Survey finds use of circular economy models improve company performance

A global survey has indicated that companies who incorporate circular economy models into their operating model are outperforming their traditional rivals. A simple definition of the circular economy model is that it adopts a refill / resale / reuse / repair approach rather than the take / make / waste modus operandi adopted in what is termed the linear economy.

Kearney – the global consultancy partnership – recently published the findings from a survey of 150 companies worldwide. Kearney identified 51 of these companies as “circular economy leaders” insofar as their core business model is non-linear. The results from the survey showed that this group enjoyed improvements in key performance indicators (KPIs) as a consequence of switching to circular products and models.

Within the group of 51, 32% of respondents reported revenue increases since they either launched or increased circular economy products or models. In addition, 38% reported cost-savings benefits, 50% saw increased customer loyalty and 70% experienced an improvement in brand recognition. The prevailing opinion among these organisations attributed the statistics to an increased consumer demand for sustainable goods and services.

Yelena Ageyava-Furman, a partner at Kearney, sees the circular economy as “the next step in the world’s necessary move to a sustainable future [with] the benefits of adopting circular strategy not singularly environmental [but providing] monetary and reputational advantages”.

The Kearney report draws attention to the timeliness of circular strategy with the world facing a “rising resource scarcity and waste problem”. Other research and reports add heft to this argument – the influential Ellen MacArthur Foundation (EMF) estimates that the first eight months alone of 2020 saw the number of outstanding corporate bonds with a circular economy focus almost double compared to the entire 2019.

Furthermore, the EMF calculated the total amount of assets managed through public equity funds with circular economy focus increased six-fold from January to August in 2020 against the full year of 2019.

There is, however, still a long way to go. A report recently published by Circle Economy, the Dutch NGO aiming to accelerate the transition from linear to circular economy, found that the world is consuming more than 100 billion tonnes (Gt) of raw materials a year and just reusing 8.6% of them. The report calculated that 70% of emissions globally are generated by the extraction, processing and manufacturing of goods meeting society’s needs e.g. clothes, mobile phones and food.

Circle Economy identified a set of circular strategies which would reduce that 100Gt amount to 79Gt by reducing the volume of materials used, using resources for longer and replacing finite resources like fossil fuels with renewable energy. The Kearney report highlights how such a transition will also pay dividends in terms of bottom-line returns and public standing.