The chemical industry in the Middle East called for the adoption of a circular economy model to reduce operating costs

The chemical industry in the Middle East called for the adoption of a circular economy model to reduce operating costs(click here chemical), create new products and services, and promote incremental value creation and sustained growth. .

The traditional and dominant linear economic model of “taking, making, using, and discarding” is not sustainable. The linear model is wasteful and destroys the environment. For example, in the past half century, the use of plastics worldwide has increased 20 times, and it is expected to double again in the next 20 years. Consumers want to end the linear model and demand environmentally friendly products. The successor to the linear model is the circular economy (CE), which seeks to reuse products and treat waste as a loss of value. The company uses the chief executive because it can bring a competitive advantage, provide a response to customers, and cause less damage to the environment. CE can reduce operating costs, create new products and services, and promote value-added creation and sustained growth.

Frederic Ozeir, Partner at Strategy& Middle East, further added: “In the past, companies adopted the circular economy model only to further advance the corporate social responsibility agenda. Now they are beginning to believe that this model can become a source of competitive advantage.”

Various other factors are also pushing companies to take action. Technological breakthroughs and a customer base that is increasingly sympathetic to environmental issues have paved the way for profitable innovation using the concept of circular economy.

Dr. Yahya Anouti, Partner of Strategy& Middle East, said: “In the Gulf Cooperation Council region, sustainable development plays an increasingly important role in the government’s national vision. Both the UAE and Saudi Arabia have set ambitious waste disposal goals. The focus is on renewable energy and water recycling. These stricter environmental standards, coupled with economic potential, make circular economy possible.”

As far as the chemical industry is concerned, companies should first determine their business reasons for turning to a circular economy model. Once they have defined their business goals, they can consider pilot projects that may yield short-term returns and inspire confidence to continue within the organization. In order to further carry out circular transformation, they also need to change the corporate culture and make circular economy second nature for employees.

The strategy and report outline the competitive advantages of the circular economy adopted by the chemical industry in the region

A 2018 Strategy& Middle East survey of chemical executives found that many chemical industries have grasped the potential competitive advantages of the circular economy. About half of industry representatives said that circular economy has increasingly become a priority on the corporate agenda, while the same proportion of representatives said that circular projects will create value.

Using the circular economy model, chemical companies in the region can take different methods to gain a competitive advantage, including; the report points out, circular procurement, customer value chain integration, recycled products and final product recovery.

Circular procurement transforms product procurement into leasing, maintenance and shared services. Due to its strong recycled content, it reduces damage to the environment. For companies in markets such as the Gulf Cooperation Council (GCC), another benefit is that circular procurement will encourage companies to support local production through refurbishment and manufacturing activities.

For example, in the chemical industry, barrels and pallets are widely used to store and distribute goods. The shift to circular procurement has created new markets for barrel refurbishment and pallet sharing.

In Saudi Arabia, the oil remediation market is still underdeveloped. However, the use of refurbished oil drums has a great opportunity to save costs. In Saudi Arabia, the price of a refurbished barrel is 50% to 60% of a new metal barrel and 60% to 70% of a new plastic barrel.

Saed Shonnar, head of Strategy& Middle East, added: “The barrel refurbishment market enables chemical companies to use refurbished old barrels instead of new barrels. Chemical companies can choose a “buy” or “lease” model, depending on them. Whether to use barrels when selling products. The company can repair barrels multiple times and achieve the same attributes as newly produced barrels.”

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