Companies making the change from linear to circular business models, aimed at keeping products in use for much longer, want more help from the government, according to a new Green Alliance report.
Circular Business: What companies need to make the switch calls on government to set mandatory reporting requirements for companies on emissions embedded in their supply chains.
Compiled from 20 anonymous interviews with businesses and industry experts across fashion, electronics and construction, the Green Alliance report finds more needs to be done – and quickly – to accelerate the take up of business models that keep products in use for longer.
Companies stated that it was not until they started to measure their full value chain emissions (‘scope 3 emissions’) that they realised how much of their carbon footprint came from purchased materials, goods and services.
By requiring companies to disclose the impact of their material use, and find circular business strategies to reduce it, the government can drive demand for circular goods and services
Construction is currently the only UK sector with some requirements – for planning applications in London – where statements on embodied carbon and the reuse of products and materials are required to win business.
This is found to be driving progress, with interviewees providing examples of new offerings and innovative partnerships deployed to secure contracts. One sector leader said, “you only take action on carbon if you start measuring it”.
The detailed conversations indicate an opportunity to boost demand for circular goods and services by factoring value chain emissions into decision making. While strong voluntary initiatives from some large companies are already starting to make a difference, economy-wide incentives are lacking: no country currently has mandatory requirements for reporting scope 3 emissions.
Businesses told Green Alliance of their frustration at the lack of government support. “You want to bring the whole industry forward, not just have one or two people moving alone”, said one manufacturer.
Boosting resource efficiency
According to analysis, emissions generated beyond a firm’s own operations are on average more than 10 times higher than direct operational emissions. They include materials extraction, the production and transportation of components, and the final disposal of products.
At the COP26 climate summit, former chancellor Rishi Sunak outlined plans for a mandatory sustainability disclosure regime (SDR) expected to cover value chain emissions for large, listed firms – but the government has yet to provide a clear timeline.
The recent report from the Climate Change Committee emphasised that the UK’s path to net zero emissions was partly dependent on the creation of a more circular economy. It found there are insufficient plans for boosting resource efficiency, undermining wider efforts to reduce emissions.
The report also calls on government to strengthen reporting requirements for large public contracts. It suggests that under new public procurement guidance suppliers should need to submit a carbon reduction plan addressing all associated emissions.
We need a plan to move away from linear business models, focused on selling short-lived goods, to circular models aimed at keeping products in use for much longer.
Susan Evans of Green Alliance said: “We need a plan to move away from linear business models, focused on selling short-lived goods, to circular models aimed at keeping products in use for much longer. Companies making this change want more help from the government.
“Asking businesses to report on their value chain emissions, and supporting them to do so, will encourage innovation in circular, low carbon business models – helping the balance sheet and the planet.
“To drive demand, we need to move on from a voluntary system. The forthcoming Green Finance Strategy is surely the moment to make the UK the first country to set mandatory requirements for embedded emissions.”
Sarah Ottaway, sustainability and social value lead at Suez said: “Keeping products in use creates more value for people, planet and the economy than recycling, but policy support remains insufficient for it to progress beyond a niche activity.
“As this report highlights, by requiring companies to disclose the impact of their material use, and find circular business strategies to reduce it, the government can drive demand for circular goods and services, and create more societal benefits as a result.”