Moving in new circles: 5 insights into the growing circular economy movement
A circular economy is coming, and we need it.
Accelerated by increasingly wasteful models of consumption, a growing strain on our finite global resources and the emergence of technology trends that enable new business models, the circular economy has evolved from a previously misunderstood and niche concept to a movement that is a topic of conversation in government and business strategies on a global scale.
Based on my experience and exposure to over 1,000 circular case studies through my work with The Circulars, the world’s leading circular economy award program, it appears that there are a number of trends emerging which are driving this transformation. Here are some of my key insights:
Technology is the key enabler: Global technology trends are well aligned to circular economy strategy
Emerging technologies that are part of the 4th Industrial Revolution, such as the Internet of Things, AI, Big Data and Robotics, are key enablers of the circular economy, and are helping companies to develop a better understanding of products and processes to drive resource efficiency. Data from The Circulars supports these claims: 100% of entries identified at least one type of digital, physical or biological technology as a key component of their circular business strategy.
Take AMP Robotics, for example. AMP Robotics is a technology company bringing AI and robotics to the recycling industry. Their sorting technology combines an AI vision system, to identify waste, with a robot, which automatically picks and sorts the desired waste stream. Their technology can be added to any recycling facility within just two days, optimising the recycling process and purifying waste materials for reuse or re-manufacturing.
To maximise the value these technologies can bring to the circular economy agenda, business leaders must be aware of their potential applications and apply a circular and sustainable lens to their implementation.
Cross Industry Innovation: A circular strategy can be applied to any industry to deliver value
Our linear economy is creating huge challenges and all industries need to re-think, innovate and challenge the status quo to develop a circular model. Whether we consider that we use 1 million plastic bottles a minute globally, that an estimated 4.78 billion mobile phones will become outdated, replaced and thrown away by 2020, or that in the UK alone we send 235 million items of clothing to landfill each year, the urgency of the circular economy is only too visible.
While innovation is long established in certain areas, notably Consumer Goods and Services, there is circular innovation visible in all industries. From LoopRocks, a marketplace app created by NCC to manage waste in the construction industry, to Michelin, selling tyres as a service to allow customers to pay per mile, the examples are diverse and wide ranging. This trend is set to continue as new industry leaders emerge to adopt circular models, in doing so inspiring competitors and whole industries to follow.
Moving beyond resource recovery: End of life solutions dominate circular thinking, but change is coming
The circular economy has seen a dominant focus on resource recovery, inherently solving waste challenges at the end of the value chain. Whether collecting waste bread, waste electronics or waste plastics, these solutions have proliferated as organisations are pressured to solve traditional waste challenges, and as measurable targets such as zero waste to landfill allow companies to demonstrate progress. However, this narrow view of the circular economy is shifting.
Product life extension, maintaining a product in its current form for longer, is growing in popularity as companies recognise the value of smart design, repair and re-manufacturing, as well as the opportunity of the secondary market — which in some industries is growing 25x the rate of traditional retain. Patagonia’s worn wear platform for example, sells returned second hand Patagonia products at a reduced price. Their solution engages previous customers with the brand to return their item, while simultaneously allowing new customers to purchase Patagonia clothing at a reduced price.
While sharing and service based models are adopted more cautiously, as they require a greater shift in business model and strategy, we have started to see the emergence of disruptive start-ups such as Vigga and UrbanVolt applying these new models, providing concrete examples of how new circular business models be more effective and capture market share.
Circular policy drives innovation: There is evidence that governance and policy is directly enabling circular progress
Clear policy framework and backing for the circular economy enables innovation. The Netherlands is a leading example. Following the publication of their national circular economy strategy for 2050, the country has become a hotspot for circular innovation — this is reflected by the fact that 15% of all Finalists at The Circulars have been from The Netherlands since 2015.
Others are following suit — China, Finland and Slovenia all made noteworthy progress towards a circular economy following clear policy and strategy developments.
The circular economy can drive economic, environmental and societal progress and should be high on the agenda of governments seeking to build sustainable growth into the future. These benefits may be even greater in today’s emerging economies, where it has been identified as a strategic approach which can create jobs and enable societal development. Policy support is a pre-requisite for accelerating circular progress and we require more governments to embed circularity into national economic strategies, to give confidence to business and investors to tackle these challenges and to enable change at the required speed and scale.
A big circular bang: Finance is key to enable circular economy progress at scale
As circular economy business models prove increasingly viable, the strategic and economic case for the financial industry to provide access to finance for circular start-ups, or to offer preferential financing to large multinationals with circular strategies, is becoming more appealing.
The interest is growing— banks are building core circular capabilities into their investment strategies, ABN AMRO will finance 1bn of circular assets by 2020; there is an emerging ecosystem of circular economy venture capital funds and policy is providing funding — the European Commission committed €650m under Horizon2020 to circular economy progress.
While progress is slow and financing the circular economy remains in an experimental phase, the role of finance cannot be underestimated. This transition will require the full support of the financial industry, with all actors playing a vital role to bridge the knowledge and funding gap and enable global adoption of circular economy models.
A circular revolution? Strong leadership and global collaboration are needed to continue this momentum
The circular economy is a revolution in sustainable business — no longer is sustainability seen as inhibitive, but is a strategy to deliver a product or service in a more efficient, effective and environmentally friendly way.
While there is momentum, the application of the circular economy remains selective and the extent to which it will create sustainable transformation remains unknown.
Regardless of this, to enable truly systemic change will require global collaboration and individual leadership to build the circular economy into business and governmental strategy. It has happened before — the unprecedented growth in renewable energy over recent years should be a blueprint for how cross industry, holistic and collective action can trigger global momentum towards an environmental and value driven business model — let’s hope that the circular economy is next.
