Five Reasons Why Businesses Should Be Building Circular Economy into Strategy

While recycling’s taken off, around 80% of the UK’s economy is still a “once through” process. Raw materials are extracted, processed, turned into products which are then dumped at the end of life. Circular economy approaches keep materials closer to hand, designing and building businesses that reuse materials and use less too. Beyond green, here are five reasons that it makes good sense for businesses to embrace the approach.

1.  Business resilience

Home retailer, Kingfisher, buys wood sourced from a forest equivalent to the size of Switzerland each year. Aero Engine manufacturer, Rolls-Royce, uses 20,000 tonnes of rhenium, hafnium, tantalum, and titanium each year. Business models reliant on virgin materials, increasingly sourced from a global supply chain, have the risks of interruption and price shocks. Using less and reusing materials, as Rolls-Royce does with its Revert program, reduces demand for raw materials, increases business resilience and cuts costs. Atlanta based carpet firm, Interface, recovers nylon from used carpet tiles and sends it back to its supply chain – helping insulate the firm from oil price volatility.

2.  Costs and growth

Increased efficiency, greater business resilience and new value chains developed to take back and repurpose goods mean lower costs and new business opportunities. The European Commission estimates that a circular economy approach could deliver €600bn in savings for European businesses, creating thousands of jobs and supporting growth. And if it’s really true that we’ve reached ‘peak stuff’ as IKEA, the global retailer, suggested earlier this year, then firms need new ways to grow home markets.

3.  Customer demand

Nearly every large infrastructure project in the UK has committed to cut greenhouse gas emissions in their designs;  reductions both in ultimate operational use, and also in the greenhouse gases it’s taken to make the concrete, metal and other materials that go into its construction. Reprocessed materials usually have a much lower carbon and ecological footprint, increasingly giving them the edge over virgin products. That’s not always the case. In a materialistic society, people like and trust new stuff, and can’t quite believe what’s gone around will be as good. So as an alternative, think of circular economy as the sharing, dematerialised economy - sharing stuff, buying music through Spotify rather than a CD.

4.  Innovation Support

Supporting the businesses’ transition to a circular economy is one of the hottest priorities for governments today. Brussels has earmarked €1bn of Horizon 2020 funding to support circular economy research and development (R&D). European Investment Bank has made €24bn of existing finance available to support circular economy investments. We expect this transition to grow worldwide momentum. 

5.  Leadership and legacy

Today developed economies use annually between three and four times the amount of resources that are sustainable in the long term. Logically this can’t continue indefinitely. Businesses have to be at the heart of the transition to a materially sustainable economy, using cleverness, pace and force for innovation. The opportunity for businesses is growth and sustainable leadership. The alternative is higher prices as raw materials become scarce, increased regulation as governments require companies to take back products at the end of life, and increased irrelevance as the global economy embraces new business models and new ways of working.

None of this is easy. Most businesses are highly efficient in single use processes. The circular economy needs new ways of thinking and new skills.  But the momentum is building. WSP is working with a number of firms on embedding a circular economy approach into their business models. Transferring our global expertise helps us to shortcut the process. But the long-term trajectory is clear, that a ‘Future Ready’, environmentally sustainable economy is a circular one. The challenge is to start now.