel about the prospects of a ‘circular economy’ with emphasis on IA’s, is its direct linkage to business operational realities and economies wherein rising percentages of most businesses-companies value, sources of revenue, competitiveness, and wealth creation potential lie in – derive directly the ‘circularity’ applied to the development, utilization, exploitation, safeguarding, and restoration of intangible, as well as, tangible assets.

I genuinely believe there is much enlightened merit embedded in the principles of a ‘circular economy’. Be assured however, those principles are not merely millenialized verses for expressing the importance of, and necessity for, businesses to engage in advanced (material, resource) recycling initiatives. Yes, I have little doubt that executing the principles of ‘circularity’ can move companies – businesses away from the ‘circularity’ of wasteful application-use of resources to more sustainable (reusable) products and materials, because doing so, paves the way for maintaining product-brand value.

A reality embedded in a ‘circular economy’ is that success is wholly dependent on (requires) cross-sector – cross-value chain collaboration. This is the circular economy’s single greatest challenge, which at minimum will require not merely a verbal commitment, rather a mandate to execute. For those reasons, I elected to miniaturize the principles and application of ‘circular economy’ to apply to a company’s IA’s, independently. My rationale is that most company’s IA’s do not function exclusively in a linear fashion. Instead, in most circumstances, IA’s are contributory, that is, they can contribute to multiple products’ value, competitiveness, brand, etc., simultaneously. In other words, it’s certainly practical and lucrative for company leadership and management teams to recognize how their various IA’s function internally, in a circular fashion.

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