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3 Industries taking advantage of the Circular Economy

ce2 On average, we produce 1.3 billion tons of municipal solid waste(MSW) per year globally and this is going to nearly double by 2025 to 2.2 billion tons. Recycling rates in the developed world top at around 63% in Austria, hitting a low of 21% in Japan. In the US MSW recycling rates peaked in 2013 at 34.3%, an increase of about 3% in the last 8 years. Much of the developing world do not have formal waste disposal systems in place.

Couple this waste issue with the fact that many non-renewable materials, that have become essential in the modern world, have been given relatively short life spans and the necessity of change becomes dreadfully clear.

Circular Economy is a new way of thinking about how the economy works. Instead of being linear, where the products are consumed and are then immediately waste; products are designed with their end of life in mind so they can be recycled or repurposed, thus circular. This new way of thinking offers us a lifeline to escape a future that is teeming with trash related trouble by innovating businesses to produce more valuable products with longer life spans and little waste. McKinsey predicts that a circular economy could generate a net economic benefit of 1.8 trillion Euros by 2030 in Europe alone.

Here are 3 interesting industries already pursuing Circular Economy (CE) thinking in a manner that is starting to transform the business landscape.

APPAREL & FOOTWEAR:

One of the main benefits for an industry from a circular economy is minimizing negative environmental impact. The apparel industry, which only trails big oil when it comes to environmental impact, also being responsible for 10% of global carbon emissions is sure to greatly improve its image by adapting to a circular economy. This industry is also responsible for 17-20% of all industrial water pollution. Not to mention the logging that takes place in the world’s rain forests to supply certain materials for this industry. Almost to add insult to injury after the exhaustion of resources to make clothing, the average American throws away approximately 70 lbs. of clothes per year.

Nevertheless, there has been an acknowledgment of these issues and companies have started to look for solutions. Many companies have employed circular economy thinking to the issues that they are faced with and have found that not only does it help the environment, it also helps their profits.

Take Nike for example, in recent years their performance footwear has become much lighter. It all started in 2008 with ‘Flywire’ technology, which is a thread used in the upper of a shoe to offer extra support to the shoe. It also allows for the weight of the shoe to be reduced by up to 50%. Further, the Nike Grind initiative closes the footwear loop as they recycle old footwear and use it to create flooring for gyms or playgrounds. Nike as a large company has become an industry leader in regards to sustainability, as many of their competitors want to keep up with them and many smaller companies look to emulate them. By 2020 they plan to double their business and halve their impact, this sends a big message to the apparel industry and is a huge commitment to the circular economy.

There are also emerging companies who value the merits of Circular Economy and have been able to use it to a business advantage. Los Angeles-based Reformation is an apparel brand only using sustainable and vintage materials. They also use sustainable manufacturing methods in their locally owned factory and team with responsible manufacturing partners. They now have a recycling program named “RefRecycling” which allows customers to give them unwanted items of clothing which Reformation will then pass onto Community Recycling (CR). Thereby, allowing their customers to reduce impact not only by purchasing from them but also by managing the product’s end of life and disposal. This company has gained traction with style influencers and has a large following due to their ethical stance and way of thinking directly reflected in their increasing revenues.

RETAIL & RESALE:

This is an industry where the Circular Economy has taken hold and you might not have even realized that you were a part of it. The internet basically became a tool for connecting buyers and sellers like never before, and you too have almost certainly used eBay at some point. Although eBay may be infamous for things such as celebrity hair clippings, weird shaped food and air guitars, it was a pioneer for the circular economy (despite only recently joining the Circular Economy 100 program in January 2016). Furthermore, with the emergence of apps and social media some companies have copied eBay’s model for enabling the circular economy for more niche items; such as Poshmark for women’s clothes or Etsy for homemade and vintage items.

It is also important to note that the primary thought of users of these kinds of sites is their pocket but their actions are also benefitting the environment as their unwanted products are finding new homes rather than ending up landfilled. This is another example of the driving force that money has on the advancement of the circular economy, with creativity and drive more systems like this can be put in place that enable us to tackle the waste problem but also fuel new parts of the economy. While the average person won’t associate second-hand markets with the environment, they have the opportunity to make a big impact on the environment. People don’t use these sites out of their affinity towards saving the environment, they do it for themselves and that is a major key for those looking to entice their target market with the CE.

FINANCE:

Finance is an industry that always seems to be in pole position when it comes to making profits. While may have gotten a bad rep for high-risk lending after 2008, typically the world of finance has always had an aversion to risks. Seeing as many circular economy ideas are new they are therefore seen as high-risk by the established institutions that rule of the world of international finance. However, there are some aspects that make CE programs very attractive to the big banks. ING outlined in their report “financing the circular economy” that it is a growing market expected to contribute 1% – 4% of the net economic growth in the coming decade. The circular economy market creates a healthy portfolio mitigating social and environmental risks and serving these markets also help financial institutions achieve their sustainability targets. What’s more, companies that are delving into sustainability are seen as more innovative and ING states that they have better credit scores so they are looking to fund these businesses more regularly. Another aspect of the CE that makes the industry attractive to financiers is the potential increasing end of life value can have. By designing products for disassembly, their residual value does not reach zero and this is very good for the accountant’s books, thus increasing the financeability of businesses that engage in Circular Economy.

Despite finance traditionally being a very closed and elite sector, the sharing aspect of the circular economy is opening up this industry with Peer to Peer (P2P) lending. This is essentially where any individual can lend a certain amount to a cause that they deem worthy. If the big banks and venture capital see Circular Economy style companies as too big of a risk or that their period for return is too long, then everyday people can step in and fund what they believe is a good idea. This is a revolutionary way of funding business.

The finance industry has the ability to drive the circular economy, as it is basically the gatekeeper between Circular Economy and everyday life. If financiers get behind the CE then more and more companies will be able to flourish, it is realistically just a matter of time until a great CE company starts a trend of that kind of investment. The sharing aspect of the CE has already taken off in the form of AirBnB, Lyft and Uber now it is just a question of how long until the other areas of the CE make it into the lexicon of everyday life.

These three industries are ones to watch if you are looking to get involved in the CE yourself. Whether you are interested in shoes or shares the CE is unavoidable when looking towards the future and it is wise to get on board now while the industry is still in its infancy.

CATEGORIES: Apparel/Fashion, Articles, Circular Economy, Corporate Social Responsibility, Life Cycle Assessment, Market Research