Details of exactly how the circular economy will work in practice have not been considered carefully enough for trading organisations. For example, EU company law and corporate governance are not included in this new world of resource management and material reuse. And how, for example, will pricing of second-hand materials operate alongside virgin material? Will it involve removing the effective subsidies on the extraction of raw materials, or will it mean shifting them to subsidies for recovered materials, and for how long would they receive such support? Creating new markets which potentially undermine old ones has been shown to be difficult to implement. See, for instance, how carbon tax policies designed and implemented in the United States distorted consumer and market behaviour, ultimately backfiring on the legislator and having little or no net impact on slowing climate change.

Something has to be done however to reclaim the value lost when materials are incinerated, discarded as waste in already overflowing landfill sites, or exported for low grade reclamation in developing areas of the world such as south-east Asia. The UK and EU legislation that bans the export of used electrical equipment for recycling in developing countries that often employ underage labour is a step in the right direction, but more action is required from organisations to redesign their products, service offerings and supply chains to stem the one-way flow of products. While the language of circular economy has begun to be used in boardrooms and parliaments, the status quo around business regulation is less responsive to change. Here are six predictions for aspirant, clean production and circular design driven organisations striving to understand what it means to engage with the idea of circular business advantage:

1. Product ownership will become a thing of the past

Traditional price-based models are under pressure from many sides, from the changing customer, from lack of demand and from technology. Large scale production requires a guess at a 20+ year payoff for fixed investment, it means finding a market when in developed nations economic growth has been slow and markets are, anyway, saturated in durable goods and credit is nearly maxed out.

Which items do we need to own, and which could we simply access? Photo by Aaron Burden on Unsplash

The emphasis in the thinking now is on more agile, technology-aware smaller scale production, selling access rather than ownership and capturing customer loyalty in new ways. It’s a perfect fit for a circular economy. Stagnant demand means finding a bigger share of the pie, and if new business models can work assets harder, lower costs and capture some of the benefits, then both sides can win. No wonder there is intense investigation of digitally boosted product-service systems. A vital aspect in the transition from traditional linear business practices is to understand what the Ellen MacArthur Foundation means by the ‘power of circling longer’. Products in the near future will be designed to last longer and will be suitable for repair and eventually recycling at the end of useful life because the benefits of manufacturers or their business contractors retaining ownership become visible. The pursuit of extended lifecycle strategies involve substantial investment in product redesign, maintenance and upgraded support services. Many businesses will struggle to see this radical shift as positive, because it demands so much, but although it is an advanced option to adopt, not doing so opens the door to competitors.

2. Future trading will be dominated by legislation and prices of raw and recycled materials

Any proposed major changes to trading structure are likely to require a stick and carrot approach by governments seeking to nudge business into action through a combination of legislation, subsidies and tax breaks. There are already first movers into the circular economy space accompanied by an impressive line-up of advisers, academics and consultants, all of whom exhibit various degrees of legitimacy and vested interest. Yet the role of government is crucial both in raising the profile and importance of the circular economy, and in encouraging the private sector to take the initiative in the conception and further development of material and product reuse schemes. In the US for example, new legislation requiring a substantial percentage of reused polymers to be used in commercial carpet production changed the rules of the game for carpet makers overnight. However, it is unlikely that the UK’s BS 8001 recommendations will have a similar effect and will require more direct legislation in place before widespread uptake occurs. Yet taking 10 years to start implementing the circular economy is not an option. Savvy organisations will be already re-orientating their existing sustainability strategy towards one of circular implementation with trusted trading partners of a similar persuasion, and not waiting to act until new legislation or spikes in commodity prices hit home.

3. Servitisation and sharing will be core to business value

Going downstream has been the call for decades by organisations adopting servitisation as a strategy that extends value, by shifting the emphasis away from product sales to aftersales customer care. Some companies have already adopted servitised elements of circular business, where selling a service means customers pay only for what they receive, while the firm retains ownership and meets maintenance and repair costs. This has the added benefit of customers paying a fee only for the duration the service is actually needed and upgrading requirements if desired. But greater levels of information sharing will be required by both producer and consumer.