Welcome back for Part II: Is a Circular Economy Viable for Entrepreneurs and Brands, and How? This week we will take another deep dive into the economy and how it correlates to entrepreneurs, brands and the environment. Read on for an amazing and enlightening conversation!
Martin, to come back to what Stefan was saying, we understand that your packaging is also part of circular economy. Is it recyclable or does it turn into compost?
We decided that we couldn’t package our biodynamic products in plastic because that would detract from what we were aiming to achieve (full biodynamism). We therefore made a decision to package all our face care and skincare products in glass containers because there is a good system to recycle glass in Austria.
And whenever it was inevitable to use plastic, such as when packaging shower gel, because you don’t want your shower gel in a glass container since the risk of breaking is high, we made sure to use 100% recyclable plastic. We try to use only packaging from recycled materials and we source our products locally.
Demeter certifies everything we use, such as the ingredients and packaging materials. For example, if we get a shipment of packaging from a supplier, it is only acceptable if it comes with a certificate confirming that it was made in a carbon-neutral way.
Otto, you wrote an article for an Austrian magazine called Econova discussing how corporations and social entities can improve the ecosystems, and that they can create economic prosperity for everyone. Where in your experience aren’t corporations implementing this and why do you think this is so?
Sustainable cooperation requires a cooperative understanding of the environment and that isn’t there. The main lever to avail this is knowledge and information, of course. Companies have to change and open up their minds in order to share and cooperate with all those involved.
As Stefan put it earlier, if you can take this and sell it for whatever amount of money, there is no problem as long as there is a benefit for all.
In order to solve the problems and make the system circular from resource extraction to waste management, all sustainability actors should come on one stage and share what they know. And together, they can cooperate and move towards a sustainable future because a sole actor can hardly have a fully circular economy.
Martin showed that in his one example of one product because he diversified by using the waste product from one operation as a resource for another operation making a different product.
But it isn’t only cooperation from companies that should share information. We also have to cooperate by coming back to nature. Mother Nature is very generous and offers excellent solutions to any problem we may see. We only have to watch and accept nature’s offer and apply this knowledge by copying nature.
Just like in nature, we have to start to design waste and emissions out of products and services. This has to be done from the first step, which is the step of designing the product. While designing, think about what is coming in, how it is to be processed and what will leave at the end of the manufacturing process. Hopefully, you can find a way of keeping everything within the circle so that nothing has to be dumped. Can it be reused, remanufactured or recycled?
In my view, recycling should be an approach of last resort. It should be avoided where possible, and this is possible if the design phase is handled with cooperation and ample knowledge.
The other area where cooperation is needed is in situations where it is unavoidable to have waste from the system. In such a case, cooperation is needed to keep that waste material within the system so that it is recycled as many times as possible.
It is also important to improve the usefulness of the materials and products you produce. That’s why plastic isn’t a good material because it can only be recycled twice and then it can’t be useful for anything after that. As soon as plastic is used, it will always become waste, since currently there is no type of plastic that can be recycled indefinitely. This is unlike glass and aluminum which can be recycled nearly endless times. It may lose some of its quality, but it is possible to keep recycling it.
I prefer to look at a circular economy not from the perspective of saving the world but from an economic view. If you don’t have to extract new materials and you keep using the existing ones over and over, are your costs going up or down? The costs may be higher in the beginning, but if you implement a circular approach and cooperate with others to stay in the circle, there is good money to be made.
A circular economy isn’t being implemented by most companies because information or data sharing is still a no go for many of these entities. They are still stuck in the thinking of intellectual property, competitive advantage, and the like. No one is thinking that if they share they will get something back and be able to create something better. They still believe that one is one, and they don’t think that one plus one may create something more than two.
Also, companies which are already on the way to sustainability may think that a corporate partner may not be in sync with their own values. There is a need to bring agreement on what sustainability means so that companies can cooperate without doubting the values of their partners.
Another big thing is that our current linear system focuses too much on profits. We need to include an additional metric because profit is just one part of the benefits. We should start thinking of creating profits for the company, benefits for society, and benefits for the environment. Once we take on such a mindset, we would begin to see things differently. Isn’t it strange that you can now make more money by destroying the planet than by building it?
Doesn’t that take us back to what Jairek was saying that there are people who pay to have favorable laws made so that they can keep their tons of money?
That is correct, and it is because there is no strong governance anywhere. The aim should be to change the economic system and not the planet per se. As we said before, Mother Nature has been doing the same thing day in and day out for 3 billion years and nothing changed until humans came on the scene.
Let me move away from there, and go to what you, Otto, mentioned to me before that in the EU by 2025, there will be a requirement for corporations to submit a non-financial sustainability report as a proposal for a circular economy. Jairek, I don’t know whether this also exists in the US or in Austria. Jairek, how do you assist CEOs with redesigning or restructuring their corporations in order to create these non-linear systems in which it is possible to implement circular economy?
To go along with the historical perspective of why things are the way they are, there’s a few reasons why things change and why CEOs would want to adapt or adjust. One is that the people in charge change. So, who is in charge and who is funding the laws or deciding what’s cool and what’s not. For example, there was a huge youth revolution in China and youths took charge. They changed the structure and laws in China and if you didn’t agree with them, I think there’s about 20 million people who died in that period in history where they would literally stamp you out of society. And so when a new reign of power, when a new group of people takes charge, things change for the better in some cases and for the worse in others.
There’s the influence of cycles. I’ve read a couple of historians from Harvard and Yale focusing mainly on the U.S. and they indicate that every 100 years there was a cycle of generations that occurred. Take the case of financial systems, there would be a phase of growth, then things would peak, and then a downward spiral would begin. When the rot gets too much, the general populace would get pissed off and take away the stuff from all who have it and take away their power since they were part of the problem. The populace would then try to implement a new system which would again begin another cycle of approximately 100 years. Ray Dallio, in a LinkedIn article delves into the different cycles and empires throughout history and it is a fascinating read.
The other thing that can influence people to change behavior or stick to the old things is circumstances. For example, with the recent Covid-19 outbreak, certain things which had existed for decades had to change in light of the situation brought by the pandemic. Think of restaurants that were only dine-in and had to figure out how to switch to offering delivery services. Large events figured out how to become digital.
How do you help the psychology of someone? The truth is, it depends on who they are. If they are the older person who has been carrying on something for a very long time, you have to help them see it in another way and get comfortable with a new approach that they are kind of getting squeezed or forced to do. If it is the new generation taking over, you have to help them to honor and value some of the old traditions that existed before and remind them they wouldn’t be where they are now without those traditions.
For instance, we were called to a large automaker that had about 60,000 employees of which 40,000 had been with the company for a really long time and a smaller group 0f about 20,000 newer hires. The older group adheres to the five pillars of how things are done there while the new group thinks those pillars are stupid. They wanted me to convince the 20,000 people to accept that the old idea was good. I couldn’t, because the idea wasn’t necessarily bad but it was outdated.
I told them that they needed something new, something that would help the two generations communicate with each other. This was very difficult because the old generation doesn’t want to change because they have been doing things a certain way for lots of years/decades.
And so how do we get the younger group to value some of the traditions that have sustained the company and get them to communicate with the older generation until it fades away so that they can implement the complete new strategy that they want. It is a question of shifting out a strategy and then shifting in a strategy.
One of the worst things I am seeing now in society is that young people from extremely wealthy families who inherited tons of money bitching about the reason they have the money. These people need to be stripped of the money and allowed to go work somewhere else so that other people who need that money can get it instead of allowing those young people to sit in a fancy house and then bitching about how horrible the ways in which their families made the money are.
It is true some of the ways in which money was made in the past were really bad, but how about first appreciating that those efforts got us here and then trying to improve them. People are instead trying to make these seem to be the worst things that have happened in history yet they aren’t offering a solution!
So the next conversation we have with the new group is that always bringing up a problem without offering a solution is whining and it isn’t effective or helpful at all. So we have those conversations about honoring what brought us here, realizing that circumstances were different and that’s how to avoid a revolt of one group saying they will smash the other since they outnumber them.
So, Jairek, what would you say if there’s someone at the top of the company having 40,000 older employees who are following an older system or five pillars from the top, so how do the younger 20,000 even get in if they aren’t in agreement with the pillars at the top? So how will change come about in this case?
Well, it depends on how it is going to be done. Either there will be a smash and rebuild or it is some type of working together which has to appreciate the new, value the old, bridge those two sides and then move forward. It’s one or the other because I haven’t seen a third option yet. This happens in the business world, and it also happens all the time in the political world. Any organizational structure will run through the same cycles.
I was just thinking that Martin was saying that he is a fourth generation owner of the two brands he leads and he himself is thinking for future generations. How are you thinking about this, Martin? Was the previous generation before you totally opposed to your way, and now that you are in charge how are you preparing those brands for the future generation?
Actually, the history of the winery dates back almost 2,000 years so it is actually the oldest winery in Austria as it was run by the Romans and we still have a Roman wine cellar. But the biggest change that happened was in 1971 when my mother came to the winery. She was the first to say she wanted to work biodynamically, and you can imagine that in 1971, this was a very big decision. For her, it was the only way she saw to run a farm and winery for generations and sustainably. She said this was challenging for her because neighbors called and told her she was doing things the wrong way, and her own mother-in-law told her she was going to ruin the vineyard since there is only so much new technology you can use yet she was reverting to old ways.
I see myself in that similar situation because I have my mother’s experience showing it can work but it can also work in a different way even if you have to wait 10-20 years. Until the mid-90s people regarded working organically as something bad or they didn’t appreciate it fully. My mother said that at least in Austria right up to the 90s you had to force people to try an organic product. She was strong enough to force people to try the wine, and then they would say I will buy it even though it’s organic, or even though it’s is produced in a sustainable way. At that time, they didn’t want to pay anything more than they paid for a conventional product, but for her, she believed that was the only way to go. So she travelled around the world and she managed to get an importer in Japan to buy the wine and 8 years later she found a partner in New York and San Francisco as these were working organically and this way of working was now more appreciated.
I was lucky in that respect because I found all the groundwork laid, but I know how difficult it can be to be the one to bring change.
Thank you for tuning in this week. I hope that you were able to learn a lot from this week’s conversation!
To Your Success,