2.3 Circular Economy 25
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Furthermore, Kienbaum Management Consulting describes the reduction of ma-
terial costs through an adequate product design where the emphasis lies on reusing
material at the end of its first lifecycle (Kienbaum Management Consulting 2014).
On (2): In an evaluation of the Chinese indicator system by Geng et al. (2012) theauthors attribute cost savings to lower insurance costs, more efficient energy use as
well as reduced environmental penalties. The evaluated Chinese indicator system
is a metric for policy-makers and decision-makers to assist them in achieving the
objectives of circular economy and enable them to reflect on the outcomes achieved.
Moreover, using this indicator system supports managers, implementing the circular
economy concept, to reach either their company’s own or governmental predefined
objectives. By adhering to given targets the costs of environmental penalties and
insurances are avoided. Sinkin et al. (2008) confirm their hypothesis that process
improvements and technological innovation stemming from the implementation
of eco-efficient measures led to the reduction of further ‘non-value-added’ costs,
such as waste and pollution inefficiencies. According to the Ellen MacArthur
Foundation, it is essential that products in a circular economy are made to last in
order to reduce the warranty costs for organizations (Ellen MacArthur Foundation
2012). The case study of Park et al. (2010) concludes that in industrial parks the
presence of a certified waste management company leads to cost savings for waste
management of all organizations of the industrial park.
The second monetary effect which has been alluded to in various reports is anadditional revenue. Additional revenue can be generated by new income streams
resulting either from selling ‘waste’ (Geng et al. 2012) or from the reselling of used
and refurbished products (Accenture 2014). Geng et al. are not explicit about what
the term waste means in this context. It could either mean that leftovers from pro-
duction which would have usually been thrown away are transformed into products
and sold to the consumers. Another option is that manufacturing waste is sold to
business clients who are able to process it as input for their own production cycle.
And third option is that organizations resell used products for a second lifetime
as also described by Park et al. (2010). In addition, Sinkin et al. (2008) come to the
conclusion that increased profits are more highly valued by the market when firms
are engaged in eco-efficient activities compared to competitive organizations which
are not engaged in these activities (Sinkin et al. 2008). However they lack to specify
how firms generate additional revenue.
As first non-monetary effect increased competitive advantage has been iden-tified. First sub-category of this effect is the improved customer relationship. In
2012 Preston published a paper on the potential of circular economy as a model
for industrial organization. He argued that a long-term relationship between firms
and their customers, which goes beyond the point of sale, is a large incentive for