the circular economy explained

Much of the economy in the industrialized world is dependent on cheap and easily-available resources as well as fossil energy. Such a dependency is largely grounded in the belief that continuous economic growth is not only possible but also necessary. Accordingly, consumption is intended to perpetually expand. The products generated by such a system lack the durability of products from previous decades as they are not designed to last, rather they are designed to promote consumerism. In turn, massive amounts of waste are generated as a part of a ‘throwaway’ society that is always searching for the next new thing, regardless of need or whether the same old thing is still perfectly good. The waste that is generated by the norms associated with a linear economic system is then poorly managed – ending up in landfills, the ocean, or burned. However, new economic strategies are being developed in order to more intelligently use existing resources.

One strategy is the implementation of a circular economy, which is an industrial system that is designed to remove waste from the system and to promote regenerative or restorative practices that encourage the use of superior design, materials, products, systems and business models in order to encourage a shift towards the use of renewable energies and the elimination of chemicals that negatively impact the environment. The practices employed are designed to optimize a system rooted in a cycle of disassembly and reuse that go beyond both disposal and recycling in order to avoid wasting the energy and labor typically lost in a linear economic system.

Within a circular economy, the components are differentiated between consumable and durable components of any given product. There is an attempt to integrate non-toxic or even beneficial biological replacements for the non-durable components so that they can safely be directly reintegrated into the environment or via a cascade of uses. The durable components in a circular economy are designed to be reusable or upgradeable – dependent on the type of technology associated with the product. By taking such steps, economic systems become more resilient and less resource-dependent.

Similarly, in a circular economy, the concept of users replaces that of consumers. In turn, new types of contracts that are more long-term in nature and based on reputation can emerge. Such contracts can be tailored to the needs of both consumers and businesses. It is also possible for manufacturers or retailers to remain the owners of the rented or leased products. In turn, the owners would be responsible for maintenance costs which would encourage the development of longer-lasting products of better quality. This form of benefit has the potential to be particularly important because prices are predicted to rise as competition for resources intensifies. The energy required to manufacture new products is augmented and valuable resources can be reserved. Common examples of items in a circular economy include car sharing services and cellphone contracts that encourage trade-ins.

sources:
https://reports.weforum.org/toward-the-circular-economy-accelerating-the-scale-up-across-global-supply-chains/from-linear-to-circular-accelerating-a-proven-concept/
https://www.ellenmacarthurfoundation.org/circular-economy

an introduction to community supported agriculture (csa)

First introduced in Japan and Switzerland in the 1970s, community supported agriculture (CSA) is a form of partnership between farmer and consumer.  They enter into a contract which provides consumers with a certain number of ‘shares’ in the farm. Each share provides the consumer a box (or bag or bucket or …) of vegetables or other products at a regular interval. 

There are four basic components of a CSA:

  1. Partnership: a mutual agreement between the producer and the consumer is established for the growing season
  2. Local Production: the exchange is local, i.e. a part of the community, in order to facilitate the relocalizing of the human-food relationship
  3. Solidarity: a unifying relationship is developed that is beneficial to both producer and consumer
  4. A Producer/Consumer Tandem: the direct person-to-person relationship, i.e. no intermediaries or hierarchies, is established

The establishment and execution of a CSA have several benefits and challenges for producers and consumers that are summarized below.

Challenges

Opportunities

Producers

  • Potential for a bad worth of mouth
  • Increased management requirements
  • Time demands → customer relations
  • Packaging and distribution costs

Consumers

  • May feel like they are not getting their money’s worth
  • Lack of choice
  • May be expensive
  • ‘Long-term’ commitment
  • Short shelf life (no preservatives)
  • A significant amount of produce that requires cooking
Producers

  • Marketing before the growing season
  • Consistent cash flow
  • Development of customer relationships → loyalty
  • Shared risk
  • Cuts out the ‘middleman’
  • Little capital investment
  • Word of mouth advertising

Consumers

  • Access to super fresh produce
  • Development of relationship with producer
  • Contact with the farm

Society

  • Reduced environmental impact of food(?)

For the implementation of a successful CSA, the participants – both farmers and consumers – must have the ‘right’ type of personality, i.e. committed and patient. However, if such a relationship can be established, CSAs are a very viable marketing strategies that can be used by small farmers to remain competitive in an environment largely dominated by industrialized agriculture.

sources:

http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/agdex3482?opendocument
http://edis.ifas.ufl.edu/fy597

7 tips for the successful implementation of direct marketing strategies by small farmers

Direct marketing is a form of marketing that is drastically different than commodity selling. Where commodity selling is based on a market-determined price and generally focused on standardized, large-scale sales that are impersonal in nature, direct marketing involves 1:1 selling between an individual/group and the seller. In doing so, trust is established and alternative forms of value are created. The value created in this respect enables small farmers to remain competitive against agribusiness as they are able to provide alternative benefits, for example, novelty or flavor, for consumers.

Accordingly, the expansion of direct marketing strategies is grounded in the trend towards embracing consumer preference. Examples of prevalent consumers demands include:

  • Authenticity: consumers are interested in the simpler things in life
  • Community: consumers want to support local businesses
  • Family: consumers want activities that the whole household can enjoy together
  • Security: consumers desire to have food that is safe for consumption
  • Convenience: consumers seek out food that tastes good and is readily available
  • Balance: consumers want a balance between work and recreation

When deciding to implement a direct marketing strategy, there are 7 basic keys to success:

  1. Involve all ‘players’: develop a strong and diverse network in order to enjoy the benefits of different skills and talents
  2. Start small: Smaller operations are easier to manage and can more easily adapt to any challenges and opportunities that may present themselves. 
  3. Grow naturally: Once a plan has been proven successful, it can be expanded at a healthy rate.
  4. Keep (good) records: Quality information is required in order to evaluate progress and determine whether goals are being met. Records are needed not only for financials but also for product interests and on-farm productivity. 
  5. Make decisions based on recorded success: The information gathered through record keeping allows for more informed and intelligent decisions to be reached. 
  6. Find and develop the niche market: Sellers should think like consumers in order to determine what products and services consumers desire. Once consumer preferences have been determined and/or a loyal consumer base has been developed, it is essential to continue to interact with customers and offer incentives, e.g. tastings, to maintain loyalty.
  7. Develop a toolset for information: Information is a key to success. Being prepared can aid in the development of new customers and help to maintain the loyalty of existing ones. 
    • Examples: Business cards, price lists, product information sheet, recipes/prep tips, website

sources:

http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/agdex3482?opendocument
http://edis.ifas.ufl.edu/fy597
http://www.investopedia.com/terms/c/commodity.asp

business clusters: what they are and why they provide a competitive advantage

Have you ever wondered why Wall Street is known for finance or why the California wine industry has been so successful in integrating itself into the global market? In a word: clusters. Clusters are concentrations of complementary organizations, institutions and companies that are components of a given field in a specific geographic location. These conglomerations of talent, finance and resources result in an apex of success that can be contributed to their locally-sourced competitive advantage that improves the innovative capacity of said location. From another perspective, clusters can be considered an alternative way of organizing value chains in that there is both horizontal and vertical integration of the stakeholders.

This unique form of organization creates a microclimate for competition that results in increased productivity for a given area attributed to the shared stimulus and gains. Likewise, the direction of innovation and growth is driven by the speciality of the area, which serves to further catalyze the economic environment and stimulates the formation of new businesses. Such an environment is usually triggered by some form of localized development or innovation, which indicates that the quality of local businesses and the environment in which they are is essential.

Four essential components for the successful development of a cluster are as follows:

  1. An appropriate location
  2. Local engagement
  3. The promotion of and investment in upgrades
  4. Collective cooperation

Once the establishment of a cluster begins, it is then possible to solidify trust via repeated interactions (game theory). The introduction of trust in economic relations results in improved efficiency, effectiveness and flexibility. Additional benefits identified include:

  • Lower search costs and transaction costs as a result of centralized information and labor
  • Increased productivity
  • Easier sourcing and reduced storage/housing costs
  • Improved reputation
  • Access to institutions and public goods
  • Lower risk
  • Reduced

Furthermore, clusters promote robust competition and cooperation due to the fact that:

  • It is easier to measure performance as the competition is close to home
  • Healthy, local rivalries can develop to promote a ‘race of arms’ which stimulates innovation
  • Economies of scale resulting from the collaboration between a number of local actors provides incentives for economic alliances

With all the benefits provided by clusters, it is easy to understand why developing a cluster in any given sector is desirable – especially in the modern, globalized world – in order to provide the advantages necessary to maintaining a competitive edge via the intelligent use of resources and innovative methods. It is, therefore, essential to be adaptive, both internally and externally, in order to avoid rigidity and inertia. Moreover, it is important to recognize that while government interventions are often good intentions, they can also cause stagnation in further development, making it essential for members of these economic communities to develop strategies not only for business success but also for sustainability, resilience and a changing social climate.