Circular Economy: Characteristics, Drivers and Application on Johnson Controls

Running Head: CIRCULAR ECONOMY 1
Managing Operations and Supply Chain

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Introduction
In a circular economy, economic activities build and rebuild overall system of the company. This
concept identifies the significance of the economy requiring working effectively at all the scales
for small and large businesses, for companies and individuals locally and internationally.
Circular economic model is categorized as an economy that is regenerative by design with the
objective to retain as much value as possible of the materials, parts and products (Ballou, 2007).
The major objective of this report is to discuss about the concept of circular economy, its
characteristics and major drivers. The report analyzes both theoretical and practical concepts of
the circular economy framework. Theoretical aspect includes the concepts and characteristics of
this model. In the next section, the concept of circular economy is applied on the chosen
organization i.e. Johnson Controls. Furthermore, there is the discussion regarding the
environmental, social and economic benefits of using this model into company’s operations.
Organizational Background
Johnson Controls is a multinational corporation that is headquartered in Cork, Ireland and
manufactures automotive components like electronics, batteries and HVAC stools for the
buildings. It is an international diversified technology and multi-industrial leader. The company
is serving variety of customers in over 150 nations. Currently, Johnson Controls employs
approximately 170,000 employees in over 1300 places across six continents. As of the year
2016, the organization was listed as 242nd rank in Fortune Global 500. Firstly, it was
headquartered in Wisconsin, United States. In 2017, it was shifted outside US so now it is not
eligible for Fortune 500 (Johnson Controls, 2018). By using effective growth strategies, the
company is able to increase its market share and deliver the value to its stakeholders and making
the customers more satisfied. The major customer segment of Johnson Controls includes car
nuts, automotive enthusiasts, gear heads, upper and middle class people etc. Johnson Controls is
one of the organizations that has adopted circular economy model to support the environment
and society.
Theoretical Perspective
In order to understand any particular concept, it is essential to recognize its theoretical aspect. It
is an important part of the methods which can be implemented to manage the situations in firm’s

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internal and external environment. It covers different assumptions and opinions about a single
concept. The conceptual perspective of circular economy and its different aspects are discussed
below:
Concepts and Characteristics
Nowadays, organizations are developing different ways to constantly reintroduce and re-gain
these assets to market instead of disposing them after one product cycle. Considering this
requirement of business and environment, companies are implementing the concept of circular
economy in their business operations. Circular economy is the concept that is regenerative and
restorative by design. Basically, this concept is about the maximization of value circulation, not
just the elimination of waste generation (Geissdoerfer, et al, 2017). It is a development cycle
which safeguards and improves the natural resources, maximizes the resource revenues and
reduces the risks by managing the stocks and renewable flows. This concept goes beyond the
waste elimination and reduction to promote the social, organizational and technological
innovation across the value chains.
The circular economic model is completely opposite of traditional business model i.e. linear
model that works on different principles of producing, using and ultimately disposing the goods.
It shows that manufacturing process of company works effectively and utilizes the waste
material as valued source for economic benefits (Pan, et al, 2015). As per the report of European
Commission, using assets and resources efficiently helps in attaining a considerable growth and
employment opportunities with eliminating harmful emission from company’s factories. Today,
there are several large scale organizations like IKEA and Johnson Controls are able to grab many
opportunities by adopting circular economy concept. They apply this concept to strengthening its
resource efficiency.
Some of the major characteristics of Circular economy concept are stated below:
 One of the major characteristics of circular economy is that it helps and improves the bio-
diversity by using the human capital and processes. The organizations implement this
model with the principle to overcome the difficulties in the process.

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 Under circular economy concept, production cycles target to close the loop across the
complete value chain. It uses fully recyclable, renewable and biodegradable resources
which can be used in sequential lifecycles to decrease the costs and increase the control.
 The major emphasis of circular economy concept is on increasing the product life across
the entire life cycle of product. It can be done by maintaining and enhancing and
maintaining the products via repairs, refurbishment, upgrades and reproduction. The
effectiveness of this characteristic is affected via design process with the emphasis on
modular design and durability (Tukker, 2015).
 This type of economy allows the firms to mitigate the risks and issues related to
environmental pollution and wastage emission. It offers a life cycle that preserves and
enhances the environment and natural resources.
Main Drivers of Circular Economy
There are many factors which drive the circular economy in the business processes. These forces
help the company to transform the business framework into reality.
(Source: Swink, et al, 2017)