Circular economy saves more than $700B, report says

Consumer goods companies could be missing out on $700 billion worth of savings by failing to incorporate recycling in their business models.

That is according to the latest report by the Ellen MacArthur Foundation, which attempts to quantify the benefits of the so-called "circular economy," where products are designed so that their materials and components can be easily recycled and reused.

The report focuses on the $3.2 trillion global markets for clothing, food and drink, and associated packaging, which together account for 35 percent of material inputs into the economy, three quarters of all municipal waste and almost 90 percent of agricultural output -- a sector projected to come under increasing pressure as populations increase and climate change impacts take effect.

Only about a fifth of material from these consumer goods sectors is recovered, at an estimated loss to the global economy of $2.6 trillion a year. However, the report concludes recovery rates could be increased to 50 percent simply through wider adoption of reusing and recycling.

It also argues that embracing these approaches would give companies a huge competitive advantage. For example, simply increasing the amount of clothing that is collected and reused or remade could generate $71 billion in material savings.

In addition, $2.35 billion could be generated annually in the U.K. alone for municipalities and investors by collecting household food waste and processing it to generate biogas and fertilizer.

The report also details how the cost of beer could be reduced by a fifth per 100 liters by shifting from using glass bottles to recyclable plastic, subsequently lowering the cost of packaging, processing and distribution.

Even greater progress could be made with wholesale redesign of both products and supply chains, the report adds.

 A profound transformational opportunity

The Ellen MacArthur Foundation already works with partners in the U.K. including Cisco, B&Q, National Grid and Renault on programs that are aiming to deliver more than $996.5 million in resource savings and new revenues. It is now set to launch a new global initiative next month, called the Circular Economy 100, bringing together an alliance of international businesses to build recycling and reuse capacity across the wider economy.

"The Circular Economy offers a profound transformational opportunity, which represents the interests of both the global community as well as the next generation," said Chris Dedicoat, president of Cisco in Europe, the Middle East and Asia.

"Transitioning towards a regenerative model will stimulate economic activity in the areas of product innovation, remanufacturing and refurbishment, and in turn generate employment."

U.K. waste advisory body WRAP also published its vision of a U.K. circular economy that could be in place by 2020 to coincide with the report. It advocates widespread adoption of lean production techniques, reducing waste in manufacturing and commerce, cutting the number of working products that are thrown away, and increasing the numbers of products leased, rather than purchased.

Writing on her blog, WRAP chief executive Liz Goodwin said: "Working from a 2010 baseline, we believe that in 2020, we could have 30Mt fewer material inputs into our economy; 20 percent less waste produced (50Mt less waste); and 40Mt more materials recycled back into the economy."