The complexities of creating a circular economy are daunting. Instead of attempting to manage the transformation as a whole, it can be more effective to focus on the ways to make it easier and more valuable for each business and customer along the chain to do the right thing.
“It’s easy to talk about silver bullet technologies or to draw perfect loops in presentations, but the hard yards are often in working together to create grounded, practical solutions. It’s not an easy answer but that’s the reality of solving it. Given the collaboration challenge, the emphasis needs to be on making it much more valuable to do the right thing for each of the businesses and customers along the chain.”
Tom Wright, Director, Strategy&, PwC
The circular economy sounds like an elegant solution to waste and resource depletion, yet in reality the complexities of creating a circular economy are daunting. It is a challenge that requires transformation on multiple levels, including internal systems, consumer interactions and cross-industry dynamics. The resulting deeply complex network of flows and dependencies can appear overwhelming when viewed as a whole, but they can be navigated with careful deconstruction of the challenge.
Speaking at a gathering of start-ups, experts and corporates convened by PwC to encourage collaboration on the circular economy, Tom Wright, Director at Strategy&, PwC, said: “The circular economy is a messy stack of capabilities held together by incentives. Don't strive for perfection or try to solve all problems. Instead, take a step back and focus on the role we can collectively play to ‘tilt the table’ in the decisions of people and businesses.”
A roundtable discussion at the event identified seven key areas of focus.
1. Set the stage for improvements with decent data
Accuracy and visibility of data is central to ensuring the right information is available for decision making, and there are plenty of examples of innovations helping organisations move towards more sustainable models. Greyparrot is an AI-powered waste analytics system that is increasing automation and transparency in recycling to release the financial value of waste. Speaking at the same event, Harry Davies, Chief of Staff at Greyparrot, said: “When it comes to waste management, up until now, there has been no data available, and consequently, no systematic accountability, which has resulted in low recycling rates. By digitising the $1.6 trillion waste management industry with our AI waste recognition system, we ensure that every piece of waste is tracked and accounted for as a valuable resource.”
2. Make collaboration easier through transparency and standardisation
An effective circular economy relies on inter-organisational collaboration, including shared operating standards, as Wright explains. “Sustainability requires different organisations to work together to get everything to fit - that is hard when it is unclear what is required to plug into each other's systems. It’s the logistics equivalent of an API, which creates the standardisations required to facilitate interactions across systems effectively.”
A good example is logistics software businesses that integrate returns providers for retailers and provide the smart routing to ensure the goods return to the right place, despite flowing via potentially many different companies. The resulting ecosystem of suppliers and partners removes wasted trips and ensures products are returned to the processing site that will maximise the financial value with minimal environmental impact. These types of standardisation and routing solutions will be critical to maintain the value in goods after their first use, ensuring the items efficiently get to somewhere that can process them and reuse them.
3. Build trust through reporting and assurance
Progress on sustainability requires trust, so improvements can be built upon in good faith. In this regard, ‘green hushing’ where companies do not disclose progress for fear of being criticised, can be as damaging as green washing as both impede progress.
Furthermore, there are already over 30 categories of ESG fraud, from misstating the impact of climate change on financial statements to carbon credit market abuse. Part of addressing this risk to progress lies in validation of claims and assurance.
This will be driven through incoming regulation, as Georgie Messent, Environmental and Sustainability Legal Advisor at PwC explains: “The next 24 months will be a critical transitional phase in ESG reporting for two reasons. Firstly, we have new ESG corporate reporting requirements coming in from EU, UK, US and global governing bodies, where the extensive EU reporting changes will impact on parent companies outside of the EU where they pass key thresholds. Secondly, in the UK and at a Member State level in the EU, we have really substantial changes in extended producer responsibility regulation for products that introduce challenging new reporting requirements. These all have significant influence on the circular economy landscape, so becoming aware of what will be required from individual organisations will contribute to progress across the circular economy as a whole.”
4. Make smart standardisation of packaging a possibility
The reinvention of the logistics chain requires a huge diversity of businesses to work together in bringing materials back into circulation. This will require standardisations across procedures, ways of operating and data exchange, while balancing commerciality of the enterprises and their products. Starting with operational factors, such as a standardised refillable bottle crate that still allows for bespoke brand packaging, is a sound foundation to build upon. Examples like these can allow for continued differentiation and competition alongside the collaboration required for success. The nature of reuse systems means they generally do better with scale or density - so anything that can facilitate this whilst maintaining competition is typically a good thing.
5. Absorb complexity for consumers
The circular economy involves a complicated set of choices and behaviour changes for consumers. However, they often don’t have the information or time to determine the right decisions. Simplification is required. Good examples of ‘nudges’ which can help change consumer behaviour are the ‘plastic bag tax’ imposed by larger UK retailers, the ‘frequently returned item’ label on Amazon, to guide consumers away from problematic purchases, and green leaf timeslot icons on supermarket delivery selection grids, which denote slots when vans are already going to be in the consumer’s area. Ultimately the aim is to help people become users rather than consumers.
6. Turn complex messages into compelling stories
As soon as you make the story complicated, it has a lower impact. Take the example of Fairtrade chocolate and sugar. When your chocolate bar says it is 100% Fairtrade chocolate, the only thing that you know for certain is that less than 100% of the chocolate in that bar is from Fairtrade certified farms. What you do know however is that the total amount of Fairtrade chocolate sold is equal to the total amount of Fairtrade chocolate produced. This well monitored system is known as mass balance. It's needed because the cost of running fully separate and segregated supply chains for Fairtrade and non-Fairtrade cocoa would be too expensive. This may lead to fewer farmers receiving Fairtrade prices as the added cost reduces demand.
The Fairtrade brand and story is a powerful way to overcome this complexity. It is an imperfect solution for the best outcome, but few consumers are aware as it muddies the waters. The most effective messages are the simplest, and the complexities of the circular economy are such that it is all the more important to keep that edict central to its communication, as Wright explains:
“Most businesses have marketing teams that are brilliant at simplifying complex messages, reframing the narrative and emotional appeal of products and services, and making it easy for consumers to behave a certain way. Use this to help your customers do the right thing for your circularity strategy.”
7. Innovate the business model so it's easier for products to stay valuable
The more organisations that can create products and processes which draw materials into the circular route over a linear one, the greater the momentum will be. Designing products and processes so it’s easy for products to maintain their value at the end of life is the most influential way of doing this. Packaging made from single materials that are easy to separate from a waste stream requires less effort to disassemble; contrast this with the classic challenge of hybrid films or disposable coffee cups (with the plastic liner inside a cardboard cup).
Wright concludes: “We, collectively, are now much better at doing this for packaging and recycling. We now need to get better at doing it at scale for reuse, and for products. It won’t work if you just say it’s technically possible. It needs to be easy or economically advantageous - preferably both.”
“It’s easy to talk about silver bullet technologies or to draw perfect loops in presentations, but the hard yards are often in working together to create grounded, practical solutions. It’s not an easy answer but that’s the reality of solving it. Given the collaboration challenge, the emphasis needs to be on making it much more valuable to do the right thing for each of the businesses and customers along the chain.”
“Climate tech is helping to tackle one of the hardest challenges of our time. We’ve highlighted 50 UK-based innovators that could be a vital part of the solution in the PwC Net Zero Future50 report. What we found was that these companies were doing interesting things, but as start-ups, they were struggling to really make a dent in some of the bigger problems. That’s why we run convening events to promote knowledge-sharing and accelerate the path to the circular economy.”
James Pincus, Partner, PwC
Contact us
