Understanding The Closed-Loop Economy

Being a business owner or manager, it’s likely that you’re familiar with a closed-loop economy model. Do you truly understand all of its benefits, though? Have you figured out how to integrate this model into your business operations? The featured infographic below takes a deeper dive into how a closed-loop economy model functions and how it can benefit your business.

A closed-loop economy is occasionally referred to as a closed-loop supply chain as a result of the lack of waste produced throughout the process. Every input is either reused, recycled, shared, or repaired in a way that makes it reusable. Rather than producing waste, what other models would consider as unusable, this model welcomes these inputs as a resource that can create a new substance or product.

This closed-loop model has seen a steady increase of popularity over time. More and more businesses are opting into this approach for obtaining, creating, and consuming materials and goods. Estimates indicate that it will contribute 4.5 trillion dollars globally by 2030. Even if your business doesn’t operate globally, your business can still locally benefit from adopting this model. This model can provide additional customer loyalty benefits, can improve your company’s public perception, and can produce significant long-term savings through reduced reliance on external suppliers.

As more and more companies continue to transition into a closed-loop economy, the reliance on raw material supplies will significantly decrease. This will provide great benefit to the environment. This model also encourages innovation and job growth internally. In addition to this, accumulated savings will boost corporate profits and can be passed on to consumers.


How Does This Model Work? 

A closed-loop economy is fully realized when companies come together to establish a closed-loop supply chain. This involves the reconsideration of how these companies’ products and packaging are designed, manufactured, and sold. Most importantly is how these companies can then refurbish and reuse these components of their products. As a result, more raw materials can be saved.

Most companies today follow a linear economy model. In this model, raw materials are used by manufacturers to design and create products, which are then used and disposed of by individuals or companies. A very minor amount of raw material is saved, and the process of creating these same products begins anew.

In the case of a closed-loop economy however, there is no end or beginning. Rather a continuous cycle of reuse. The materials that are used to create a product are reprocessed into raw materials that contribute to the creation of that same product. The process operation looks something like this: consume and collect raw materials. Process these materials into a reasonable design. Manufacture these materials, and then you’re back at the start and the cycle continues. This is the most effective way for companies to reduce manufacturing costs and produce more sustainable products for their customers. For more information on how this production model operates, check out the featured infographic below. Courtesy of Quincy Recycle.