EC The Circular Economy’s Six ‘C’ Challenge

Despite the promise of the Circular Economy - which aims to deliver economic growth without waste - businesses have been slow to embrace it. Here are six reasons why:

Why market forces alone won’t drive it

In a recent presentation to the Financial Services Forum, I addressed the financing of the Circular Economy. A growing number of companies are beginning to acknowledge its potential to deliver sustainable development. But adopting its zero waste philosophy of reduce, reuse and recycle – what I called the ‘veganism of sustainability’ – is easier said than done. Why aren’t circular business models taking off faster? Market forces alone plainly aren’t enough. Here are the six ‘C’ challenges:

 

Source: ING

 

Consumer demand

 

A vocal minority of consumers are advocates of sustainable living, but few are willing to pay up for it. Surveys show that few consumers are prepared to pay more for green products, let alone ones that embrace fully circular principles. And what they tell pollsters may overstate their real appetite to do so. Lack of accepted definitions and labelling of circular products doesn’t help, but in any case, businesses face the challenge of making them price competitive.

 

Counter trends

 

Although sustainability is now a cultural trend, there are still cultural trends running in the opposite direction. Some business models are not merely waste-intensively linear, but actively accelerating resource use. Fast fashion has spurred rapid increases in clothing purchases and disposal, with so far limited push back. E-commerce is fuelling a want-it-now culture of over-ordering, fast delivery and return. Moreover, the burgeoning middle class in the emerging markets are embracing the consumerist habits of the developed world.

 

CSR investor pressure

 

Businesses are also facing pressure to ‘go circular’ from investors adopting more ethical corporate and social responsibility (CSR) principles. But while this trend is growing, it is hampered by controversies over whether these principles lead to higher investment returns. Some studies show that they do, but the question of whether the profitability of sustainable principles is the cause or the effect of business success is unresolved.

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