the circular economy report 2015€¦ · discussion around the circular economy and its...

BUSINESS INTELLIGENCE FOR CORPORATE RESPONSIBILITY AND SUSTAINABILITY

The Circular Economy Report 2015The Circular Economy Report 2015

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The Circular Economy Report 2015: Making the Circular Economy Work for your Business

Executive summary

Against a backdrop of commodity price volatility and the need for more sustainable use of the planet’s resources, businesses are beginning to seriously consider how they can begin to embrace the circular economy. Much has already been made of the potential benefits that society and the economy in general could draw from a more circular economy – these include resource efficiency, lower environmental impacts, and the creation of jobs within the wider ‘green economy’. But so far, less has been said about how individual businesses can profit from the circular economy, and how exactly they can go about tran-sitioning to a more circular model. This report aims to help businesses embrace the circular economy, and unlock the myriad benefits – both short-term and long-term – on offer.

The report covers some of the main areas of discussion around the circular economy and its implications for the business sector, including the potential benefits for businesses, an overview of the present legislative and regulatory environment, and a look at some of the main obstacles that still stand between businesses and greater circularity. These discussions, embellished by exclusive input from some of the leading experts on the circular economy, then lead into a series of eight in-depth case studies which detail some of the companies that have learned how to tackle the various challenges in going more circular, and have been able to see and demonstrate the benefits of doing so.

Some of the key points covered by this report can be summed up thus: organisations that reposition their business model towards the circular economy can expect to enjoy greater stability and efficiency among their supply chains; cost savings from the reduction in waste and resource use; and reputational enhancement from increased brand awareness and loyalty. They can also benefit from the sharing of knowledge and solutions that would come from greater collaboration with suppliers, industry peers and their own customers, as recommended by several of the report’s case studies and experts.

While many of these benefits will likely come in the medium- to long-term, experts are united in affirming that the sooner the transition to a more circular business model is made, the sooner companies will be liberated to start realising those benefits. Our hope is that by reading this report, taking on board the lessons set forth in our exclusive case studies, and considering the recommended steps provided by our analysis and that of this report’s many contributors, businesses will be in a position to make this transition easier, clearer, and quicker.

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Executive Summary ................................................................................................................................................. 2

Table of contents ..................................................................................................................................................... 3

About Ethical Corporation ....................................................................................................................................... 4

About the author – Sam Phipps .............................................................................................................................. 5

Methodology and preface ....................................................................................................................................... 6

Acknowledgements ................................................................................................................................................. 8

1. Introduction ..................................................................................................................................................... 9

2. Legislative and regulatory environment ...................................................................................................... 16

3. The business case ........................................................................................................................................ 21

4. How to make it work for your business ....................................................................................................... 28

5. Case studies .................................................................................................................................................. 33

5.1. BT .......................................................................................................................................................... 33

5.2. Maersk Line ........................................................................................................................................... 38

5.3. Hewlett-Packard ..................................................................................................................................... 42

5.4. Patagonia ............................................................................................................................................... 47

5.5. Jaguar Land Rover ................................................................................................................................. 51

5.6. Fairphone ............................................................................................................................................... 56

5.7. TerraCycle .............................................................................................................................................. 61

5.8. Vegware ................................................................................................................................................. 66

6. Conclusions ..................................................................................................................................................... 70

Bibliography .......................................................................................................................................................... 76

Glossary .............................................................................................................................................................. 78

Table of contents

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Ethical Corporation is an independent business intelligence company. Our stated mission is to help businesses around the globe do the right thing by their customers and the world. We believe this is not only how to guarantee a future for all, but that it also makes good business sense! We provide objective analysis in our reports, news, events and updates for thousands of companies and individuals from the corporate sustainability sector.

Through a monthly magazine, website, conferences, and our intelligence reports, our aim is to act as an impartial voice, provide industry data, and carry critical analysis of current best practices. Our practical reports aim to provide critical independent analysis, purvey necessary industry data, and carry out in-depth, real life case studies – all in an easy-to-read format.

About us

Sam Phipps is a freelance writer who has contributed regularly to Ethical Corp and other titles in the FC Business Intelligence portfolio over the last five years. These include Wind Energy Update, Electrical Vehicle Update, CSP Today and Decom World. For Ethical Corp, he has recently covered sustainability in the extractives industry, conduct risk in banking and schemes to boost cycling in the Europe and US – as well as profiling major companies including Mars and Walmart from a CSR angle.

He grew up in London and worked full time for the BBC World Service (Russian section), then Reuters news agency in London and Milan. Now based in Edinburgh, he was on the staff of the Scotsman’s sister title, Scotland on Sunday, for several years before turning freelance. Since then his features and articles have appeared in several publications, including the Spectator, Scotsman, Guardian, Herald, the education weekly, SecEd, and Scotland Outdoors.

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The Circular Economy Report 2015: Making the Circular Economy Work for your BusinessSELECTED

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The circular economy is gaining traction as a concept and practical model, both for established multina-tionals and start-ups. It is a way of fundamentally realigning businesses, supply chains and markets so that growth is decoupled from resource constraints, a higher premium is put on value and “waste” becomes a thing of the past.

Some view it as potentially as significant a change in the coming decades and beyond as the Industrial Revolution was in the 19th century. They also argue it is vital in order to provide a sustainable supply of goods and services to meet the ever-growing demands of the global population.

How does it work?

The circular economy replaces the established linear economic order whereby raw materials are mined, extracted and processed – and goods designed and manufactured – without concern for re-use, reman-ufacturing or disposal. In contrast to the old “take,

make, dispose” model, the circular economy offers a sustainable system that not only conserves finite natural resources and safeguards the environment but also brings business opportunities and enables growth (Ellen MacArthur Foundation, 2015a).

In this way, products are designed with deep understanding and measurement of inherent value so that biological and technical “nutrients” are kept in the system beyond the life cycle of the product or service. Alongside product life extension, long-life goods, reconditioning activities and waste prevention, renewable or low-carbon energy is also a key component in most circular economy strategies.

1Introduction

The circular economy replaces the established linear economic order whereby raw materials are mined, extracted and processed – and goods designed and manufactured – without concern for re-use, remanufacturing or disposal. In contrast to the old “take, make, dispose” model, the circular economy offers a sustainable system that not only conserves finite natural resources and safeguards the environment but also brings business opportunities and enables growth (Ellen MacArthur Foundation, 2015a).




Individual businesses could gain from the circular economy in several ways, including less uncertainty over supply and cost of materials and enhanced reputation. However, the benefits will mostly be in the long term and sometimes hard to measure, according to executives and economists interviewed by Ethical Corp for this report.

Any shift to a newer model must therefore be carefully thought through, with deep commitment from the top down and willingness to collaborate with other stake-holders, sometimes even competitors.

Dr. Daan Elffers, CEO of the Netherlands-based consultancy EMG, says both scarcity and cost of materials will continue to rise as the linear industrial model holds sway in the near to medium term: “By transitioning their enterprise into a circular model, businesses can separate – or largely remove – their supply chain from this risk, protecting their business from rocketing resource prices in the future.”

“Of course it’s up to the business as to the best time to make this transition – depending on the business, this may require upfront investment – but the sooner the transition is made, the sooner the company can start realizing those benefits. In time, these will only become greater, and that’s before we even start looking at other gains such as broader competitive advantages, etc.” – Dr. Daan Elffers, CEO, EMG

Success stories

Patagonia, whose doubling of revenue in the last five years has coincided with its clothing and equipment repair and recycling Worn Wear program, argues

3The business case

“By transitioning their enterprise into a circular model, businesses can separate – or largely remove – their supply chain from this risk, protecting their business from rocketing resource prices in the future.”– Dr. Daan Elffers, EMG

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its part, Maersk Line admits it has more to do in this area itself, but, again, collaboration will be key.

Future reputational benefit, for instance, is something that would be hard to measure even though Maersk Line believes it is both desirable and likely. “A business case based on reputational value is much weaker – it’s not that it’s necessarily wrong, it’s just that there are so many unanswered questions.”

Also, instead of mapping everything, Stensen sees a case for perhaps reducing the scope and focus onto aspects that are most important and have the biggest impact.

“But then eventually – again, it’s not where we are today either – it should be an integrated part of designing any product, including a ship, that when you choose your materials you do so based on how good they are to recycle.”

Similarly, steel recyclers and certifiers will have to play an active role in developing the circular model and closing the loop, Stensen says.

Sharing knowledge and finding more similar minded companies and organizations that are willing to work on these areas is therefore the way ahead, according to Maersk Line. “Sometimes that may mean us tapping into something that already exists, at other times it would be us sharing some ideas. We don’t know everything that needs to happen. It’s difficult to be more precise than that.

“This first lesson from cradle-to-cradle passports has been a big step forward. But many more steps will be needed for circularity in shipbuilding.”

Key points




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“We could see that it is going to drive environmental degradation so far that we would have to continue to work harder and harder to extract the natural resources we need to make stuff. So it’s about whether we as a world decide to introduce a more circular model or just continue to progress down a dead-end path,” she says.

This view was reinforced during the recent economic recession by research in the US, published in the New York Times (Goodman, 2009), showing that some people were turning away from impulse buys and spending more on high-value items that would last longer or help them subsist, such as gardening tools for growing their own vegetables.

Apparel appeal

Patagonia was determined to reach out and appeal to that demographic, Cohen says. Over the course of two years, more than 75,000 of its customers signed Patagonia’s Common Threads Pledge (a precursor to Worn Wear) to buy only what they need, repair it when it is broken, or sell or give it away for reuse or recycling.

Since 1996, the company has committed to using only organic cotton in its cotton products. Yet the concern comes after the sale of the product. “We’ve always been looking for sustainable solutions for sure, but what happens after the consumer buys our product? That’s a place for huge potential change,” Cohen says.

The company, therefore, began involving consumers in these efforts. “Worn Wear has been our sort of conduit

to the circular economy as part of our business model. We realized so many other things needed to happen before recycling, including repair and reuse, and so that was when we established the program.”

Research by the UK non-profit organization Waste and Resources Action Programme (WRAP) has shown that the single most effective way for a company to reduce environmental impact is to make its products last as long as possible, suggesting that Patagonia is on the right track.

Moreover, in terms of benefits from these circular economy initiatives, Patagonia is reaping several “ancillary rewards” beyond environmental impact reduction. One of these is improved customer service. “Worn Wear is all about prolonging the life of products, which translates into a meeting of customer service demands. I think people in general are tired of being let down by large corporations and not receiving good service, and not having them repair things yet failing to explain why,” states Cohen.

“We could see that it is going to drive environmental degradation so far that we would have to continue to work harder and harder to extract the natural resources we need to make stuff. So it’s about whether we as a world decide to introduce a more circular model or just continue to progress down a dead-end path.” – Nellie Cohen, Worn Wear Coordinator, Patagonia




What people are saying……about this report

For any businesses interested in gaining an informed understanding into what the circular economy truly is, and learning from the experience of businesses which have already embraced and are successfully operating to the principles of the circular economy, this report is a must read.

The report gives a real insight into addressing the needs of the circular economy and the potential benefits and challenges that face businesses, and provides the kind of key first hand learnings that will allow the reader to make intelligent informed decisions.

Importantly it provides insightful case studies on both new generation companies like Fairphone and TerraCycle, which launched from day one in response to circular economy, societal challenges and opportunities, and also on more established businesses like HP and BT which have recognised the growing importance of the circular economy and are changing their business models accordingly.

Tom Szaky, CEO and Founder, TerraCycle

This report, a snapshot of the circular economy today, is a compelling argument that we are near the tipping point of the next industrial revolution.

More and more organisations are already embracing circularity, from countries to companies, and finding that it drives innovation, economic growth, sustainable development and social wellbeing.

Ethical Corporation showcases some great examples of leadership across the globe and demonstrates that embracing the circular economy brings wealth and prosperity today as well as in the future.

Simon Graham, Environmental Strategist, Commercial Group

Companies who were interviewed during the production of this report include:


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