A new study from Bain & Company reveals that 55% of large businesses have made commitments to circularity, but a “linear mindset” is preventing them from embedding it into their businesses.
20% of organisations surveyed only had emissions commitments and 25% had no commitments.
Bain’s research shows more than half of the circular initiatives businesses pursue are “narrowly confined” to recycling or waste management strategies rather than embracing the technologies and business models needed for a circular economy.
The research cites examples including reengineering products to last longer, embracing repairability, adopting leasing models, reducing virgin material use, and providing complimentary services throughout the lifecycle of a product.
Bain’s findings are contained in a new brief, Strategy in a Circular World, which is based on a survey of 400 organisations.
Executives will need to shift their mindsets to replace linear business models by decoupling growth from resource consumption.
Jenny Davis-Peccoud, partner at Bain & Company and global head of the firm’s Sustainability & Responsibility practice, commented: “Executives will need to shift their mindsets to replace linear business models by decoupling growth from resource consumption.
“Companies have started by improving recycling and waste management. To accelerate progress, they will need to embrace new technologies and reconfigure their value chains.
“For example, companies investing in recyclable PET bottles are now also investing in recycling infrastructure to improve access to circular materials.”
The study identifies three sources of “circular value” companies should consider, these include:
- Virgin material consumption rate
- Product lifespan
- Product capacity utilisation
Bain says companies making disposable or short-life products, such as plastic bottles, can create circular value and find growth opportunities by reducing the use of virgin materials and ensuring raw materials are recycled at the end of the product lifespan.
The report also identifies extending a product’s lifespan as an “effective strategy” for high-value premium products that are both durable and easy to disassemble. Bain says companies should adapt their business models to engage customers after they purchase a product and develop economical repair options, including right-to-repair guarantees.
Finally, companies that make products that require fast upgrades or have short lifespans can increase product utilisation by exploring different uses, sales models, and business models, Bain’s research says.
The ability to link circular strategies to business objectives and understand the industry’s future profit pools will be key to unlocking value.
Reacting to the report, Hernan Saenz, partner at Bain & Company and global head of the firm’s Performance Improvement practice, said: “The ability to link circular strategies to business objectives and understand the industry’s future profit pools will be key to unlocking value.
“Executives need both the vision to imagine a circular future for their industry and the initiative to convert that into concrete action today.”
