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Welcome to the Circular Economy

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As climate change accelerates, how can corporations reduce waste, reuse materials, and improve sustainability in a way that’s good for business? Enter the circular economy.

Here’s what happens in a linear economy: companies make a product. Consumers use it, and when they’re done, they throw it out. Multiply that across materials, industries, and geographies, and you’re left with a global cycle of production and consumption that generates staggering amounts of waste. But as climate change accelerates and materials become scarce, the ‘take, make, waste’ approach we’ve relied on since the Industrial Revolution isn’t going to work anymore. If we really want to address today’s most pressing environmental issues, we need to minimize waste and find innovative new ways to reuse materials. We need a circular economy. 

What is the Circular Economy?

The Ellen MacArthur Foundation, which helps businesses transition to a sustainable future, defines the circular economy as a restorative system that “aims to redefine growth” by “gradually decoupling economic activity from the consumption of finite resources, and designing waste out of the system.” It’s based on three principles: eliminating waste through smart design, extending the life of products and materials to keep them in the production cycle, and regenerating nature by returning biological materials back to the environment. 

Enabling a circular economy at scale requires participation from businesses, governments, investors, institutions, and consumers. Increasingly, major global corporations are realizing they stand to gain economically by integrating circular practices into their sustainability strategies over time. 

“Circularity is part of being a good corporate citizen—and it’s good for business,” explained Silicon Foundry Partner Erik Terjesen. “Remanufacturing helps companies capture additional revenue from their products. Reusing materials helps reduce cost. When companies adopt circular practices, they differentiate themselves from competitors, mitigate risk, and create resilient supply chains.”  

How Are Companies Contributing to the Circular Economy?

Circularity looks different depending on what your business is: for some companies, it means designing their products for longer lifespans. For others, it means making waste-saving changes in their supply chains or consumer journeys. Terjesen explains that in practice, perfect circularity isn’t always possible. “Once you’ve created an object, there’s no scenario where it gets reduced back to its component parts and reused in exactly the same way,” he said. “Even so, companies can still make a big impact through reuse, recycling, and smart design.” 

Terjesen points to successful take-back programs where customers can send back used items for recycling. Ikea, which aims to be 100% circular and use only renewable or recycled materials in its products by 2030, implemented a buyback program where it pays customers up to 50% of their item’s original value when they return it to a store. UPS has partnered with Nespresso to cut down on single-serve coffee capsule waste. Nespresso supplies consumers with pre-paid recycling bags they can fill with used capsules and drop off at any UPS location. UPS then delivers the capsules to recycling partners for processing.  

Reducing waste from packaging—which in 2018 accounted for approximately 82.2 million tons of municipal solid waste in the U.S, only half of which got recycled—is another key circularity endeavor for many companies. 

Kroger recently partnered with packaging start-up Loop to pilot reusable packaging at its Portland-area Fred Meyer stores. Burger King and Tim Hortons also partnered with Loop earlier this year to pilot a reusable food and beverage packaging. In 2019, UPS worked with Loop to deliver products to consumers in a reusable tote that gets collected, cleaned, and redelivered. Estée Lauder Companies, as part of its commitment to transition to 75-100% recyclable, refillable, reusable, recycled or recoverable packaging by 2025, has announced strategic partnerships with Roctool and Eastman

“Partnerships can be key to unlocking circular initiatives, but companies have to make sure they are working with partners that are aligned with their goals,” Terjesen said. “When we help companies evaluate potential partners, we look at their circular strategies and evaluate how their areas of expertise complement our Members’ businesses.” 

Terjesen notes that another way companies can work towards a sustainable future is by investing in circular solutions. “Corporate venture capital has the power to meaningfully accelerate our transition to a circular economy by investing in circular technologies,” Terjesen said. “We work with several CVCs that are investing in technologies that contribute to a sustainable future and are relevant to their businesses.”  

Terjesen says he also sees companies evaluating their supply chains with help from companies like Circulor as part of their circularity efforts. “Where do your materials come from, and how can they be reused in order to minimize waste? Those are important questions to answer as you establish a circular economy strategy.” 

Bringing Circularity Into Your Business

For businesses that are just beginning to explore the circular economy, Terjesen recommends assessing your products or offering, identifying relevant circular technologies and practices, and making the business case for why your company should adopt them. 

He also suggests assessing the landscape of start-ups and founders pioneering innovative practices that relate to your sustainability goals. 

“Successful circular economy initiatives are operationally feasible and aligned with your mission,” Terjesen said. “They’re not just a public relations play—they’re part of your core business strategy. Corporations shouldn’t be afraid to seek circular solutions that deliver lasting value to shareholders, consumers, and the planet.”

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