Be More Green: innovating to deliver a circular economy

Discover the key takeaways from the second discussion in the CBI’s Be More Green roundtable series, bringing together business leaders from across different sectors and business sizes leading the way in creating circular business models and contributing to a circular economy.  

1. There is a long way to go to achieve a circular economy

Businesses agreed that the UK still has a long way to go before achieving a circular economy, and even to make a significant start along the journey.

The majority of businesses have ‘linear’ business models, and there are sizeable financial and risk-based barriers to change. There is currently little financial or regulatory incentive to embrace the circular economy and make a shift to products and processes that enable products to be re-used, recycled and last longer.

But despite these barriers, many businesses, including those in the room, are exploring how they can contribute to a shift in approach.

2. We need to build a broader understanding of the circular economy and how we can achieve it

There is a considerable lack of understanding of what the circular economy means, as well as the actions that will help us achieve it, which is an obstacle to making progress.

Attendees discussed that for many company boards or C-suites the term ‘circular economy’ is perceived as jargon or a niche concept. Senior leaders are often more familiar with the net zero framework. Circularity will reduce business’ scope 3 emissions, and therefore help deliver net zero targets. Being clear on the link between net zero and the circular economy can help to build buy-in.

The business community and media also have a role to play in educating and supporting consumers to make the most sustainable choices. For example, attendees noted that sometimes they will make decisions on their use of materials based on their evidence of environmental impact across the full lifecycle of the product, but consumers attempting to be sustainable may not understand this process.

What are businesses already doing to tackle this?

• One business is running mentoring sessions for their supply chains on what the circular economy means for them
• Another has set up a Circular Economy Governance Board made up of mid to lower-level managers who make decisions on facilities, waste and procurement. This is a tool to educate and ensure those responsible for making ‘circular’ decisions are bought into the process.

3. Overcoming barriers to the circular economy

There are also several legislative, commercial and material challenges across the business landscape that must be resolved to enable and incentivise businesses to use circular business models.

Access to data

To achieve circular business models, businesses need access to data and information on the background and lifecycle of all the materials they are using, across supply chains. This is often not available. For example, in the construction sector, building materials can be digitally identified and tracked, but there is no interconnected system for businesses to find out the background of materials they are working with in existing structures or buildings.

Businesses in the room suggested solutions could be:

• Increasing availability and use of open access data across sectors and supply chains. The more data that is shared, the more materials can stay in use for longer. Use this CBI resource to make the most of your data
• Digital technologies, including blockchain and digital twins, have a role to play in increasing the amount, quality, and value of data available to businesses to make more sustainable decisions. Increasing the number of businesses working together to build and use these tools will move the economy towards the critical mass required to drive system-level change
• Engaging and collaborating with sector groups to share best practice on data sharing, such as the Client Infrastructure Group, where CEOs and CSOs share sustainability initiatives and challenges at a strategic sectoral level.

Regulatory environment

Regulation can be a helpful lever in driving system level change in business behaviour. Currently the regulatory framework relating to the circular economy is very fragmented. And the taxation system often does not reflect the true cost and value of products, sometimes penalising businesses not buying new.

Businesses in the room suggested solutions could be:

• Better regulation to drive significant change. For example, the Extended Producer Responsibility scheme has and will force businesses to think more about their packaging materials. Similar regulation in other areas could be helpful
• A review of the tax system to ensure it is based on true cost and value and does not penalise businesses moving to a circular approach.

A need for commercial incentives

For many businesses, circularity is not currently the most commercially valuable option. Incentives must be developed for businesses and senior leaders to make the shift.

Businesses in the room suggested solutions could be:

• Embed sustainability targets into company targets and annual reviews
• Connect company bonuses to sustainability credentials
• Green the financial services industry (e.g. link loan rates to sustainability targets)
• Discuss rephrasing contracts with clients to include greener options, reduce waste etc.
• Continue education of consumers, clients and supply chain, to drive demand for greener, more circular products and services.

4. Finally, this is a systems issue…

Participants overwhelmingly agreed that the solution to a circular economy is working together as a whole system.

This starts with partnerships. Businesses in the room are already working with agile start-ups offering innovative solutions to challenges around the circular economy. Participants also discussed forums their CEOs and CSOs could take part in to share best practice and learn from the lessons and mistakes of early adopters. Discover how partnerships could help your business.

These partnerships must also feed into a larger systems-based approach. This is where each part of the ecosystem works together to create a fully circular economy. Competitors must work together, as well as organisations across public and private sectors.

There is no silver bullet to deliver a systems-based approach, but your business can start this journey by speaking to other business leaders, and engaging in partnerships, something the CBI can enable.