The Circular Economy is a $1 Trillion Opportunity
Rinse and Repeat
The Circular Economy involves maintaining, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible, thereby extending the life cycle of the materials. It rests on three principles1:
- Preserving and enhancing natural capital (e.g. using renewable resources)
- Optimizing resource yields (designing for reuse/repair/refurbish)
- Bringing effectiveness by designing out negative externalities (e.g. land use, water/noise/air pollution...)
McKinsey and the Ellen MacArthur Foundation have suggested that a circular economy represents an economic opportunity of more than $1 trillion globally. Examples of the circular economy are found in a variety of industries including automotive, clothing, waste management and oil and gas.2
The aim is to reduce waste as once the product reaches the end of its life, the materials are kept within the economy and used again and again to create further value.
In today’s established economic systems, we see linear processes where goods are produced, used and discarded. The circular economy designs products and services which can be reused. For the circular economy to work, companies have to rethink how they design and manufacture their products AND their relationships with customers.
Currently, there are notable trends which are shaping the future of the circular economy3:
- Legislators holding producers responsible for waste
- Collaboration among companies to reuse materials
- Exploring refill models
- Scaling up of chemical recycling
- The move against throwaway fashion
Legislators holding producers responsible for waste
Legislators are faced with the task of how they are going to make producers responsible for their waste, especially in relation to plastics. In the US, there are already nine states which have introduced Extended Producer Responsibility (EPR) legislation requiring manufacturers and retailers to contribute to the cost of collecting, recycling and disposing of their products at the end of life.
Collaboration among companies to reuse materials
Companies are also increasingly looking to collaborate to reuse materials and packaging. The Next Gen Consortium is trying to develop ways to create fully recoverable takeout cups while companies are also exploring the necessity of packaging at all.
Exploring refill models
There has been an increase in companies addressing refill models to reduce waste. The US based start up Loop has attracted interest from companies such as Tide and Colgate, which refills your product using their durable packaging. The company Conscious Container enables beer lovers to refill their bottles, thereby reducing the amount of glass waste.
Scaling up of chemical recycling
Advances in chemical recycling have meant that plastic is more valuable for recycling than through traditional methods. Partnerships between companies and chemical recyclers ensure that the quality of plastic produced can be used for companies’ packaging.
The move against throwaway fashion
Increasingly, consumers are turning their backs on cheap, throwaway ‘’fast fashion’’ as they seek more sustainable clothing options. The Make Fashion Circular initiative
from Ellen MacArthur Foundation aims at zero waste design while Adidas has just produced the first infinitely recyclable sneaker.
Models currently being adopted in the circular economy include leasing products instead of buying, companies collecting, renovating and reselling their products and peer to peer models.
Interesting startups in Circular Economy
- Aeropowder – is an award-winning startup from London creating novel materials from surplus feathers
- Fjong – unlimited access to fashion in an affordable and sustainable way. On Fjong’s platform you can either rent or lend clothing.
- Grover – is a subscription technology rental platform that allows you to rent tech devices for as long as you want (one-month minimum) instead of buying a brand new one
- Biopack Packaging – This Groningen-based startup decided to tackle plastic waste by offering a sustainable alternative to plastic packaging.
- Too Good To Go – Good To Go allows people to buy surplus, unsold food from restaurants, cafes, supermarkets, and bakeries that otherwise would have to be thrown out
- Worn Again – UK-based startup set to transform the textile and fashion industries with its polymer recycling technology
The furniture industry
One industry trying to address the challenges of the circular economy is the furniture industry, where if we look at Europe, around a quarter of the world’s furniture is manufactured within the European Union – representing a €84 billion market.4
It is estimated that 10 million tonnes of furniture is discarded in the European Union every year with most of it destined for landfills or incineration and the obvious impact on the environment.
The market for second-hand furniture is one that the industry is starting to address.On average, second-hand furniture is more than 50% cheaper which allows the consumers access to the products at comparatively less cost with low cost being the primary factor estimated to expand the market. The market is also growing rapidly due to the rising availability of second-hand furniture products across both online and offline channels. Interestingly, the rising millennial population across the countries such as India and China have been paving the way for rising sales through the online channels.
Currently, there are a number of innovative startups and global furniture retailers who are attempting to address the challenges faced by the circular economy for furniture.
Kaiyo is an online marketplace committed to great design, exceptional customer care, and a more sustainable planet. Their belief is that buying well-made, pre-owned furniture is a better choice than buying new because great design is sustainable design — meaning it’s timeless, accessible, and built to last for a lifetime of good vibes. In addition, Kaiyo promises to plant a tree through the National forest foundation for every order completed on the platform. They estimate that 1,330,087 pounds of furniture is kept out of landfills thanks to their customers.
A US startup called Feather also aims to keep furniture out of landfills by wants to begin to change that by shifting ownership - instead of selling furniture, the company rents it. When someone moves or wants a different sofa, they can send it back, and the company will clean and repair to rent to someone else.
Feather developed this business model to provide a solution to the problems caused by the rise of “fast furniture”, which has a trendy look and low cost, but it isn’t designed to be used for the long haul.
IKEA – the circular economy
Even IKEA, the largest furniture retailer in the world has made a commitment to become fully circular by 2030. In June 2020, IKEA announced a strategic partnership with the Ellen MacArthur Foundation advocating for closed-loop home furnishing designs and methods to promote circular offers to customers.5
IKEA wants to give its products and materials a longer life through reuse, refurbishment, remanufacturing, and, as a last option, recycling. They are currently trialing a number of initiatives including new models of furniture rental and refurbishment as well as expanding its take-back offering for furniture and textiles recycling.
However, the circular economy is not without its obstacles. The high cost of repair and refurbishment due to high labor and transport costs will require economies of scale and incentives to make repair and refurbishment cost effective. The challenges of collection and logistics for furniture take back will also have to be addressed.
The road to achieving the circular economy is not going to be a smooth ride, but with global players and startups starting to address the issues, it is a step in the right direction. Rinse and repeat is not going to be that easy.