This article is provided by BRC Associate Member 4C.
The concept of a circular economy has become an industry buzzword – often repeated, often understood, but difficult to fully implement and achieve. So, what is a circular economy and how can retailers – large and small - work towards it?
Kirchherr, Reike and Hekkert describe the circular economy as “an economic system that replaces the end-of-life concept, with reducing, alternatively using, recycling and recovering materials in production/distribution and consumption processes”.
The Ellen MacArthur foundation suggests that it operates around three main principles:
- Design out waste and pollution – achieved by promoting reduction and elimination of negative impacts during the design phase.
- Keep products and materials circulating at their highest value – preserving the value of materials and products over time, e.g., extending product life cycles, repair, and re-use etc.
- Regenerate nature – favour use of more sustainable materials and renewable energy sources, rather than fossil fuels.
It exists at both micro and macroeconomic levels, meaning a move towards a more circular economic model has become a focus of consumers, businesses, and governments in the last decade. The main drivers behind this desired transition are widely considered to be climate change, regulation and growing urbanisation. Nowadays, climate change is a key driver behind many business decisions, leading to rapidly increasing regulation and it is predicted that, by 2050, 55% of the world’s population will be living in urban areas.
From a retail perspective, this indicates a redesign of products to be more durable, repairable, and recyclable, and changing views on consumerism. There are several innovations that are being brought into the retail sector that will aid this transition to a more circular economy:
- Product as a service (PaaS) - for Retailers, this can represent an opportunity for a budding e-commerce landscape. Subscription and service models allow retailers to create relationships with PaaS providers and deliver effective channels to market without heavy investment and wasted resources.
- Upcycling - the process of taking waste goods or materials and turning them into higher value products. A survey from Element Three and SMARI found that 87% of millennial online shoppers say that sustainability is a key attribute of product that will inform their buying decisions.
- Circular design - a design philosophy in which the use of sustainable materials is emphasised. This way, products can be easily repaired, upgraded, or recycled to reduce waste.
- Closed loop supply chains - a system in which products are designed in a way that allows them to be easily disassembled and recycled or reused at the end of their life.
Are smaller businesses as involved in circular practices, without the social pressure that large companies face?
As with many changing business landscapes, smaller companies are just as valuable to inciting systemic change as large organisations. Coupled with their ability to be more responsive and pioneering in their strategies due to their more agile business infrastructure and higher risk tolerance, the circular economy poses a great opportunity for small businesses.
A fantastic local example can be seen in a 6-month trial undertaken by ReLondon, alongside Islington council, where 23 local small-to-medium enterprises (SMEs) were given grants between £5,000 and £10,000 to implement new, or scale existing, circular economy practices. During the 6-month trial, 7,724kg of waste was avoided – that is around 260 bin bags a month, and 25 jobs were created or safeguarded. The initiative also had fantastic wider community engagement, with 16,000 customers taking part in circular activities. A phone repair shop in Archway used the grant to purchase additional equipment that allowed them to perform same-day repairs. Despite the cost-of-living crisis, their increased circular activity drove a 22% increase in customers over the programme.
How are large companies committing to delivering Net-Zero?
Net-Zero commitments are also on the mind of large retailers, with a plethora of multinational retail giants signing up to support the BRC Climate Action Roadmap. These companies are committing to reducing carbon footprints through five pathways:
- GHG data at the core of future business decisions.
- Sites to be powered by renewable energy.
- Low-carbon logistics.
- Sustainable sourcing.
- Helping employees and customers become more sustainable.
A prime example of international companies driving innovation to meet their Net-Zero commitments can be seen within Mars. In July 2021, they announced a new development: FSDUs designed from 70% recycled paper and 30% waste cocoa bean shells. This adds to work started in 2020, where Mars removed 51 tonnes of plastic from their selection of chocolate sharing bags in the UK. Retail giants like Mars that possess an abundance of resources and funding, with a company mission to become more circular, can inspire future generations of retail and drive progress across the industry.
Although reaching net-zero is a challenge, it is evident that large companies are championing developing circular policies and establishing best practices, whilst smaller businesses take steps to new initiatives. The role of procurement and supply chain teams in developing these practices and leading these innovations will be more important than ever in transforming written commitments into measurable, tangible actions.
ReLondon – Islington circular economy grants: https://relondon.gov.uk/business/islington-circular-economy-grants/
OECD report on drivers of circular economy:
Net Zero BRC: https://brc.org.uk/climate-roadmap/