Analysis

Discuss about the Circular Economy for Globalization.

In this era if globalization, organizations have expanded in different parts of the world. The economies of various countries have expanded and the demand has increased exponentially. It is practically not possible to keep serving the demands of global population without sustainable development and recycling and these two concepts are the basis of circular economy. A circular economy seeks to rebuild capital, whether this is financial, manufactured, human, social or natural (Tukker, 2015). This ensures enhanced flows of goods and services. The objective of this report is to discuss the key benefits of circular economy. This report would discuss the key potential of the circular economy and the benefit that this system can bring for Australian companies. The report is based on the retail industry and it would focus on the ways that can enable the firms in the retail industry to gain competitive advantage through circular economy.

The circular economy is a relatively new concept. The companies in the retail industry in Australia may not be using this concept much. However, the companies in retail industry in America and Europe have already started to focus on circular economy. It is expected that the trend of circular economy would pickup in Australia and there would be more and more firms in Australia that would start focusing on circular economy (Geng, 2016). The companies in the Australian retail segment may be particularly interested in the circular economy as there are various benefits like optimization, cost reduction, etc. The benefits of circular industry for the organizations in retail industry in Australia can be discussed as:

It is important to mention that circular economy is much more than recycling of goods. It is correct that the environmental impacts are definitely a major benefit of circular economy. However, there also exist various other benefits of circular economy that organizations in retail industry in Australia can not ignore (Golev & Corder, 2016). The key benefits of circular economy for the organizations in retail industry can be discussed as:

With the basic philosophy of circular economy, the organizations can optimize the use of resources. It means that the organizations in retail industry can actually produce more with the same set of resources and it would eventually improve the overall productivity of the organization.

With the focus on circular economy, organizations can actual save certain costs. Usually, organizations would have two types of costs (Halog, 2015). These would be capital expenditure and operation expenditure. The organizations may not be able to optimize the capital expenses. However, the circular economy would definitely provide a platform where the organizations can reduce its operational expenses. This is done through various optimization techniques such as waste management, recycling, multiple use of resources, etc.  

Benefits of Circular Economy

It is believed that the path of sustainable development could be achieved with the basic philosophy of circular economy. Therefore, it would be correct to say that sustainable development and circular economy goes hand in hand and in fact, circular economy could just be a way to practice sustainable development in the organization.

The companies would be able to practice and implement the principles of circular economy only when they realize the value that could be derived from circular economy. It can be said that the organizational design is the key for circular economy. Before focusing on competitive advantage through circular economy, the organizations should have an effective and flexible organizational design. While Winslow Taylor and Henri Fayol significantly impacted how organizations function with the ultimate objective of sustainable development, Elton Mayo impacted contemporary organizational design the most.  Fayol took Taylor’s work and expanded it to eventually create what is the foundation for modern organizational management.  There was not a lot of focus on worker satisfaction, but more on structure and management. Although hierarchal structures suggested by Fayol still work in many organizations, such as the military, organizations needed to change when the environment changed. Mayo focused on how worker satisfaction affected productivity. He believed that workers, and society in general, were happiest and most productive when conflict was minimal and people had a sense of security, both mentally and economically (Ionescu & Negrusa, 2013).  Mayo realized that people needed to know they had a place and were important, and that security and general satisfaction in their workplace made them more productive.  More secure, happy people equal a more industrious environment.

The strategic management theories around competitive advantage suggests that organizations would usually have competitive advantage through one of the two ways of product or service differentiation and cost leadership. With the circular economy, organizations may be able to use cost leadership as competitive advantage (Golev & Corder, 2016). With the focus on circular economy, the organizations in retail industry can actually reduce the cost of operations and this could result in competitive advantage through cost leadership. 

It is correct that circular economy has various benefits for multiple stakeholders like organizations, governments and society at large. However, there also exist several challenges of circular economy. One of the biggest challenge is that it may not be easy to change the organizational design or to align the organisational design with the basic theme or philosophy of circular economy (Halog, 2015). Organizational design and development centres around the idea of planned change interventions which should improve the long-term health and performance of any organization.  One key factor is that top management must actually buy into the long-range approach to change. Organizational design in today’s society has grown to take many factors into consideration when assessing the way organizations should be structured to meet the demands of change. 

Optimization of Resources

The other key challenge could be the change management challenge. There are several significant elements that ensure successful change in an organization. However, management has to understand that in order for significant change to take place the organization must do an overall assessment of where the organization needs to improvement. With the many dynamics in business today organizations are seeking innovated ways to remain on the cutting edge; out front of the customers. Hass & Krausmann (2016) argued that conducting an organizational assessment to determine if and where change is necessary is very important. Organizations should conduct such assessments periodically, perhaps as part of their annual strategic planning activities. According to Kraatz and Zajac (2001),  “Strategic change has been recognized as an important phenomenon because it represents the means through which organizations maintain coalignment with shifting competitive, technological, and social environments which occasionally pose threats to their continued survival and effectiveness” (p. 632). 

Conclusion and Recommendations

The above report discusses the various aspects of circular economy. With the above discussion it can be said that there are various benefits of circular economy; however it is not easy to implement the practices or philosophies of circular economy. Therefore, it is important that the organizations in retail industry and other industries should identify the way to overcome the challenges before taking the steps to implement the basic principles of circular economy. Some of the recommendations for the organizations in the retail industry can be discussed as:

• It is recommended that the organizations must take the inputs from various stakeholders of the organization. The internal stakeholders like employees are the key (Haas & Krausmann, 2016). The organizations in retail industry, the big or the small retail stores should not avoid the discussion with any of the stakeholders before following the principles of circular economy.
• It is recommended that the organizations should have a structured approach to change management that occurs with the implementation of circular economy. observed that organizations seeking change go through a series of steps: idea generation, determination of need, building support, implementation, and obtaining resources. Idea generation and determining need are obviously important, as without good ideas that advance an organization’s goals, nothing will change (Golev & Corder, 2016).  Implementation and obtaining resources are also obviously important.  After all, without the proper financial resources, material and equipment, and staff development, even the best of ideas is doomed to failure. 
• It is recommended that the organizations in retail industry should take a small and gradual steps with circular economy (Figueroa, 2015). The big bang approach may not be the recommended approach. It is important that the organizations should define the small targets and then the progress of the company should be measured against the defined targeted state. The small organizations in the retail industry can also use benchmarking to benchmark their operations and practices against the practices of large organizations in the global retail industry.

References

Geng, Y., Sarkis, J. and Ulgiati, S., 2016. Sustainability, well-being, and the circular economy in China and worldwide. Science, (6278 (Suppl.)), pp.73-76.

Genovese, A., Acquaye, A.A., Figueroa, A. and Koh, S.L., 2015. Sustainable supply chain management and the transition towards a circular economy: Evidence and some applications. Omega.

Golev, A. and Corder, G., 2016. Modelling metal flows in the Australian economy. Journal of Cleaner Production, 112, pp.4296-4303.

Haas, W., Krausmann, F., Wiedenhofer, D. and Heinz, M., 2016. How Circular Is the Global Economy? A Sociometabolic Analysis. In Social Ecology (pp. 259-275). Springer International Publishing.

Ionescu, G. G., & Negrusa, A. L. (2013). Elton Mayo, an enthusiastical managerial philosopher. Review of International Comparative Management / Revista De Management Comparat International, 14(5), 671-688.

Kraatz, M. S., & Zajac, E. J. (2001). How organizational resources affect strategic change and performance in turbulent environments: Theory and evidence. Organization Science, 12(5), 632-657.

Pagotto, M. and Halog, A., 2015. Towards a Circular Economy in Australian Agriâ€Âfood Industry: An Application of Inputâ€ÂOutput Oriented Approaches for Analyzing Resource Efficiency and Competitiveness Potential. Journal of Industrial Ecology.

Tukker, A., 2015. Product services for a resource-efficient and circular economy–a review. Journal of cleaner production, 97, pp.76-91.