Breaking barriers to circularity

Overcoming barriers to circularity by implementing sustainable business models

In an era where sustainability has become a top priority for businesses, the circular economy stands out as a vital strategy for addressing resource scarcity, reducing climate impacts, and enhancing profitability. Unlike traditional linear models that lead to waste and depletion, circular solutions focus on reusing and recycling materials, thus preserving their value and minimising environmental harm. As policies evolve to support circular practices and companies seek to align with these changes, overcoming existing barriers and embracing new business models will be key to driving a more sustainable and resilient future.

Current situation and challenges faced

As sustainability gains increasing prominence, driven by societal, customer, and regulatory demands, companies are prioritising sustainability initiatives. The Circular economy emerges as a pivotal solution to address sustainability challenges, aiming to enhance resource utilisation.

The extraction and utilisation of raw materials are significant contributors to climate emissions and pose threats to biodiversity and other sustainability aspects. In conventional linear business models, raw materials, often fossil-based, are extracted, processed into products, used, and eventually discarded, resulting in the loss of both material value and other invested resources such as transportation and manufacturing processes. This leads to materials becoming harder to find and extract, hence increasing material scarcity over time. Furthermore, many minerals are sourced from countries on which we might prefer not to be dependent.

Circularity is also crucial for nutrients like phosphorus and nitrogen, which in turn are important for sustaining food production for our growing global population. Unfortunately, when these elements aren't re-circulated, and industrial and agricultural activities disrupt their natural flows, they end up contributing to climate change and eutrophication.

In a circular economy paradigm, investments can be reclaimed through product/component reuse or material recycling. Crucially, this approach offers reduced costs, carbon emissions, and biodiversity damage. Many companies recognise the rising demand for raw materials, especially critical metals, and seek to ensure their availability through circular economy solutions.

Future demand for critical metals in solar PV and wind energy: Projections relative to 2021 production levels

The presented values are normalised to the 2021 global production tonnage and reflect the increasing material scarcity driven by rising demand. The consumption of critical metals is expected to exceed current production capacities by 2030 for most materials, and significantly for all represented materials in the long term, underscoring the importance of implementing circular solutions.

Source: RMIS – Raw Materials Information System

While many techniques and methodologies necessary for achieving a circular economy are already available and applied in some companies, the full implementation of circularity remains a distant goal. Research indicates that significant barriers hinder the transition to circular systems. Some of the key obstacles include:

Resistance from companies due to the transformative nature of new business models
Challenges faced by companies in attaining profitability quickly enough during the transition phase
Insufficient knowledge, particularly among decision-makers
Incomplete and non-harmonised policies, prolonging the process of change
The necessity for new forms of collaboration and potential adjustments within supply networks
The difficulty of behavioural changes, such as educating customers and consumers on utilising products in a circular manner

Tackling these barriers is crucial for accelerating the transition towards a circular economy.

Looking ahead

Alongside the imperative to secure future raw material availability, recent policies such as the Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy are placing increased emphasis on the circular economy alongside climate and other sustainability concerns. These policies centre on reporting aspects of circular economy practices within companies, including the use of recycled materials and established circular economy processes.

CO2 savings potential of replacing one car every 10 years: Linear vs. circular approach

Implementing a circular economy can reduce CO2 emissions in a car's life cycle significantly compared to a linear economy

Source: AFRY

Consequently, there will be a demand for enhancements, compelling companies and organisations to adapt and embrace circularity.

This shift will entail:

The adoption of new business models, such as leasing systems instead of traditional sales, and implementing take-back systems to facilitate component and product reusability
Product design adjustments, driven by regulations like the Ecodesign Directive of the European Union, which advocate for initiatives like Digital Product Passports and specify requirements for repairability, recyclability, and minimum percentages of recycled content
Potential modifications to logistics to facilitate circular product/component and material flows
Development of supply networks and collaborative approaches to ensure effective circular solutions for all stakeholders. For instance, customers may transition into suppliers when companies implement product take-back schemes

Drawing from the example of new car production, it becomes clear that while technical advancements within the existing linear business model have slightly reduced CO2 emissions, achieving automotive companies' netzero targets necessitates adopting circular practices. This entails reusing components, products, and materials to a significant extent.

The realisation of circular economy solutions is inevitable, as they offer a pathway for society, companies, and individuals to meet current and future needs in a more sustainable manner.

Manufacturing emissions per car in linear and circular economy (Tonne CO2-eq Emissions / car)