Headline plastics and packaging policies – including Scotland’s Deposit Return Scheme (DRS) and the UK’s Extended Producer Responsibility (EPR) – have run into delays, throwing the increasingly complex patchwork of regulation into further uncertainty. Nevertheless, now is the time for businesses to take advantage of this pause and assess their packaging and waste management strategies and resist the temptation to roll back efforts to implement change. By approaching compliance with packaging and waste legislation as a minimum stepping-stone towards a circular business model, and not the end goal, businesses can encourage sustainable consumption and capture value in their waste streams.
Central to the concept of circularity is the belief that waste is a valuable resource. Traditional linear business models rely on large quantities of readily available cheap materials and energy and disregard the value of a product in its post-consumer phase. Conversely, circularity aims to extend the life cycle of products so that materials can productively be used over and over, which increases their value and reduces waste.
There are significant environmental advantages of transitioning to a circular business model, but businesses should consider three other reasons to gain competitive advantage:
Legislative changes, particularly in Europe, create both an incentive for action and the potential to add cost for businesses that wait to respond. Many European countries already have a number of successful EPR and DRS schemes; however, at both regional and country level, more initiatives are being proposed. Earlier this year, the European Commission proposed the introduction of mandatory and harmonised EPR schemes for textiles in all EU Member States as well as the ‘right to repair’, which would legally require businesses to make it easier and cheaper for consumers to have products repaired. Meanwhile, France has taken this further and announced a ‘repair bonus’ scheme. From October 2023, consumers will be able to claim up to 25 EUR from the government to cover the cost of mending clothes and shoes to reduce textile waste.
While UK policies, including a proposal for EPR for textiles, have been delayed, this has not been the case in other jurisdictions, and this indicates the direction of travel. It can be significantly more economical for businesses to implement uniform management approaches across countries of operation, especially when standards will inevitably tighten everywhere. As regions such as the EU increasingly legislate to facilitate the transition to circular business models, it is crucial for businesses everywhere to look beyond short-term regulatory compliance and integrate circular principles that will insulate them from onerous regulation and increased operating costs.
Transitioning to a circular business will allow industries to build supply chains which are less prone to shock because they increasingly rely on a diverse bank of recycled material, rather than raw materials. While it takes time to build economy-wide banks of recycled material and recycling infrastructure, businesses that take steps to source a larger percentage of inputs from recycled materials can guarantee, to an extent, a steady supply of materials. Moreover, circular business models are likely to reduce procurement costs over time as the price of recycled material drops below that of raw or virgin materials. While this in part relies on the availability of recycled materials and infrastructure, intensifying nature loss and degradation will reduce the availability of finite resources and drive-up prices.
The UK’s EPR and DRS schemes both aim to improve the collection of plastics and other packaging materials to underpin the transition to a circular economy. In time, this will provide a steady supply of recycled and reusable packaging and reduce the extraction of natural materials for plastics. As the impacts of over-consumption become more apparent and volatile weather patterns threaten natural resources and crop production, businesses that rely on recycled materials for their products will be at a significant advantage.
There is a positive relationship between ESG-related product claims and consumer spending, and consumers are increasing the demand for goods and services that align with circular principles. The circular economy encourages long-term relationships with customers, not just one-off purchases, as reuse, repair, repurposing, leasing, trade-in, and other models offer opportunities to increase contact and add value for customers. While these models can be complex and necessary infrastructure may be lacking, companies can realise these opportunities by laying the groundwork for a circular economy, even as customers buy fewer products.
Businesses that develop these strong consumer relationships through the integration of circular principles before their peers can expect to benefit from increased brand loyalty and secure their financial success. In the long-term, successful businesses will be those with circular principles at the heart of their strategy.
Written in association with Sancroft.