Circular Economy: The Role of Intangible Assets…

This is a perspective of ‘the circular economy’ as seen through the eyes of an intangible asset strategist and risk specialist…by design, a circular economy (macro perspective) is…

  • restorative and regenerative,
  • insofar as keeping products, components, and materials, etc.,
  • both tangible and intangible,
  • at their highest utility and value,
  • throughout the (intangible) assets respective value, materiality, and functionality life cycle.

When introducing a new business concept, such as, ‘circular economy’…leadership teams exhibiting interest, will be obliged to recognize the obvious and potential obstacles to execution. One obstacle being, of course, converting the new concepts’ principles to (a.) practicality, (b.) functionality, and (c.) return-on-investment.

As for a ‘circular economy’ itself, in the absence of a fully integrated and companion (circular) ecosystem…there are indeed various obstacles and impediments,  which cynically or otherwise, can manifest on multiple levels, e.g.,

  • actually applying ‘circularity’ to each facet of a company in terms of product (tangible-physical asset) development, acquisition, production, renovation, and destruction.

On the other hand, through my admittedly, intangible asset influenced lens, the concept of ‘circularity’…produces a natural relevance for articulating the contributory role and value of intangible assets to a company vis-a-vis the…

  • globally universal economic fact that 80+% of most company’s value, sources of revenue, competitiveness, reputation, and sustainability lie in – derive directly from intangible assets.

Obviously, restructuring entire (state) economies to become (more) ‘circular’ would likely deliver significant environmental benefits…too, proponents of circular economies encourage companies to seek ways to retain – reuse more of the value of the physical materials, i.e., tangible asset inputs), and energy and labor, i.e., intangible asset inputs that collectively produce their products. (The above was adapted by Michael D. Moberly from the intriguing work of Markus Zils.)

Interestingly, the EU (European Union) is characterized as being in the transformational midst of a ‘circular economy’…influenced by multiple initiatives, one being what is referred to as ‘Cradle to Cradle’.

Cradle to Cradle represents a cross-sectoral socio-economic system…absent conventional lineally-based economic principles.

  • Instead, a ‘circular economy’ relies on concepts-principles 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…are obliged to develop strategies that lead to its application, among them being, continuing to design high-quality products, but incorporate – include these features…

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

Real innovation and effectiveness, ala application of a circular economy will, proponents argue…lead to increases in (people) prosperity and live-ability throughout 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)

Thus, a ‘circular economy’, as it is being 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 occurring 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, i.e.,
    • thinking, acting, and executing in contexts of systems and feedback loops between, 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) renewable, recyclable, and/or repurposed components.

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 intangible assets…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.

An important reality embedded in a ‘circular economy’ is that…success is wholly dependent on (requires) cross-sector – cross-value chain collaboration.

But, this is the circular economy’s single greatest challenge…which, at minimum, will require not merely verbal commitments, rather some type of mandate to commence execution.

For these reasons, I have elected to miniaturize the principles and application of a ‘circular economy’ to…apply to a company’s intangible assets, independently.

My rationale for doing so is that most company’s intangible assets do not function exclusively in a linear fashion…instead, in most circumstances, intangible assets are contributory, that is, they can contribute to multiple products – projects value, competitiveness, brand, etc., simultaneously…

  • in other words, it’s certainly practical and lucrative for company leadership to recognize how their various intangible assets function internally, in a circular fashion.

Michael D. Moberly  St. Louis March 18, 2019 [email protected] the ‘Business Intangible Asset Blog’ since May 2006, 650+ published posts, read in 137 countries, ‘where one’s attention span, businesses intangible assets, and solutions converge’!  (This post was originally published March 13, 2017, it underwent significant revisions at my hand, and republished for March 18, 2019.)

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Reader comments, as always are invited and respectfully welcome!

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