How to build a circular business model that pays off

Manufacturers and distributors are working hard to upskill and strategise, taking advantage of the circular economy's golden opportunity for return on investment.

Let's lay out evidence pulled from the 'State of the Circular Economy Report' created in partnership with CIO.com

60%

Three in five (60%) senior manufacturing and distributing business and technology leaders say they have advanced knowledge of circular economy and sustainability.

84%

Manufacturing and distributing business and tech leaders are paying greater attention to the benefits of the circular economy—most survey respondents (84%) say that they have a role in their company's circular economy and sustainability strategy, and 32% say it's central to their job. 32%

32%

32% of manufacturers and distributors have experienced significant benefits from the circular economy. They picked out:

• Improved brand image and reputation (50%)

• Energy efficiency (47%)

• Increased productivity, efficiency, and resiliency (46%)

• Increased productivity, efficiency, and resiliency (46%)

• Improved competitiveness (44%)

The circular economy could attract new customers

What can you learn from the report?

• Improving your brand image and reputation concerning sustainability is a big priority, as it could lead to customer acquisition and retention wins.

• Digitising manufacturing processes to support the circular economy could make your business more robust, resilient, and profitable in the long term.

• Sustainable business practices are now a critical concern for customers, employees, shareholders, and supply chain partners who want to take responsibility and action around sustainability.

• Customers will expect your business to conscientiously control and limit your damage to the environment through an environment, social and governance (ESG) strategy.

Let's illustrate the circular economy's potential for profitability with a real-life case study from the Sage Advice Podcast. Circular economy case study: Teemill

Building a circular business model with customers in mind

Usually, T-shirts are made by retailers using screen-printing mass production techniques because it's financially viable to order hundreds of shirts at once rather than produce odd numbers in their dozens. This means that up to 40% of all clothing production is wasted. Teemill is a business cutting a different path. It is a sustainable fashion brand using patented technology to print recyclable and returnable shirts made-to-order, cutting this immense waste and using natural, organically grown cotton from farmers. What's more, customers can recycle their old t- shirts and have them made into something new. An example of where Teemill saves itself money by cutting waste is through removing swing tags, a relic of resale found tied to clothing which displays product information. Teemill co-founder Mart Drake-Knight says, "Taking away is one of the best things you can do. You can design stuff out of your business, removing waste to save money. Waste is where sustainability and the economy line up. "If you have a Venn diagram, you'll overlap sustainability and economy, with waste in the middle. If you hunt waste, you can find many exciting opportunities. I think that's pretty much true for every business." Listen to the interview with Teemill here, on the Sound Advice Podcast

How to start your circular economy strategy Prize employees with inquisitive, provocative, and innovative thinking

Consulting Chief Information Officer (CIO) and technology expert Isaac Sacolick says a successful circular model is all about having the right people and cultural mindset. He recommends recruiting and encouraging curious and provocative colleagues to overcome any challenges in thinking innovatively.

Sacolick says, "We need people who ask questions, who can look at how issues are solved today, and challenge assumptions.

"They should be able to do their research and see how other people are doing things, not only within the manufacturing or distribution space.

Looking at how other industries are using artificial intelligence (AI) and new materials is helpful.

He adds, "What materials could you look at to build your parts? How can you find more generic materials in manufacturing, so you don't have this tightly coupled supply chain?"

Hire or upskill manufacturing workers with data and analytics skills

Manufacturers and distributors need workers trained in advanced data-rich technologies to take full advantage of the circular economy.

It's vital to have a team that can forecast how a circular model will affect manufacturing costs and consider the associated risks beyond quality and cost. "If I put more capabilities into my product, what does that say about what I can charge for it?" Sacolick says.

"What is the elasticity of my pricing if I start marketing against something that I couldn't do before? I am looking for somebody to analyse the entire manufacturing process fully." Six Sigma is a quality control program that uses statistical control measures to show and remove the causes of defects. It minimises variability in business processes—which cuts waste.

Having employees with a Six Sigma background is helpful as they can improve manufacturing quality by managing, collecting, and analysing large data sets. "They have the training to decouple existing processes to discover how to perform them more sustainably, with lower risk, at lower cost, or with a greater or new value."

Use the right technologies

In our research, respondents ranked four digital transformation technologies in order of importance for chasing your circular economy goals.

1. Cloud applications and infrastructure (74%)

The cloud drives digital transformation, impacting every aspect of modern manufacturing. Think of Enterprise Resource Planning (ERP), workforce training, or apps to monitor machines. With the circular economy, cloud software helps research, design and develop products more efficiently and cost- effectively.

The cloud also transforms physical processes. You can fabricate, manufacture, and analyse products by innovating with processes that drive sustainability, such as 3D printing and digital twin solutions.

2. Data analytics (68%)

Data analytics can support your circular economy strategy by speeding up product development and quality control while reducing manufacturing costs. You can more easily monitor your machinery and make the best use of resources, eliminating waste as much as possible.

Data analytics can also strengthen your supply chain to help with logistics, distribution, and product scheduling.

3. Automation (67%)

Automated processes speed workflows, boost productivity and reduce human error. You'll also yield analysable data that can improve circular economy production performance.

4. Internet of Things (IoT) (48%)

By adopting IoT technology for machinery, endpoints in the field, or products and parts, you can carry out predictive monitoring and maintenance, increasing efficiency in support of greater circular economy sustainability.

A sustainability goldmine

The circular economy could be a goldmine of innovation with the right people and technology. You're also doing the right thing—which is becoming more of a legislative necessity due to regulations being put in place on businesses in response to the threat of climate change.

Keep your eyes on the prize and focus investment on people and technology.

Although the circular economy is most associated with sustainability, there are impactful ways to make it pay off financially in the short and long term.

Want to learn more? Download the full report here

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