The role of retail in a world going circular

As shoppers flock to (online) malls this season, businesses have a key responsibility to provide sustainable offerings. Photo by Heidi Fin on Unsplash

Circle Economy’s Ana Birliga Sutherland look at five steps businesses can take to harness their buying power and drive action.

The way we extract and process materials to transform into products that we transport around the world and sell is responsible for nearly three-quarters of global emissions.

For the climate catastrophe, consumption is a clear culprit—and while shoppers have a substantial role to play in shaping the market for sustainable items, research shows that the overwhelming majority of consumers want help from brands in doing so.

Through proactive knowledge sharing, the use of cutting-edge new technology, and the application of tried-and-tested circular strategies, the opportunities for businesses are endless.

It’s clear that companies can drive climate action—and that consumers are keen to see it happen. The way to do it? Shifting to a circular economy, which our Circularity Gap Report 2021 found could close the Emissions Gap and limit warming to well-below two-degrees if enacted globally.

Leaving the deeply-ingrained linear processes that have fuelled the production and consumption of the last century behind isn’t easy—and may even seem impossible for large-scale retailers whose reach spans nations.

Businesses looking to go circular will inevitably stumble through a process of trial and error. But at Circle Economy, we started big, and our work with international budget retailer Action gave way to some pearls of wisdom that can help other companies in retail jump start their circular journeys.

The power of procurement: buying teams must take the wheel in driving circularity

Our analysis with Action confirmed: the vast majority of a retailer’s emissions and material use occur at the product level—and that the most impactful change can be driven by buying teams tweaking their product assortment. But with an often-varied product assortment and hundreds of suppliers, this can seem like a daunting task. We’ve boiled it down to five steps:

  1. Select your indicators and gather data. A common bad habit: diving into data collection without first outlining exactly what you want to measure and the questions you’re looking to answer. To drive circularity in retail, we’ve narrowed our scope, calculating the circularity of the top 50 (or so) products in an assortment category, determined by commercial relevance—a figure based on revenue and units sold. Then it’s time to measure each product’s circularity. After choosing the Circular Transition Indicators (CTI) framework—developed by the World Business Council for Sustainable Development to create a common language for measuring circularity and informing decision-making—we can determine the current baseline and chart a course forward.
  2. Focus attention on ‘change’ products. Once the relative circularity and commercial relevance of products in an assortment is known, the path forward is clear: target items that are highly relevant to your revenue, but have low circularity. Products that sell in far lower quantities, or have good-but-not-great circularity can always be improved—but they shouldn’t be your first priority.
  3. Understand the nature of your ‘change’ products. What are these items like? Are they long-lasting goods—like appliances, clothing or furniture? Are they disposed of relatively quickly, like paper plates or party decorations—or even consumed through their use, like cleaning supplies or candy bars? Understanding how your products will most likely be used after they’ve been bought will help hone in on the most suitable strategies for boosting circularity. We’ve already developed lists of the most relevant circular strategies for each product type so that buyers can quickly identify their best options for improvement.
  4. Choose strategies for each stage of a product’s life. Going circular isn’t as simple as recycling a good rather than throwing it in the bin: it requires changes spanning design, use and end-of-use. Has a product been designed for easy repair, or recycling when it’s stopped being useful? What materials have been chosen—emissions-intensive plastic, or regenerative, sustainably sourced wood? Are there options for customers to refill, reuse or repurpose the product? Is recycling possible given your locale’s resource recovery infrastructure—and is it made easy for consumers to carry out? Circular strategies can address all these questions, ensuring a product’s impact is as small as possible from start to finish.
  5. Connect and collaborate with suppliers to turn strategy into action. At this stage, you know which strategies you’d like to try out for your products—but suppliers will have to be brought up to speed. Share your insights and discuss what’s feasible and affordable, before collectively setting targets. Buying teams should set KPIs—which through the CTI framework can be translated into a single company-wide metric, allowing monitoring across a diverse portfolio of products.
The Circular Change Matrix allows a buying team to prioritise the products that will contribute most to improving the circularity of an assortment, based on a product’s ranking along two dimensions. Framework and image developed by Circle Economy.

The aftermath: what does your business stand to gain?

We now know there’s no reason to disregard sustainability in business: the so-called ‘eco-wakening’ is spreading among consumers across the globe, in high-income nations and emerging economies alike.

The numbers show just how much sustainability is valued: in the US, revenue from sustainable products spiked 29% between 2013 and 2018, and these goods grew 5.6 times faster than their regular counterparts.

Businesses around the world are already cottoning on to this trend, realising that sustainable sells. Lidl Belgium, for example, has launched a programme to track supply chain emissions, finding that 80% stem from just 60 suppliers.

The retailer is now sending climate consultants to its primary suppliers to help them cut carbon emissions, especially targeting meat and dairy. Global brand IKEA is aiming to go fully circular within the next decade—in every aspect of its business, from its business model to its product range—while online fashion retailer Zalando has joined forces with the Ellen MacArthur Foundation to imbue circular principles in its offerings from more than 3,000 brands.

Food retailers are also making moves to combat food waste through artificial intelligence, supported by new technology: US-based startup Wasteless, for example, uses an algorithm to calculate weather, a product’s stock availability and its sales trends to price items—both optimising revenue and cutting waste.

Through proactive knowledge sharing, the use of cutting-edge new technology, and the application of tried-and-tested circular strategies, the opportunities for businesses are endless.

Taking the plunge: a circular product line is only the first step

Going circular is a lengthy journey: it will require education, radical collaboration and drive to translate data into actionable targets and vague ambitions into achievements.

But retailers stand a lot to gain—from boosting customer satisfaction and increasing brand value to meeting sustainability goals. Circle Economy’s work with Action has already gleaned promising results: by following our five step process, the retailer is taking the first steps to make practical changes to some of its best-selling products.

And contrary to popular opinion—they’re showing that this doesn’t have to mean giving up on their goal of selling affordable products.

Retailers stand to gain a lot from going circular—but collaboration will be key to getting there. Photo by Tyler Franta on Unsplash

The future is circular: a means to an end, strategies that design out waste, optimise materials’ value and keep them in use, and regenerate nature, will help us reach a safe operating space for humanity—while delivering the financial wins businesses want to see.

And while the ultimate goal is a shift to circular business models—such as rental or resale—championing a circular assortment of products is a good place to start. Are you ready to get on board and kickstart your circular journey?

Our work with businesses can help embed circularity in your company—and guide you through the analysing, strategising and collaborating of our five-step process. Get in touch with our team to explore your circular potential and transform the way you do business.

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