Design and innovation are at the heart of the circular economy – a restorative approach to economic activity that could transform our future. Instead of continuing with the old linear model – barely 150 years old – in which goods are made from newly extracted finite natural materials, used and then mostly thrown away, there is another way. It is not just about designing products so that they can be returned, disassembled and recycled.

It is about thinking about how to make a product good from the start, so that it has a positive impact on the environment and human health. Of course, Cradle to Cradle® pioneers Michael Braungart and William McDonough have inspired many businesses, including ours, with their call for designing for eco-effectiveness. They describe the approach in their latest book, The Upcycle:

“Human beings don’t have a pollution problem; they have a design problem. If humans were to devise products, tools, furniture, homes, factories, and cities more intelligently from the start, they wouldn’t even need to think in terms of waste, or contamination, or scarcity. Good design would allow for abundance, endless reuse, and pleasure.”

For those of us that do go down this path we soon realize it helps to drive innovation across processes, products and the wider business model. It also helps to engage employees as they will most likely be enthused by the goal of developing products and services that are commercially successful while also contributing positively to human health and the environment.

Thanks to two in-depth reports from the Ellen MacArthur Foundation and the management consultants, McKinsey & Co., we also know how much commercial value might be unlocked as a result. Looking at a defined set of industries across Europe, they calculated that new material savings from circular economy models could be as much as $630 billion per year. They estimate, for example, that the impact of refurbishing smart phones at 50-60% collection rates could reduce manufacturing energy costs by $4 million, save an estimated 100,000 tonnes of CO2e emissions, and generate €350 million of material savings per year. Their second report calculated that in the fast-moving consumer goods sector, there could be material savings of up to $700 billion per year based on smarter circular methods used in the food and beverages, clothing and packaging industries.

We can see innovative business models and products being developed today. The heavy machinery company Caterpillar, for instance, has developed an engine block that can be removed and returned in improved condition as part of its remanufacturing business. Danish shipping giant Maersk has developed Cradle to Cradle® passports for its Triple-E container ships to start making: “a detailed inventory that can be used to identify and recycle the components to a higher quality than is currently possible”. Given the scale of the materials involved – 60,000 tonnes of steel per ship – change here will have a huge impact.

In the long run, the circular economy calls for smarter design. As Cradle to Cradle® co-founder William McDonough explained recently, upcycling is about designing processes and activities that actually make “the world better than it was before”. In relation to one example he explained: “You don’t melt food grade plastic and downcycle it into a park bench. You don’t turn food grade plastic into fleeces. You create food grade plastic that is non-toxic and can be reused – as food grade plastic.” This is an inspiring vision to work to as we move towards the circular economy.

Read the World Economic Forum’s new report on the Circular Economy 

Read more blogs for the World Economic Forum’s Annual Meeting in Davos 2014.

Author: Alexander Collot d’Escury is chief executive officer of Desso and is participating at the World Economic Forum’s Annual Meeting in Davos 2014.

Image: A Palestinian sifts through garbage for salvageable items at a local dump site, in the east of Gaza City. REUTERS/Mohammed Salem