Monetizing the Circular Economy

By
Noslen Suaréz
September 10, 2024

The circular economy represents a paradigm shift in how we produce, consume, and manage resources. It offers a promising path to address the pressing environmental challenges we face, including climate change and resource depletion. With mounting pressure on companies to adopt sustainable practices and the advent of new technologies, the transition to a circular economy is not just necessary but increasingly feasible. As we move forward, embracing circular principles will be crucial to our collective effort to create a more sustainable and resilient global economy.

Digital traceability can enhance supply chain transparency, allowing for better tracking of materials and ensuring the authenticity of recycled or sustainably sourced products. This innovative approach to product lifecycle management offers a comprehensive digital record of a product's journey, from raw material sourcing to end-of-life disposal, creating a digital product passport (DPP) to drive sustainability and transparency across supply chains.

This ebook delves into the concept of DPP, examines the regulatory landscape driving its adoption, and highlights the benefits for businesses in terms of achieving ESG goals and fostering a circular economy. 

Additionally, we will present MARCO Track & Trace, Finboot’s innovative traceability solution to automate ESG and sustainability credit record-keeping, create digital product passports, and manage sustainability declarations and certifications.

Monetizing the Circular Economy

The circular economy represents a paradigm shift in how we approach production, consumption, and resource management. This innovative economic model is designed to revolutionize our traditional linear "take-make-dispose" approach by eliminating waste and maximizing resource efficiency throughout the entire product lifecycle.

At its core, the circular economy is built on three fundamental principles:

  1. Designing out waste and pollution from the outset
  2. Keeping products and materials in use for as long as possible
  3. Regenerating natural systems to ensure long-term sustainability

According to various reports, projections indicate substantial growth opportunities across various sectors within the circular economy. As consumers become more environmentally conscious and regulations tighten around waste and emissions, businesses that embrace circular and low-carbon models are likely to see increased demand and potential for profitability.

Recent McKinsey research proved that consumers care about sustainability, and they back it up with their wallets. Products that make ESG claims have disproportionate growth.

On average, across 32 different categories, consumer products with ESG claims have 1.7% higher growth than products with no claims. Some categories, like paper and plastics, have seen as much as 20% higher growth. 

  1. Global Market Size: The Ellen MacArthur Foundation estimates that the circular economy could unlock more than half a trillion euros in economic benefits annually by 2035.
  2. Electronics: By 2030, 80% of hardware vendors’ product portfolio will be linked to circular initiatives, up from 20% in 2023, according to Gartner. In fact, re-manufacturing and reusing end-of-life devices instead of having them end up in a landfill has become top of mind for most businesses around the world.
  3. Recycled Plastics Market: The global recycled plastics market is projected to reach $72.6 billion by 2026, growing at a CAGR of 8.5% from 2021 to 2026 (MarketsandMarkets).
  4. Circular Fashion: The secondhand clothing market is expected to reach $64 billion by 2024, growing 39% annually (ThredUp).
  5. Renewable Energy: The global renewable energy market is projected to reach $1,977.6 billion by 2030, growing at a CAGR of 8.4% from 2021 to 2030 (Allied Market Research).
  6. Electric Vehicles: The global electric vehicle market is expected to reach $802.81 billion by 2027, growing at a CAGR of 22.6% from 2020 to 2027 (Allied Market Research).
  7. Sustainable Packaging: The global sustainable packaging market size was valued at USD 244.30 billion in 2022. It is projected to reach USD 476.28 billion by 2031, growing at a CAGR of 7.70% during the forecast period (2023-2031). 

Embracing sustainability isn't just about boosting revenue; it's about cultivating a diverse array of enduring economic advantages by transforming eco-friendly initiatives into profitable enterprises. While initial investments may be necessary, they hold significant potential for long-term gains. This is particularly true because circular practices significantly reduce expenses related to raw materials, energy consumption, and waste management.

Being a first mover will put you in a strong position as we explore new revenue streams and business opportunities that can only be unlocked through digital traceability and green supply chain management.

Consider techniques such as solvent recovery, material recycling, and waste repurposing. These methods aren't merely environmentally responsible; they're financially astute. They lead to considerable cost savings, increased revenues, and enhanced profitability.

In the circular economy, companies have several strategic positioning options within the value chain:

  • Circular Design and Materials: Utilize bio-based or other sustainable materials in product design to minimize environmental impact throughout the product lifecycle.
  • Comprehensive Product Stewardship: Adopt models like "product as a service" to maintain control over materials and ensure their return to the production loop. For example, ¨polymer as a service¨ in the chemical industry.
  • Resource Sharing and Recovery: Implement innovative approaches such as shared platforms and technologies to maximize resource efficiency.
  • Value Chain Coordination: Orchestrate local or regional loops to optimize material flow and resource utilization.

By adopting these circular economy principles, businesses can simultaneously drive profitability and environmental sustainability, creating a win-win scenario for both their bottom line and the planet.

Understanding the Value of the Green Premium

As businesses transition towards a circular economy, it's crucial to reassess and reimagine your value chain, particularly regarding the reuse of waste products. The journey begins with a deep dive into your target circular value chain.

Identifying potential partners along this chain is essential, but equally important is adopting your customers' viewpoint. Scrutinizing their purchasing processes is a critical step in successfully monetizing the green premium. Gone are the days when a product-centric, feature-focused portfolio sufficed.

To effectively sell the green premium, two key factors come into play: product quantification and customer qualification. Quantifying the product requires a shift from traditional cost-based pricing to a value-based approach, addressing the crucial question: "What are customers willing to pay for sustainability?"

Deloitte outlines four interconnected elements crucial for monetizing the circular economy's green premium. These elements reach their full potential only when integrated into a comprehensive Monetizing Circular Economy Framework:

Monetizing CE Framework

Customer insights and engagement form the backbone of this framework, influencing every aspect from product development to commercialization. By understanding customer perspectives, needs, and preferences, businesses can align their offerings with sustainability-driven demands.

Checklist for Monetizing the Circular Economy:

  • Identify your position in the circular value chain
  • Adopt a circular mindset
  • Foster collaboration and understand customer needs throughout the value chain
  • Engage customers and partners early in the process
  • Continuously challenge and refine business models
  • Develop a suitable monetization strategy
  • Craft a compelling narrative

By following this approach, businesses can effectively navigate the transition to a circular economy while capitalizing on the green premium, creating value for both the company and its environmentally conscious customers.

Examples show companies can establish and monetize the circular economy

In our experience working with forward-thinking clients, we've observed the tangible benefits of adopting cutting-edge technologies to support circular economy initiatives. Two key tools have emerged as game-changers in this space:

  1. Digital Product Passports: These provide a comprehensive digital record of a product's journey, from raw materials to end-of-life, enhancing transparency and traceability.
  2. Mass Balance Approaches: These enable companies to track and allocate recycled or bio-based content in complex production processes, supporting credible sustainability claims.

Our clients are already reaping the rewards of implementing these technologies. They're not only enhancing their sustainability practices but also gaining competitive advantages in terms of operational efficiency, regulatory compliance, and market differentiation.

Business Opportunities:

  1. Recycled Products:

The Cepsa Case: Digital Product Passports for Homecare Products

Finboot’s MARCO Track & Trace has allowed Cepsa to implement digital traceability systems for tracking each batch of vegetable oil from its origin to its use in biodegradable surfactant production, in addition to automating bookkeeping and determining what percentage of output is from renewable and circular inputs.

> LEARN MORE

  1. Circular Products:

The SABIC Case: Blockchain to Deliver Sustainable Packaging 

SABIC, the global leader in the chemicals industry, becomes the first in their industry to unlock batch-level traceability from waste to packaging for their TRUCIRCLE products through MARCO Track and Trace.

The project, with advanced recycling pioneer Plastic Energy and packaging specialist Intraplás, uses the Finboot application to support end-to-end digital traceability of circular feedstock in customer products.

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  1. Low-Carbon Products:

The Repsol Case: Full Traceability of net-zero emissions fuels (HVO) 

Repsol has been a client since 2018 and uses our digital traceability solutions extensively across several business areas. They use our digital ecosystems for the traceability of low-carbon fuels like HVO (Hydrotreated Vegetable Oil), and circular chemical products like packaging.

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The transition to a circular economy is not just an environmental imperative; it's becoming a business necessity. As we move forward, the companies that will thrive are those that embrace these principles and leverage innovative technologies to create value while contributing to a more sustainable future.

Download the ebook to read more!

Download the ebook to read more!