The global economy is growing and will reach an unprecedented $104 trillion by 2022, according to IMF estimates, as population, urbanization, and living standards rise. Sustaining the current growth trajectory would require the ecological resources of 2.3 planets by 2050. These trends, concomitant with the new risks and challenges posed by the global climate crisis and pandemics, make sustainable business transformation more important than ever.

The circular economy offers companies the opportunity to rethink the way they operate. By moving from the traditional linear “take-make-dispose” model to a closed-loop and circular approach, businesses can create more efficient and sustainable operations for future growth. The term ‘circular economy’ describes an economic system that aims to design out waste and pollution and minimize the use of resources by keeping them in circulation for as long as possible. This works by designing products with the intention of reusing, repairing, refurbishing, or recycling them when they reach the end of their useful life.

A circular economy is not just about addressing environmental challenges; it can also create tremendous opportunities and positive impacts across industries, sectors, and lives.

In a circular economy, waste is viewed as a valuable resource that can be used to make new products. This shift in thinking can help businesses reduce their environmental impact while saving costs, increasing productivity, driving innovation, generating new revenue streams, and improving the customer experience.

The circular economy is often regarded as the business opportunity of our time. According to a report by Accenture, the circular economy could potentially unlock $4.5 trillion in value by 2030. Several companies have already started the journey of becoming more circular, adopting changes such as increasing reuse and recycling, prioritising repairs over replacements, and embracing circular services instead of selling products. Yet only 8.6% of the world’s economy is currently circular, while we continue to waste 91 billion tonnes of materials each year.

The circular economy is a key ingredient for sustainable business growth

While some businesses may find the transition to a circular economy daunting, there are different circular business models that enable businesses to profit from this transition. First, businesses can adopt a product-as-a-service model, where the original manufacturer or leaser of a product retains ownership and responsibility for managing the materials throughout the product lifecycle, while customers subscribe to the product and pay recurring fees. This model is most likely to create circular material flows and maintain a high value. Secondly, the product life extension model creates a second use phase and/or prolongs the useful life of products.

Third, the resource recovery model utilises waste as an asset to ultimately create new revenue streams or provide material supply for new products. Closed-loop recycling, industrial symbioses, and cradle-to-cradle ideas are a few examples of processes that transform waste into new resources. Fourth, businesses that depend on scarce materials will benefit most from the circular supply business model, where scarce resources are replaced by renewable, recyclable, or biodegradable ones. Finally, the sharing platform model focuses on the sharing of products and assets that have a low ownership or use rate.

There are various business models that can offer economic and supply chain benefits to companies that are aligned with the circular economy vision. As the circular economy is a broad field, the implementation of these principles will be nuanced and require careful assessment to determine where it makes the most sense to apply these strategies. By embracing the power of the circular economy, businesses can unlock the potential for new sources of profit and create long-term value for their customers, while also doing their part to protect the planet.

References

How can businesses accelerate the transition to a circular economy?, WEF: https://www.weforum.org/agenda/2020/01/how-can-we-accelerate-the-transition-to-a-circular-economy

Vision 2050: The new agenda for business, WBCSD: https://www.wbcsd.org/contentwbc/download/1746/21728/1

5 circular economy business models that offer a competitive advantage, WEF: https://www.weforum.org/agenda/2022/01/5-circular-economy-business-models-competitive-advantage