What’s driving the industry shift to circularity? – GreenBiz

This is an excerpt from "The Circular Economy Handbook: Realizing the Circular Advantage" by Peter Lacy, Jessica Long and Wesley Spindler. It is reprinted here with permission from Accenture Strategy.

The types and volume of industry-level circular activity vary widely. In general, consumer-facing industries have seen the largest volumes of circular activity, often driven by demands from consumers, governments and employees. Specifically, the leading players in fast-moving consumer goods (FMCG) have set ambitious circular economy goals, often with a focus on packaging and input waste reduction. The consumer-facing fashion industry has also seen an uptick in action and commitment on the circular economy, from use of alternative materials to product takeback and reuse. For these industries, rising consumer demand and expectations is a clear driver.

According to a 2019 Accenture survey, nearly three-quarters of consumers (72 percent) say they buy more "environmentally friendly products" today than five years ago. Growing public discourse on issues such as plastics and "disposable" fashion is spurring the "call to action" for brands in these sectors. More recently, however, business-to-business (B2B) industries that are less visible to consumers, such as chemical, and metals and mining companies, are starting to see a push from customers (or from the customers of customers). Indeed, a majority of consumers (83 percent) believe it is important for companies to design products that are meant to be reused or recycled, and about half (49 percent) believe that the chemical industry, for example, is the least concerned about the impact it has on the environment compared with eight other sectors.

Business-to-business industries that are less visible to consumers, such as chemical, and metals and mining companies, are starting to see a push from customers (or from the customers of customers).

Other industries feel the pressure of regulatory drivers. In the household appliances sector, for instance, increasing regulations on responsible treatment of products at end of use are pushing companies to focus on greater recovery of used machines. In the United States, Environmental Protection Agency (EPA) regulations require technicians who service refrigeration and air-conditioning equipment to follow specific practices to maximize recovery and recycling.

In some cases, circular economy principles naturally align with how industries have long managed their businesses, such as the focus on multi-decade product lifecycles for machinery and industrial equipment (M&IE) and automotive companies. These industries often have strong after-sales maintenance and services baked into their business models. Therefore, the transition to circularity is a natural extension of business-as-usual.

Across industries, a compelling financial case is emerging for the move from linear to circular models of production and consumption. To capture circular value and pivot to new growth areas, most industries adopt a dual focus: applying circular models to their existing value chains, while also incrementally altering the way they do things today. An example is driving efficiencies within operations while experimenting with Product as a Service business models. The typical mix of opportunities across industries includes a change to the product itself (via Circular Inputs, such as renewable materials), its production (the use of fewer resources and reduced resource or material waste), and its consumption (circular models that change the way that customers consume, re-consume or take control of a product at end of use).

The greatest opportunity for creativity and industry crossover occurs ... as each industry tries to figure out what it can and should take back into its value chain versus what it should divert for reuse.

Today, the greatest opportunity for creativity and industry crossover occurs at the intersection of Resource Recovery and Circular Inputs, as each industry tries to figure out what it can and should take back into its value chain versus what it should divert for reuse by others. We are seeing used shoes recycled into sports flooring or car interiors, unwanted plastics transformed into superior road surfaces and wastewater becoming fuel for public fleets. Although the crossover of Circular Inputs is still limited by technical feasibility, inadequate infrastructures and unintended impacts, the potential is huge.

Circular opportunities may also blur industry lines. Many businesses are finding opportunities by enabling circularity for other sectors. Oil and gas companies are getting into the electricity and e-mobility sectors, and chemical companies are embracing their role in textiles and food component innovation. Take, for example, American chemical company Eastman Chemicals circular recycling technology that has the potential to break down polyester-based products into "building blocks" which can, in turn, be used in new products, ultimately helping to solve the textile recycling challenge.

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What's driving the industry shift to circularity? - GreenBiz