Global leaders in circular economy business agree the time to act is now for first-mover advantage on circular economy business opportunities and meeting global climate change targets. With 45 percent of global emissions generated through consumer products, business have a pathway to sustainable growth by combining renewable energy with a circular economy business model that designs out waste while creating new business value.
The circular economy goes beyond sustainability programs to business models that address climate change and business growth.
The prospect of driving profitable business outcomes alongside sustainability makes a convincing argument for many leaders. According to research from SAP, 75 percent of surveyed executives believe sustainability is a key driver behind operational and strategic decisions. Recently, a group of leaders shared their advice on how to successfully scale a circular economy business model at the SAP Sustainability Summit. Here’s a summary of their perspectives.
Build consumer acceptance of circular economy
Global leaders emphasised the importance of broad consumer communications and education programs to drive demand for sustainable products and increase pressure on companies to shift to a circular model. The value and desirability of the circular economy can be embedded through initiatives such as school education programs, supporting generational change.
For more immediate impact, communicating the ‘carbon cost’ of individual products at the point of purchase may influence decision-making, and even consumer acceptance of higher prices. Alternately, decreasing prices for products with lower carbon footprints, such as locally produced foods, may shift decision-making naturally towards these lower impact products.
“Consumers need to understand the importance and the power that they actually have in how things will progress, moving forward” said Martin Dickie, co-founder of Brewdog.
Partnerships power circular business models
Backed by a clear circular economy mission and vision, Mitsubishi works with value chain partners to help them understand the costs, rationale, and timeframes involved in supply chain transformation. New partnerships and diversification can spark additional business value downstream from current operations. One example was Mitsubishi Chemicals’ investment into waste collection companies.
Circular economy business design requires whole system thinking to drive scale, extending beyond the current value chain to create materials value. This is where technology comes in. Cloud-based platforms such as SAP Business Network, allow companies to exchange data and insights across trading partners and industry, creating network intelligence and fostering collaboration around materials flows for systemic analysis and opportunity identification.
Circular economy transforms business models
Garry Cooper, CEO and co-founder of Rheaply, said that he built his business to help professionals share surplus materials and resources that would otherwise be wasted. He encouraged companies to move beyond sustainability policy and focus on the financial benefits of circular business models. His point was that companies generated profit by better managing the materials flows to reduce costs or create additional revenue streams from previously wasted materials or premium-priced products.
“Circular economy solutions are not the same as typical sustainability initiatives. Circular economy is a business model; it has a business case. It just so happens that it also helps organisations get to net zero,” he said.
Sustainable supply chains add business value
The panel also advised organizations to consider how internal sustainability initiatives could create new business value by being shared with external parties. Companies could establish a sustainable supply chain to ensure fairness and equity, as well as measure carbon emissions and environmental impact.
Another example came from H&M, a fashion industry leader in developing a sustainable supply chain that meets the expectations of a young, socially conscious customer base. The company allows emerging fashion brands to access their supply chain though its Treadler service. H&M is not only eliminating ‘knowledge waste’, which would occur if these new fashion brands had to build their own sustainable supply chains, but also accelerating change to circular business models across the fashion industry.
Collaborate to unleash disruption
Beyond short-term government incentives to encourage companies to embrace circular economy, the leaders agreed that fewer restrictions around remanufactured materials or products would help bolster circular economy business models. Whether for global sustainability impact or to carve out a competitive position, organisations need to scale quickly and collaborate with consumers in their markets, partners along their value chains, and across industries.
“We need to be transparent on how we as a business community can collaborate, selflessly share and act collectively,” said Scott Russell, head of customer success and member of the executive board at SAP. “None of this can happen unless we can work together to drive change at scale.”
