Unlocking Unprecedented Value with Circular Business Models

circular enterprise

The impact of waste, carbon and pollution from industry is now a primary concern. For the benefit of both society and the businesses that depend on it, fundamental changes are taking place, and that change is happening fast. Overhauling the outdated business models of yesterday and placing a focus on sustainability and circularity has the potential to unlock unprecedented levels of economic growth, even up to $25 trillion by 2050. The race is on to address the climate emergency, with a scale of urgency that has and will continue to change the face of business as we know it.  Companies who ignore the signals will not be able to compete in tomorrow's transparent, conscious, and increasingly vulnerable world. A business cannot exist without a society to sell to, and the fragility of current predominant business model is something that the COVID-19 crisis has made very apparent.

There is a solution for those who move quickly, where growth can come from new markets, new revenue streams and reduced costs. This journey to become a more circular enterprise will get you ready to thrive and grow and also help to regenerate and repair the planet we all depend on.

What is the circular economy?

Circular economy is replacing the linear economy. It aims to keep resources in use for loner and generate value from services rather than virgin materials. As concerns for environmental conservation are at an all-time high, the world’s leading companies are being pressured to rethink their business models and processes if they are to remain viable. However, having one small group within the business considering greener options as a side-project is simply not enough. A real commitment is needed from the entire organisation if the required changes are to be successful.

It's not just individual businesses that need to make these shifts; it’s a mentality that needs to be spread globally if we are to steer clear of the cataclysmic future on the horizon. Kate Raworth, economist and environmental board member at the University of Oxford, is known for her work on ‘Doughnut Economics’: an economic model that measures and balances the needs of humanity against the maximum limits that Earth can withstand. Between these two measures lies a healthy balance, but right now there is not a single country on our planet that works within that safe space.

What is a circular enterprise?

Most businesses worldwide currently operate on a linear business model, where resources are consumed, and waste created without the external cost of use or disposal being included in the price of products or services. This is harmful not only for the environment but for your business too, as all waste produced from your entire supply chain is a potential missed revenue gain. A business that extends, reuses, or recycles resources, creates loops to avoid leakage and therefore retains control and value. Circularity means designing for reduced raw materials, keeping products in circulation for as long as possible and finally regenerating the natural systems that we derive materials from.

What can you do to begin the change?

For many businesses, the fundamental question is the following: How do I make the transition from linear to circular on a global scale?

According to Leading the Circular Enterprise Masterclass leader Emma Burlow, by designing your products with a focus on reuse and recycling you are future proofing your business. You have multiple opportunities to make revenue from the same product and have control of your resources, so you reduce the risk of losing the value invested in your materials or harming the environment in the process. As the world continues waking up to the realities of climate change and environmental harm, customers are demanding more sustainable products and packaging from their chosen brands and in these competitive times, their loyalty is valuable. These growing global markets are key to recovery in the post Covid-era.

Along with Emma Burlow, fellow Leading the Circular Enterprise Masterclass leader Andy Middleton suggests that another approach is to design to keep products in use for longer. A large majority of today’s business models are based on a continuous stream of new products to sell. From annual iPhone upgrades to the seasonal fashion industry, these products are not designed to last. This flow of constant consumption needs to be replaced with concerns for product longevity, a fact that some businesses are already taking advantage of. In direct opposition to the fleeting world of seasonal fashion are brands like Patagonia, whose entire product line is sold upon how long-lasting and durable it is.

Swedish home and furniture giants IKEA are well known for their unique approach of supplying ready-to-build products, but now championing the slogan “Why the future of furniture is circular”, they pledge to eliminate all waste and become 100% circular by 2030. Although they already sell a range of products made from recycled materials, they have been conducting research to discover which materials have the “fullest circular capabilities” so that they can design their products to be entirely waste-free from the very beginning.

An example of a company that listened to consumer sustainability demands is Tesco, whom this year has partnered with reusable packaging company Loop to trial a returnable packaging solution. The process works like this: Customers pay a 100% refundable deposit for all the packaging they use, then return it to Loop to be cleaned ready for reuse. No waste ends up in landfill; everything is reused.

Tesco claims this is part of what they call their “4R Plan” which stands for Remove, Reduce, Reuse, Recycle. As one of the largest supermarket chains in the UK, steps like these toward circular business models are sure to put serious pressure on others to follow in their footsteps.

There is a third pillar of circularity that Andy and Emma acknowledge is the most difficult, but potentially the most powerful. This approach consists of regenerating natural systems. This requires a hard look at business purpose; admitting that you must be more than merely a machine that churns out an annual profit.

Who else is taking steps towards circularity?

Traditional industries are being increasingly disrupted by innovation, often from smaller companies. An example of a smaller company making the most of reusing materials is Elvis & Kresse. Describing themselves as ‘sustainable luxury’, their impressive product range is marketed as ‘reclaimed, ethical and handmade’. Their famous fire hose collection including: bags, wallets, luggage tags and more made from genuine decommissioned fire hoses from the London Fire Brigade. 50% of all profits made go to The Fire Fighters Charity, allowing the once life-saving materials to come full circle and continue their service while eliminating waste.

The environmental rescue mission being carried out by Elvis & Kresse did not go unnoticed, and a new avenue opened to bring about change in larger corporations through strategic partnerships. Back in 2017, it was announced that British fashion powerhouse Burberry would be launching a five-year partnership with Elvis & Kresse in efforts to transform standards for waste in the global leather industry. It is estimated that approximately 800,000 tonnes of leather waste are produced every year globally. Before the partnership, Burberry was paying £400 per tonne to send their treated, ready-to-use leather offcuts to landfill. With the partnership in place, Elvis & Kresse can take just one tonne of those offcuts and transform it into £100,000 of value. 

With partnerships like this in place, and a target to source 100% of their leather from ‘environmental, traceable and socially compliant’ tanneries by 2022, Burberry takes responsibility and applies pressure on other fashion brands to follow in their footsteps and change their practices for the good of the planet.

At the same time, global corporations like Amazon, Google and Microsoft have become more vocal than ever about climate change concerns, and for most of these companies, these statements will mean that there is some degree of circular implementation underway. Whether it’s eliminating single-use plastics or creating products with longer lifespans, these measures promise a positive direction and an increasingly competitive marketplace in the future.

Circularity is a key tool to help businesses reach carbon goals as it represents the pathway to reducing 45% of emissions that are embodied in product and services.

Source: Ellen MacArthur Foundation

While the future of our planet remains a tentative unknown, we can be sure that circular economy will play a key part in how we adapt to future pressures. With industry giants acknowledging that their role and the opportunities, it's time for everyone to assess how they can do their part.

Join Emma Burlow and Andy Middleton for their Leading the Circular Enterprise Masterclass and learn first-hand from their work with Fortune 500 companies how to successfully deploy circular systems that unlock growth and resilience in your product development, operations and supply chains.

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