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Key Barriers and Benefits to Growing a Circular Economy

Wednesday, November 5, 2014

A new leadership paper has been published that highlights the key challenges and potential business benefits of moving towards a circular economy.  ‘Ahead of the Curve: How the Circular Economy can unlock Business Value’ is the latest publication by Corporate Citizenship and explores a number of themes on how and why businesses should be thinking circular.

These themes include why we should be thinking about a new economy, the challenges that are currently faced in the existing economy and the benefits of moving towards a circular economy, such as new revenue streams, cost savings and enhanced stakeholder relationships.

The paper explains that ‘the time is now’ for businesses to start thinking circular and concludes with a number of practical ways in which a circular business model can be implemented.

The paper also identifies eight key challenges that businesses face when addressing circular models, including the need for the development of material and design standards, setting clearer government signals, the development of internal skills and the transformation of staff mind-sets and consumer behaviours. 

The paper also recognises that the legal framework needs to be updated to accommodate new developments in a circular economy and the importance of financing business transitions.  Without the support and understanding of the finance and investment community, companies that want to explore product and service innovations as part of their circular economy journey will still face barriers.

Despite the barriers, the paper also highlights the potential business benefits of a circular economy, including:

1) Optimising the use of materials

Exploring the reuse, remanufacture and refurbishing of materials within the value chain can lead to significant cost savings for businesses, whilst also generating less dependence on the need for resource inputs from virgin raw materials.

2) Realising new revenue streams

By applying circular economy concepts and thinking across their value chains, companies can transform their products and services by rethinking the way they do business, which in turn can identify new revenue streams, product or service innovations and new co-creations.

3) Enhancing stakeholder relationships

Companies that become more resource efficient display themselves as responsible businesses that care about the markets they serve.  Companies that go further by thinking about circular strategy also help create wider positive impacts beyond the value chain.  It is these companies, who work to live within the constraints of the world’s resources, which will ultimately develop more competitive, cutting edge business models and lead to a more restorative economy.

4) Mitigating risk from future policy and industry shocks

The European Union recently released a communication that demonstrated its support for the circular economy and announced the establishment of a non-binding resource productivity target for member states, relating to GDP and raw material consumption.  This, and the development of other, similar policies, shows that global policy is starting to shift towards circular thinking.  Those businesses that are up to date with best practice and regulatory changes will mitigate potential shocks from future policy, industry standards and stakeholder demands.

 

As well as discussing the evolution of the circular economy and the benefits that can be received, the paper also provides example of how companies are participating in the circular economy.

The full Report – Ahead of the Curve: The Circular Economy – is available to view here.  

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