BCG-The New Big Circle

THE NEW BIG CIRCLE
Achieving growth and business model innovation

through circular economy implementation
A joint report from the World Business Council for Sustainable
Development and The Boston Consulting Group
2 THE NEW BIG CIRCLE – Achieving growth and business model innovation through circular economy implementation
Content
1. Executive Summary 4
2. Introduction 6
3. Circular economy benefits

and performance 10
4. Three types of circular innovation

12
Process innovation 15
Product innovation 16
Business model innovation 17
5. Success factors and recommendations 18
6. Case Studies 24
AkzoNobel 25
C&A 26
CMPC 27
Cohealo 28
GREEN HOME 29
Hirdaramani 30
IKEA 31
LafargeHolcim 32
Michelin 33
Philips 34
Rubicon 35
Skanska 36
Solvay 37
7. Conclusion 38
8. About the research 39
THE NEW BIG CIRCLE – Achieving growth and business model innovation through circular economy implementation 3
1. Executive summary
State of current circular Practical
trends and practices in
companies
97% recommendations to
successfully transition
of respondents said that towards a circular
Corporate leaders are increasingly the circular economy drives
seeing the business and societal
innovation to help
economy
value of strategies to re-use and
recycle resources—and are moving
make the company more We learned that circular
efficient and competitive implementation involves various
toward what’s commonly known as stakeholders at different stages
a “circular economy.” This approach in areas such as sourcing,
of the journey and calls for strong
rethinks the traditional “take- product development and collaboration all along the value cycle.
make- dispose” economic model, production processes While each company is different,
and envisions a new model that is with its own unique challenges, we
96%
regenerative by design. distilled 10 recommendations for
The business benefits are expansive. putting circular initiatives in place.
Innovations that foster resource of respondents believe
reuse can, for example, make that the circular economy 10 recommendations
companies less dependent on is important for their for implementation of
scarce inputs, increase operational company’s future success
efficiency and enable new offerings circular initiatives
that attract customers and deepen 1. Engage with external
existing relationships. It’s been
estimated that the transition to the
61% stakeholders
of the surveyed companies 2. Ensure consistent and strong
circular economy could unlock USD top management support
$4.5 trillion of GDP growth worldwide fund their circular projects
by 2030.1 The societal benefits are internally 3. Define “circular” and
also numerous—making it easier to communicate the vision
shelter, feed and clothe the 8.5 billion 4. Quantify specific ambitions
people expected to inhabit the planet
by 2030.
51% and develop a business case
of respondents state 5. Educate your employees
This report is the result of research that circular economy 6. Engage and empower
which included a survey of 78 activities already add to business units
managers from a variety of industries company profits
around the world, and one-on-one
7. Start with process innovation,
then move to product
interviews with leaders to understand innovation and business model
best practices.
50% innovation
of respondents stated that 8. Collaborate with external
customers are the most partners
influential external group 9. Define and align KPIs for goals
and accountability
10. Do good and talk about it
1
Lacy, Peter; Rutqvist, Jakob (2015): Waste to Wealth – The Circular Economy Advantage, New York/London: Palgrave Macmillan.
EXECUTIVE SUMMARY
Circular economy activities along the value cycle*

* Percentages below show the share of surveyed companies that are active and successful in each area.
32%
DESIGN
44% RAW MATERIALS
products that
are recyclable
RECYCLE/ and reusable
BUY materials that NEW INPUT
are regenerative DESIGN
or recycled
47% PROCESS
INNOVATION
54%
PRODUCT
INNOVATION 41%
COLLECT COLLECT 42% MAKE products
AND RECYCLE as waste-free and
PRODUCE
products and resource-efficient
materials at the end BUSINESS MODEL INNOVATION as possible
of their current life
to close the loop 18%
USE
DISTRIBUTE
12%
SELL access
(rather than
42%
ownership), leasing
or sharing products
USE products responsibly, not
excessively, to extend their
lifetime and to reduce pollution
2. Introduction
INTRODUCTION
As the global population surges and more consumers enter the

middle class, the demand for commodities and raw materials
has dramatically increased. And the situation will only get more
challenging.
The United Nations estimates that There’s also the growing pressure At the same time, corporate leaders
the world’s population will reach 8.5 to reduce the environmental have realized that a sustainability
billion in 2030, an increase of 16% impact to benefit society at large by focus can drive innovation and
since 2015. Without more sustainable improving reusability, lowering energy improve competitiveness on many
agricultural and production practices, consumption and reducing pollution. fronts. With this in mind, we believe
housing, feeding and clothing so For private companies, that pressure leaders should embrace the circular
many people will severely strain the is coming in the form of increased economy as perhaps the most
planet’s natural resources. government regulations, consumer promising way to accelerate their
demands and costs. own organizations and society as
whole toward a sustainable future.
Pressure is also growing
internationally, evidenced by the As noted in WBCSD’s CEO Guide to
U.N.’s Sustainable Development the Circular Economy, transition to
Goals, the first globally agreed to the circular economy could unlock
framework for sustainability. USD $4.5 trillion of GDP growth
worldwide by 2030, and those
Reducing worldwide kinds of numbers are catching the
resource use by only 1% attention of corporate leaders. This
could save approximately is mirrored by survey results, in which
The world’s 840 million tons of metals, 84% of respondents stated they
population will reach fossil fuels, minerals and expect to increase their investments
in circular economy projects in the
8.5 billion by 2030 biomass annually—as future, and 96% said the circular
well as 39.2 trillion liters economy will help increase long-term
This impending resource scarcity
of water. We estimate that value creation (for more about our
is just one reason that sustainable could translate into potential survey please see Section 7 “About
development is at the top of the savings of approximately the research”).
agenda among many governments, $80 billion for the global
private companies and nonprofit economy.2
organizations.
$4.5 Trillion 84% 96%

The GDP growth that of respondents said they of respondents stated
could be unlocked expect to increase their the circular economy
by transitioning to a investments in circular will help increase long-
circular economy economy projects in the term value creation
future
2
https://www.bcg.com/publications/2017/sustainability-operations-urgency-opportunity-smart-resource-management.aspx)
INTRODUCTION
The circular economy is a new way of “We see the value and future potential “The circular economy has the
looking at the relationships between of the circular economy. This is why we potential to change the way we create
markets, customers and natural endeavor to ‘disrupt ourselves’ – rather value, and relations with our customers
resources. It moves away from the than be disrupted by others. Over the and other partners — for the better.
traditional “take-make-dispose” next decade the circular economy will Thinking circular strengthens our
economic model to one that is become even more important for all innovation capabilities to further
regenerative by design. The goal is businesses,” said Markus Laubscher, develop more sustainable solutions
to retain as much value as possible a director in the Sustainability that unlock Solvay’s business growth
from resources, products, parts and Department at Philips, a Netherlands- while doing good for the planet,” said
materials to create a system that based health technology company. Jean-Pierre Clamadieu, CEO of Solvay,
allows for long life, optimal reuse, a global chemical company.
By unleashing circular innovation,
refurbishment, re-manufacturing and
companies can act now to boost the
recycling.3
global economy’s resilience, support
For this reason, we discuss the circular people and communities around
economy in terms of how it effects the world and help fulfill the Paris
the value “cycle” instead of the value Agreement and the UN Sustainable
“chain.” The circular economy requires Development Goals. Without
an evolution from linear thinking to one immediate action, the consequences
of cycles. It’s a shift in mindset and of today’s “take-make-dispose”
business practices that will disrupt mindset will be dire. By 2025, for
industries and business models, example, it’s estimated that two-thirds
significantly reshape customer of the world’s population could face
demand and could prove to be the water shortages.5
biggest opportunity to transform
production and consumption since
the first Industrial Revolution 250 years
ago.4
3
Kenniskaarten: https://kenniskaarten. Hetgroenebrein.nl/en/knowledge-mapcircular-economy/definition-circulareconomy/
4
Lacy, Peter; Rutqvist, Jakob (2015): Waste to Wealth – The Circular Economy Advantage, New York/London: Palgrave Macmillan.
5
Source: https://www.worldwildlife.org/threats/water-scarcity
INTRODUCTION
3. Circular economy benefits
and performance
CIRCULAR ECONOMY BENEFITS AND PERFORMANCE
At the individual company level, implementing circular solutions

involves rethinking products and services using principles
based on durability, renewability, reuse, repair, replacement,
upgrades, refurbishment and reduced material use. By applying
these principles, companies can design out waste, increase
resource productivity and decouple growth from natural resource
consumption.
In our study, 96% of respondents Respondents also said that This means that companies are
believe that the circular economy is the circular economy drives reaping the financial rewards through
important for their company’s future better operational efficiency (96%
success, and 51% of respondents
innovation (97%) to help of survey participants cited this as
state that circular economy activities make the company more a factor) and increased revenue by
add to profits. Given this strong efficient and competitive deepening relationships with current
positive sentiment, we wanted to in areas such as sourcing, customers, winning new customers
better understand how moving product development and who are attracted to circular products/
towards the circular economy can help production processes. solutions (93% cited this as factor).
business capture significant benefits, Financial rewards also take the form
including: These findings around costs, business of reduced risk, easier financing and
risk and innovation help explain why access to new markets. The overall
• increased growth from new sustainability and circular economy effect is a more robust business. The
customers and deeper principles are moving so decisively to circular economy helps to “transform
relationship; the top of the corporate agenda and customer relations from transaction-
• innovation and competitive are attracting greater investment. based contacts to strategic, long-term
advantage cost reduction;
Akzo Nobel’s CEO Thierry Vanlancker partnerships,” said Nikhil Hirdaramani,
• lower material and production
aptly sums it up: “The circular economy a member of the Board of Directors
costs;
is a key element of the necessary of Hirdaramani Group, an apparel
• reduced energy consumption and
route towards a sustainable society. manufacturer based in Sri Lanka.
CO2 emissions; and,
• risk mitigation by improving supply At AkzoNobel, we use circular
chain and resource security. principles to achieve radical resource Figure 1: Effect of circular economy
efficiency and to design out negative on profitability
In addition, we wanted to learn the How do your company’s circular economy-related actions/
externalities. This approach offers clear decisions affect its profitability?
extent to which adopting circular (%) of respondents
benefits for the environment, for our 60
economy principles could help 51%
customers and for ourselves.”
companies get ahead of government 40
policies and regulations, pricing Respondents’ optimism and strong 30%
externalities and shifts in tax rules. commitment to the circular economy 20
14%
Our findings were enlightening, tying is no doubt influenced by the benefits
6%
real-world benefits and performance they’ve already seen. Among 0
to specific circular economy projects. respondents, 51% stated that their Added to
profit
Broken
even
Subtracted Don’t know
from profit
Respondents clearly stated that circular economy-related decisions

engaging in the circular economy is and actions added to profits while only
one way to address our serious natural 6% reported a negative impact on their
Figure 2: Margins of circular
resource challenges and mitigate profits. economy products
business risk (93% consider it), as well What makes these results even more
If your company develops circular economy-specific products,
are they ... sold with superior margins?
as reduce GHG emissions (96%) and impressive, is that consumers are (%) of respondents
50 48%
water pollution (83%). mostly unwilling to pay a premium for 42%
40
more sustainable and circular products,
30
and so companies are not using circular
20
initiatives to raise prices. In our survey, 10%
10
only 10% of the companies stated that
0
they are selling their circular products at Yes No Don’t know
higher margins.
4. Three types of circular innovation
THREE TYPES OF CIRCULAR INNOVATION
To start their circular economy journey, companies need to innovate

with circular principles in mind from the outset.
There are three types of circular
innovations with progressing degrees Figure 3: Frequency of process, product and business model innovation
There are different types of innovation. Please evaluate the status of each innovation type in your company’s circular economy activities
of complexity that should be tackled
in stages. “Start with circular economy Process
Innovation 54% 14% 6% 13% 5% 8%
as early as possible in the project or
process,” suggests Jenny Adholm,
Product
Sustainability Lead at Skanska. Innovation 42% 24% 8% 9% 9% 8% Active and successful
Recently started to be active
Decision taken, project still in planning phase
Business Not yet active - might consider in the future
Model 18% 12% 26% 4% 41% Not active
Innovation Don’t know
0 20 40 60 80 100
1 2 3
Process innovation Product innovation Business model innovation
is generally the easiest since most is somewhat more difficult is the most challenging because
companies have always been because it touches more areas it involves significant changes
engaged in traditional process of the organization. It involves the and/or the creation of a new logic
innovations. It involves the development and introduction around how a company generates
development and implementation of new or significantly improved value.
of new or significantly improved goods or services.
production, logistic or recycling
methods.
Taken together, these three types of innovation touch all aspects of the value cycle. Below we will share how
companies are pursuing innovation in each stage of the value cycle.
Figure 4: Circular economy activities along the value cycle
DESIGN
products that
RAW MATERIALS are recyclable
RECYCLE/ and reusable
BUY materials that NEW INPUT
are regenerative DESIGN
or recycled
COLLECT PROCESS PRODUCT

AND RECYCLE INNOVATION INNOVATION
products and COLLECT MAKE products
materials at PRODUCE as waste-free and
the end of their resource-efficient
current life to BUSINESS MODEL as possible
close the loop INNOVATION
USE
DISTRIBUTE
SELL access
(rather than
ownership), leasing
USE products or sharing products
responsibly, not
excessively, to extend
their lifetime and to
reduce pollution
Figure 5: Frequency of circular economy projects along the value cycle

Please select in which of the steps your company actively performs circular economy
Design
32% 17% 13% 12% 12% 15%
Buy 8%
44% 23% 6% 6% 13%
Make
41% 22% 12% 8% 6% 41%
Sell
12% 14% 13% 19% 24% 18%
Use Active and successful

42% 23% 9% 8% 5% 13%
Recently started to be active
Decision taken, project still in planning phase
Not yet active - might consider in the future
Collect &
Recycle 47% 18% 10% 10% 4% 8% Not active
Don’t know
0 20 40 60 80 100
1. Process innovation
For several reasons many companies Survey respondents said they were
moving towards the circular economy somewhat more successful with the
start with process innovation. “collecting and recycling” stage of
Generally process innovation the value cycle: 47% said they were
involves the operations areas active and successful in this area,
of the business and therefore is although activity in this area varied
considered within the direct control significantly among industries.
of the business. Many employees The most active was pulp and paper.
are also familiar with adjusting to new In the survey, 100% said they are
production processes. And since active and successful in this field.
customers are not directly affected
by changes in production processes, Sri Lankan apparel manufacturer CMPC is a Chilean pulp and
these innovations often pose less Hirdaramani constructed its paper company that turned waste
risk. Hirdaramani Knit – Agalawatta treatment from a cost into a profit.
(‘Mihila’) plant with four sustainability Maintaining the commitment to local
Among our survey respondents, 54% focus areas in mind - energy community, when CMPC acquired
said they are active and successful in consumption, water consumption, the Brazilian pulp operations, and
waste reduction and improving as a way to continue treating and
process innovation, which primarily biodiversity. From the very start, recycling solid waste the company
involves production (i.e., “make”) as the company thought in terms of kept the association with Vida. In a
well as collecting and recycling the sustainability, even the location of conventional plant, only 22% of the
waste created during production the factory was selected considering waste can be reused (in agriculture);
the rainwater-harvesting requirement 25% is incinerated and 53% go to
processes. for running operations at the factory. landfill.
Hirdaramani then focused on the
54% operation of low energy ventilation

and cooling systems, while also
seeking out circular technologies
But thanks to its circular economy
efforts, the mill in Brazil now has
recycling rates of 99%, which means
of all respondents said they to reduce water consumption, such almost 600,000 tons of industrial
are active and successful in as rainwater harvesting and waste waste is not going into landfills. What’s
process innovation water recycling. more, Vida earned US$1 million in
the last five years by selling products
The plant, which opened in
47%
from recycled waste that once
2008, has a production area of created costs. In fact, the project has
approximately 96,000 square feet, been so successful that CMPC plans
of respondents said they are a capacity of up to 70,000 standard to expand these processes to all its
hours, and employs more than
active and successful in the 1,000 people. Although it was costly
plants in Latin America.
collecting and recycling stage to build — 30-40% higher than a “At CMPC, circular solutions are
of the value cycle conventional plant — the investment not only a means to do good for
has paid off in many ways. Energy the environment by establishing
100%
use is 48% less than a conventional sustainable processes, but also a
plant, water consumption is 70% means to make our company more
less and the plant sends zero waste valuable. By changing our recycling
of respondents from the to landfills. As a result, the Mihila practices, we were able to turn
pulp and paper industry are plant has earned international production waste - that created a
certifications and awards such as financial loss before - into profit,” said
active and successful in the the LEED Gold Certification. Hernán Rodriguez Wilson.
collecting and recycling stage
2. Product innovation value cycle, though some have made Finally, there is the “use” part of the
progress. “If products were designed value cycle—how customers actually
Product innovation is more
with their next use in mind, people use the product. Under circular
complicated than process innovation
could more easily reuse and recycle economy principles customers
given its broad impact on the value
those products,” said David Rachelson, should be able to use products
cycle: procurement (i.e., “buy”), product
Vice President of Sustainability at responsibly, not excessively, in order
development (i.e., “design”), how
Rubicon Global. to extend their lifetime and reduce
customers use the product (i.e., “use”)
pollution. According to our survey,
and how the company can “collect and
42% of companies are active and
recycle” finished goods.
successful in this stage of the value
Innovative thinking is critical, which cycle.
South Africa-based GREEN HOME
often requires recruiting and training produces and sells plant-based,
employees, cooperation among
employees with different skills from
biodegradable food packaging using
raw material such as sugarcane, plant 32%
various departments (e.g., R&D/design, starch, wood and wood fiber. Founder of respondents say that their
Catherine Morris got the idea for
procurement, operations) and the “circular packaging” during a trip to companies are active and
inclusion of external partners with Thailand where she saw packaging successful in the design
made from organic material. She
different skills and/or resources to
started her business less than a year
stage of the value cycle
produce circular products. Customer later, at first doing research on potential
demand may drive product innovation, raw materials by herself and eventually
or the company might use product hiring designers to develop the C&A is a family-owned, Dutch business.
innovation as a testing ground-a products. The companies’ circularity journey
started when the company asked
means to constantly learn about “Circularity is at the core of our William McDonough, founder of Cradle
customer needs and develop new corporate strategy. When I founded to Cradle (C2C), to speak about C2C
the company, still a lot of education of at C&A’s annual shareholder meeting.
markets. customers had to be done. This has His presentation sparked excitement
42%
changed a lot in recent years. Both for how fashion could contribute to
business and private customers are sustainability, and the company created
more aware of sustainability and the a task force (including BCG and others)
of respondents are active circular economy today and demand to assess potential circular activities
and successful in product for recyclable products,” Morris said. and create an “ecosystem” of internal
innovation and external stakeholders to pursue
these activities.
Among those seeing themselves
as industry leaders in the circular
44% The C&A’s first circular product
innovation was a C2C-certfied, fully
of respondents are active bio-degradable t-shirt. Even though a
economy, this percentage increases
to 62%; while among those who see
and successful in the buying t-shirt is one of the easiest products
to design and produce, meeting C2C
themselves as average, only 33% stage of the value cycle standards was challenging. C&A
describe themselves as active and needed to find alternatives for polyester
successful. A closer look at the value IKEA has introduced new design or nylon stitching, new care labels,
principles that can be bundled together as well as dyestuffs by innovating
cycle finds that procurement, or “buy,” to extend the product life. “It’s about within the existing value chain. Despite
is relatively easy to accomplish: 44% seeing products as ‘material banks’ these challenges, employees were
of companies from the survey are for the future. And from the very enthusiastic and proud to participate
beginning design them so they can be in the sustainability effort alongside
active and successful in the buying management and in close cooperation
repurposed, repaired, reused, resold
stage, even though it often means and recycled in any other way,” says with new and existing partners.
finding new suppliers and forging new Malin Nordin, Development Leader Ultimately, C&A launched a mass
partnerships. for Circular IKEA. To this end, IKEA is market, price-competitive C2C t-shirt
constantly developing, testing and in the early summer of 2017 in its retail
A second part of the value cycle implementing new offerings with stores in Europe. It was one of the
touched by product innovation is different solutions that deliver true best-selling products in the company’s
“design.” To be successful with design, value for the money. For example, with history and enjoyed margins on par with
IKEA’s Modular VIMLE sofas customers conventional products. Furthermore, the
companies need to educate and train can create their own combinations, t-shirt helped attract new customers
employees about circular principles removing or adding modules if their and increase the value of the average
and practices. It can prove quite a needs change (e.g., moving to a smaller shopping basket. With this pioneering
or bigger apartment). IKEA also offers work, C&A proved existing products
challenge. Only 32% of the companies a wide selection of cover styles to
in our survey say they are active and can be redesigned with CE principles at
change the look of the sofa or replace affordable prices for the mass market.
successful in the design stage of the covers that are worn out or dirty.
3. Business model innovation

Business model innovation is the Unlike process or product innovation,
most challenging concept towards business model innovation also
a more circular economy because touches on how the product is
it can change the entire value cycle, being sold—the “sell” stage of the
including how products are marketed value cycle. To make the transition,
and sold to customers. Thus, companies often need to devote a lot
Michelin, the French manufacturer
business model innovation is more of time and resources to educating of tires, is pressing forward with
difficult to accomplish, especially for customers, trying to change innovations such as selling tires
large corporations in conservative consumption habits that are deeply as a service. Trucking, airline and
industries. ingrained (e.g., leasing or sharing mining companies can choose to
be charged based on the number
instead of buying). Only 12% of the of kilometers travelled, the number
Only 18% of the companies from our
companies are active in this stage of landings made or the weight
sample are successfully engaged
of the value cycle, though some transported using the Michelin tires.
in business model innovation. Even
companies are making inroads. As part of the service, the company
among the circular leaders, only
takes care of every aspect of tire
about one-third are successful with management, including selection,
business model innovation. Cohealo is a US-based technology mounting, maintenance, assistance,
company founded in 2012 that retreading and end-of-life recycling.
18% developed a cloud-based platform,
which allows healthcare systems to
These solutions use onboard
pressure monitoring systems to
of companies are active schedule, track and share medical optimize preventive maintenance
equipment. That’s a big deal in the and reduce vehicle downtime. Well-
and successful in business industry because health systems maintained tires last longer, which
model innovation usually spend millions of dollars on is good for the planet and good for
purchasing and renting equipment, customers’ business.
“Process innovation is always yet utilization rates for owned
equipment is often below 50%. Because transportation customers
tough to implement but we have are very price sensitive, Michelin has
been doing it for decades and Because hospitals have limited spent significant time educating
resources and can’t afford to buy all them about the benefits of tires-
have gained valuable experience. available equipment, they will often as-a-service. By 2017, Michelin
Product innovation requires new rent equipment on a case-by-case solutions managed the tires of more
ways of thinking from designers and basis. This can result in astronomical than 400,000 trucks and light trucks
collaboration with new partners and rental costs. Additionally, hospitals in 18 countries. The goal is to double
don’t have hard data on equipment revenue from their services and
suppliers and is thus more difficult. utilization, making it difficult to solutions businesses by 2020.
We are in the process incorporating determine whether the patient case
circular ingredients into products, volume exists to justify the purchase “Circularity has an impact on
for new, cutting edge technology. every aspect of our product’s
such as recycled and renewable lifecycle - from the design of our
content in plastic products and From the beginning, Cohealo’s cycles to recovery and recycling.
making spare parts available for founders believed technology- Our sustainable growth strategy
supported collaboration among particularly relies on circular
repairs. In contrast, business hospitals could help to facilitate economy levers which help us to
model innovation is an even greater positive clinical outcomes and lower develop innovative processes and
challenge. We are testing and piloting costs. Today, the company is growing products,” said Michelin CEO Jean-
circular initiatives, but still struggle to by over 1000% year-over-year. Dominique Senard.
find scalable solutions,” says Nordin
of IKEA.
5. Success factors and
recommendations
SUCCESS FACTORS AND RECOMMENDATIONS
Each company is different, of course, with its own unique challenges.

But in our discussions with managers, especially those who consider
themselves leaders in the circular economy, we have identified
several common success factors and best practices that every
company should bear in mind as it initiates, implements and markets
circular solutions to customers.
Here are 10 recommendations For example, customers are #2: Ensure consistent
to implement circular economy encouraging AkzoNobel and Solvay and strong top
principles into any business: to develop chemical products that
are more sustainable.
management support
#1: Engage with external And LafargeHolcim, a construction Respondents cited management
stakeholders materials company, conducted as the most important internal
External stakeholders often play focus groups to better understand stakeholder for driving circular
an important role in pushing the customers’ needs and concerns initiatives. Without leadership from
circular economy to the top of around the circular economy, an top management, the organization
the corporate agenda so it makes approach that is still remarkably rare. will not deploy the necessary
sense to be proactive. Customers financial and human resources.
While survey respondents said
have their own sustainability goals. Most circular projects are financed
that media, suppliers and local
Government agencies and regulators internally: almost 61% of the
communities generally play a minor
are setting requirements. NGOs and companies in our survey fund their
role in bringing circular to the agenda,
local communities are embracing circular projects internally, while 21%
our survey found that the influence
sustainability to improve local quality receive grants or public support for
of stakeholders varies a lot from
of life. Investors are prioritizing their circular activities.
industry to industry. For example,
61%
sustainability and will divest from regulations are strongly influencing
industries/companies that are not circular adoption in construction and
sustainable; meanwhile, suppliers and pulp and paper. “It is important not of the surveyed companies
contractors face similar pressures, as to rely on the market, but to enforce fund their circular projects
well as from the media, public opinion the change by regulation,” stated Dr.
and opinion leaders.
internally
Dirk A. Schwede former manager at
the consulting firm energy design in
21%
More than 50% of survey
respondents said customers were Shanghai and currently Robert Bosch
one of the most influential external Junior Professor for Sustainable
Building at the University of Stuttgart.
of the surveyed companies
groups. receive grants or public
50% support for their circular
activities
of respondents stated that
customers are the most
influential external group
In half of the surveyed companies, top #3: Define “circular” and #4: Quantify specific
management made the decision to communicate the vision ambitions and develop
engage. This vocal and visible support
is also vital to maintain momentum As basic as it might sound, a business case
and build enthusiasm for the circular management must take the time According to our survey findings, 81%
initiatives among the rank-and-file. at the outset to clearly define what of companies with a circular strategy
Engaged leadership understands “circular” means for the company— also have a clear business case
the potential relationship of circular both strategically and operationally. underlying it. Among those companies
initiatives—that decrease costs This will ground the circular concept who do not have a circular strategy,
or unlock new profit pools—and and make it easier for management only 39% have a circular business
competitive advantage. to communicate with employees. The case. Given the higher costs often
definition is unique for every company associated with circular activities
For example, Solvay’s top and helps to foster a common view compared to traditional activities,
management brought sustainability internally. According to Malin Nordin, the business case for circularity is
to the agenda, emphasized Development Leader for Circular IKEA: usually strongly linked to acquiring new
its importance and secured “From the beginning, we had clear customers, strengthening existing
executive committee support to communication of what the circular customer relationships (increasing
drive implementation. “Our senior economy means to IKEA.” volumes, cross-selling, long-term
executives wanted to unlock new
contracts, etc.) or opening new
business potential by closing the Figure 7: Incorporation of circular markets.
loops,” stated Dominique Debecker, economy strategy into other
81%
Deputy CSO at Solvay. corporate strategies
Where is your company’s circular economy strategy incorporated?
of companies with a circular

# of respondents
Figure 6: Internal stakeholder groups

giving impulse to bring circular strategy also have a clear
economy to the agenda 25 49% circular business case
Which internal stakeholder groups were the most important
to give the initial impulse to bring circular economy to your 20 42%
company’s agenda?
To build enthusiasm and focus
64 15
Score1
60 among employees to pursue this
60 10 business case, leaders should
5 7% quantify their ambitions and set
40 2%
0% 0% goals to get the organization moving.
25 0
Ambitious, measurable goals drive
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20
ab o
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s a
n’t
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action, create accountability and

ul nd
su P
bu P
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Do
rc ta
10 10
No
ci S
emphasize the need for change. “We

0
Management also needs to explain the endeavor to disrupt ourselves –rather
rtm d/ ility
s
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it es
SE
en
ee
rtm gy
t
pa ar b
en
ag p
than be disrupted by others,” said

un ine
em
oy
pa ate
HS
a
an To
strategy and rationale. In most cases,

t
de bo in
en
pl
s
a
de Str
Bu
Em
st
Su
m
the circular strategy is incorporated Markus Laubscher, a director in the

Calculated based on survey results: For each ”top 1” rating, 3 points
Sustainability Department at Philips.
1
were given, 2 points for each “top 2” and 1 point for each “top 3” in companies’ overall sustainability
strategy (49%) or corporate strategy
(42%). Only 7% have a standalone Figure 8: Frequency of sustainability
circular strategy. and circular economy strategy
Overall, has your company developed a clear business case of
proven value proposition for its approach to CE?
(%) of respondents
66%
60
40 34%
20
0
Yes No
#5: Educate your Philips has developed training

employees materials and tools to educate
business leaders on design for reuse,
Particularly in the first year of change, recycling and refurbishment. This
leadership should consistently spurs them to generate their own
reinforce the importance of the ideas for sustainable products and
circular idea with employees—who services. After all, education and
must bring the circular vision to life. training are not just about developing
These communications should “technical” skill, they are also about
aim to change the mindset of encouraging creativity and out-
employees from thinking in value of-the-box-thinking. “Flexibility in
chains to thinking in value cycles. It’s thinking and the way you do things is
a transformation that in all likelihood required,” said Martijn van Loon, RD&I
will require the corporate culture to Operations Manager at AkzoNobel.
16%
change. It’s never too early for this
indoctrination. At GREEN HOME,
for example, the importance of of survey respondents say
sustainability is put front and center it’s easy for employees to
during the recruiting and interviewing suggest specific circular
process.
activities or projects
And companies need to back up
talk with training. For example, Many of the leaders surveyed noted
those in operations need how receptive employees are to
education in dematerialization being educated about the circular
and remanufacturing, while those economy, how much they enjoy being
in design need to be trained in involved in circular economy projects,
practices to extend product and their cooperation in adapting the
lifetime, eco-design (including the corporate culture accordingly. “Our
consequences of using certain employees are very proud to work at
materials in the design) and ‘Mihila’” said Nikhil Hirdaramani. “They
recyclability. Companies must also were highly involved in the circular
train employees on the merits and economy activities right from the
the practice of cooperation. As start and very motivated to develop
noted earlier, product and business sustainable solutions.”
model innovation in particular require
cooperation between different
functions and departments.
An open culture that supports
internal cooperation is needed so
skills and competences from various
backgrounds can be combined to
deliver new, sustainable solutions
and implement circular economy
projects. This is something that many
companies struggle with. Only 16%
of survey respondents said that
it’s easy for employees to suggest
specific circular activities or projects.
#6: Engage and Figure 9: Transformation of circular economy activities from top-down
empower business units to bottom-up
Please state which stakeholder group inside your company ...
Although sustainability departments
may initiate and incubate circular ... first
24%
40%
recognized CE
economy projects (46% do so), the opportunity 6%
core business is responsible for 49%

... took
implementing and scaling these decision to 19%
engage in CE 13%
initiatives. This is smart because
sustainability is not an isolated ... incubated
13%
46%
competency, but a mindset that CE
15%
potentially impacts all types of
business activity. ... took over
responsibility and
6%
18%
Top management
implemented Sustainability board
49% Business Units
Almost half of the companies in the
survey said business units ultimately 0 10 20 30 40 50 (%) of respondents
take over project responsibility and

drive the change, while only 18% of
the sustainability departments took #7: Start with process #8: Collaborate with
responsibility for implementation. innovation, then move external partners
For this handoff to succeed, top to product innovation It takes an array of skills and new ways
management must make certain that
sustainability departments involve
and business model of thinking to develop circular products
the business units early. innovation and processes. The most successful
companies do not try to develop or
This handoff is made smoother when Given the previous section’s
acquire all of these skills internally-a
circular principles are integrated discussion on product, process
probably fruitless task. Instead they
into the project teams. And, indeed, and business model innovation, this
collaborate with a variety of external
most companies in our survey (54%) recommendation needs the least
partners, from suppliers to research
have integrated circular economy explanation. It suffices to say that it
institutions to NGOs, which has the
principles into existing project makes sense to start with the least
added benefit of expediting circular
teams within the business units. For disruptive change first. Then based
projects. Sometimes this collaboration
example, at Solvay, circular principles on that foundation of early success,
can even span across industries. After
are embedded into daily business: it’s easier to explore new product
all, one industry’s waste could be
“We do not have a standalone opportunities. Only after circular
another industry’s raw material.
sustainability roadmap but rather thinking is well-established, does it
embed sustainability and circularity make sense to consider the big step of Time and again, managers at leading
in each business unit and into our business model innovation—an area circular companies extoled the value
‘normal customer relation,’” stated where even many circular leaders are of collaboration. Nordin at IKEA said:
Dominique Debecker. “The circular struggling. “You can’t do it on your own!” At C&A,
economy is not a change process Donald Brenninkmeijer said: “Finding
anymore but an integral part of our the right partners and suppliers
core business activities.” and having the ability to bring those
partners together was a key success
factor to develop the C2C t-shirt.”
A further example is AkzoNobel’s
effort to turn waste into chemicals.
The project, which started in 2014,
is investigating the feasibility of
using waste as a feedstock to make
chemicals. A consortium of partners
with different backgrounds and
competences aims to establish a
functioning plant in the Netherlands
in the near future, which would be the
first such facility in Europe.
#9: Define and align One company active in the #10: Do good and talk
KPIs for goals and development and use of circular- about it
accountability specific KPIs is Solvay, which has
created the Sustainable Portfolio When circular initiatives are pursued
The circular economy promises Management tool (SPM) that links correctly, they create tangible
improved sustainability, strategy and sustainability. The tool business and social benefits: among
competitiveness and profitability. assesses two aspects of Solvay’s them, more efficient processes,
In our survey, two-thirds of the portfolio: (1) the monetized risk of its compelling new products and
companies had a clear business case environmental impact (i.e. Where is services, adjacent growth and
or proven value proposition; among Solvay “part of the problem?”) and (2) enhanced brand equity. Circular
circular leaders, 95% reported having the extent to which it helps consumers products and services generally
a business case. However, the only to address their own sustainable don’t support a price premium
way a company can prove a business development concerns (i.e. Where over traditional offerings; however,
case is by having the right KPIs in is Solvay “part of the solution?”). sharing information about circular
place to measure progress. Regular Today, an internal team analyzes the initiatives can attract new customers,
reporting both internally and externally entire portfolio with the SPM tool on strengthen existing relationships and
(to customers, investors, public, a yearly basis; then each business satisfy investors.
etc.) is also important to maintain unit and the company’s sustainable Today, just 42% of the companies
accountability. Among companies development function discusses specifically market their circular
in our survey, about half have KPIs in next steps. According to Dominique products as such. But given that
place to measure circular progress, Debecker, “measuring environmental circular initiatives can translate into
but only a third regularly report those and social impacts is key and a means greater profits (although there is not
KPIs. to detect potential next challenges and a green price premium), promoting
opportunities. It makes our strategy a company’s circular projects is
KPIs do not necessarily need to be
more robust. Solving a problem well-worth the effort. Moreover,
circular specific, especially not at first
here while creating another problem as noted, investors increasingly
since they are often measured against
somewhere else isn’t good enough.” consider sustainability when making
traditional projects with traditional
metrics such as ROI or NPV. Today Solvay and other circular leaders investment decisions and will divest
most companies use general KPIs are also starting to align their annual from companies if they consider a
such as ROI (51% from our survey), reporting with Global Reporting company’s non-sustainable practices
amortization rate (41%) or net present Initiative (GRI) standards to bring too risky. The bottom line is that
value (31%) to track their circular greater transparency to their circular companies who “do good” should talk
journey. At the moment, there are efforts. GRI is an international about their efforts.
independent standards organization
42%
no generally accepted circular KPIs,
though some leaders are working to that helps businesses, governments
develop them. And some companies and other organizations understand of companies specifically
are trying to track the “true costs” of and communicate how their activities
market their circular products
their goods or services to society (e.g., and supply cycles impact climate
by applying internal carbon pricing to change, human rights and corruption.
quantify the cost of pollution).
6. Case Studies
Overview of Case Studies:

INNOVATION TYPE MENTIONED IN CASE STUDY BUSINESS CASE
BUSINESS ROLE OF TOP KPI COST- GROWTH

INDUSTRY COMPANY VALUE CHAIN PROCESS PRODUCT MODEL MANAGEMENT SYSTEM RELATED RELATED COLLABORATION
Chemicals AkzoNobel
Textiles C&A
Wood & Packaging CMPC
HealthCare Cohealo
Wood & Packaging GreenHome
Textiles Hirdaramani
Wood & Packaging IKEA
Construction LafargeHolcim
Transport Michelin
HealthCare Philips
Transport Rubicon
Construction Skanska
Chemicals Solvay
ATTRIBUTE SCALE
Value Chain
Buy Design Make Sell Use Collect & Recycle
Role of Top Management

Recognized Took decision to Incubated CE Took over
opportunity engage responsibility and
implemented
KPI System
No CE KPI's and/or Reporting based on Dedicated CE
reporting general KPIs report and/or KPIs
APPENDIX: CASE STUDIES
20% One example of flexible thinking and

strong collaboration with external
of AkzoNobel’s total revenue partners is AkzoNobel’s effort to turn
to come from eco-premium waste into chemicals. The project,
AkzoNobel is a global leader solutions by 2020 which started in 2014, is investigating
in coatings and specialty the feasibility of using waste as a
After senior management put the feedstock to make chemicals.
chemicals. Sustainability topic on top of the agenda, it tasked A consortium of partners with different
is well embedded in the the individual BUs with driving the backgrounds and competences aims
organization and is a core implementation and encouraged to establish a functioning plant in the
operational principle, with a strong sense of ownership for Netherlands in the near future, which
the CEO as a high-profile sustainability initiatives across the would be the first such facility
organization. To track progress, the in Europe.
ambassador, AkzoNobel
company settled on a set of KPIs and
dubbed its sustainability incorporated a sustainability report
Additionally, AkzoNobel develops
strategy “Planet Possible” into the annual corporate report.
new sustainable products in close
and set ambitious goals. cooperation with customers and
Today, people from different suppliers who are trying to meet
departments collaborate to develop their own customers’ demands for
These included improving resource circular solutions, and the company sustainable products. For example, it
efficiency across the value cycle by, for cooperates with external partners to introduced the first fully compostable
example, reusing packaging to reduce access the necessary expertise for and recyclable coating for paper cups.
waste, and increasing revenues from sustainability innovations. “Flexibility
downstream eco-premium solutions in thinking and the way you do
to 20% of total revenue by 2020. The things is required,” states Martijn van
long-term goal is to eliminate carbon Loon, RD&I Operations Manager at
emissions. AkzoNobel.
“ The circular economy is a key element of the necessary

route towards a sustainable society. At AkzoNobel,
we use circular principles to achieve radical resource
efficiency and to design out negative externalities. “
This approach offers clear benefits for the environment,
for our customers and for ourselves.
Thierry Vanlancker
CEO, Akzo Nobel
Credit:Hummel Fotografie
CASE STUDIES
The task force created the “Fashion for Ultimately, C&A launched a mass
Good” initiative based in Amsterdam. market, price-competitive C2C t-shirt
It aims to encourage and help those in the summer of 2017 in its retail
in the fashion industry adapt good stores in Europe. It proved immensely
circular practices in five areas: popular—indeed it was one of the
Founded more than 170 materials, economy, energy, water best-selling products in the company’s
years ago as a Dutch and lives. Fashion for Good embodies history—and enjoyed margins on
textiles company, C&A is C&A’s belief that the fashion industry par with conventional products.
a family-owned business must work together toward circularity. Furthermore, the t-shirt helped attract
that today is at the forefront “We cannot roll the stone all the way up new customers and increase the value
by ourselves,” Donald Brenninkmeijer of the average shopping basket. It all
of circularity in the fashion said. added up to a very powerful business
industry. case that will pave the way for more CE
The C&A’s first circular product
products.
innovation was a C2C-certfied
The company’s recent circularity
2017
t-shirt. Even though a t-shirt is one of
journey started when the the easiest products to design and
Brenninkmeijer family asked William produce, meeting C2C standards The year in which C&A
McDonough, founder of Cradle was challenging. C&A needed to
to Cradle (C2C), to speak about
launched their first mass
find alternatives for polyester or market, price competitive
C2C at C&A’s annual shareholder nylon stitching, new care labels, as
meeting. His presentation sparked C2C t-shirt
well as dyestuffs. Despite these
excitement for how fashion could challenges, employees were
contribute to sustainability, and the To help other fashion brands with their
enthusiastic and proud to participate sustainability efforts, C&A published
company created a task force to in the sustainability effort alongside
assess potential circular activities and a “how-to guide” and shared insights
management and in close cooperation and lessons learned. On an industry-
create an “ecosystem” of internal and with new and existing partners (e.g.,
external stakeholders to pursue these level, it is a first step towards more
suppliers, manufacturers, Fashion for “good” fashion.
activities. Good).
“ The journey towards circularity is a change that we should

make for future generations. It is a journey that requires
strong collaboration within and across industries. We as
C&A can be a leader and that’s our clear ambition. But “
we cannot do it on our own. The more stakeholders join
forces, the more of a change can be achieved.
Alain Caparros
CEO, C&A
CASE STUDIES
Empresas CMPC The company has been incorporating While CMPC does not market its
is a Chilean- circular principles into its strategy by, circular products explicitly as such,
for instance, using recycled fibers and and cannot pass along higher prices,
based producer efficiently consuming raw materials it considers these projects necessary
of solid wood and water. as a way to attain sustainability. For
products, pulp, example, its partnership with Vida has
Last year, CMPC created a corporate
paper, packaging sustainability area and one of the
given the company the possibility of
and tissue with main goals is to support the circular
creating 180 local jobs.
customers in 45 economy efforts on both the
different countries corporate and the BU level. Every
across the world. BU has one dedicated sustainability
manager.
“ At CMPC, circular solutions are not only a mean to do

good for the environment by establishing sustainable
processes but also a mean to make our company more
valuable. By changing our recycling practices, we were
“
able to turn production waste - that created a financial
loss before - into profit.
Hernán Rodríguez
CEO, CMPC
CASE STUDIES
Additionally, hospitals do not have hard a hospital might need is already in the
data on equipment utilization, making network and has excess capacity.
it difficult to determine whether the
Cohealo’s model has a clear business
patient case volume exists to justify
case for itself and its customers,
the purchase for new, cutting edge
Cohealo is a US-based technology.
helping to push the industry towards
technology company more sustainable solutions. “Cohealo
From the beginning, Cohealo’s partners with hospitals to help solve
founded in 2012 that founders believed that technology- for one of the most overlooked
developed a cloud-based supported collaboration among challenges in healthcare: how
platform, which allows hospitals could help to facilitate hospitals can make the most of their
healthcare systems to positive clinical outcomes and lower medical equipment. By allowing
schedule, track and share costs: “Our hospital partners are hospitals to share equipment between
medical equipment. always working on ways that they facilities, we’ve been able to deliver
can do more and better, with less,” significant cost savings to our clients.
That’s a big deal in the industry explained Brett Reed, co-founder and Our sharing capabilities, as well as the
because health systems usually spend CEO at Cohealo. Besides offering resulting equipment utilization data,
millions of dollars on purchasing and technological support to facilitate has been attractive to investors,” said
renting equipment, yet utilization rates sharing, Cohealo works closely with Reed.
for owned equipment is often below customers on using the analytics
50%. Because hospitals have limited generated from the platform for
resources and cannot afford to buy smarter, data-driven capital expense
all available equipment, they will often planning. With sharing in place,
rent equipment on a case-by-case hospitals can collectively purchase
basis. This can result in astronomical a single piece of equipment, or make
rental costs. fewer purchases overall, because what
“ Cohealo partners with hospitals to help solve for one

of the most overlooked challenges in healthcare: how
hospitals can make the most of their medical equipment.
By allowing hospitals to share equipment between
facilities, we’ve been able to deliver significant cost
savings to our clients. Our sharing capabilities, as well
“
as the resulting equipment utilization data, has been
attractive to investors.
Brett Reed
CEO, Cohealo
CASE STUDIES
Early on there was little demand for GREEN HOME’s commitment to

biodegradable food packaging in education extends to its recruitment
South Africa, but Morris worked to and training process. Most new
educate potential customers and employees don’t arrive with a deep
has helped to make biodegradable environmental awareness, so
Established in 2007 in products more mainstream. Today, educating them about the importance
South Africa, GREEN HOME B2B and end customers generally of sustainability and circularity has
produces and sells plant- know what biodegradable and proven crucial to the company’s
based, biodegradable compostable mean and companies success.
food packaging using raw advertise their use of such materials.
Given the comparably higher cost for
material such as sugarcane, Some of GREEN HOME’s customers the raw materials that go into GREEN
plant starch, wood and wood purchase the products to meet HOME’s products, the margins are a bit
fiber. their clients’ growing demand for smaller than conventional, high quality
sustainable solutions (e.g., cafés, plastic packaging. Even so, they are
Founder Catherine Morris got the idea restaurants, and corporate canteens). priced competitively, and the business
for “circular packaging” during a trip Other customers are not motivated case is strong given the growing
to Thailand where she saw packaging by sustainability per se but by the demand for sustainable packaging
made from organic material. She efficiencies of composting. For solutions. Indeed, growth has not
started her business less than a example, mines that can compost been limited by demand, but by the
year later, at first doing research on green waste on-site instead of company’s own production capacity.
potential raw materials by herself and shipping it elsewhere.
eventually hiring designers to develop
the products.
“ Circularity is at the core of our corporate strategy. When I

founded the company, still a lot of education of customers
had to be done. This has changed a lot in recent years
and both business and private customers are more aware
“
of sustainability and circular economy today and demand
for recyclable products.
Catherine Morris
CEO, Green Home
CASE STUDIES
Hirdaramani is a family-owned circular activities, with support from a

business and has been involved dedicated sustainability department.
in corporate social responsibility
Admittedly, lower production costs do
(CSR) for many years, largely by
not offset the higher building costs.
supporting local communities and
Hirdaramani was founded empowering their employees. But the
However, the factory confers other
in the early 1900s as a benefits. As Hirdaramani had originally
environmental dimension of CSR got
hoped, its sustainability offering is a
tailor and retail store in a big push around 2005. At the time,
differentiator that few competitors can
Colombo, Sri Lanka. Today, it with the industry quickly consolidating,
match. This has helped the company
partners with many leading Hirdaramani saw sustainability as a
grow its business by evolving many
way to differentiate itself and created
international apparel brands an environmental sustainability
customer relationships from being
including Levi’s, Patagonia agenda based on four pillars: energy,
transactional in nature to more long
and Tommy Hilfiger. With term and strategic. Furthermore, the
water, waste and biodiversity.
company’s focus on sustainability has
38 production facilities The company involved local improved recruitment and retention.
across Sri Lanka, Vietnam, communities early-on by People want to work for the company;
Bangladesh and Ethiopia, educating students on eco-friendly employees are proud and want to
the company is involved manufacturing, and it built internal remain.
in all aspects of the value enthusiasm by empowering
Given the multitude of interconnected
cycle: product development, employees. “We tried to make it a
stakeholders in the global fashion
topic that employees are interested
manufacturing, printing, in. It is a mindset that needs to
industry, no single company can make
embroidery, washing and change,” states Nikhil Hirdaramani, a
the change to sustainability on its own.
packaging. Looking forward, Hirdaramani wants
member of the Board of Directors. To
the industry to cooperate across the
accomplish these goals, the company
entire value cycle, and to this end is
avoids a heavy handed top-down
willing to share insights to develop
approach and instead makes sure
sustainable solutions.
the business units are involved in all
“ Today the fashion industry is very fast moving and

cost-driven. Building our ‘Mihila’ plant was a long-term
investment that helped us to push customer relations to
the next level. Our circular production is a unique selling
proposition which helped us to establish new, long-term
“
partnerships with customers instead of transaction-
based relations.
Nikhil Hirdaramani
Member of the Board of Directors of Hirdaramani Group
CASE STUDIES
“It’s about seeing products as ‘material However, IKEA has found that business
banks’ for the future. And from the very model innovation is the biggest
beginning, designing them so they can challenge, and today it’s testing
be repurposed, repaired, reused, resold different business models in order to
and recycled in any other way.” To this extend product lifetimes. Examples
IKEA’s sustainability journey
end, IKEA is constantly developing, include: taking back old furniture,
started 50 years ago, testing and implementing new offerings providing spare parts for furniture,
spurred both by an internal that deliver true value for the money. organizing refurbishment workshops
conviction that sustainability for customers and reselling used
At IKEA, BUs implement circular
was a matter of corporate projects using their own project teams
furniture. The challenge is to find
responsibility and, if done (e.g., for material innovation, purchasing,
scalable solutions with a clear business
case. Any new business case-even
correctly, a way to lower design). According to Nordin, circular
one built on clear customer needs
costs. economy process innovation is the
and demands--must factor in how
first step and IKEA has been engaged
Those early first steps toward circularity customer interactions will change, and
in traditional process innovation for
succeeded in lowering production how this change will affect the entire
years. (Although circular is a more
costs by reducing packaging material value chain and costs.
comprehensive framework for process
and using waste as a resource. IKEA innovation). Product innovation, on IKEA has set ambitious circular goals
also began cooperating with the World the other hand, requires a new way that it tracks using agreed upon KPIs.
Wildlife Fund (WWF) to study its waste of thinking. Designers, partners and For example, one aim is to eliminate
stream to understand which materials suppliers need a deep understanding waste from all operations by 2020.
ended up where and how they could be of customer needs and be able to The IKEA Sustainability Strategy,
used alternatively. That work paid off. translate those needs into products People & Planet Positive, is currently
By 2016, 89% of waste was recycled and business models. For both types being updated with new ambitious
or energy recovered. As Malin Nordin, of innovation IKEA demands a clear commitments and goals on circular
Development Leader for Circular IKEA, business case, including non-monetary that will guide the transformation into
puts it: “We need to be resource smart benefits such as higher customer a circular business to by 2030. Targets,
to keep low costs.” acquisition and retention. progress, challenges and solutions
Today, top management is committed are detailed in an annual sustainability
To foster innovation and confidence
to continuing the transformation of report available to the public.
in the entire circular effort, IKEA
IKEA’s offering and business model leadership has taken the time to clearly
using circular principles, especially define what it means by circular and
given customers strong awareness articulate a comprehensive change
around consumption and waste and management strategy. IKEA has also
over 9500
desire for more value in what they buy. introduced design principles for internal
The company sees circularity principles use to develop products that can
as a way to reach more customers, last longer by being reused, repaired,
articles will have circular
being more affordable and enabling recycled, resold based on renewable capabilities to fulfill our
more people to live a sustainable life and recyclable materials. “You can’t do it ambition to become fully
IKEA wants to create. on your own,” Nordin said. circular
“ At IKEA, we aim to create a better everyday life for the many

people that are impacted by our business. The circular
economy helps us to rethink our processes, products,
customer meetings and even our business model to create a
more sustainable future. Despite the great progress we have
already made in the past, transforming IKEA into a circular
business remains a big challenge that we can only achieve “
through collaboration. We need to work together to achieve
faster and greater success than we ever could alone.
Torbjörn Lööf
CEO Inter IKEA Group
CASE STUDIES
They learned that customers were A LafargeHolcim global brand, aggneo

primarily worried about the quality of is managed by a dedicated team of
material derived from recycling, and specialists who help set up projects
so the company addressed this issue in a country and then the local teams
from the start. drive the actual implementation.
Headquartered in
80 million tons
For example, in 2016 Bouygues
Switzerland, LafargeHolcim Construction partnered with the
is a leading global amount of waste company in France to renovate two
construction materials and LafargeHolcim aims to reuse heritage buildings in Paris. Thanks to
solutions company with each year by 2030 aggneo they converted 100% of the
construction and demolition waste
a presence in around 80 into ready-to-use concrete products
countries employing nearly Today, LafargeHolcim’s sustainability (18%) and road gravels (82%).
90,000 people. strategy is articulated in The 2030
Even with this kind of demonstrated
The company first took up the Plan which describes the company’s
success the construction industry
sustainability cause in the mid-1990s ambitions and, among other
remains conservative when it comes
thereby differentiating itself and commitments, defines targets to
to sustainability. According to Mark
driving the emergence of a sustainable transform waste into resources for
Tomlinson, Business Development
construction sector. Solutions production processes. By 2030, the
Manager at LafargeHolcim, this may
designed to help customers meet EU company aims to reuse 80 million
persist until regulations really come
targets for recycling and reuse under tons of waste each year, and to supply
into force. “Enforcement of regulation
the Horizon 2020 program is just one four times more recycled aggregates
is fundamental” to kick-off circular
example. from construction, demolition waste
initiatives in construction. In the future,
and reclaimed asphalt pavement
Prior to starting the circular initiative Tomlinson expects that urbanization
compared to 2015.
in the area of product innovation, will steadily drive disposal prices
LafargeHolcim conducted focus One specific circular solution is the higher and with it the demand for more
groups to understand customer needs company’s aggneo offering, which recycling solutions.
and concerns. provides high quality aggregates
processed from recycled concrete.
CASE STUDIES
To stimulate new thinking and new

partnerships, the company schedules 20%
regular meetings on circular economy percentage by which Michelin
projects that bring together employees aims to further reduce the
from different backgrounds and feature carbon footprint of their tires
Michelin, the French external speakers. by 2030
manufacturer of tires, This 4R framework also helps
produces 187 million tires Michelin’s circular economy While process and product innovation
per year and operates in transformation committee track the pose challenges, it’s been business
170 countries. It’s helped company’s progress toward becoming model innovation that’s proven the
an industry leader in performance and most difficult to implement. Even
shaped the market for more so, Michelin is pressing forward with
sustainability by 2020, a goal inspired
than 125 years, and now by the global climate deal adopted innovations such as selling tires as a
the company is working to at the Paris climate conference. To service. Trucking, airline and mining
develop innovations that better measure progress toward these companies that choose this business
address environmental goals and make regular reports to the model are charged based on the
challenges associated executive committee, the company number of kilometers travelled, or the
uses tailored KPIs developed in part by number of landings made or the weight
with transportation. “The transported using the Michelin tires.
sharing insights with other companies.
whole company strategy
Michelin began its circular As part of the service, Michelin
is sustainable,” stated
implementation by focusing on takes care of every aspect of tire
Bertrand Bonhomme, Head process innovation to improve management, including selection,
of Sustainability and Chair production and resource efficiency, mounting, maintenance, assistance,
of the circular economy and then moved onto product retreading and end-of-life recycling.
working group at Michelin. innovation. By developing durable tires These solutions use onboard pressure
that offer long-lasting performance monitoring systems to optimize
Circular principles can impact all
with less weight and material, Michelin preventive maintenance and reduce
stages of the tire lifecycle, starting with
hopes to continue shrinking its tires’ vehicle downtime. Well-maintained
the design of the product and ending
carbon footprint by 20% between 2010 tires last longer, which is good for
with its recycling. This continuum is
and 2030. the planet and good for customers’
reflected in Michelin’s “4R strategy,”
business.
which it developed to educate clients Achieving that goal would reduce CO2
and anchor circular principles within emissions by 30 million tons while also Because transportation customers are
the organization itself: Reduce (develop lowering material and production costs. very price sensitive, Michelin has spent
tires that are lighter, last longer and For example, the company developed significant time educating them about
save fuel); Reuse (repair, re-groove an all-season tire called CrossClimate the benefits of tires-as-a-service and
and retread tires); Recycle (improve that uses less raw materials, improves by 2017 Michelin solutions managed
material and energy recovery); and fuel efficiency and lasts longer than the tires of more than 400,000 trucks
Renewable (use renewable materials competitors’ tires (6,430 km longer in 18 countries. The goal is to double
for manufacturing). According to B. on average). The product launched revenue from its services and solutions
Bonhomme “introducing CE is more with great success in 2015, and the businesses by 2020.
a question of behavior and not about following year sales volume jumped
technical training.” 30% in Europe, Turkey and Russia.
“ Circularity has an impact on every aspect of our product’s

lifecycle - from the design of our cycles to recovery and
recycling. Our sustainable growth strategy particularly “
relies on circular economy levers which help us to
develop innovative processes and products.
Jean-Dominique Senard
CEO, Michelin
CASE STUDIES
The initial drive for circular economy It’s now widely understood that
thinking came from the Executive circular thinking is not an inconvenient
Committee, which decided it wanted necessity, but a driver of innovation
to drive transformation with a for more efficient processes, valuable
Headquartered in the sustainability agenda at the core. products and new business models.
Netherlands, Philips is Philips looks for opportunities where Philips invests in training and tools
a global leader in health social and environmental benefits to educate employees on reuse,
technology. More than two can translate into a strong business recycling and refurbishment—and
case and competitive advantage, then encourages them to come up
decades ago, Philips began with the ultimate goal to shift the with their own ideas for sustainable
to ask itself questions business model from selling products processes, products and business
concerning sustainability, to selling services and solutions. models.
such as: What is our According to Markus Laubscher, a
For example, with healthcare
footprint and how can we Philips Director of Sustainability and
provider budgets coming under
reduce it? Since then, Circular Economy, developing a clear
increasing pressure, Philips is looking
value proposition for customers is key
the company’s focus on for commercial success: “If you have
for solutions to extend resources
sustainability and circularity the same product in green and non-
without compromising product
has steadily increased. quality. In response, Philips created its
green alternatives, the customer is
Refurbished Systems business unit,
Its credo is that one “cannot have often unwilling to pay a price premium;
which offers refurbished products
healthy people on an unhealthy you have to deliver a new value
such as MRI systems that reuse
planet,” and, with that in mind, Philips is proposition.”
components like magnets, and cost
transforming its business toward being Besides appealing to customers, just 60% to 85% of a new system.
green. This includes an acceleration sustainability needs to appeal to
in the innovation process to develop employees. Getting the whole
solutions that help customers respond company on board is critical for
to operational and competitive success. To this end, the company
challenges while also becoming more works hard to communicate the value
sustainable. of circular thinking.
“ We expect the circular economy to replace the traditional

“take-make-dispose” scheme. At Philips we aim to take
back all capital equipment from our hospital clients. We
expect this to become a win-win business model. There
is much residual value to recover. We endeavor to “disrupt “
ourselves” by rethinking and redesigning the way we do
business. This will contribute to a better world.
Frans van Houten
CEO, Philips
CASE STUDIES
Using technologies such as visual circular economy value cycle to

recognition and machine learning, the create sustainable offerings for its
company conducts an initial screening small business customers, such as
of a client’s waste streams to identify Michelin, which offers discount pricing
types of waste and quantities, on new commercial tires and retreads,
develops a waste separation system, and TerraCycle, an expert in hard-to-
Rubicon is a technology and then tailors a waste collection recycle waste.
company that was founded schedule. This helps customers
Rubicon’s growth outlook is bright
to help companies improve their recycling rates, lower
as more and more companies,
costs by reducing the frequency of
reduce costs and waste collection, and sometimes
customers and regulators push toward
increase sustainability earn extra income from selling the
the circular economy. The company
employees close to 300 employees
by improving their waste recyclable products (e.g., carton,
and has raised over $200 million of
and recycling practices. paper).
funding to date. In 2016, Forbes named
Today, the Atlanta-based As part of its mission, Rubicon Rubicon one of the next Billion-Dollar
company supports small educates its customers’ employees Startups, and in 2017, Inc. named it one
businesses across a on waste separation and recycling. of the Top 25 disruptive companies.
wide range of industries, It also connects clients with its “The circular economy laid the
independent hauler network, which foundation for building a company that
such as restaurants
offers competitive prices, on-demand is reinventing the waste industry - Our
and food service, retail pickups, billing transparency and even business model is circular by design,”
stores, hospitality and a report on the customers’ recycling said CEO Nate Morris.
manufacturing. efforts. And Rubicon collaborates
with other companies along the
“ The circular economy laid the foundation for building

a company that is reinventing the waste industry - our
business model is circular by design.
“
Nate Morris
CEO, Rubicon
CASE STUDIES
Environmental responsibility is Concrete is a massive resource on this

embedded into all parts of Skanska’s project; at the end of 2017, more than
business processes and project 40,000 cubic meters of concrete had
operations. For example, Skanska been used, with more to come. With
Skanska is one of the
business units have environmental all those concrete pours, sometimes
world’s leading construction plans fully integrated into business there is leftover concrete. Rather than
and project development plans, and most projects have the traditional practice of wasting
companies, focused on tailored, measurable key performance that concrete, Skanska re-purposes
selected home markets in indicators, such as ones for chemical leftover concrete to create concrete
the Nordics, other European usage and waste. Another proactive blocks usable in other construction
aspect to Skanska’s green efforts is projects. The concrete blocks are
countries and North
collaborating with universities and primarily sold on the market. Instead of
America. Sustainability is other external institutions and partners creating waste, a new product is being
important to how Skanska when developing solutions. made.
builds for a better society. In a major step, Skanska has Sustainable materials is also an
Skanska’s strategic work with committed to significantly reducing important area for this project. As
environmental aspects of sustainability carbon emissions by 2030 in much as possible, materials are to be
started about 20 years ago. In the alignment with the Paris agreement. free of substances with a negative
beginning, Skanska’s circular activities Increasing circular economy activities impact on the environment, both to
focused on reducing materials is expected to be an important part of create a healthy work environment and
used in constructing buildings and this reduction. Ultimately, Skanska is to facilitate future recycling and reuse
infrastructure, and diverting from striving to be the leading green project of materials.
landfills the significant amounts of developer and contractor, while also
ESS is committed to using energy
waste traditionally generated by creating shareholder value and helping
wisely and in a responsible way. The
construction projects. This has evolved improve society.
excess heat from the research facility
to include more sustainable uses of
An example of Skanska collaborating will be captured and distributed in
material through reuse, recycling and
with customers and suppliers to raise the local district heating system.
renewable materials. Since 2000, all
environmental achievements is the Also, all electricity is from renewable
Skanska business units have been
European Spallation Source (ESS), sources, during construction and later
certified to ISO 14001 standards-
which aims to be the world’s first during facility operation. “Skanska
-the requirements for a certifiable
sustainable research facility. Skanska focuses on the sustainability areas
environmental management system.
is designing and building this pan- through which we can make the most
To guide and measure environmental European research facility, which has significant positive contributions to
performance, in 2009 Skanska ambitious goals such as zero waste to society. Important to this is using – and
developed the Skanska Color landfill and zero concrete waste. re-using – materials in smart ways.
PaletteTM. This strategic tool focuses Taking a circular approach helps lower
To meet this mega project’s goals,
on guiding activities and projects environmental impacts and costs,
Skanska and the customer are
toward near-zero environmental helping our customers achieve their
focused on being preventative. “Think
impacts by reducing uses of energy, own environmental ambitions,” said
about solutions, not about problems,”
materials, water and embodied carbon. Skanska CEO Johan Karlström.
said one Skanska manager.
“ Skanska focuses on the sustainability areas through

which we can make the most significant positive
contributions to society. Important to this is using – and
re-using – materials in smart ways. Taking a circular
approach helps lower environmental impacts and costs,
“
helping our customers achieve their own environmental
ambitions.
Johan Karlström
CEO, Skanska
CASE STUDIES
organization’s mindset by emphasizing from products where Solvay is “part

training and acquiring the right skills. of the solution” by 9%, and shrunk
Today, sustainability and circularity are revenue from products where Solvay
embedded in each business unit and is “part of the problem” by 3%. Solvay
in customer relations. managed these results despite the
fact that customers are unwilling to
At Solvay, a global chemical To measure its progress on
pay a premium purely for sustainability.
company headquartered sustainability, Solvay also developed
Part of Solvay’s success is because
the Sustainable Portfolio Management
in Brussels, sustainability it doesn’t redesign existing products
tool (SPM) that links strategy and
has moved from being a sustainability. The tool assesses two
in a more sustainable way, instead it
regulatory necessity to a aspects of Solvay’s portfolio: (1) the
looks for niches and unmet demand to
create new, sustainable products for
driver of product innovation monetized risk of its environmental
their customers.
and growth. Solvay’s CEO impact (Where is Solvay “part of
43%
led the charge and put the problem?”) and (2) the extent to
which it helps consumers to address
sustainability at the top
their own sustainable development of Solvay’s revenues in
of the agenda, winning concerns (Where is Solvay “part of the 2016 were associated with
support from the executive solution?”). sustainable products
committee to become a As with the sustainability initiative
leader in circularity. itself, leadership played a key role by
Besides process and product
innovation, Solvay is exploring ways
To this end, they created a guide— endorsing the SPM methodology and
to use circular economy principles
the “Solvay Way”—to translate setting clear goals. Today an internal
in business model innovation. As
Solvay’s ambitions for sustainable team analyzes the entire portfolio with
Dominique Debecker, Deputy CSO
value creation into clearly assigned the SPM tool on a yearly basis; then
at Solvay put it, “At some point you
responsibilities and concrete action at each business unit and the company’s
need a system that is self-sustained.
the operational level. sustainable development function
Where you have a tangible product
discuss next steps.
Once Solvay’s leaders recognized that for consumers, you don’t need to wait
sustainability and circular economy In 2016, 43% of the revenues were for new regulation. The increasing
principles created an opportunity for associated with sustainable products, consciousness became the driving
long-term competitive advantage, whereof two-thirds deliver on circular force for sustainability.”
they worked hard to integrate the economy objectives. During that
principles of circularity into the time the company grew revenue
“ The circular economy has the potential to change the

way we create value, and the relations with our customers
and other partners - for the better. Thinking circular
strengthens our innovation capabilities to further develop “
more sustainable solutions that unlock Solvay business
growth while doing good for the planet.
Jean-Pierre Clamadieu
CEO, Solvay
CONCLUSION
7. Conclusion
The need to use resources The circular economy is a driver for The time to act is now. As Donald
more sustainably in order innovation and competitive advantage, Brenninkmeijer, whose family owns
and recent experience shows there C&A, a Dutch textiles company, put it:
to guard against price is room to improve performance “We still have a long way to go but it is
swings and scarcity, to by creating sustainable processes, the way forward.”
conform to regulations and products and business models. That
to satisfy increasingly vocal means that companies who pursue
local demands to protect circular principles first could gain a
the environment might be significant competitive advantage as
they drive the transformation of their
all the reason a company own industries and put competitors on
needs to embrace the their heels. Companies at the forefront
circular economy. Yet, there of the circular economy are already
are still other compelling seeing a clear business case, often in
reasons to do so. the form of new customers, deeper
relationships and more steadfast
investors.
ABOUT THE RESEARCH
8. About the research

In 2017, the World Business We purposefully reached out to Based on the findings from the
Council for Sustainable sustainability leaders from many quantitative and qualitative data
industries around the world to gain sources, we developed case studies,
Development (WBCSD) insights into successful circular derived key success factors and
and The Boston Consulting economy implementations. Of the identified hands-on recommendations
Group (BCG) joined forces respondents, 95% said their company for the implementation of circular
to study key success had a sustainability strategy in projects.
factors in circular economy place. Based on a self-assessment
This is the third guide in WBCSD’s
implementations based on comparing themselves to other
circular economy series. The first was
companies in their industry, most
a quantitative survey of 78 survey respondents evaluated
“The CEO Guide,” which explains the
managers and more than a themselves as either an industry
circular economy and its benefits; that
dozen qualitative interviews. was followed by “The Practitioners
leader in the circular economy (29%)
Guide,” which describes circular tools,
The global sample was or above average (31%).
resources and practices for different
drawn from a variety of In addition to the survey results, functions (e.g., sales, product design,
sources including WBCSD we conducted interviews with and manufacturing). Together these
member companies and practitioners to gain a deeper three guides can advise the entire
BCG clients. understanding of success factors organization along its entire circular
in a circular implementation. These economy journey.
interviews offered valuable insights
into the roles of internal and external
stakeholders, organizational
integration of circular principles,
decision processes and so forth.
INTRODUCTION
ACKNOWLEDGEMENTS CONTRIBUTORS ABOUT THE WORLD BUSINESS
COUNCIL FOR SUSTAINABLE
WBCSD would like to thank the following BCG Contributors
DEVELOPMENT (WBCSD)
authors and editors for this report: Kristina Blinda, Consultant
Sophie Zielcke, Consultant WBCSD is a global, CEO-led organization
Holger Rubel is a Senior Partner and
Coralie Grau, Associate of over 200 leading businesses working
Managing Director in the Frankfurt office
Hanna Marie Asmussen, Associate together to accelerate the transition to
of The Boston Consulting Group and
Frederik Brandis, Associate a sustainable world. We help make our
is BCG’s global topic leader for green
Lena Bayer, Visiting Associate member companies more successful and
energy & sustainability. You may contact
Sonja-Katrin Fuisz-Kehrbach, sustainable by focusing on the maximum
him by email at rubel.holger@bcg.com
Knowledge Expert for Sustainability positive impact for shareholders, the
Marc Schmidt is a Partner and Managing Miriam Benedi Díaz, Senior Knowledge environment and societies.
Director in the Singapore office of Analyst for Sustainability
The Boston Consulting Group and is Matthew Clark, Global Marketing Our member companies come from
leading BCG’s Asia-Pacific sustainability Director, Strategy all business sectors and all major
activities. You may contact him by email at Michael Sisk, Writer economies, representing a combined
schmidt.marc@bcg.com revenue of more than $8.5 trillion and 19
The authors would also like to thank the million employees. Our Global Network
Alexander Meyer zum Felde is a Principal many participating companies and their of almost 70 national business councils
in the Hamburg office of The Boston representatives, who greatly enhanced gives our members unparalleled reach
Consulting Group and is BCG’s expert the outcome of the report with their across the globe. WBCSD is uniquely
principal on the sustainability topic. You valuable insights and contributions. positioned to work with member
may contact him by email at meyer.zum. companies along and across value chains
felde.alexander@bcg.com DISCLAIMER to deliver impactful business solutions to
Maria Mendiluce is Managing Director the most challenging sustainability issues.
This report is released in the name of
at the WBCSD. You may contact her by WBCSD. Like other reports, it is the result Together, we are the leading voice of
email at mendiluce@wbcsd.org of collaborative efforts by WBCSD staff, business for sustainability: united by our
Andrea Brown is the Director of Circular experts and executives from member vision of a world where more than nine
Economy at the WBCSD. You may contact companies. Drafts were reviewed by a billion people are all living well and within
her by email at brown@wbcsd.org wide range of members, ensuring that the boundaries of our planet, by 2050.
the document broadly represents the
Brendan Edgerton is Manager of Circular www.wbcsd.org
majority view of WBCSD members. It
Economy at WBCSD. You may contact does not mean, however, that every Follow us on Twitter and LinkedIn
him by email at edgerton@wbcsd.org. member company of WBCSD agrees
Juliet Taylor is Manager of with every word. Please note that the Credits
Communications at WBCSD. You may data published in the report are as of Copyright © WBCSD January 2018
contact her by email at taylor@wbcsd.org December 2017.
WBCSD and BCG thank the following companies for their active participation
World Business Council
for Sustainable Development
Maison de la Paix
Chemin Eugène-Rigot 2B
CP 2075, 1211 Geneva 1
Switzerland
www.wbcsd.org

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THE NEW BIG CIRCLE

Achieving growth and business model innovation

3. Circular economy benefits

4. Three types of circular innovation

5. Success factors and recommendations 18

8. About the research 39

Circular economy activities along the value cycle*

As the global population surges and more consumers enter the

$4.5 Trillion 84% 96%

At the individual company level, implementing circular solutions

Respondents clearly stated that circular economy-related decisions

To start their circular economy journey, companies need to innovate

Figure 4: Circular economy activities along the value cycle

COLLECT PROCESS PRODUCT

Figure 5: Frequency of circular economy projects along the value cycle

Use Active and successful

54% operation of low energy ventilation

3. Business model innovation

Each company is different, of course, with its own unique challenges.

of companies with a circular

Figure 6: Internal stakeholder groups

action, create accountability and

emphasize the need for change. “We

than be disrupted by others,” said

strategy and rationale. In most cases,

the circular strategy is incorporated Markus Laubscher, a director in the

#5: Educate your Philips has developed training

core business is responsible for 49%

take over project responsibility and

Overview of Case Studies:

BUSINESS ROLE OF TOP KPI COST- GROWTH

Wood & Packaging CMPC

Wood & Packaging GreenHome

Wood & Packaging IKEA

Role of Top Management

20% One example of flexible thinking and

“ The circular economy is a key element of the necessary

“ The journey towards circularity is a change that we should

“ At CMPC, circular solutions are not only a mean to do

“ Cohealo partners with hospitals to help solve for one

Early on there was little demand for GREEN HOME’s commitment to

“ Circularity is at the core of our corporate strategy. When I

Hirdaramani is a family-owned circular activities, with support from a

“ Today the fashion industry is very fast moving and

“ At IKEA, we aim to create a better everyday life for the many

They learned that customers were A LafargeHolcim global brand, aggneo

To stimulate new thinking and new

“ Circularity has an impact on every aspect of our product’s

“ We expect the circular economy to replace the traditional

Using technologies such as visual circular economy value cycle to

“ The circular economy laid the foundation for building

Environmental responsibility is Concrete is a massive resource on this

“ Skanska focuses on the sustainability areas through

organization’s mindset by emphasizing from products where Solvay is “part

“ The circular economy has the potential to change the

8. About the research

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