rethink sustainability

The CLIC® Chronicles: 10 ways to build a circular economy and the companies leading the way

The CLIC® Chronicles: 10 ways to build a circular economy and the companies leading the way

Our linear ‘take–make–waste’ economic model is evolving, as governments, businesses and people around the world are waking up to its unsustainable impact on our planet. Today, only 9% of our resources are recycled, and the trend has been going down, leading to high levels of extraction and pollution, damaging the environment and pushing the world even closer to dangerous tipping points. Similarly, inefficient and wasteful forms of production and consumption contribute to excess levels of emissions, worsening climate change.

Change, however, is in motion. Replacing this linear model with a more circular economy that protects our natural capital and brings us closer to a net zero and nature-positive model is the end goal. More and more companies have started applying the 10 principles of circularity to their products, services and business models. How? By designing for circularity from the ground up. And, for investors, significant opportunities await in all ten aspects of the circular economy.

But the challenge is vast. Even to keep global warming well below 2°C, the level of circularity in our economy would need to double (and then some) to fully safeguard other environmental challenges and keep warming below 1.5°C.

More and more companies have started applying the 10 principles of circularity to their products, services and business models

1. Refuse

The simplest way to reduce resource extraction and waste creation is to give consumers an alternative to the physical purchase of a product especially when that product is rarely used. UK-based sharing economy platform Fat Llama provides an alternative solution to such needs by enabling people who own products from drills to drones to make money by renting them out when they’re not in use. In turn, renters get access to the products they need for much less than they’d cost to buy. They are contributing to the circular economy by reducing the demand for new product manufacturing.

Continuing trends started by the likes of Airbnb and Uber, such tech-enabled sharing solutions are set to be a vital component of tomorrow’s circular economy.

2. Rethink

If our most famous brands are to survive the transition to a circular economy, they must do more than just attempt to retrofit circularity to their existing products and services. Instead, they must fundamentally rethink how they do business. In moving to sell light as a utility instead of a product, global lighting leader Signify (previously Philips Lighting) adopted a new circular business model that enables its business and government customers to pay a fixed monthly rate for the design, installation and maintenance of their lighting infrastructure. In turn, Signify is able to reduce waste by giving an incentive to produce long-lasting products, rather than a business model based on so-called “planned obsolescence.” It manufactures only what it needs, re-using or recycling what it can, and optimises the entire life-cycle of its lighting products for circularity. This business model can also deliver increased customer loyalty and growth.

If our most famous brands are to survive the transition to a circular economy… they must fundamentally rethink how they do business

3. Reduce

Eliminating waste begins at the manufacturing stage. For instance, 41% of liquid aluminium and 26% of liquid steel produced fails to end up in the final product1. To tackle this problem, sensor, software and autonomous solutions provider Hexagon is pioneering computer-aided design techniques that enable additive manufacturing. Whereas traditional machining techniques work by removing or subtracting unnecessary pieces of raw material, additive manufacturing technologies such as 3D printing reduce costs, waste and resource extraction by adding only what’s necessary. And with its full potential yet to be unlocked, the future of additive manufacturing as a key enabler of the circular economy is looking bright.

 

4. Reuse

When it comes to the second-hand economy, trust has always been a challenge. Today, digital technologies are enabling companies to implement new business models that take lack of trust out of the equation, enabling consumers to get great deals safely while reducing waste and the demand for new manufacturing. For instance, The RealReal focuses on selling quality used products from luxury brands — including clothes, accessories, furniture, and art — with a rigorous authentication process implemented by a team of experts ensuring that customers get exactly what they pay for. By specialising in specific categories of second-hand goods in this way, companies and investors have a significant opportunity to reap the rewards that come from optimising consumer trust in used products.

Read also: The 10 steps to a circular economy

 

5. Repair

In terms of circularity, fixing what’s broken is always better than buying a replacement. But, all too often, it’s the product’s design and not the problem itself that determines whether it can be repaired and how much the repair will cost. Fortunately, there are signs that policymakers and even the largest tech companies are beginning to listen. In early 2021, France moved to implement a repairability index that requires manufacturers to tell their customers how repairable their devices are via a ‘repairability score’, with fines for companies failing to comply set to begin this year. Meanwhile, Apple—whose products are renowned for their low repairability—recently announced its first Self Service Repair programme for individual customers.

In terms of circularity, fixing what’s broken is always better than buying a replacement

Read also: Fixing items for durability – how French manufacturer SEB leads the way

 

6. Refurbish

A great alternative to buying second-hand, refurbished products are used items that have been professionally restored to perform as well as their brand-new counterparts. Besides contributing to the circular economy by significantly extending product lifespans, refurbished items offer big cost savings and can even help bridge the digital divide. UAE-based Veracity World, for example, specialises in refurbishing used electronics for sale to businesses in low- and middle-income countries in Africa and the Middle East. Even Amazon has gotten in on the act via its Amazon Renewed offering, enabling millions of people to access more affordable, high-quality refurbished devices from the most popular online store in the world.

Read also: The CLIC® Chronicles: Now you can subscribe to a new sofa – the rise of furniture rental

 

7. Remanufacture

A less well-known yet fast-growing element of the circular economy is remanufacturing. By rebuilding an old product using a combination of reused, repaired and new components to meet brand-new specifications, companies can reduce waste and conserve resources while improving their margins, revenues and supply security. Construction equipment manufacturer Caterpillar has become a world leader in remanufacturing thanks to its Cat Reman programme, which enables businesses to reduce their costs by having their old equipment remanufactured to as-new condition for a fraction of the price of a new replacement. By focusing more on remanufacturing, businesses can tap into an opportunity estimated to be worth £5.6 billion in the UK alone2.

By focusing more on remanufacturing, businesses can tap into an opportunity estimated to be worth £5.6 billion in the UK alone

8. Repurpose

Upcycling has been a big trend at home of late, with the likes of Etsy successfully tapping into the market for products that have been repurposed by talented artisans and hobbyists. But as recognition around the need to expand the circular economy grows, repurposing used products and materials is now a growing opportunity for businesses able to innovate. Taiwan-based Miniwiz specialises in taking a scientific approach to upcycling through its TRASHLAB, the only laboratory in the world dedicated to unlocking the potential of trash and which has so far invented over 1,200 materials derived from discarded items. Among Miniwiz’s many innovations is a modular Covid-19-ready hospital made largely from trash, which was deployed at the Fu Jen Catholic University Hospital in Taiwan and features an antiviral acoustic wall panel coated with waste aluminium from recycled cans. Miniwiz intends to sell this as a standalone product.

 

9. Recycle

Although recycling is arguably the most mature component of the circular economy, a significant untapped opportunity remains. In Canada, for instance, over 30% of waste paper and cardboard is still not recycled3. Canadian company Cascades has carved out a thriving business collecting and recycling waste paper and turning it into packaging and hygiene products, a business model that has required ongoing innovation to maximise its recycling capacity and efficiency. Today, Cascades is Canada’s top collector of recyclable paper fibres with sales of CAD 1.3 billion in 2020, and is ranked 17th on Corporate Knight’s list of the world’s most sustainable corporations.

 

10. Recover

While food waste is a significant problem, the fact that bio-waste can’t be traditionally recycled or re-used means that much of it still gets sent to landfill. Even so, a significant opportunity lies in unlocking the nutrients and energy contained in our bio-waste through technologies such as composting or anaerobic digestion. In 2020, the Veolia group treated around 47 million tonnes of bio-waste collected from its almost half a million business clients worldwide which it then turned into products like bio-fuels, organic fertiliser and animal feed, reducing waste and the demand for new resources in the process.

The momentum is growing, and we believe that the transition to a circular economy is now inevitable. As such, to invest with a circular mindset is to invest in the winners of tomorrow

Accelerating the transition

A net-zero, nature-positive economy is only possible through maximum circularity which, in delivering all-new business models based on circular principles like recycling and reuse, would also enable us to preserve and create even more economic value. But while it will ultimately be up to companies to recognise the opportunity and deliver the new kinds of business models and products and services we need to achieve a circular economy, investors have the power to incentivise and accelerate the transition by investing with a circular mindset.

The momentum is growing, and we believe that the transition to a circular economy is now inevitable. As such, to invest with a circular mindset is to invest in the winners of tomorrow.


 

1 Milford, R. L., Allwood, J. M., and Cullen, J. M. (2011) ‘Assessing the potential of yield improvements, through process scrap reduction, for energy and CO2 abatement in the steel and aluminium sectors’, Resources, Conservation and Recycling, 55. pp. 1185–1195.
2 Smith-Gillespie, A. (2015) ‘Supply chains are shaping the business models of the future’, Carbon Trust.
3 TwoSidesNA.org (2021) ‘Canadian Paper and Paper-based Packaging Industry Sustainability: The Facts’.

Important information

This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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