A man recycling a product © 123RF
A man recycling a product © 123RF

'Insufficient business case biggest barrier to circular economy'

22 April 2016

The number of sustainability executives who think the circular economy will be important to their business has nearly doubled, according to research.

But an insufficient business case has been cited as the biggest barrier to implementing a global circular economy, along with the logistics costs to reclaim used goods, lack of executive and consumer understanding and other business objectives taking priority.

The Circular Economy Research Study 2016, carried out by sustainability think tank Greenbiz and UPS, found that 86% of executives surveyed believed the circular economy would be important to their business two years from now. This compares to 47% who felt the same two years ago.

The online study aimed to provide an understanding of the business drivers and challenges associated with the circular economy, where resources and products are reused and regenerated after the end of their initial life.

Respondents predicted that the biggest growth in the adoption of the circular economy model would come from the technology sector – especially electronics such as computers and cell phones – as “take-back” systems and product reuse are most easily integrated with these products.

Nearly three in five respondents said their organisation was implementing circular economy principles in at least one of its product lines or services.

The survey also highlighted the belief that logistics played a critical role in implementing a sustainable circular economy.

Some 97% of respondents said logistics was very important (87%) or somewhat important (10%) to moving to a circular economy.

Respondents felt that logistics companies could help incentivise increased participation in the circular economy through a seamless and convenient take-back model.

Pre-paid shipping labels, smart packaging and convenient take-back mechanisms helped fuel market demand, while customer and consumer costs could be reduced through the use of backhauling as well as load and route optimisation, the survey found.

However, the study also suggested that businesses would need to identify a better business case and generate market demand through incentives focused on cost and convenience, if the circular economy concept was to be embraced.

A quarter of respondents said customer and consumer demand for products that are recoverable, recyclable or able to be refurbished was the most important factor in the adoption of a circular economy.

Respondents believed the best incentives to ensure the return and the reuse of consumer products was a cash back rebate (56%). This was followed by making it convenient to return a product at a brick-and-mortar location (47%), being able to return a product with pre-paid shipping (42%) and discounts towards future purchases (40%).

The best way to ensure the return and reuse of industrial products was the producer or distributor physically reclaiming the product (59%), turnkey packaging and pickup services (51%), the manufacturer refurbishing products and organising returns for continued use (48%), discounts towards a future purchase (38%) and cash back (34%).

Ed Rogers, UPS senior director of global sustainability, said the growing importance of circular economy concepts to business was not a surprise.

“Our customers are recognising the environmental and social impact of their products and operations across the entire value chain, from raw materials and design through manufacturing and logistics,” he said. “They recognise the opportunity to move toward a model that keeps resources in use for as long as possible.”

John Davies, GreenBiz Group vice president and senior analyst, said there were many reasons to consider moving away from the traditional “make-use-dispose” economic model.

“In addition to growing demand among consumers who value sustainable businesses and products, businesses are also being motivated by factors such as resource scarcity and climate change,” he said.

“Our research shows that rethinking processes surrounding material inputs, product design and logistics will all be necessary to move toward a more regenerative, circular economy.”

The study was an online survey of 423 respondents within the GreenBiz Intelligence Panel.

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