A circular economy model offers a strong business case by reducing waste, lowering consumption, and keeping resources in play for longer. When rethinking product lifecycles, companies can improve efficiency while reducing their environmental footprint.
According to a Gartner study, 75% of supply chain leaders now consider the circular economy a strategic priority. Such a change demonstrates the growing recognition that sustainability is not just an ethical choice but a profitable one.
Businesses adopting circularity can differentiate themselves, cater to the increasing demand for eco-friendly products, and position themselves as forward-thinking leaders in sustainability.
Many businesses are struggling to implement circular practices due to deeply ingrained linear supply chain models.
Only 19% of organizations have the necessary tools and processes to support circularity initiatives effectively, according to Gartner. A gap in capabilities has led to a decrease in global circularity rates, dropping from 9.1% in 2018 to 7.2% in 2023, as reported in the Circle Economy Foundation’s Circularity Gap Report 2024.
A 21% decline signals the challenge of transforming established, resource-intensive systems into ones that prioritize reuse and sustainability.
Several factors impede the widespread adoption of circular models. Systems for waste collection are underdeveloped, particularly in emerging markets, which hinders efficient recycling and material recovery. Companies often fail to collaborate across the value chain, focusing on individual gains rather than collective, industry-wide progress.
Such a need for scalable technologies is another barrier, as existing innovations in circularity often lack the reach or integration required for mass adoption. According to Guy Bailey of Wood Mackenzie, companies must find ways to build relationships that encourage shared value creation across the entire supply chain, not just within their own operations.
Your circular economy success blueprint
In order to unlock the full potential of circularity, businesses must embrace technologies that streamline resource reuse and extend product lifecycles. Solutions like advanced tracking systems, AI for supply chain optimization, and specialized ERP software can improve the visibility of materials and components, facilitating better reuse and recycling.
When investing in such tools, companies can also make sure of better compliance with evolving sustainability regulations while simultaneously creating efficiencies that reduce costs.
For circularity to thrive, standardization is key. Creating common processes and benchmarks across industries ensures that all stakeholders measure and approach circularity consistently.
Collaborative partnerships also improve circular initiatives, creating a networked approach that shares risks and rewards across the value chain. Whether it’s through industry consortia or joint ventures, businesses that work together are better positioned to achieve scalable circularity.
Securing executive buy-in is critical for long-term circular economy success. C-suite leaders must see the business case for sustainability as an environmental initiative but as a driver of innovation and revenue growth.
Engaging key stakeholders early on and aligning circularity goals with broader company objectives can help build the internal momentum needed to see these initiatives through. According to Anne Michelle Avolio from Gartner, companies that get this right can transform circularity from a side project into a core strategic priority.
The tough challenges on the circular path
While the concept of keeping resources in use for longer seems straightforward, implementing it can be far more complex. The lack of clear standards across industries makes it difficult to define what constitutes a circular product or service.
Processes remain fragmented, with different parts of the value chain often working in silos. This disconnection reduces efficiency but can lead to disputes over value allocation, weakening the overall system.
Another obstacle to circularity is the imbalance between the supply of renewable or recyclable materials and the growing demand for them. With many companies setting ambitious sustainability targets, competition for limited resources is intensifying. This dynamic drives up prices, making it more expensive to adopt circular practices.
Guy Bailey from Wood Mackenzie notes, companies must work together to ensure the supply of circular materials keeps pace with demand if these initiatives are to succeed on a larger scale.
Circularity can boost, not break, your bottom line
One of the most persistent misconceptions about the circular economy is that extending product lifecycles or reusing materials will negatively impact revenue. In reality, adopting circular models often opens up new revenue streams. “As-a-service” business models, where companies lease rather than sell products, are becoming increasingly popular, particularly in tech industries.
When extending product lifespans and tapping into refurbished or recycled markets, companies can reduce costs and increase profitability, all while appealing to sustainability-conscious consumers.
Circular economy success stories
Businesses that embrace circularity are finding opportunities to enter new markets and serve broader customer bases. When designing products in modular or flexible ways, extending their lifespans, and offering refurbished or recycled versions, companies can introduce lower-cost alternatives that attract new consumers.
Circular practices also yield cost savings, innovation gains, and sustainability benefits, as noted by Autumn Stanish of Gartner. When capitalizing on these advantages, businesses can simultaneously grow market share and bolster their bottom line.
Inspiring moves from fashion to tech
Several industries are already leading the charge in adopting circular practices. In the IT sector, refurbished computers, smartphones, and GPUs make up a comprehensive secondary market that offers savings and extends product lifecycles.
The fashion industry is shaking off its fast-fashion reputation, with companies like Supercircle offering discounts to customers who return old clothing for recycling. Such an approach helps retailers source materials for new products while reducing textile waste. These initiatives demonstrate that even the most resource-intensive industries can pivot towards sustainability without sacrificing profitability.
Zero-waste is changing the game
Packaging is another area ripe for innovation. In Vancouver, for example, Reusables has introduced RFID and QR-coded containers for food and beverage services. This system incentivizes customers to return containers, reducing waste while keeping packaging in circulation.
With a 95% success rate across more than two dozen establishments, this model showcases how zero-waste packaging can be both practical and scalable. Similar models could have widespread applicability in the retail and foodservice sectors.
How big players are making it work
Even industries traditionally reliant on linear production models, such as petrochemicals and heavy manufacturing, are beginning to adopt circular practices. When forging partnerships, implementing vertical integration, and sharing the proceeds of circularity across the supply chain, these sectors are discovering new ways to minimize waste and maximize resource efficiency.
As Guy Bailey from Wood Mackenzie points out, shared incentives are key to making sure that all participants in the value chain are motivated to act.
How to achieve circularity with smart strategies
Many companies set ambitious targets for circularity but struggle to translate those goals into actionable strategies. Shifting the focus from what needs to be achieved to how it can be realized is critical.
Such a process requires innovation in business models, from leasing and refurbishment services to pay-per-use systems that extend product lifespans while offering new revenue streams. According to Guy Bailey, organizations that successfully make this shift unlock both environmental benefits and new commercial opportunities.
Instead of overhauling entire operations at once, businesses should start with pilot projects that test circularity principles on a small scale.
Pilots allow companies to identify what works, refine processes, and build internal expertise before expanding the model. Both B2C and B2B markets present opportunities for early wins.
As Gartner’s Anne Michelle Avolio suggests, focusing on a few key products or services initially can help build the momentum necessary for larger, organization-wide initiatives.
How companies are winning with sustainable strategies
Successful circular economy strategies rely on strong leadership and cross-departmental collaboration. Executive sponsorship ensures that circular initiatives are prioritized and adequately resourced, while coordination between internal and external stakeholders ensures seamless implementation.
When these factors align, circularity becomes a powerful driver of innovation, sustainability, and revenue growth. Anne Michelle Avolio stresses that companies able to integrate circularity at all levels of the organization will see the most gains in both financial performance and environmental impact.
How circularity can transform your entire business
Circularity extends far beyond products. Businesses can also apply circular principles to operations, including optimizing building materials, machinery, energy consumption, and water usage.
When redesigning facilities with sustainability in mind, companies can drastically reduce their resource footprint while achieving cost savings. Combining circular products with circular operations offers a comprehensive approach to sustainability that can deliver long-term value.
Technology plays an essential role in enabling businesses to implement and scale circular practices. AI-powered tools can identify inefficiencies, track materials through complex supply chains, and verify that components are sourced from renewable or recycled materials.
Specialized software and ERP systems further support the integration of circularity into everyday business operations, giving greater transparency and accountability. Guy Bailey highlights that technology-driven solutions will be essential to the future success of circular initiatives.
