19 Jan Circular economy models are profitable and sustainable

Reduce, reuse and recycle. It’s DPD UK’s mantra across the board and forms part of its drive towards the fourth pillar of its strategy – to become the most sustainable delivery company in the world.

Evidence suggests that businesses following this kind of circular economic model outperform those that don’t.

What exactly is a circular economy model?

A circular economy model is used by companies that are concerned about climate change and the environment. It’s a major move towards sustainability and is an alternative model to the traditional linear economy. Here’s the difference:

  1. Traditional linear economy – make, use and dispose.
  2. Circular economy model – use, reuse, recycle and regenerate.

A circular economy model is vital for the future of our planet and for society. Not only does it create opportunities for economic growth, it also:

  • Reduces waste.
  • Drives much greater productivity from resources.
  • Delivers a globally competitive UK economy.
  • Positions the UK as a major player when it comes to addressing resource security for the future.
  • Reduces the environmental impact of both consumption and production.

Circular economic models proven to generate more revenue

Companies following a circular economy model outperform their competition by an average of 32%. Based on a survey conducted by globally renowned consultancy firm Kearney, the data analysis covered 150 companies all around the world across different sectors.

From the 150 businesses surveyed, 51 were considered to be sector leaders in circular economy models. This means that their core business model is based on circular economic strategies, or that they have recently made changes to focus on this area. When these businesses were compared against the rest, which follow linear models, it was found that their revenues were around a third higher. In addition, these 51 businesses saved an average of 38% on costs.

And from the companies that had recently switched to the circular economy model, disclosures included the fact that overall business had improved by 6%. Most of the business leaders involved cited the rapidly increasing demand from customers for truly sustainable and responsible products and services. They also said that they had increased customer loyalty by 50% and their brand had leapt by 70% in terms of recognition.

What’s wrong with the linear business model?

There have been endless warnings for years that linear business models are inextricably linked with climate change risk, resource scarcity and biodiversity loss and damage. For example, the Circle Economy researched how much of the 100 billion tonnes of virgin materials extracted annually is actually reused or recycled. The Circularity Gap report concluded that just 9% of these massive amounts of materials are appropriately reused or recycled.

And now the Kearney report makes it very clear that not only is it objectively morally uncomfortable for businesses to ignore the need for a circular economic model, companies, that refuse to do so will lose investor and customer support before long.

Companies polled by Kearney categorised as circular economy leaders include Ikea. The Swedish furniture company is now the world’s largest and is aiming to ensure all of its designs use solely recycled and renewable materials by 2030. Launched in 2018, Ikea’s ‘People and Planet Positive strategy’ includes this pledge, along with a single-use plastic ban.

Its broad strategy is already working, as its latest sustainability report shows that Ikea has already instigated circular design strategies across 80% of its global product lines. The company is also offering several recycling and ‘take back’ schemes, where furniture can be repurposed and recycled.

Fashion and retail sector increasingly implementing circular economy

In the fashion sector, rental strategies are starting to be introduced across major brands thanks to the success of start-ups like By Rotation. The innovative start-up allows people to rent designer clothes, shoes and accessories, with a model they call Lend, Rent, Rotate.

In the first half of 2020, the start-up recorded an increase of 130% in listings, and doubled its membership. Selfridges and H&M are also piloting rental schemes, and there is strong data from analysts at GlobalData to suggest that the UK’s fashion rental sector will be six times its current size by 2029.

DPD trials Re-Love along with ASOS

As one of the biggest parcel delivery firms, DPD UK has come up with a ground-breaking new circular economic service in partnership with ASOS. Re-Love is the clothing recycling scheme that sees unwanted clothes donated to five national charities in a carbon-free way. Here’s how it works.

Using the DPD app, ASOS customers can organise a collection of their clothes to coincide with a delivery already being made. They can then choose which of the five charities they want to their clothing to go to. DPD drivers repackage the clothes by recycling previous packaging and takes the clothes to the charity. This circular economic model is entirely green, sustainable and the start of bigger things to come.