Circular economy's virtuous circle

A radical departure from the old linear “take, make, waste” production and consumption models, the circular economy instead decouples growth from the constraints of natural resources and environmental impact. Better yet, it’s a virtuous circle prompting companies to double down on innovation and customer value.

As business today moves away from a mindset of doing “less bad” in terms of their sustainability practices, the question becomes, what does “good” look like?

For us at Accenture Strategy, on environment, the answer lies in the circular economy. We think of it as the ultimate virtuous circle that isn’t just the right thing to do for the planet, it also serves as an engine for growth and innovation for business.

Just how much potential does the circular economy hold? According to our own research, turning waste into wealth will be worth $4.5tn in the next 15 years for businesses globally.

That’s not just waste in the traditional sense of rubbish, but the enormous underutilisation of natural resources, products and assets. It’s about eliminating the very concept of “waste” and recognising everything has a value. While not a panacea for sustainable development, it is a major opportunity for transformation.

In our extensive research over the last two years and across hundreds of companies, we uncovered five business models that not only drive profit through mitigating waste, they also drive profit by fuelling new sources of innovation, and by bringing businesses much closer to customers.

Product as a service is one such model. By putting sensors in products, a dishwasher for instance, companies can better analyse and understand performance, wear and tear and maintenance issues.

Information flows again and again back to where the most can be made of it. It’s a shift in the usual company-to-customer dynamic that brings the end consumer into much closer contact. And it allows companies to discover exactly what buyers care about and how exactly they’re using products and services – which becomes a source for improvement and innovation 

Just as the steam engine powered the industrial revolution, digital is powering the circular revolution. Across every link of the value chain from the backend (providing the technical platforms that allow data gathering and sharing) to the front end, (payment, customer service, etc) cloud, mobile, social, machine-to-machine communication and big data analytics allow for new levels of automation and coordination.

Adopting the virtuous circle of circular practices is about gaining competitive advantage by doing away with the broad concept of waste. Yes. But as important – or perhaps more – it’s about gaining unprecedented insight into consumers by adopting business models engaged in every link of the value chain. Along the way, gaining an edge from the circle means getting much more agile, adaptive and aligned to customer need.

Readers might also be interested in the Circulars – an initiative of the Young Global Leaders taskforce supported by the World Economic Forum – which is looking for nominations for the individual leaders, corporations, entrepreneurs, digital businesses, investors and public sector organisations establishing the circular economy.

Click here for full details, including the awards ceremony held during the World Economic Forum’s annual meeting in Davos in January 2016. Entries close 30 September.