By Ivanna Gomez & Kinge Gardien
This blog is part of a series of reflections on covid-19 and the circular economy. For previous blogs in the series, please see here.
The covid-19 pandemic has exposed the fragility of linear value chains and brought a renewed attention to the importance of risk mitigation and the importance of building resilience towards the future. Resilience of a business or a system constitutes the ability to overcome vulnerability to certain risks at limited economic, social or environmental cost. Organisational resilience has long been a core element of success in big organisations, but it is also crucial to small and medium enterprises (SMEs), who have been particularly hard hit by the current crisis. This article shares insights collected during ‘Circularity-in-Depth’ workshops, hosted by Circle Economy and Tevi, a business support programme, funded by the European Regional Development Fund (ERDF), operating in Cornwall and the Isles of Scilly, UK.
The vast amount and types of threats that can undermine a value chain, regardless of the size of the business, are now greater than ever. Currently, most businesses operate around full efficiency and may perceive resilience as an opposition rather than an ally. As stated by technologist Mark Ridley: ‘efficiency is not fragility, nor is resilience wasteful’. By taking the best of both worlds, it is possible for a value chain to be capable of surviving a disruption, while remaining flexible enough to deliver results without additional costs or value loss. The key for any long-term model is to strike for a balance between efficiency and resilience.
From a demand, supply and revenue perspective, SMEs are considered to be more vulnerable to disruptions than larger organisations. Due to their size, SMEs are limited to the range of risk-management mechanisms they can access. They also typically use their energy on absorbing risks rather than preventing them.
To overcome such challenges, increased focus on leadership skills, and the ability to collaborate on an organisational, financial and operational level can help safeguard a business and increase business resilience. One example of an initiative driving this forward in the tourism industry is Disaster Risk Management (GIDRM). Tourism is one of the most exposed sectors to natural hazards and, therefore, local communities that rely on it as their primary source of income can be seen as ‘at risk’. GIDRM focuses on the Asia-Pacific region and developed the ‘Hotel Resilient’ initiative after identifying the lack of know-how during these natural disasters as a major weakness. This initiative helps hotels and resorts, regardless of their size, find the right resources and systems to properly prepare for natural disasters. This includes training, certification programmes and opportunities for collaboration between involved parties to share and exchange insights.
At Circle Economy, we have identified different categories ranging from external and internal factors that may disrupt a value chain. We have developed an approach that can mitigate risks and facilitate action. This begins with identifying relevant types of disruptions for an organisation by understanding the company’s culture, processes, products and/or partners, followed by taking action mitigating these disruptions.
Whilst covid-19 took many value chains by surprise with containment measures, the food industry suffered widespread disruptions affecting harvest, transportation logistics and processing. However, due to these disruptions, new opportunities opened for companies to make their operations more resilient through shorter value chains for example.
By shifting one’s mindset now, it is possible to help build up resilience. Our learnings from our work with SMEs in Cornwall & the Isles of Scilly can help build a buffer against future crises and threats.
Awareness is key. Resilience is not limited to size nor budget. External disruptors can take unprepared organisations by surprise and result in immediate survival struggles. Taking a resilient-proof approach to business development prepares and strengthens the agile muscle that is needed in times of change. Nurturing a disruptor-awareness culture can increase the shock resistance of an organisation.
Search for alternatives. As a business, focus should be shifted from scarcity to abundance from a materials, system and stakeholder perspective. In other words, look into alternatives with higher availability which may be through higher-energy-efficiency manufacturing and processing, videoconference instead of business travel or increased digitisation in sales and marketing.
Strength in agility. Strengthening one’s resilience demands letting go of the false notion that as humans, it is possible to control everything. As we have experienced during this pandemic, our power is very limited but the need for quick adaptation is essential and we can learn to become resilient to what we cannot control. Agile organisations react with flexibility rather than control. After attending the online ‘Circularity In-Depth’, a UK-based participant identified talent loss as one of his main potential risks in the construction sector in Cornwall. In order to mitigate this threat, he plans to further develop an apprenticeship program that can attract recent graduates in order to kick-start their careers and consequently meet the demand for new talent. This would form one part of a much wider workforce development programme to support recruitment and retention, a win-win for the community and business.
There is no such thing as a one size fits all solution — every value chain is different and, therefore, responds differently to disruptions. In other words, there is no specific expertise or expense required, except the conviction that it must be done as soon as possible. However, this process requires the fortification of an entire network of relationships; from stakeholders, to customers, suppliers and community. Now is the perfect time to find the solution for your business.
To learn more about the findings of the collaboration between Tevi and Circle Economy, and the insights towards building resilience for SMEs, please find more information here. To learn more about Circle Economy’s trainings to build your resilience, please contact our Circle Design and Brands Programme team.
 Goerner, Lietaer and Ulanowicz, 2009 Effective Systems as a Dynamic between Efficiency and Resilience