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Economic players are showing a growing interest in the circular economy. Contrary to the "throwaway" system associated with the linear economy, this new mode of production and consumption is more sustainable and responsible. This concept also separates economic growth from the pressure on the planet and its resources. Companies are beginning to see the benefits of the circular economy, which contributes to the competitiveness and sustainability of their activities.
Reducing production costs
For businesses, one of the main benefits of the circular economy is centred around “smart” economies. By optimising how they use their resources, companies can reduce their production costs. This also makes them more competitive on the market.
The European Economic and Social Committee (EESC) estimates that raw materials account for between 30 and 50% of production costs in companies. Since the European Union imports almost half of the raw materials it consumes, the EESC points out that better resource management efficiency could save up to EUR 600 billion each year. It is up to each company to make its own contribution and reap the economic benefits.
Complying with regulations or even future proofing
More and more regulations are fostering the circular economy throughout the world to try and fight against climate change. The consultancy firm Ernst & Young has conducted a very interesting study on this topic, called "Regulatory landscape of the circular economy".
It traces the evolution of circular economy regulations worldwide and points out that Japan was the first country to lead the way in the 1990s, followed by China with its Circular Economy Promotion Law (2008). Then it was the turn of the European Union with its Roadmap for a Resource-Efficient Europe (2011) and its Circular Economy Package and Action Plan (2014 and 2015). From there, many countries followed suit (Germany, Ecuador, Canada, the USA, Rwanda, South Korea, etc.).
Today, almost all governments have initiated actions, and this is expected to increase in today’s globalised economy. Companies therefore have no choice but to integrate the circular economy into their business practices if they want to comply. And businesses that are ahead in this area can even plan for future regulations, thus giving themselves a competitive advantage.
Optimising resources and raw materials
The world’s population is growing exponentially, as is the need for resources that are becoming increasingly limited. The independent think tank Global Footprint Network mentions that at the current rate, it takes 1.75 Earths to regenerate what humanity consumes each year and that this biocapacity is unevenly distributed across the planet. According to the same
source, more than 70% of the world’s population lives in countries where the resources are not enough to meet their needs.
One of the founding principles of the circular economy is to preserve and optimise natural resources. Faced with increasing scarcity and competition for most resources, companies that have embarked on a circular economy approach will be able to capitalise on the circumstances.
Mathis Wackernagel, President of the Global Footprint Network, is convinced: "Enabling circular solutions gives companies the best chance to succeed in the predictable future. There are many examples that demonstrate how. They symbolise the power of possibility.”
Helping to protect the environment
One of the main benefits of the circular economy is also the fact that it helps protect both people and the planet. This economic model tends to reduce the impacts (greenhouse gas emissions, pollution, waste) on natural systems and biodiversity while promoting sustainable development and producing wealth and jobs.
According to Circle Economy, two thirds of global greenhouse gas emissions are estimated to come from the extraction, processing, and manufacture of consumer goods. The organisation also states that the circular economy, especially the recycling and reuse of objects at the end of their life, could reduce these emissions by around 39%. This would avoid several billion tonnes of CO2 emissions and help cut down global warming to 2° C, in line with the objectives of the Paris Agreement. In this respect, circular economy plays a key role in the energy and ecological transition by reducing the environmental impact of business activities.
Seizing business opportunities
Another benefit of the circular economy is the possibility of reaching new markets that previously had little to no interest in offering products and services. By implementing a circular economy strategy, companies can develop new business models including renting products, selling spare parts, reusing raw materials, etc. These are all new ways of meeting market needs while stimulating innovation.
A study by Accenture, the World Economic Forum, and the World Business Council for Sustainable Development suggests that car manufacturers could improve the profitability of their value chain by 50% and generate revenues 15 to 20 times higher than the initial selling price of a vehicle by fully integrating circularity into their business models. These benefits would mainly come from leasing, car sharing, and mobility as a service (MaaS), but also from repairs and recycling throughout vehicles’ life cycles.
Fostering stakeholder engagement
Companies committed to the circular economy also unite their stakeholders to support their cause, whether it’s their customers, employees, partners, or suppliers.
A recent study by Cap Gemini Research Institute shows that more than 70% of consumers would like to embrace circular practices, such as buying sustainable products or maintaining and repairing products to extend their life.
Therefore, the circular economy model is clearly going to permeate the entire ecosystem, with each company capitalising on this dynamic in its own way. This will help attract and retain customers, recruit (and retain) committed employees, and kickstart new ways of working with partners and suppliers who share the same beliefs and values.
Ultimately, all the benefits of the circular economy are interconnected in one way or another. This creates a virtuous dynamic for companies, as well as for their ecosystem and, more widely, for society as a whole. This paradigm shift opens up new prospects for a regenerative economy of the future. All that remains is for companies to seize the opportunity.
