If you've been on this journey with me for a while, or even if you're just joining me (welcome, BTW), you're probably interested in learning more about the circular economy, even if you're still a bit uncertain about taking the plunge.
Here's a real-life concern: What will happen to your business if you decide to sell products that will last longer for consumers who want to buy less? That's the circular way, and yes, it might add up to fewer sales dollars. And less profit. Which hardly serves your bottom line.
I get it; I do. Why would you pursue something that might reduce your revenue in such a challenging retail environment? Should circular approaches and sustainability really be your top priorities right now?
There. Does it feel good that someone finally said (wrote) that out loud?
Still, I'm going to invite you—encourage you, maybe even exhort you—to make the shift to a circular mindset. Circular can be good for the environment, good for your customers, good for your team, and good for your business. But it will require you to revamp some elements of your business.
Circular Economy Opportunities
The Ellen MacArthur Foundation estimates that retailers lose $500M in revenue every year because they continue to use linear systems instead of circular ones.
Now, that's a lot of missed opportunities.
So, how can you reclaim that value in your business, while advancing the circular cause? Well, perhaps you could:
Find more suppliers that create products without using virgin raw materials
Collect and safely recycle used goods from your customers
Create secondhand markets for selling those goods
Upcycle production waste
Increase productivity in cultivated spaces by diversifying crops or using water more efficiently
Yes, you can do these things—and more. Companies adopting circular principles are finding creative ways to increase revenues, reduce costs, and increase business resiliency by managing risks.
Resilience, Risk, and the Circular Economy
But how can circular approaches influence resilience and risk?
In commercial food production, for example, regenerative agriculture improves supply chain resilience by safeguarding ingredients from pests, diseases, and extreme weather. In general merchandise, resilience can come from using more sustainable cotton, recycled plastics, or nearshoring production.
Even better, investment firms are starting to take notice of these resilience-increasing, risk-reducing approaches. The volume of assets held by public equity funds that target circular technologies and businesses has multiplied six times since the start of 2020. Early results show that these investments are doing well, as they have performed 5 percentage points better than category benchmarks.
Of course, past performance does not indicate future results, but it is an exciting trend to see.
Circular Investment Examples
Closed Loop Partners is a New York-based investment firm that provides equity and project finance to scale products, services, and infrastructure that support the circular economy. They made news in the summer of 2020, as they raised $15M from prominent retailers such as CVS, Target, and Wal-Mart to fund the Beyond the Bag initiative, an effort to find a circular alternative to the ubiquitous plastic shopping bag. Exciting solutions are being tested throughout US stores now.
Other well-known financial teams prioritizing circular investments include BlackRock, BNP, Goldman Sachs, and ING. Corporations investing meaningfully in circular include Google, Alibaba, Apple, and Pepsi-Co. The stunning investment in Trove, now in its Series D funding round, raised more than $75M.
It is becoming clear that the circular economy is a good business to be in.
When you adopt circular strategies, not only can you meet your sustainability commitment, but you can also deliver a significant return on your circular investment.
At this point, the pivotal question is, what are you waiting for?
In my next post, I'll dig into ways you can build momentum for a circular strategy, then take those first steps toward developing and deploying your own circular roadmap.