The Circular Economy Handbook

1. The circular economy offers a $4.5 trillion opportunity by 2030

We are now consuming about 1.75 times the earth's carrying capacity, meaning we are using 75% more natural resources than we are regenerating each year.

Unsustainable linear model. Our current "take-make-waste" economic model is depleting finite resources at an alarming rate. This linear approach is not only environmentally destructive but also economically unsustainable in the long term.

Circular transformation. The circular economy offers a compelling alternative, decoupling economic growth from resource consumption. By designing out waste, keeping products and materials in use, and regenerating natural systems, the circular model presents immense economic potential.

Massive opportunity. Accenture estimates that adopting circular economy principles could generate $4.5 trillion in additional economic output by 2030 - equivalent to 4-5% of projected global GDP. This represents a paradigm shift in how we produce, consume, and manage resources, offering new avenues for innovation, growth, and competitive advantage across industries.

2. Five circular business models drive the transition from linear to circular

To seize the opportunity value of redefining waste, we introduced five business models underpinning the transformation to a circular economy.

Circular Inputs: Use renewable, recycled, or highly recyclable materials to eliminate waste and pollution.

Sharing Platform: Increase utilization of products through shared ownership and access.

Product as a Service: Offer product access and retain ownership to maintain and recover value.

Product Use Extension: Extend product lifecycles through repair, remanufacturing, and resale.

Resource Recovery: Recover valuable materials from end-of-life products and waste streams.

These models, individually or combined, help transform linear approaches into circular ones that minimize waste and inefficiencies. By adopting these models, companies can capture new value, reduce costs, mitigate risks, and drive innovation across their operations and offerings.

3. Fourth Industrial Revolution technologies are crucial enablers of circularity

Fourth Industrial Revolution (4IR) technologies enable the smart use of resources and create new opportunities for the circular economy.

Digital technologies:

• Artificial Intelligence
• Machine Learning
• Cloud Computing
• Internet of Things
• Blockchain

Physical technologies:

• 3D Printing
• Advanced Robotics
• New Materials

Biological technologies:

• Synthetic Biology
• Genetic Engineering

These technologies enable greater efficiency, innovation, information transparency, and reduced reliance on resource-intensive materials. They facilitate new circular business models, optimize resource use, and enable the tracking and recovery of materials throughout product lifecycles.

When combined, these technologies have the potential to create even more powerful solutions for circularity. For example, AI-powered robots can efficiently sort and disassemble products for recycling, while blockchain can ensure transparency and traceability in circular supply chains.

4. Industries must tailor circular strategies to their unique waste challenges

Different industries may need to focus on different types of waste.

Resource-intensive industries like metals and mining, oil and gas, and manufacturing should prioritize:

• Reducing wasted resources in production
• Minimizing energy and water consumption
• Maximizing asset utilization to reduce wasted capacity

Consumer-facing industries like electronics, fashion, and fast-moving consumer goods should focus on:

• Extending product lifecycles to reduce premature disposal
• Recovering valuable materials from end-of-use products
• Implementing take-back and recycling programs

Service-oriented industries like telecommunications and financial services can contribute by:

• Enabling circular business models through digital platforms
• Providing financing solutions for circular initiatives
• Integrating circularity criteria into investment decisions

By understanding their specific waste profiles and value chain impacts, industries can develop targeted strategies to capture circular opportunities and address their most significant sustainability challenges.

5. Circular operations reduce costs and drive efficiency across value chains

Companies can generate circular value in three ways: value addition through cost reduction, revenue migration, and value addition through revenue generation.

Cost reduction is often the most immediate and tangible benefit of circular operations:

• Minimize resource inputs and waste outputs
• Optimize energy and water consumption
• Increase asset utilization and productivity

Revenue migration occurs as circular offerings capture market share from linear alternatives:

• Shift to renewable energy and sustainable materials
• Transition to product-as-a-service and sharing models
• Develop remanufactured and refurbished product lines

New revenue generation emerges from innovative circular business models:

• Create value from waste streams and by-products
• Offer repair, maintenance, and upgrade services
• Enter new markets with circular products and solutions

Companies should prioritize initiatives based on their potential for cost savings, market opportunity, and strategic fit. Implementing circular operations often requires upfront investment but can deliver significant long-term financial and environmental benefits.

6. Circular product design and business models extend lifecycles and value

Building a circular portfolio will ultimately reduce a company's exposure to risk and drive long-term growth and profitability.

Design for circularity:

• Use renewable, recyclable, or biodegradable materials
• Create modular, repairable, and upgradeable products
• Minimize resource use and facilitate end-of-life recovery

Circular business models:

• Implement product-as-a-service and leasing offerings
• Develop sharing platforms to increase utilization
• Establish take-back, refurbishment, and resale programs

Extended value capture:

• Generate recurring revenue from long-term customer relationships
• Reduce dependency on volatile commodity markets
• Create new revenue streams from secondary markets and material recovery

By reimagining products and services through a circular lens, companies can unlock new sources of value, enhance customer loyalty, and build resilience against resource scarcity and regulatory pressures. This shift requires collaboration across design, marketing, supply chain, and finance functions to align incentives and processes with circular principles.

7. Cultural transformation and ecosystem collaboration are vital for circularity

To accomplish that pivot within the circular context, companies must do three things simultaneously: (1) transform the existing value chain to remove waste and increase efficiencies to drive up investment capacity, (2) grow the core business organically by embedding circular offerings to sustain the fuel for investments, and (3) invest in and scale entirely new, disruptive circular businesses.

Internal transformation:

• Embed circularity in corporate vision and strategy
• Develop circular skills and mindsets across the organization
• Align incentives and KPIs with circular objectives

Ecosystem engagement:

• Collaborate with suppliers, customers, and peers
• Partner with startups and innovators
• Engage policymakers and industry associations

Innovation and investment:

• Allocate resources to circular R&D and pilots
• Establish corporate venturing and incubation programs
• Explore new partnerships and business models

Successful circular transformation requires a holistic approach that combines operational changes, business model innovation, and cultural shifts. By fostering a circular mindset internally and collaborating across value chains and industries externally, companies can overcome barriers and accelerate the transition to a circular economy.

8. Financial services play a key role in funding the circular transition

Financial services companies that emerge as pioneers in scaling the circular economy will establish a leadership position, gaining significant advantage over their peers.

Innovative financing mechanisms:

• Sustainability-linked loans and bonds
• Circular economy funds and investment products
• Blended finance and risk-sharing instruments

Risk assessment and valuation:

• Develop new models to evaluate circular business models
• Account for long-term environmental and social impacts
• Integrate circularity criteria into investment decisions

Ecosystem support:

• Provide advisory services for circular transitions
• Facilitate partnerships and knowledge-sharing
• Advocate for supportive policy and regulatory frameworks

Financial institutions have a crucial role in mobilizing capital for circular initiatives and helping to de-risk innovative business models. By developing expertise in circular financing and valuation, they can not only support the transition but also capture new market opportunities and mitigate long-term risks associated with linear economic models.

Last updated: September 6, 2024