The Path to Profitability: Simple measures for Sustainable Entrepreneurship

“What’s the allure? Change will happen when the value of circularity is clearly visible.”

By Catherine Wijnberg

There is no shortage of climate change headlines to terrify us and motivate new ways of living and doing business. Strangely though, despite the raging fires, deadly heat and supersized climate events, very few individuals and even less businesses are taking action to change this future. Why is this?

It is clear that we need solutions. And fast.  Yet to take hold they must be solutions that make sense for citizens and business alike. One of these is “The circular economy” – a climate change antidote that also promises to be good for job creation and economic growth. The circular economy at its core is about eliminating waste – all waste – from our system. Designing out waste at its root and keeping products and their components in use forever.

So, if the circular economy is so great, why aren’t more people sold on it? And why are even less actually adopting it? To answer this we need to get down to basics. Anyone who has tried to change a bad habit knows that change is painful and is made of three parts – the heart, the head and the hands. The heart is our emotional motivation for change, the head is our technical ability to make the change and the hands are the outcome of our actions.

The motivation for monitoring

Millions of people are feeling the emotional concern of climate change, what they need is the belief that there is a solution, so they can be inspired and motivated to take action. Here we need better storytelling of the successes that the solutions such as the circular economy can achieve!

Next, we need to educate people on the how. Educate them on ways in which they can reduce or eliminate waste and become more circular.

What you measure you master and what you monitor you motivate (Just check the increase in fitness activities since the invention of the smartwatch to be convinced of that!). So, to embed change we need to measure, monitor and report the positive effect that this delivers so we are motivated to do more of it.

And here is where it gets a little tricky. Whilst monitoring of electricity and water usage is made easy through utility meters, and monitoring our recycling waste is within reach if we count the number of bags we take to the recycling plant, a full report on circularity is much more than that.

Making circularity visible

The question is how do we make measuring and reporting of circularity simple and easy to do so that its value can become visible – both to citizens and business?

In Fetola’s circular economy accelerator, we have discovered that this is not a simple task. Entrepreneurs are motivated to improve their circularity but struggle to measure it in a simple, meaningful and measurable way.

The challenge is twofold – firstly to reduce the complexity of a systems change to a manageable message and secondly to find simple ways to measure and report these results.

If a business aspires to expand globally, especially into the EU and countries with punitive carbon footprint taxes, it is going to become essential to be transparent, measurable and accountable on the climate impact of production. Just labelling a product circular because the packaging is recycled cardboard won’t cut it.

But how practically does an entrepreneur measure their processes, their energy and waste efficiencies and their environmental footprint? This impact monitoring is important for brand positioning, to reduce carbon tax and to identify improvements in profitability that measures the effectiveness of a shift to circular economy principles.

Impact Models can become extremely complicated, and measuring of it even more onerous, so it’s important to bring the focus back to three principles: eliminate waste and pollution, circulate products and materials, and regenerate nature. The key to trust building is to keep it simple, logical and easy to understand:

  1. What are you going to measure?
  2. How easy is it to measure?
  3. Can it be verified?

The value of verifiable measurement is that it turns circularity from a ‘nice-to-have’ into a tangible financial asset – something that companies can monitor and invest in. A typical calculation might go as follows:

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In theory, each component in the manufacturing cycle could be monitored, for example, circular water discharge, renewable energy consumption vs. total energy consumption and so on. Water starvation is expected to displace up to 700 million people in Africa by 2030 and is a critical resource to save, so reporting this saving is a very valuable indicator. Entrepreneurs could simply start tracking their water savings by calculating the reduction in freshwater usage, or go deeper to monitor the portion of recycled water as follows:

Tracking product recycling is more difficult to measure, but a workaround might be to employ a returns policy with a deposit system that can be monitored. Another measure would be to determine what percentage of a product is repairable, or reporting lifetime durability using an extended warranty system.

What is really important is that entrepreneurs are not left feeling overwhelmed by the monitoring process and that citizens are able to understand and trust the measures they are reporting.

Cape Town-based business Plant The Seed launched a ‘Zero Waste Toolkit’ programme in 2022 to drive sustainability in schools has mastered this. Within a year the holistic recycling and waste management service already has meaningful, verifiable and visible metrics they can leverage to build their business and their reputation:

Dilex, another participant on Fetola’s circular economy accelerator, currently cleans 600,000 kilolitres of used car oil for re-use, which saves 500 billion litres of water annually from contamination. Used engine oil doesn’t wear out, it just gets dirty – less energy is required to re-refine this than to use crude oil and can be repurposed again and again as an eternal resource. Another useful measurement would be the savings of the re-refined product since one litre of re-used engine oil is reported to replace the need for extracting & refining 42  litres of crude oil.

Creating simple solutions for self-monitoring is a critical step towards increased profitability, enhanced market access and investment opportunities. Circularity is a legitimate future for small and micro business, so providing the tools that demystify and uncomplicate the process is vital to inspire that early stage of business

Further addressing this basic gap are programmes such as Youth Business International, which has launched their trial of a global circular business startup toolkit encompassing all industries to form a free resource accessible to all. But designing it is often complex and legislative frameworks don’t necessarily translate across international borders.

Whilst the majority of mid-income South Africans are more concerned about crime, corruption, loadshedding and government incompetence, perhaps it is time for small business to ignore consumer trends and rather focus on getting on board before they are left behind the curve. Now is the time to listen to that instinctive business sense: one of honing cost inefficiencies and finding opportunity.

Simple measurements set entrepreneurs apart from the competition. When metrics are clear and trustworthy entrepreneurs and their products become more credible with both customers and financiers alike. This trust is the starting point for positive change.

About the Author:

Catherine Wijnberg is the CEO of Fetola, a leading provider of world-class entrepreneurial support programmes for African entrepreneurs building businesses that last through scalable solutions that deliver social, environmental and economic impact.

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