The Industrial Revolution ushered in a production system characterised by unchecked raw material consumption and a take-make-use-dispose mentality. Driven by capitalism, the relentless pursuit of maximum profits has led to a precarious future. A circular economy (CE) model, coupled with a mindset focused on reasonable returns, offers a promising alternative.
Before capitalism, primarily agricultural societies aimed for a reasonable return. This approach was partly due to the absence of public reporting technologies and a means to compare performance, making it difficult to even conceptualise the idea of a maximum return. Consequently, the goal was simply to generate enough to sustain the society for another year and possibly accumulate some surplus, in essence a reasonable return.
With the advent of capitalism, the idea of a reasonable return was supplanted by the imperative to maximise profits at all costs. The global dissemination of standardised information facilitated continuous performance comparisons, driving investors to seek the highest possible returns. This logic, I argue, is impeding our transition to a CE and a more sustainable way of life.
The formal concept of a CE emerged in the 1970s, but circularity ideas have been found since the late 1800s. The general idea is to create material loops that (1) reduce waste, (2) extend the life of products through reusing, repairing, reconditioning and then (3) disassembling products to form the raw materials for new products. This approach utilises materials ‘already in circulation’ to manufacture products, reducing the need for continuous virgin resource extraction.
Unfortunately, CE principles are sometimes viewed as being anti-business or adopted only if they contribute to profit maximisation. I propose a shift in mindset from the need to maximise profits to generating reasonable profits. This doesn’t mean companies should become altruistic or unprofitable. Rather, they should aim for a balance where shareholders earn dividends and continue to invest, employees earn a decent living, customers pay fair prices, and we safeguard a habitable planet for future generations.
By intentionally designing products and fostering collaboration at the national and global levels, we can create a truly sustainable society that minimises the use of virgin resources. The European Union (EU) are leading progress in this area with policies that mandate longer repairability for certain electronic products and the standardisation of connectors (such as USB-C connectors for cellular devices) to reduce e-waste. While policy initiatives like these are crucial, the next critical step is to redefine our notion of success in business. By aligning our economic goals with environmental sustainability and embracing the concept of reasonable returns, we can create a system that benefits both business and the planet. The question now is not whether we can afford to make this transition, but whether we can afford not to.
In Summary
Are you willing to accept a reasonable return instead of a maximum return? What if the future of your descendants relied on it?
Author
Wayne van Zijl CA(SA)
Associate Professor at School of Accountancy WITS
