Product, Service & Design Innovation
Circular Economy Promises $700 Billion in Savings for Consumer Goods Industry, Report Says

The consumer goods industry could save $700 billion in materials alone through the adoption of a circular economy, according to a new report by the Ellen MacArthur Foundation. The report also details how land productivity and supply chain stabilitydesigning products so they can be recycled or reabsorbed into the biosphere without toxic residuals.

The report, Towards the Circular Economy Vol.2: opportunities for the consumer goods sector, was released at the World Economic Forum in Davos and includes analysis by McKinsey & Co. It builds on a report released by the foundation last year, making the case for a faster adoption, quantifying the economic benefits of circular business models, and laying out pathways for action.

The report was central to the agenda of four of the World Economic Forum’s official sessions this year, indicating the concepts of the circular economy are gaining attention from business and government.

The report focuses on consumer goods, which globally account for approximately 60 percent of total consumer spending and 35 percent of material inputs into the economy. Importantly, the consumer goods sector absorbs more than 90 percent of agricultural output — possibly the most embattled resource in the future, the report states.

The report features specific examples of how businesses derive competitive advantage from better valuing material flows in product categories such as food, beverages, textiles and packaging. Household food waste, for example, presents a huge opportunity for biogas generation. If collected and processed, one metric ton of food waste can create electricity worth $26, heat worth $18, and fertilizer worth $6. For the UK alone this could represent an income stream of US$1.5 billion annually, according to the report.

In textiles, $71 billion in material savings could be achieved through increasing the amount of clothing that is collected and reused or remade, while also generating additional revenue streams. Beverage manufacturers could reduce material inputs and the price of packaging by moving to reusable glass bottles (as opposed to recyclable). This would enable a cost reduction of 20 percent (per hectolitre) of beer.

The Foundation says its work with existing founding partners, B&Q, BT/Cisco, National Grid and Renault has triggered circular economy initiatives that collectively target over $1 billion in resource savings and new revenues. The Foundation is set to launch a new global initiative in February. The so-called Circular Economy 100 will bring together an alliance of global businesses and provide a platform for building circular economy capacity across the wider economy.

“We have seen tremendous momentum building behind the circular economy in the last year. With this report showing a $700 billion opportunity for the consumer goods sector alone and making the economic case clearer, we expect to see more and more businesses exploring this new way of thinking,” said Ellen MacArthur, the retired record-breaking sailor whose foundation focuses on building a sustainable economy.

In related news, a recent survey found more than two-thirds (68%) of consumers say businesses bear as much responsibility as governments for driving positive social change, and 55 percent think corporations are better positioned than governments to combat climate change. And business model innovation and collaborative innovation are expected to play larger roles in global performance, according to a new report by GE.

@Bart_King is a freelance writer and communications consultant.