Circular manufacturing: Three steps to future-proof your business

If the commodity price volatility and supply chain disruption of recent years have taught us anything, it’s that we can no longer take critical resources for granted.

Right now, a lot of the focus centres on how to secure scarce resources ranging from the rare earth elements used in metal alloys, aircraft engines and LED screens to the lithium, cobalt and other rare metals required by battery-makers. Competition has been exacerbated by geopolitical instability. Yet as demand increasingly outstrips supply, pressure on supply could soon spread across once seemingly plentiful metals, minerals and organic resources, as well as the water used in production and cooling.

Globally, use of resources has tripled since 1970 and could double again by 2050 if business continues on its current course. Without more efficient use of resources, this surge in demand would exhaust our planet’s already stretched ecosystems, raw material availability and ability to absorb waste. But less than 10% of the some 100 billion tonnes of resources that enter the global economy every year are reused or recycled.

Boosts for resilience and decarbonisation

By moving from resource drain ‘take, make and dispose’ to resource gain ‘reduce, recover and reuse’, circular manufacturing would strengthen supply chain predictability, resilience and control. With resource extraction responsible for nearly half of the world’s carbon emissions, circularity would also accelerate moves to net zero.

Economic dividend

Alongside the environmental benefits, circularity opens up valuable commercial opportunities and economic dividends. Meeting consumer expectations is a key part of this as they look ever more closely at the sustainability of what they buy and how it’s produced. More than 40% of the manufacturers taking part in the latest Make UK/PwC Executive Survey feel that the demand for ESG initiatives, low-carbon products and eco-friendly services is being driven by customers.

The opportunities circularity opens up are reflected in the development of a new generation of products and processes that reduce material demands, design out waste and extend product life cycles. Examples range from real-time material management to lighter and longer lasting electric vehicle (EV) batteries. Harnessing such innovations will drive competitive advantage, while slower moving peers could find themselves marginalised.

The leaders include packaging companies who are responding to regulatory and consumer demands by using more reusable, recyclable and compostable material. Innovative developments include compostable food service packaging made from renewable plant-based materials and low value agricultural feedstock. The benefits of circular packaging not only include reductions in waste, but also differentiating your business among environmentally-conscious consumers. Research indicates that two-thirds of consumers believe it is important that the products they buy are in packaging that is recyclable.

Remanufacturing on the rise

Remanufacturing – recovering and reconditioning end-of-life products to return them to market as good as new – represents a significant growth opportunity in its own right.

This is a long-established business model in the UK covering areas ranging from air conditioning compressors to fuel cells and power steering units. Customers benefit from the same performance as a new product, but at much less cost and environmental impact.

Looking ahead, significant opportunities are opening up in areas such as EV battery recycling. Our analysis anticipates that EV recycling revenues could eventually reach €8 billion a year in the EU as the first wave of EV batteries come to the end of their life from 2030 onwards.

Mounting regulatory pressure

Regulations such as the extended producer responsibility (EPR) covering packaging, batteries and electronics have sharpened the focus on end-of-life waste and other key aspects of circularity. New reporting demands such as the EU Corporate Sustainability Reporting Directive (CSRD) will add to the pressure by heightening the spotlight on the environmental impact of resource demands within your value chain.

A circular way forward: three priorities for manufacturing

How far have manufacturers come on circulatory? Directly consumer-facing sectors such as packaging are making strong headway. Elsewhere, however, there is still a huge amount of untapped potential. While many manufacturers see the appeal and have been setting up pilot schemes and R&D initiatives, progress remains limited.

Common barriers include the lack of infrastructure for recovery and re-use. Many businesses also believe that circularity will push up prices, though UN analysis suggests that costs for both producers and consumers would actually come down without compromising quality.