With the EU’s passage of the Circular Economy Package in April, many European companies are now facing mandates to reuse the products they create for as long as possible. The EU is not alone in seeking ways to convince firms to recycle. The U.S. Chamber of Commerce supports companies in developing circular economies (CEs), and China — like Europe — has developed policies and legislation around CEs. It’s easy to see what countries think they have to gain in these efforts: The Ellen MacArthur Foundation, McKinsey, and Accenture believe that enabling CEs will lead to trillions of dollars in savings and is a particularly significant step in protecting the environment.
Rethinking Sustainability in Light of the EU’s New Circular Economy Policy
Many companies face serious challenges when it comes to executing on a circular economy (CE) strategy. They usually lack access to used products, they aren’t able to refurbish or recycle used products in a cost-effective way, their products are not designed with circularity in mind, and their customers discount the value of refurbished or remanufactured products. But these obstacles can be overcome. Companies can take three actions to build strong CEs: creating modular products, developing a refurbishing infrastructure, and leasing. Companies that aren’t succeeding in building CEs often adopt some of these approaches, but never all three in coordination. It is the combination of all three approaches that improves access to products, reduces costs, and increases value to the consumer. Together, they create the scale needed to make CEs profitable.