The Circular Economy: Why Now?

In our last discussion, we talked about a comprehensive approach to sustainability called the circular economy.

The circular economy takes the idea of “reduce, reuse and recycle” to a whole new level, one in which manufacturers, suppliers, retailers and customers aim to create a zero-waste supply chain.

This nifty diagram from the Carlsberg Foundation illustrates the differences between the linear economy (“take, make, use and waste”) and the restorative, multi-faceted circular economy (just look at everything possible after “use”).

The Burning Question

Nifty diagrams aside, why should manufacturers, suppliers and retailers care about the circular economy at this very moment?

Is the circular economy an idea that’s merely the darling of an elite few? A concept that’s destined to be the latest business fad?

Or is there real evidence indicating that “going circular” is the wise way of the future?

Two Consequential Generations

Thought leaders have long looked to Generation Y—also known as the Millennials—to back up their purported commitment to the environment with a change in purchasing patterns. And so far, most business and media mavens would probably say that Millennials are more talk than action—that is, they are unwilling to change their buying habits and pay more for sustainable products.

Then we have the successors to the Millennials, Generation Z. Again, most experts believe that when they’re acting as consumers, Gen Z has an even greater interest in social transparency, coupled with a similar passion for the new and the unique.

Expert opinion is helpful, but what does the evidence actually suggest about the buying patterns of Gen Y and Gen Z?

Patterns Are Shifting

Well, it seems that both generations are committed to change. In a recent survey by Thredup, 25% of women are willing to ditch their fast fashion purchases in 2019, with disproportionately higher percentages of “ditchers” among the Gen Y and Gen Z cohorts. These numbers imply that the “greening of retail” will only intensify in scope and impact.

Moreover, we’re now seeing businesses who are moving closer to a circular economy, connecting with their (mostly) Gen Y and Gen Z audiences, and reaping real benefits from both:

The trend is clear: Customers are increasingly selecting brands and retailers who are committed to change and transparent about their responsible sourcing capabilities. The question is no longer about customers comparing prices and then selecting the cheaper product, regardless of environmental impact—sustainability is becoming a deciding factor in consumer purchases.

What’s more, brands are increasingly becoming a reflection of personal value for Generations Y and Z. You can throw the status symbol stuff out of the window—if a brand’s value system isn’t in line with a consumer’s personal ethos, those customers won’t even look at a real or virtual shelf without meaningfully sustainable products.

Going Circular Will Become Reality

Beyond the shift in consumer appetites, the digital revolution, with its data gathering capabilities and innovations such as artificial intelligence, will also usher in the reality of the circular economy.

According to the Ellen MacArthur Foundation, a leader in all things “circular:”

“Enabled by intelligent assets, a new model of development gradually gaining independence from finite resource extraction is emerging . . . Such a system would generate, on top of business advantages, multiple benefits for users and society as a whole.”

In fact, I highly suggest reading the 2016 report on unlocking the value of the circular economy by this same Ellen MacArthur Foundation. Without question, this report is the gold standard for an in-depth look at the circular economy and its viability.

And three years later, the premises and predictions outlined in this groundbreaking MacArthur report only continue to build in pervasiveness and impact. So if you’re interested in taking an even deeper dive into the circular economy, you may want to peruse some of these publications.

Next Up

In my next update, we’ll move from theory to practice. We’ll talk about what you can do—as a retailer, supplier or manufacturer—to prepare for this new “circular” reality.