The Transition To A Circular Economy – And What Businesses Need To Know

It is nothing new for organisations, consumers and governments to take a keen interest in global sustainability. However, many of us might not be aware of precisely what these institutions and individuals are doing to help usher in the new era of the circular economy.

More and more, customers are exerting pressure on companies to embrace circular models. Unsurprisingly then, recent years have also seen shareholders place greater emphasis on the measures their companies are adopting in relation to social and environmental issues.

How can a business move towards circularity?

If private-sector businesses are to be successful in achieving circularity, it is crucial for them to be aware of the business models that would be most helpful in this regard.

The Organisation for Economic Co-operation and Development (OECD) has outlined five such business models for firms seeking to transition to a more resource-efficient and circular economy:

• circular supply models
• resource recovery models
• product life extension models
• sharing models
• product service system models

Some high profile organisations have already embedded one or more of these models into their all-round business processes.

Specific steps that businesses may look to take on their journey to circularity include investment in innovation and research & development, as well as increasing collaborations, incentivising innovation by employees, and the termination of existing contracts, so that they can be replaced with alternative arrangements. Many firms are also engaging circularity specialists to aid them in undertaking this important transition.

What are the consequences and risks of circular business models?

The adoption of circular business models is not without its risks. In collaborative situations, for instance, it is vital for all parties involved to be clear about who will own, or have the right to use, the data, intellectual property and know-how arising from the relevant products or processes.

A similarly pressing priority is for due diligence to be undertaken in supply chains to discern whether there are any links in the value chain that are not circular.

In addition, businesses must be cautious about any ‘green’ claims they may make in their marketing materials. Any such claims turning out to be false present the risk of consumers initiating actions in relation to misrepresentation, or actions based on their consumer rights.

With moves being made across the UK, the European Union (EU) and the world towards a more circular economy, it is not a matter that many businesses around Europe and beyond will be able to ignore in the months and years to come.

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