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ViewPoint Espresso Capturing Value from Circular Economy November 2019

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Setting the Scene

The linear take-makewaste industrial model is no longer viable in the face of rapid population growth, resource constraints, sprawling urbanization, water insecurity and other trends. This scenario is giving way to Circular Economy, a model that focuses on careful management of material flows through product design, reverse logistics, business model innovation and crosssector collaboration. 2

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Circular Economy offers an opportunity for companies to tackle environmental priorities, drive performance, innovation, competitiveness and stimulate economic growth and development.

Circular Economy means that the value of products, materials and resources is maintained in the economy for as long as possible, the generation of waste minimized, and resources are kept within the economy when a product has reached the end of its life, to be used again and again to create further value.

This survey aims to understand new business models, actions and tools, metrics and benefits achieved by companies belonging to wide set of industries and geographies, who are facing a transition towards Circular Economy.


Circular Economy in Focus We have investigated the following set of questions related to the concept of circular economy: 1 – Which of the following circular business models has your company adopted (or are in the path of adopting)? 2 – Which of the following initiatives have been adopted (or are in the path of being adopted) by your company to achieve a more circular approach? 3 – Metrics 4 – Which benefits has the implementation of Circular Economy business models, actions and tools led to for your company?

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Question 1 – Circular Business Models Which of the following circular business models has your company adopted (or are in the path of adopting)? (multiple answers are allowed)

Resource recovery: recover, recycle and reuse resource outputs that eliminates material leakage and maximizes economic value. Waste materials are re-processed into new resources Product life extension: extend the lifecycle of products and assets to ensure they remain economically useful (remanufacturing, regenerating, repairing, upgrading or re-marketing)

48%

30%

Greener supply: traditional resources are replaced with fully renewable, recyclable or biodegradable resource inputs

28%

Product as a service: use products through a lease or payfor-use arrangement versus the conventional buy-to-own approach

13%

Active engagement of consumers/final users: engage final users in positive behavior such as materials recycling implementing an incentives system (e.g. blockchain based platforms with tokens as spendable rewards) or on… Sharing economy: collaborative consumption or peer-topeer based sharing (sharing of products and assets)

12%

I don't know

16%

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9%

▪ The top three may be easier to adopt and do not imply/impact customer centric processes; but more the operational/production processes. Results that are more immediate/short term are more predictable. ▪ It is reassuring that 6% of companies have implemented sharing economy policies and opens up the potential for more in the future. This shows that interest in circular business models is a trend. Businesses may need to be accompanied and supported to get a better understanding of how implementing circular models can be good for trade and help their profits. ▪ The fact that just 16% of business have not adopted a model yet is a positive sign.

6%

None of them

▪ Resource Recovery is by far the most popular business model (48%), followed by Product Life Extension (30%) and Greener Supply (28%), Product As-A-Service (13%), then Consumer Engagement and Final Users (12%).


Question 2 – Initiatives Which of the following initiatives have been adopted (or are in the path of being adopted) by your company to achieve a more circular approach? (multiple answers are allowed)

36%

Use of secondary (recycled) raw materials

27%

Reduction of the use of virgin raw materials Actions for a more sustainable supply chain (e.g. the use of recycled material is one of the relevant criteria for…

23%

Greater recourse to repair, regeneration and recovery

23%

End-of-Life issues considered since products and process design

22% 17%

Development of Life Cycle Assessment studies Implementation of collection point and/or reverse logistic for the…

17%

Technological investments (e.g. development of digital platforms as enabler to circular economy projects and…

14%

Development of partnerships (as well as collective actions across different stakeholders, industries and geographies)…

13%

Offer of purchase options based on rental and not on product sales Rewards granted to consumers or other stakeholders for their contributions to a more circular approach (e.g. for… Other initiatives (please specify)

I don't know

6% 3% 14%

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8%

▪ Next Sustainable Supply Chain initiatives highlight the importance of proper supply chain management. It is equally positive to see that 23% of companies are developing policies and circular economy actions along the supply chain.

▪ It is encouraging that 22% of business say that End-of-Life issues are considered from the design stage. ▪ Only 14% of businesses are not adopting circular economy measures which is promising. ▪ It is good that 13% of companies are engaged in collective action across countries and industries - alone we walk but together we run!

8%

None of them

▪ Secondary Raw Materials (36%) and Virgin Raw Materials reduction (27%) go hand- in-hand with better use of raw materials and is a good sign that aligns with global trends. The material-side of circular economy shows a good percentage already use recycled material in their production processes and reduce virgin raw material.

▪ While just 6% of companies say they are giving rewards to consumers/stakeholders, it is indicative that this will rise as more companies follow suit. Trends show rewards were not embraced before.


Question 3 – Metrics Strategic goals and targets Performance Indicators

Has your company established strategic goals and targets associated with the adopted (or in the path or being adopted) circular economy business models, actions and tools?

Has your company set performance indicators associated with the adopted (or in the path or being adopted) circular economy business models, actions and tools?

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33%

Yes

45%

No

Don't know

▪ It is significant that a third of companies have strategic goals and targets on the circular economy.

22%

▪ A third also are also monitoring and tracking performance indicators for progress. ▪ A coherent measurement system helps companies to implement action and improvement plans, and therefore cuts the risk of “green washing” or “circular washing". ▪ It is telling that 22% of respondents don’t know whether their firm has circular economy goals, and 23% don’t know whether they have performance targets. It suggests more internal awareness and information is required.

Yes

30%

48%

No

Don't know

23%


Question 4 – Benefits Which benefits has the implementation of Circular Economy business models, actions and tools led to for your company? (multiple answers are allowed)

40%

Cost saving in terms of waste management

38%

Cost saving in operations and production

32%

Improved public image/brand reputation

32%

Cost saving in procurement of resources and input factors

30%

Improved ability to comply with legal requirements and…

29%

Cost saving in use and consumption

22%

Competitive advantage

17%

Improved relations with other stakeholders (e.g.…

15%

Shareholders’ satisfaction

14%

Improved relations with authorities (e.g. regulatory…

11%

Enhanced networking with partners in the value chain… Distribution cost saving

11%

Other cost saving

10%

Opening new revenue streams for the company

10%

8%

Increased market share

7%

No benefits achieved Other benefits I don't know

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1% 15%

▪ Cost saving in the circular economy, through waste and production, has the potential of being the main driver because of the benefits it brings. ▪ Circular Economy business models make huge impacts and benefit market position. It is shown in the results for branding and reputation (32%) and competitive advantage (22%). ▪ Only 10% say it has opened up new revenue streams or increased market share, but this may be attributed to a lack of awareness of the circular economy. ▪ Just 7% of say they have not achieved any benefits from the initiatives carried out. ▪ Despite cost saving in waste management, operations, production and procurement being strong (40%; 38%; 32%), creating shared value, through distribution of cost saving is weak at 11%. Companies have not yet introjected the logic of sharing value along their stakeholder ecosystem.


Methodology and Sample

October

2019

This Espresso survey was conducted in October 2019.

757

It involved 757 professionals in companies across different industries in Europe, North America, Central & South America and Asia.

▪ The sample consists of customers of DNV GL – Business Assurance and does not claim to be statistically representative of companies worldwide. ▪ The questionnaire was administered using the CAWI (Computer Assisted Web Interviewing) methodology.

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Thank You!

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