About $2.6 trillion annually. According to McKinsey & Company, that’s the amount of material in fast-moving consumer goods that is “thrown away and never recovered.”
Which brings to mind the waste-not-want-not proverb. Although it’s been around for hundreds of years, it sounds a lot like circularity —a concept that’s been gaining momentum across industries to tackle the types of wasteful trends the global consulting firm cites.
This idea of reducing waste today to ensure a plentiful tomorrow is increasingly important in light of sustainability goals that are causing organizations of all sizes to re-evaluate their business models in support of a healthier planet — and a healthier bottom line.
Here, we’ll take a look at expert perspectives about circularity, what recent research indicates about related trends, and steps companies can take to embrace it.
What is circularity?
McKinsey refers to circularity as “practices that optimize resource use and minimize waste across the entire production and consumption cycle… .”
The firm says a circular economy is governed by three major principles:
- Preserve and enhance natural capital — by “controlling finite resources and balancing the flow of renewable resources”
- Optimize resource yields — by “circulating products, components, and materials in use at the highest possible levels at all times”
- Make the system more effective — by “eliminating unintended negative consequences, like air and water pollution”
As far as what’s driving the push toward circularity, McKinsey says consumer demand for sustainable products likely tops the list. The firm notes that additional factors in the mix include:
- Regulation
- Technological progress
- Infrastructure
- Supply-side activity
- The macroeconomic environment
Although most any consumer industry could benefit from embracing a circularity mindset and model, the firm says there are five that have particular potential:
- Fashion and luxury
- Electronics
- Home and living
- Sports
- Fast-moving consumer goods
“Selling more circular products is one opportunity—but circularity is also about servicing products,” McKinsey says, noting that it “anticipates circular services to be a growth area as well.”
The circular economy
According to the Circle Economy — which describes itself as a “global impact organisation” — the circular economy is “nature’s equivalent of ‘living within your means’” and is a concept that’s rapidly gaining steam.
“The circular economy is an economic system where waste is designed out, everything is used at its highest possible value for as long as possible and natural systems are regenerated,” the organization says. “The concept of circularity closely mimics nature, where there is no waste: all materials have value and are used to sustain life in a myriad of ways. If we effectively deploy these strategies, we will ultimately require fewer materials to provide for similar societal needs.”
Circle Economy describes four foundational principles of the circular economy:
- Narrow flows: Use less resources by adopting circular design and circular business models.
- Slow flows: Use resources for longer to “make the most of what we have” through strategies such as “repair, refurbishing, renovation or remodelling.”
- Regenerate flows: Use cleaner resources to help maintain “natural ecosystems.”
- Cycle flows: Use resources again by designing products that can be recycled and disassembled, “which facilitates both reuse and recycling.”
The organization is made up of three “dynamic entities,” which include:
- Circle Economy Foundation — which develops an evidence base and builds capacity “to accelerate circularity across sectors, cities and nations.”
- Circle Economy Consulting — which provides consulting services to “forward-thinking leaders and businesses to identify, evaluate and implement circular solutions.”
- Circularity Gap Solutions — which uses data and digital tools to “accelerate the shift to a circular economy, including the Circularity Gap Report.”
“Circularity Gap Report 2024”
In its January 24 press release about the Circularity Gap Report 2024, global consulting firm Deloitte announced the formation of an exclusive partnership with Circle Economy Consulting. The new report was a result of a collaboration between the two.
Despite the fact that “discussions, debates and articles” regarding the circular economy concept have nearly tripled over the past five years, the “decline in circularity continues,” according to the announcement — which also described additional highlights of the report, including two which reflect both bad and good news:
- “In the past six years, the global population consumed more than 500 billion tonnes of materials—nearly as many materials as were consumed during the entire 20th century.”
- “The circular economy is projected to help reduce emissions by 40%, generate nearly 2 million jobs, and become a US$2-3 billion market in the coming years.”
In addition to identifying how reforms in policy, finance, and employment can help “accelerate progress toward the circular economy,” the report also includes strategies that can help governments and community leaders shift “from commitment to action” through:
- Adopting policies and frameworks that “incentivize circular practices while penalizing harmful ones”
- Adjusting fiscal policies and practices to help “create true prices that include the social and environmental costs of a product or service”
- Funding circular solutions so they can “replace linear norms”
- Helping ensure their workforce is “skilled and trained to support a just transition”
It also focuses on “transformative circular solutions across the food system, built environment, and manufactured goods.”
“Leveraging the Circularity Gap Report, stakeholders are able to prioritize their circular roadmap based on a data-driven analysis. Policymakers, industry leaders, and financial institutions can agree on focus areas and work collaboratively on the systemic change needed to stay within our planetary boundaries,” says Ivonne Bojoh, CEO of Circle Economy Foundation. “To ensure the transition to a circular economy is just and fair, circular solutions must be designed with the world’s most vulnerable populations in mind, then these solutions will reduce inequalities across workforces and increase job opportunities worldwide.”
“Prioritizing circular efforts today can help organizations retain a competitive advantage while accelerating progress against their environmental goals. We’re proud to help businesses around the world address their environmental footprint, adapt their value chains, and shift to a circular approach,” says Jennifer Steinmann, Deloitte Global Sustainability & Climate Practice leader. “Together with Circle Economy Consulting, we will continue to drive market discussion and collaboration by bringing Deloitte’s technology and strategy capabilities to designing, piloting, and ultimately scaling circular solutions globally.”
To read the findings of the Circularity Gap Report 2024, visit: https://www.circularity-gap.world/2024.
“Retail Circularity: An Action Guide for Retailers”
In another Deloitte collaboration — this time with the National Retail Federation (NRF) — the two worked together to create a retail circularity action guide, according to a May 23 NRF blog post.
“To better understand industrywide circularity opportunities, the National Retail Federation collaborated with Deloitte to create a retail-focused circularity action guide,” post authors Scot Case and Tal Viskin write. “’Retail Circularity: An Action Guide for Retailers’ explores the Ellen MacArthur Foundation’s circular economy principles through the retail industry’s perspective, identifying activities retailers can directly control and those they can only influence. The action guide also zooms in on retail resale, repair and recycling business models.”
Describing the unique difference among retailers, Case and Viskin say that for circularity to be effective, a “tailored approach” is needed.
The new guide is the result of research conducted after “NRF 2024: Retail’s Big Show” in January, during which an invite-only workshop of over 80 executives was held to compare “successful strategies and shared challenges.”
“Following the workshop, and based on findings compiled by Deloitte, we conducted an industry-wide benchmarking survey completed by 100 executives from 83 retailers,” the authors say. “Survey results were used to identify issues that were explored further in interviews with 16 retailers. The meeting participants, survey respondents and interview subjects reflected the wide diversity of retailers across size, type, products sold and consumers served.”
Key findings emphasized in the guide include:
- Recognize the business landscape is shifting. Growing interest in sustainability by consumers, investors, and board members — plus regulatory pressures — underscore the need for change.
- Focus on the business value proposition. Retailers enjoying the most success in the implementation of “circularity-focused projects” have “embedded circularity into core traditional business value drivers — growing revenue, reducing costs and reducing risk.”
- Support existing consumer circularity behaviors. Since many consumers already embrace a circularity mindset in various ways, retailers have “opportunities to facilitate and scale these consumer practices while simultaneously improving existing customer relationships, attracting new customers and generating new revenue streams.”
- Focus on what your business can control. Since each retailer is unique, those which focus on “aspects over which they have greater control” often enjoy more success when it comes to circularity initiatives.
- Prioritize circularity business models carefully. Of the six circular retail opportunities that persistently emerged in discussions with executives — resale, repair, recycling, reuse, donation and re-design — no retailer seemed to be implementing all six beyond some instances of a “mix-and-match” approach. It’s important to remember that each strategy “can become successful only within specific business contexts.”
For more on the topic of circularity, see:
- Bain & Company: Strategy in a Circular World
- Environmental Defense Fund: New report: A business transition to “circularity” is crucial to achieving global climate goals
- MIT Sloan Management Review: MIT Sloan Management Review Research Examines Circular Business Models’ Benefit to Bottom Line and Increased Sustainability Measures
- NRF: Retailers close the loop on creating a circular retail economy
- Supply Chain Management Review: Rethinking Strategy for a Circular World
- Unilever: The CIRCLE Alliance: scaling packaging circularity to reduce plastic waste
- WSJ: A 5-Step Shift to Circularity Can Reduce Waste and Emissions, Boost Revenues
