Circular economy

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‘Closing the loop’ on the supply chain through improved product design, extending asset life, reuse and recycling can deliver tangible commercial and sustainability gains across a wider range of goods and materials.

Closed-loop systems reduce the need for extraction and processing of new resources, and lessen the associated impacts on the natural environment. They can improve quality and value by extending the useful life of goods, enabling their re-use and re-sale, saving money for businesses and cutting costs for consumers.

Value can be realised by:

  • circling goods within the system for longer by enhancing their durability and reusability

  • cascading the use of materials more effectively through different sectors and products (for example, using fibres in textiles, upholstery, and finally insulation materials)

  • ensuring that material streams remain uncontaminated and of high quality, enabling their longevity

  • tightening the circle by minimising initial material use.

Business value levers

Click on the chart to view a bigger version.

Source: Accenture, 2013

Size of the prize

  • Net material cost savings of around £15-£18 billion a year in the UK consumer goods industry, representing around 20% of all material input costs. [i]

  • Circular economy has created over 100,000 jobs in the UK (83% of which are outside London), in over 5,000 companies, servicing market of £13 billion. [ii]

  • For example, food waste could create profits of £113 per tonne of waste in the UK (£1 billion a year), based on savings from roll-out of anaerobic digestion, avoided landfill costs and revenues in the form of feed-in-tariffs from electricity generation. [iii]

  • In the clothing sector, around £850 per tonne of clothing in net profit could be generated in the UK from enabling re-use and recycling (£1 billion a year). [iv]

Diagram source [v]

Sustainability benefits

The environmental benefits, particularly from retention and regeneration of natural resources, from a circular economy are significant and the market is still under-developed. Circular economic approaches can achieve a possible 50-90% reduction in a product’s environmental footprint. [vi]

Examples

Marks & Spencer reduced the number of carrier bags customers use by 78% over 5 years since the introduction of carrier bag charging. Using closed-loop thinking, they were also able to ensure every carrier bag is made from 100% recycled material that is sourced from their own waste streams (thereby cutting costs). [ivi]

We say to our paint suppliers: If you won’t recycle the cans, we won’t buy the paint from you.

- John Hayes,
Chief Executive, Axis

Example questions to ask to help your business consider this innovation area

Opportunity Which of the materials we use are suitable for reuse and recycling?
How can closed-loop thinking support new business models that better meet customer demand?
How could our products and services be redesigned to work in a closed-loop system (e.g. to avoid obsolescence and enable re-use and disassembly)?
Competitors How are our competitors innovating to close the loop?  
Business case What are the benefits to our business from moving to a circular business model (e.g. lowered input costs, or improved security of supply)? What investment is required to build a closed loop supply chain?
Source: Accenture 2013

References

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