Five ways to thrive in the circular economy

From fast fashion to food waste and plastic packaging, sustainability issues are now imperative for consumers.

The Global Consumer Pulse Research 2018, conducted by Accenture Strategy, found that 62% of consumers want companies to take a stand on social, cultural and environmental issues close to their heart.

The same percentage say their purchasing consideration is driven by a company’s ethical values.

What is the circular economy?

While the concept of a circular economy – moving from linear, single-use products to those designed for re-use or recycling – is not new, it has taken time for some retailers to acknowledge these shifting consumer attitudes, and to reconcile environmental objectives with growth.

“The circular economy offers an opportunity to re-examine customer offerings, build new revenue streams and create innovative models that are good for people, the planet and profits”

For retailers, this is not just about lowering costs by reducing waste and recycling more. It’s an opportunity to re-examine customer offerings, build new revenue streams and create innovative business models that are good for people, the planet and profits.

A $4.5trn opportunity

Research by Accenture Strategy estimates that the circular economy could be worth $4.5trn by 2030.

The number of retailers and brands tapping into this opportunity is growing steadily, with more than 1,500 start-ups and multinationals participating in the The Circulars, the world’s premier circular awards programme.

These businesses are innovating to create more value from the products that they sell, exploring new revenue streams that are enabled by new technology.

Five circular business models

Our analysis has identified five business models that are emerging to support more sustainable practices.

1. Circular supplies: Perhaps the most obvious step, this approach replaces scarce or harmful raw materials with renewable, recyclable or biodegradable ones. For example, clothing giant H&M Group has committed to use recycled or other sustainably sourced materials in all its products by 2030.
2. Recovery and recycling: Nike’s Flyknit technology is an example of using new production processes to reduce waste and resource leakage, saving valuable material, components and energy. On average, waste is down by 60% compared with cut-and-sew shoe manufacturing.
3. Product life extension: John Lewis has partnered with Stuffstr to buy back clothing purchases customers no longer use. Extending a product’s lifecycle ensures it remains economically useful for longer through remanufacturing, repairing, upgrading or remarketing.
4. Sharing platforms: Rent the Runway – now a $1bn company – offers short-term access to designer apparel, allowing customers a low-risk option to rotate their wardrobe affordably and more sustainably. Approaches like this – enabled by scalable technology – maximise the use of assets that have a low ownership or use rate-by-renting, sharing, swapping or lending otherwise idle goods.
5. Product-as-a-service: Pay-for-use access to functionality incentivises product performance and longevity. Ikea is trialling furniture leasing and will expand this to 30 markets next year – customers rent their furniture for a set period before returning it for refurbishment, upcycling, resale or recycling.

Deeper customer relationships

Moving from established ways of operating to circular business models is challenging, especially when it comes to scaling efforts.

Those that are succeeding are taking the opportunity to reinvent their relationship with customers at the same time.

By moving away from transactional interactions to ongoing relationships, retailers can forge deeper bonds, uncovering what buyers care about and identifying additional opportunities for meaningful, differentiated services.

Consumers who score retailers higher on their business purpose spend 31% more – so it pays for retailers to act with care and responsibility.

Influenced no doubt by increased public scrutiny of business practices and the voices of David Attenborough and Greta Thunberg, consumer attitudes are hardening.

For retailers, the choice is no longer about whether to champion increasingly sustainable ways of operating, but how you go about achieving this.