Aiming to eradicate waste and pollution, the circular economy is regenerative by design, circulating products and materials for as long as possible, it operates by making use of the most up to date technology, implementing dynamic, repetitive systems and having no specific endpoints.
The model has existed for a long time, but in recent years, its prominence and popularity has soared and the current global transition towards a circular economy signifies the biggest fundamental adjustment to hit the world of business since the industrial revolution. Whatever the size of your stake, anyone involved in e-commerce needs to take note.
The move to adopt the circular economy on such a scale can be put down to several factors all of which have combined to create the perfect time to adopt such a model. Firstly, there has been consumer demand for increased levels of sustainability as well as evolving attitudes towards ecologically sound consumerism. Secondly - and as a direct result of these evolving attitudes - retail has seen a renewed enthusiasm for second hand, ‘pre-loved’ items. Then, there’s the continuing growth of the e-commerce industry and subsequent scrutiny on environmentally friendly packaging and order fulfilment. Finally, for many people and notably the younger demographic, there’s the number one reason, protecting the natural world and nurturing its habitats as opposed to what is seen to be happening now: an outdated linear model which seems to squander the earth's finite resources, causing widespread pollution and mountains of problematic waste.
Circular economy aren't just buzz words. Momentum behind the movement is gaining pace. Consequently, e-commerce businesses face the real risk of going circular or going bust. Don’t believe us? Here are four reasons why.
Be one of the pack: strength in numbers
A significant number of companies are already in the process of making the transition towards circularity. Of course, just because everyone’s doing it, doesn’t automatically make it the right thing to do, but the seismic shift towards a CE is happening thanks, in no small part, to government legislation (more on that later). It’s vital not to be left behind.
But there’s an extra reason to make the shift as soon as possible. Change, even when positive, can be tricky and fraught with challenges, obstacles and even backlash. A business will have its own ethos and motivations as well as unique goals and objectives, but working together and sharing common experiences - especially with those in common fields - as well as analysing what is working well and what has been problematic in other transitional processes could manage expectations, avoid unnecessary pitfalls and make the inevitable shift more manageable. Better to be adapting alongside others than to be stranded at the starting blocks watching them streak down the track.
One of the key descriptors of the Circular Economy is that it is iterative. Such a repetitive approach necessitates close collaboration, so it might as well start as soon as possible during initial implementation. No business wants to find themselves outside the loop. There’s strength in numbers and working together means that universal solutions can be found to address complex problems much faster and more efficiently. Collaborating means access to pilot projects, ways to overcome shared stumbling blocks, plus an insight into tried and tested projects, both large and small. Collaboration automatically generates support networks of advice, information, resources and future goodwill.
The writing’s on the wall: regulations and compliance
High levels of international trade as well as the rise in e-commerce has meant an increased use in packaging materials. As a result of the use of excess packaging and the associated problems of waste disposal and recycling (as well as growing consumer frustration), packaging regulations have come under scrutiny from international bodies such as the United Nations and the European Commission. Towards the end of 2022, for example, the European Commission proposed EU-wide packaging rules “to tackle the constantly growing source of waste and consumer frustration”.
Government policies and legislation have therefore been rapidly revised to help the drive towards circularity and sustainability and encourage swift reform. For the UK government, these include schemes such as the Extended Producer Responsibility scheme, the Plastic Packaging Tax and The Deposit Return Scheme. Each of these schemes has been specifically designed to encourage and enable the re-use and regeneration of products but they will also impact businesses financially if they continue to use packaging solutions that aren’t as sustainable as they could be. Companies outside the U.K. but operating within the EU will also have to pay attention to new ambitious regulatory requirements or face substantially increased costs.
Sustainability aside, there is a huge financial incentive for an e-commerce business to go circular and adopt ecologically sound packaging and operating strategies.
Futureproof against instability
Proponents of the Circular Economy maintain that its significantly less wasteful, regenerative practices will help protect retailers against the costly supply chain issues of the last few years, issues that have been caused by geopolitical tensions, global pandemics and resource scarcity especially in terms of delays to raw materials and finished products.
Additionally, it has been estimated by The World Economic Forum that, by 2030, the circular economy has the potential of generating around $4.5 trillion in global opportunity as a direct result of ensuring that businesses are more efficient and less wasteful and that’s before employment opportunities that will come as a result of the new economy are taken into consideration.
However, before reaping the financial rewards which will come as a direct result of greater stability and less waste, companies must have the guts to make meaningful change. The World Economic Forum refers to this change as the “wise pivot” and promises that if businesses go through with it, they will see “astounding results”. Move now, says the WEF, from “insight to action”.
Go circular for your brand image
Brand reputation should be a big motivating factor when it comes to the decision to transition to the circular economy. Going circular means a company’s brand strategy sends a message in addition to that of its own unique ethos. Its vision and purpose can align not only with its overall strategy, but also with the circular economy’s core values and guiding principles.
In a competitive marketplace, the more positively consumers view a company, the greater their advantage. Being part of a circular model demonstrates to consumers how seriously a business takes their environmental responsibilities and their obligations to communities as well as their consumer base. It’s been proven time and again that customers vote demonstrably with their wallets when a commitment to green solutions is unequivocal.
Brand image will be further enhanced by the opportunities the circular economy affords for creativity. Innovative and inspired design will be needed to improve both products and packaging so that both are a viable part of the circular model. This is valuable not only from an environmentally sound perspective but also in terms of staying ahead of the competition in an economy that is evolving into a circle.
A revised brand image, new products and improved services is more likely to appeal to new types of consumers. However, at the same time, embracing a circular economy will increase current consumer loyalty because it affords a new way for businesses to connect emotionally with existing customers building stronger bonds and increasing satisfaction levels. There are opportunities for new levels of honesty and transparency and the possibility to stay in touch with customers for years as they repair, recycle and resell. At the end of the day, customer retention is far easier to achieve than customer recruitment.
To conclude
This article has set out four reasons why it’s imperative that e-commerce businesses, both big and small, make the changes which will enable them to function within the circular economy. These reasons might seem cumbersome and complicated, but they hold promise. They're also incentives; making changes in order to function successfully means that an e-commerce business will also be able to flourish in a future global economy that looks set to be defined by its circularity.
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