The circular economy is inspiring a new way of thinking about how we produce and consume goods and services. It offers economic benefits to businesses as well as sustainable ones to the planet, but where should companies begin to navigate the circular economy?
In a world grappling with environmental challenges, including global warming and habitat destruction, the concept of a circular economy offers a promising solution. Unlike the linear economy’s ‘take, make, dispose’ approach, a circular economy aims to eliminate waste and keep products and materials in use for as long as possible.
In this article, we explore the benefits of a circular economy for your business and provide practical tips to help a successful transition.
Benefits of a circular economy for businesses
In terms of planetary sustainability, adopting a circular approach offers many advantages, including reducing emissions, safeguarding habitats, and avoiding resource depletion.
But that doesn’t mean circular economies can’t also benefit your business by helping it grow and develop. Here are some way’s circularity can bring advantages to your business.
- Cost Savings: Transitioning your business to a circular economy can lead to significant cost savings. By reusing and recycling materials, companies reduce reliance on expensive raw materials and lower waste disposal expenses.
A study by the Ellen MacArthur Foundation found that the fast-moving consumer goods sector could have net material costs savings of roughly $700billion (£550bn) each year. - New revenue streams: Embracing a circular economy opens doors to innovative revenue streams. Businesses can explore opportunities to refurbish and resell products, provide repair services, or adopt product-sharing models instead of traditional ownership.
Take for example, IKEA’s furniture rental service called “IKEA Renting.” This service allows customers to rent furniture for a monthly fee. This model has helped IKEA to reduce its waste and increase its profits. - Increased innovation: The circular economy spurs innovation by challenging businesses to rethink traditional approaches. Companies are motivated to design products, processes, and services that minimise waste and maximise resource efficiency, leading to novel and sustainable solutions.
This is the route taken by companies such as Loop, a global reuse platform that aims to eliminate the idea of waste.
How SMEs can support the circular economy
Small and medium enterprises (SMEs) play a key role in the global economy. They constitute the majority of businesses worldwide and have a significant impact on job creation and global economic progress. According to the World Bank, SMEs make up around 90% of businesses and contribute to over 50% of total employment globally.
With that level of impact, it’s no surprise that businesses who transition to circular practices are integral to the circular economy as a whole.
Tips for transitioning to a circular economy
Getting started, especially with an already established business, can be a challenge. In fact, a study by the Ellen MacArthur Foundation found that 60% of businesses are unsure where to start when it comes to implementing circular economy principles.
So, how should your business start working towards becoming more circular, below we share some practical tips.
- Design for circularity: Focus on designing products and services that are durable and recyclable. This includes using recycled or renewable materials, implementing modular designs, and considering the entire life cycle of the product.
- Extend lifespans: Nothing will last forever, but you can find ways to extend the lifespan of products through repair and refurbishment, or encourage customers to return products for maintenance and upgrades, reducing the need for new purchases.
- Collaborate with suppliers: Work closely with suppliers and educate them on the benefits of incorporating circularity into your business relationship. Collaborative efforts can help secure sustainable sourcing of materials and enable the design of products that are easily recyclable or reusable.
- Engage with customers: Raise awareness about the circular economy by providing information on sustainable consumption practices, educating customers about the environmental impact of their choices, and promoting the benefits of circular products and services.
Initiatives supporting a shift to a circular economy
The good news is that you’re not alone in figuring out how to incorporate circular practices. There are numerous initiatives globally that are encouraging small businesses to adopt circular economy methodologies and embrace sustainable practices
- Circular Economy SMEs (CESME): Funded by the EU Interreg Europe program, CESME helps small and medium-sized enterprises (SMEs) to transform linear business models into circular ones. Through workshops and networking events, businesses learn to identify opportunities for resource efficiency, design out waste, and create closed-loop systems.
- Ellen MacArthur Foundation’s SME Program: This initiative provides resources, tools, and case studies to help small businesses understand and apply circular economy principles. It also promotes collaboration and peer learning, fostering a global community of circular economy pioneers.
- The Green Business Network: A project of Green America, this network helps small businesses improve their environmental and social impacts. It provides members with certification standards and practical resources on topics like renewable energy, waste reduction, and sustainable supply chains.
- Circular Economy Business Support Service (Scotland): This service, run by Zero Waste Scotland, offers free consultancy, funding, and training to Scottish SMEs seeking to adopt circular economy strategies. It has helped businesses in sectors ranging from food and drink to manufacturing and construction.
- New York City’s Zero Waste Challenge: This initiative encourages businesses to reduce waste, donate surplus food, and recycle effectively. Many of its participants are small businesses making significant strides in sustainability.
Closing thoughts
Embracing a circular economy not only benefits the planet, but also offers substantial advantages for businesses. Transitioning to this sustainable economic model enables cost savings, creation of new revenue streams, and enhanced innovation. Moreover, it plays a crucial role in waste reduction, resource conservation, and climate change mitigation.
Businesses have the opportunity to explore the circular economy further and consider how they can gradually transition their operations toward a more sustainable future. By doing so, they contribute to the well-being of the planet while paving the way for long-term success.
