Circularity 101: Get to know the basics for business leaders

Like any growing industry, certain terms gain momentum over time. In the sustainable business space, we have seen this over recent years with terms like emissions, CO2 avoidance, carbon neutral, net positive and more. To be honest, some might argue that many companies have had emissions blinders on. But this is slowly changing, as regulations and best practices around the world are starting to look at other key sustainability considerations. As a result, new terms are bubbling up, and leaders are left trying to adapt quickly (and meaningfully). One such term is that of “circularity”, and today I am going to dive into what this means for the business leaders and entrepreneurs listening in. 

While this episode will be short and sweet, my goal is that by the end of this, you will feel more comfortable talking about the concept, and possibly even start getting ideas as to where you might be able to apply it within your own business. Even as a consumer, hopefully this helps you to make more informed decision as the term “circularity” slowly starts to make its way into company messaging and marketing.

To do so, I am going to provide a quick definition, go over 3 of the main circularity principles, share a few benefits, and then share a selection of real-world business examples.

Let’s start with a quick definition.

The funny thing is that circularity is nothing new. In fact, this was the dominant way we did business for the longest time, and the way several communities still operate around the world still operate.

So what is it?

The easiest way that I have found to think about it is that a circular economy is an operational / strategic framework where resources are kept in circulation for as long as possible, waste is minimized, and materials are continuously repurposed or regenerated.

Still not clear?

Well, let’s think about how this is different from the main way we do things in western culture.

The industrial revolution saw us take on a linear approach: we extract raw materials, manufacture products, and discard them post-consumption. Otherwise known as “take-make-waste”.

Unlike linear models that culminate in waste, circular systems design out disposal by maintaining materials at their highest utility through reuse, repair, remanufacturing, and recycling.

So, what is the current state of circularity? In 2023, only about 7% (!!!) of raw materials extracted worldwide were reused/recycled. 

Now that we have the definition, let’s move onto the core principles of circularity in business. Before doing so, I do want to start with the fact that there seems to be some variation/debate online as to the exact pillars. This, like so many areas in the sustainability space, will likely gain more formal guardrails in time as regulations around the term itself come to light.

• Eliminating waste and pollution
  • This is really thinking about the waste reduction all the way back from the moment a product is designed. So, designing repairable products, items that can be easily broken down and recycled etc.
  • This area also involves working with your full value chain: we are already seeing this with some regulations where manufacturers are now responsible for the end-of-life of a product, or around recycled content, etc.
• Keeping products and materials in use
  • This essentially is keeping a product or material in use as long as possible. We see this with things like PaaS (Product-as-a-Service) and secondhand markets. We have talked about the latter with previous guest Annette from Shwap Club, and have a designer coming on in just a few episodes who talks about his experience in office furniture as a service!
• Regenerating natural systems
  • This is the idea that we should be not only be taking resources, but also investing back into our systems. Examples include regenerative agriculture (PS: if you are listening and know someone in the space, give me a shout – I would love to dive in more!)

So why might we be interested in exploring circularity in our own business beyond the environmental benefits?

• Cost savings 
  • At a time where costs continue to climb due to inflationary and resource pressure, there is an interesting opportunity to explore what savings are available by leaning into recycled/repurposed materials.
  • Also waste disposal costs can potentially be reduced by closing the loop on your production process, etc.
• Differentiator
  • We saw this with LOOP Mission, the amazing cold-pressed juice company that came on the podcast to talk about how their customers have made them the number one cold-pressed juice company on the market in part due to their mission of reducing food waste by taking fresh fruits and vegetables destined for waste and converting it into delicious (and responsible!) juice.
• Risk reduction
  • With the current uncertainties of the world, having local access to certain finite resources presents an interesting opportunity to strengthen local resilience in the face of volatile markets.
  • In addition, by starting to look at circularity more seriously now, there is an opportunity for proactive readiness for regulatory changes globally.
  • Finally, different business models based on circularity can include new service opportunities that create jobs and recurring revenue.

Now, let’s dive into a few example of businesses doing great things in circularity:

• Decathlon: if you have not already listened to last week’s episode with Julia Binder from IMD, I highly recommend you go back as she is a true expert in the circularity space. She mentioned that Decathlon (the sporting good brand) is a fantastic example of circularity.
• In the fashion space: beyond Patagonia’s resell and repair program, there is also Mud Jeans. Maybe I am late to the party, but I only found out about this company while researching for this podcast! Jeans are a tricky one, because we know that they require considerable resources per pair. I try to always get mine second hand, but this is (for whatever reason) one of the items I have a harder time tracking down. They essentially recycle old jeans to make new ones!
• Ikea (seeing how much we all turn to Marketplace to buy their products secondhand!) has now created a pilot program allowing consumers to resell their furniture on their site.

To conclude, the circular economy re-engages consumption and production beyond the linear model by decoupling economic growth from resource use. It allows us as business leaders to create value for the end user while minimizing environmental impacts. 

Circularity truly holds the potential to be the engine for resilient growth!