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With Australia projected to hit its annual Earth Overshoot Day later this month – the day each year by which we’ve already consumed a year’s worth of resources based on Australians’ footprint – we’ve been thinking a lot about sustainability. Specifically, how brands are facing increasing pressure to join the circular economy.
What is the circular economy?
Our economy is largely based on a linear take-make-dispose system. According to the UN, currently only nine percent of the 90 billion tonnes of primary materials that are extracted and used globally every year are recycled or reused. In a circular economy, the aim is a dramatic reduction in waste through the continual use of resources. More than simply increased recycling, circular businesses are completely rethinking the system. Manufacturers design saleable goods to be reusable, or they retain ownership of goods over the entire product lifecycle, leasing out access to end users and then repurposing, over and over again.
In a circular economy, instead of buying a new washing machine, I rent one directly from Miele. When it finally conks out in 15 or so years, instead of me leaving it out on the sidewalk for a council clean-up day, Miele picks it up, takes it back to a factory, and repurposes all the components into new appliances. This system reduces waste going to landfill, prevents further ‘virgin’ material extraction, and incentivises companies to produce higher-quality, longer-lasting goods (not to mention all but eliminating my green guilt).
Why is it important?
Consumers and shareholders have woken up to the fact that we consume resources at an unsustainable rate. But that doesn’t stop people from consuming. Instead, people are shifting how and where they consume by actively seeking out brands that embrace sustainable practices, and punishing those that don’t. The result means that circular principles aren’t just good for the environment, they are highly profitable. Take fashion for example: By 2023, the resale market will be worth an estimated $51 billion USD and the rental market close to $2 billion USD. Both markets are expected to grow rapidly, with rates generously outperforming traditional — linear — apparel retail, and are set to displace fast fashion in as little as 10 years’ time.
How are brands embracing it?
Circular-by-design brands like The RealReal, Loop, and Mobile Muster are disrupting existing linear markets and growing rapidly. But established brands are also integrating circular principles into their business models. Sustainability poster child Patagonia introduced Worn Ware to enable customers to repair, share and recycle their outdoor gear. Ikea introduced a large-scale buyback program in 2020, where customers receive a portion of their item’s sale price in the form of an Ikea voucher. Burger King is testing reusable packaging, while Adidas has achieved the Holy Grail of circular manufacturing with a shoe can be completely recycled at the end of its life and used to make a new pair of the same shoes.
But not all brands have the deep pockets of Ikea or the ability to start from scratch like The RealReal. To start, businesses should ask themselves a few key questions to begin planning for a circular future:
1. How might we inspire our customers to use or repurpose our products or packaging in new ways?
2. Do we have excess or unused stock that can be better utilised through leasing?
3. Can we take back our products when customers no longer want them, or help our customers repair our products for a longer lifespan?
4. How can we make it as easy as possible for customers to recycle our products?
5. How can we reward sharing or reusing amongst our customer base?
Once you have a circular idea you’d like to trial, the next step is getting consumers on board, which may require convincing them to shift well-established consumption habits. Here at Edge we’re big fans of using behavioural economics to create new social norms, but that’s a topic for another day!
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