Circularity in business maximises value across entire supply chains and moves away from the traditional take-make-waste model associated with traditional linear capitalism. What this looks like is hotly debated, with supporters and detractors conferring their own narratives towards the argument.
However, circularity in business isn’t only a good idea - but it’s also a necessary one. Take electronic waste production, for example. According to the World Economic Forum’s ‘A New Circular Vision for Electronics’ report, 44.7 million tonnes of e-waste is produced every year, equivalent to the size of 125,000 jumbo jets or 4,500 Eiffel Towers.
In circumstances such as this, it’s no longer viable for all that material to simply be thrown away after use. Circularity within economies replaces this, extending the life and therefore the value of materials through reuse, repair, reclamation and recycling.
This blog explores why a circular economy is a good thing for UK businesses and how you can achieve it.
It’s no secret that addressing climate change is the topic of the day from an environmental and economic perspective. Companies with green credentials are increasingly popular and those that go without are beginning to feel the pinch of scrutiny and decreasing investments. Many articles call out the companies seen as the top offenders regarding greenhouse gas emissions in a world where reputation is everything.
So why does circularity matter for businesses today?
While the main argument against pursuing greener routes for business is cost, evidence suggests the fallout of climate change will cost $7.9 trillion by 2050. A key motivation for companies, however, is consumers are willing to pay more for sustainable products. According to a survey by Nielsen, 73% of consumers are ready to change their consumption habits to reduce the impact they have on the environment.
A poor reputation can be damaging. With public consensus and political strategies reflecting the need for circularity and environmental protection, businesses refusing to do this will be left in the past.
Similarly, the younger generations - the next consumers - are more likely to pay for sustainable products. For example, in a survey conducted by First Insight, it was discovered that 62% of Generation Z prefer to buy from sustainable brands and 54% of the same cohort will spend more on sustainable products compared to 34% of Generation X and 23% of Baby Boomers.
With economic growth being slow, credit being maxed and markets saturated in durable goods, it’s more difficult for traditional price-based models to succeed. One trend coming to the forefront of future viable business models is to focus on selling access rather than ownership, sold by agile, tech-driven companies with their eyes on smaller-scale production that fit more with decreased levels of demand for specific products.
The Ellen MacArthur Foundation refers to it as the ‘power of circling longer’ - designing devices with longevity in mind, suitable for repair and recycling at the end of increasingly valuable life cycles.
While this involves investment in product and business model redesign, it’s a niche market currently thoroughly under-appreciated by larger businesses who may fall foul of supply chain issues in the future, drastically affecting their ability to keep churning out goods built with ‘planned obsolescence’.
Governments across the globe are structuring current and future legislation around sustainability, with an emphasis on reducing greenhouse gas emissions and limiting resource use.
For example, the UK’s BS 8001 standard was the first of its kind to set out the parameters for introducing circular economy tactics to the country’s markets, intending to decouple economic growth from resource consumption. While this was just a beginning and more direct legislation must be put in place to legally influence businesses to implement circularity, companies can expect an increased emphasis and appearance of standards like this.
Smarter businesses will notice this trend and re-orientate their business strategies to represent this trajectory, collaborating with suppliers and trading partners who are also recognising the change. They’ll be better prepared to thrive under new legislation when it’s introduced.
So what does circularity look like in practice?
Today, businesses are quickly realigning their models to suit consumer interests driven by the want to reduce environmental impact, carbon emissions, plastic waste or other motivations.
The latest trends, such as recommerce, leasing and repair options, show economies can easily be altered to fit the current business climate. So what actions are helping businesses to capitalise on circularity?
Made using reused or discarded materials, upcycled products are increasingly popular - especially within the fashion industry. Many large clothing retailers currently offer upcycled pieces as part of their main retail offering, such as Patagonia and Asos.
According to ThredUp’s 2020 Resale report, resale models grew 25 times faster than retail in 2019. With the reclamation, recycling and reuse of products easier than ever before, businesses are finding buying non-virgin material and reusing it in new products is much cheaper than buying new.
Similarly, because of the reuse of material, the related carbon emissions of each product will be far reduced - an attractive quality to many people.
With an emphasis on reuse or reclamation, products need to be designed in a way that considers their end-of-life. Will there be any value to be extracted upon disposal? Does end-of-life really need to be ‘the end’?
Circular design considers both the user, the lifecycle and the entire system that the product exists within. This aligns with what the Ellen MacArthur Foundation defines as the three pillars of a circular economy:
For the business owner, drawing the maximum value from a product or material before it needs to be truly retired makes financial sense. Similarly, new business paradigms can be created from a focus on circular design.
Take a piece of technology, such as a phone or laptop. How much more does a business stand to make if they can offer effective repair services on top of their traditional products and plans?
This is a key part of any circular business model. With efficient reverse logistics, products and materials can be reintroduced to the market after being used. It involves having products returned, broken down into their respective parts and reusing any parts deemed market-grade.
Circularity within a business can present itself in many forms. However, each needs systemic thinking, planning and collaboration to work. With an emphasis on transitioning to business models with much-reduced environmental impact, businesses now need to identify what works best for them.