How could a business analyst explain the principles and the value produced by a production system completely based on the circular economy? For this the BACCM framework of the IIBA can help us.
Circular Economy and BACCM
We start from two very different definitions of circular economy and which provide two very different world views.
The first is that provided by the European Community which tells us that “it is a production and consumption model that involves sharing, lending, reusing, repairing, reconditioning and recycling existing materials and products, for as long as possible“.
The second is the one suggested by the ellenmacarthurfoundation.org foundation which defines it as “the economy capable of regenerating itself and reintegrating biological materials in the biosphere, and enhancing technological materials and products without impacting the biosphere“.
This model is based on three principles:
- Reduce, Recycle, Reuse which, for us business analysts, can mean, for example, optimizing and redefining business processes thinking about the waste, scraps and emissions produced.
- Maximize use value which, from a business point of view, can mean predicting or integrating the current business model or creating partnership agreements.
- Life extension which, for us business analysts, can mean introducing a new product design requirement considering technical obsolescence as obsolete. (Excuse me for this sentence between puns and puns.)
As a business analyst, we will be helped in this in-depth study on the circular economy by the BACCM framework based on six interconnected concepts. The first concept examined is the need or opportunity.
In our case, it is introducing the mechanisms of the circular economy while maintaining the centrality of the corporate mission. This would make it possible to combat climate change, which is the most difficult challenge faced so far. It’ a challenge probably perceived individually without a common meeting point, as demonstrated by the last COP26 held in Glasgow recently.
Here we find the first difference between the two definitions. The first addresses the need and the solution towards “technical” and organizational issues such as BPM, the supply chain and stakeholder management.
The second introduces a new actor that was not present in the first definition: nature. It is such a pervasive element that it is almost ignored or underestimated even if it is vital for every activity. Do you think you can do the same things if the air were warmer and contained less oxygen and more carbon?
With this statement we move on to the second concept of the BACCM in order to link it, too, to circular economy. Change is literally defined as “the act of transformation in response to a need“.
Looking at the first definition, the transformation mainly affects each phase of the production and logistics process, before and after (but let’s remember that there is always the human factor).
In the second, however, a new (and ideal) perspective opens up in which the organization becomes an organism integrated with nature: in this ideal and hypothetical perspective there is a radical change that involves every element of the organization.
For both definitions we have a change in the business model which must necessarily include rules and principles for sharing tools and resources. This is one of the changes expected from the application of the circular economy, especially for the world outside the organization. Business models such as pay-for-use, cloud platforms such as PaaS, according to Ellen MacArthur, incentivize and multiply the offer of services, products and technologies.
The third concept of the BACCM is the response to the organization’s need, that is, the solution. We anticipated something about the solution in the concept of need and we channeled it into two very different solution hypotheses. Cost and timing of implementation of the two solutions depend on numerous factors including the organizational structure, business processes and existing policies.
The important thing is that the solution solves the need, allows stakeholders to exploit business opportunities and allow new production activities, or remove constraints that blocked pre-existing activities.
The decision of the solution to be adopted may not be based only on cost or time of realization, but can be linked to the last two very important concepts: context and value.
BACCM defines the context as the set of elements that influence and condition change. In this case there are many opportunities such as the availability of investments, the inclusion of sustainable objectives within the European agenda and within the individual states. The context of the circular economy highlights the importance of exogenous variables such as non-profit organizations linked to the environment and social inclusion, innovative startups that know how to combine the principles of reuse, reuse and recycling with business needs.
Looking at the policies of the European Community, the European action plan approved in February 2021 aims to accelerate the transition towards the circular economy, i.e. the design of sustainable products, the circularity in production processes and in the sectors with greater use of resources and high environmental impact (think of plastics, textiles, construction and electronics, food, batteries and vehicles to indicate the most common). Even the change in the lifestyle of some generations compared to others affects the development and affirmation on the market of many products and services. Imagine, the establishment of the “right to repairability” which provides consumers with greater purchasing power the obligation to introduce this requirement in product design. Ellen MacArthur, promotes the application of the principles of sharing economy between companies which is expressed, I add, in the “trust between peer companies” and “product trust”.
It is therefore a very complex, heterogeneous and varied context.
Stakeholders, for the BACCM, are the actors impacted by change, need or solution. Within the company it is necessary to share the transformation roadmap from the linear economy to the circular economy, share and decide on measurable objectives and then monitor the progress of the transformation. What could facilitate the implementation of the transformation project? The development of a “circular” culture necessary to transmit “circular” values and habits, to strengthen transparency and develop skills. All stakeholders focus attention on the other dimensions of sustainability and mutual connections with human capital, inclusion and diversity.
The last concept is the value, defined by the BACCM as the usefulness or importance for the stakeholder within the context. It can be tangible, such as, for example, the expected increase in revenues, the decrease in production costs. The reputation of the brand in the market may be intangible.
The circular economy allows them to be achieved both. In the case of the first definition, for example, the change in internal production processes leads to the reduction of waste. The “Upcycling” cycles allow you to transform a low value material (for example used plastic or tires) and transform it into a finished product of greater value and, in this case, the company becomes a value amplifier. In the linear economy, value is a consequence of the product design and production chain and value is dependent on the functionality, production and sale of the product. The value for the circular economy also includes the origin of materials, the ability of the product production cycle to reduce the use of virgin resources and materials and to limit waste. Even the features of the product are designed not to be used only once but to be reused possibly in different forms.
The value of sustainability is deeply felt by public opinion, stakeholders, competitors, partners and institutions, so it is important to track and monitor the efforts made especially on manufacturing companies that use a lot of resources and materials.
The lack of this data can be deleterious and instead of contributing to increasing the value of its products and can lead to and be accused of “green washing”. A risk that can only be avoided thanks to transparency and the implementation of sustainability objectives.
The circular economy examined through the lens of the BACCM is a complex topic. It affects and impacts every organizational and productive element of the company, if fully applied. The mutability of the context in which we live does not make this transformation easy. But, at least as far as possible, the three fundamental principles of the circular economy must be applied in the management of requirements and in everyday activities: reduce, recycle, reuse.