The circularity movement
Participating in the circular economy continues to be on every company’s sustainability to-do list in 2022. This movement has resulted in a burgeoning industry of resale, leasing, subscription, re-commerce, product-as-a-service providers, and an increased flow of financial capital. According to the Ellen MacArthur Foundation’s Finance Report: Facing the Circular Economy, assets in public equity funds dedicated to the circular economy grew 28-fold from $300 million USD to almost $9.5 billion USD from 2019 through November 2021. Many of the circular technology and operational start-ups are filling crucial gaps and enabling brands to build scalable circular businesses. Other times, they provide a quick solution that at worst can end up creating negative externalities.
Brands are looking for solutions in this new (green) gold rush and it’s challenging to understand the space, let alone build a circular business model that truly enables an organization to begin its transformation away from a purely linear business model. But for brands, circular business models are the ultimate sustainability initiative. When done well, they generate revenue and customer engagement while reducing impacts. Effectively, they enable an organization to derive revenue from products that already exist, without added raw material inputs.
Navigating your circularity journey
So how does a brand navigate its circularity journey? While it might sound attractive to flip the switch to “on” through a circular technology or operations provider, it’s never that simple. After being in this space for the last decade and having built circularity systems for brands, including my experience as the architect of Patagonia’s Worn Wear program, I can personally attest to the challenging nature of this work. In my experience, these are the three most common missteps of a brand’s circular business model:
- Inventory shortages and customer participation. Perhaps surprisingly, many circularity programs are hampered by a lack of customer participation which results in insufficient inventory levels for programs to generate meaningful revenue for a brand. Circular systems, at their heart, are behavioral changes. These business models are asking people to switch from linear mindsets to circular ones – not always an easy task. For example, motivating people to refill a product before they run out completely is not nearly as easy as buying a new one at the street down the store. Getting customer participation right is key to scaling a circular business.
- Lack of long-term internal support. You may recall the 1980’s Film, Field of Dreams, in which Kevin Costner’s character hears the famous quote, “If you build it, they will come.” As much as we’d like circular businesses to be self-sustaining; but, they actually need the same level of strategy, marketing, operational, and digital support as any product line. This means that someone needs to oversee them. The most successful circular businesses have a champion and leader, either internally or externally based, but there’s someone reminding the company that this program matters to the brand and its customers and they garner the required support of the organization.
- Unintended consequences of the business model. The most important part of any circular business is that it facilitates a transition in the brand’s business model from purely linear to partially circular. If the model inadvertently encourages the consumption of new things, it might not be delivering the desired sustainability goals. This likely sound completely obvious, but in this green-gold rush, there is an ample supply of technology platforms that get a thumbs-up from the C-Suite precisely because they promise these sales.
The right program, suited to your company’s needs
Signing up with the first circularity service provider may sound like an easy choice that checks off the to-do list, but the danger is spoiling the opportunity –- as the adage goes, ‘you only get to go first once’. Presenting customers with a circularity solution that is not the right fit for them or the brand can sour the experience for both public and internal support for this critical initiative, making the transition to circular unnecessarily difficult.
Anthesis can help. We’re not here to build complex, detached, and costly sustainability programs – rather our goal is to deliver simple, integrated, commercial sustainability solutions to our clients. We have a cohesive ecosystem of skills to do this, and we can help brands discover and nurture productive relationships with service providers. A circular business can so easily be seen as an inviting and palatable sustainability initiative to implement; but it is a deep shift in mindset, business models, commercial strategy, product and packaging design, and brand value. It should not be taken lightly, but rather leveraged to save our home planet.