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Circular Economy Re-Invigorates Resource Conservation Efforts

The ‘circular economy’ has re-emerged as a hot topic in 2016. The fundamental principle of a circular economy is to shift production processes from a linear ‘take, make and dispose’ model to a cyclical ‘reduce, reuse, refurbish, recycle, and remanufacture’ model. Many aspects of the circular economy are not new and harken back to ideas from the early-1970s such as biomimicry, cradle-to-cradle design, and closed-loop recycling.

Recent policy decisions have helped provide renewed momentum to the circular economy concept. The EU has been one of its biggest champions and in December 2015, passed the EU Circular Economy Package which commits over €6 billion to achieve EU-wide recycling targets of 75% for packaging waste, 65% for municipal waste, and 50% for food waste by 2030. Beyond the EU, there have also been positive policy moves in the past from the likes of China, Brazil and Japan.

Verdantix expects the circular economy will grow in significance as global brands, such as Caterpillar, Levi’s and Unilever compete to take their resource conservation efforts to the next level. Witness 3M who have been ramping up efforts across both product sustainability and supplier EH&S performance management. Not only do such efforts support product innovation, reduce the risks associated with natural resource scarcity and boost the sustainability credentials of the firms, they also present new revenue opportunities for product firms and help establish deeper relationships with customers. Veolia, for example, cite over 10% of global revenues originate from upcycled processes such as waste-to-energy production and re-using wood and furniture waste to name a few.

For most firms, the key challenge will depend on whether they can produce upcycled products at costs on par or even below the traditional production model. While the economics for resource cost savings are very clear, the ROI behind recycling resources and ‘closed loop’ products will require case-by-case investigation. The issues involved can also be more complex than just production costs; witness the strategy of ‘planned obsolescence’ used to generate recurring sales such as electronic gadgets with irreplaceable parts or fast-fashion in the apparel industry.

To find out more about to the circular economy market opportunity, please join us for our upcoming webinar where we will be sharing insights from our recent publication ‘Product Stewardship Market Size and Forecast 2016-2021.’