The move towards a circular economy is at a crossroads. Consumers are more alert than ever to the menace of waste and pollution. Regulations and financing support in the UK and Europe are accelerating the transition. But the switch to re-using products, packaging and materials depends on consumers changing their habits and expectations, and perhaps giving up some of the speed and convenience they’ve got so used to. Rather than proactively making such changes, most consumers are expecting businesses to find ingenious ways to make it easy for them to break the make-consume-dispose cycle.
On the one hand, re-use has been around for years – think milk floats taking back empty bottles. In some cases, it’s also been easy to adopt. ‘Bags for life’ are a relatively simple concept for shops and customers to make a dent in the global single-use plastics mountain. But, as they contain two to three times the plastic of single-use bags, government levies on all plastic bags are key to nudge shoppers into re-using them.
Broadening the bring-your-own-bag concept, UK supermarket Waitrose has expanded packaging-free products from the fruit and vegetable aisles to include pasta, cereal, rice and more. Customers load up their own containers, or pay a deposit to borrow one, in a move that follows the lead of Whole Foods Market in the US. Meanwhile, cosmetics giant Lush has opened plastic-free stores in Manchester, Berlin and Milan. And zero-waste or zero-packaging shops are springing up around the world, from ALLgoods in Copenhagen and fillgood in San Francisco, to Novo in Bolzano and Gather in London.
This is against the backdrop of a wider shift to re-use platforms such as sharing, renting and returning products, particularly among younger, urban consumers. Businesses like Rent the Runway and Loop have all exploited technology to offer a new kind of service that’s quickly made the shift from ownership to access feel commonplace and second nature.
But re-use can also seem inconvenient for consumers, due to a range of practical barriers, such as processes for returns, perception of hygiene and the retail experience, especially around luxury items. While some people are ready to lease jeans from Amsterdam start-up MUD Jeans, furniture from IKEA, technology from Grover, or sign up to a car subscription service from Volvo, the idea of not owning such personal things outright is still too big a mindset shift for many.
For businesses too, there are barriers to offering re-use. Often, product businesses don’t have direct relationships with customers, so they need to build the relationships and learn how to keep customer connections. They’ll need to handle elements like collection, inspection, cleaning, repackaging, inventory management, pricing, re-distribution and more – all of which require new skills and capabilities, as well as decisions around doing it yourself or partnering. Businesses will also need to work out the costs and understand the potential profit and risks. Re-use models are different to the make-and-sell models – lent assets remain on balance sheets and their value evolves in different ways. There’s also uncertainty around potential customer take-up and the prices they’re willing to pay.
Re-use models are vital to improving sustainability. And these circular models can bring value to consumers and businesses, including those that don’t sell direct to customers. And now is a good time to commit.
Consumer sentiment is real, and it’s relevant. If anything, the disruption caused by COVID-19 has made consumers more open to questioning what everyday life looks like and more receptive to change. For example, if shops and direct-to-consumer organisations handle hygiene well, customers could prefer using their own containers as they won’t have to worry about contamination from products passing through countless hands.
We recently worked with Dunnet Bay Distillers, who have revolutionised the spirits industry with a recyclable pouch that lets customers minimise waste by refilling their ceramic Rock Rose gin and vodka bottles. Customers post the pouches back, with no need for an envelope, and they become plastic pellets upcycled into new products. The business also saves substantially on storage and shipping costs because the pouches weigh a fraction of the bottles. And customers win because the refill is much cheaper than the bottle.
Another great example is Stuffstr. They give businesses a way to take back used clothes and put them back into circulation. Critically, it’s easy for consumers – there’s no listing or shipping; couriers pick up everything. And businesses win because giving past purchases a buy-back value keeps their customers loyal. Interestingly, big names like John Lewis are showing such a model works. In a pilot with Stuffstr, customers sold back about 20 per cent of what they’d bought from the store in the last five years. None of them had ever resold anything, and some hadn’t even taken their used items to charity shops or recycling centres. Stuffstr says ‘recommerce’ will double in size over the next five years.
Business-to-business supply chains can benefit too. Brambles is an Australian business offering reusable pallets, crates and containers. It’s not a tiny start-up but a listed company with 11,000 employees and $4.6 billion in revenue. And with origins going back to 1875, it shows a long legacy needn’t be a barrier to changing purpose and practice. Caterpillar, another name with a long history, has spent decades honing its remanufacturing operation, which means customers get equipment and parts at 50-60 per cent of the cost of the new equivalent, but with as-new performance. The ability to predict when new parts are needed using digital technology promises to make the model even more attractive.
While consumers must make at least some changes to their usual buying habits, reuse models are working.
According to the Ellen MacArthur Foundation, replacing just 20 per cent of single-use plastic packaging globally with reusable alternatives offers an opportunity worth at least $10 billion.
Adopting models based on sharing, renting and recycling, businesses can create new revenue streams and deeper, potentially much more valuable, relationships with customers that last beyond a single sale. They can also squeeze more value from existing products by extending their lifespan and increasing their end of life value. All while cutting operational costs and costs in raw materials. And investors are increasingly looking at environmental, social and governance (ESG) ratings and other measures that guide investment in businesses and shape public perceptions – more sustainable businesses will attract investment.
For some businesses, re-use could be the opportunity they can’t afford not to take.
How can the circular economy create value for your business?