The Linear Economy: Creating and Losing Value
Value is added as the product is developed (the left side uphill slope) and once the product reaches the top of the hill, the product’s value is at its maximum after a relatively short time the product’s value is destroyed quickly and value rapidly goes downhill (Achterberg et al., 2016).
- Value creation+
Value Creation is the process of turning labour and resources into something that meets the needs of others.
By extracting resources from the earth, refining them for manufacturing, assembling them into products and distributing them to consumers, value is added at every step.
“Value-added" describes the economic enhancement a company gives its products or services before offering them to their customers.
- Extraction (value creation)+
Drawing materials from the environment for human use, such as fossil fuels (oil, gas, and coal), rocks and minerals, biomass (deforestation, fishing and hunting) and water.
The value of such extracted materials will be higher due to the now accessible and usable materials, for example:
- Mining fossil fuels
- Fishing and hunting for consumption
- Deforestation for timber
- Water for consumption
- Manufacturing (value creation)+
Manufacturing refers to processes or steps within a process which transform raw materials into more valuable materials or components
- Ore transformed into steel
- Silica transformed into glass
- Component manufacturing (e.g., components for car assembly)
- Assembly (value creation)+
Assembly refers to processes which transform components into products
- Furniture manufacturer assembling different parts of timber, foam and textile to create a chair
- Parts of a car put together in an assembly line for the final product
- Retail (value creation)+
Retailers create value by delivering products and engaging experiences that fulfil end-consumer needs.
- Providing services (help choose products, delivery, servicing, returns, repair, end-of-life options)
- Assisting in making products (promotions, testing, display)
- User (peak value)+
The peak value will be at purchase by the consumer
- Waste (value destruction)+
After the consumer no longer uses the product, its value decreases.
Value decreases for the product, components, and materials.
Value destruction occurs when the products, components, and materials are disposed of as:
- Food waste
- Destroying used cloths
- Plastic waste
- Wasting any upcyclable material or products