New report: A business transition to “circularity” is crucial to achieving global climate goals

Acknowledging that net zero climate goals will not be achievable without circularity, the Environmental Defense Fund (EDF) and Deloitte* have collaborated on a new report, 'Pathways to Net Zero: Circular Strategies for Climate Action,' that aims to provide companies with a tangible on-ramp of strategies, approaches and tactics to help their business grow while using and wasting fewer resources. Circularity, or the circular economy, refers to “an economic system where waste is designed out, everything is used at its highest possible value for as long as possible and natural systems are regenerated,” (Circle Economy).  

According to the 2023 Circularity Gap Report, today’s global economy consumes 100 billion tons of materials. Less than eight billion tons of those materials (under 8 percent) are reused and considered circular, a decline over the past five years. But new policy changes, growing resale markets, recent technological developments and rising consumer demand for sustainable products are changing the value equation for companies, raising the stakes for circularity.

Pathways to Net Zero: Circular Strategies for Climate Action

• The report builds on a series of ‘Pathways to Net Zero’ reports by EDF and Deloitte that highlight high impact, near term climate solutions and technologies that companies can use now.
• EDF introduces a roadmap to help businesses drive environmental, social, and business value through circularity and help businesses meet critical climate goals by applying circular principles.
• The report includes leading case studies of businesses leading the way on circularity, including Patagonia, Samsung, Madewell, and Trove.
• Resale & recommerce revenues are projected to more than double from $27 billion in 2022 to $82 billion by 2026, fueled by consumer demand for sustainable products and lower-cost goods.

“The short-term use of materials in our everyday goods and services comes at a tremendous cost to the planet – but they do not need to. By closing the loop, and keeping materials in the economy for longer, we could add value, cut costs, and protect nature,” said Elizabeth Sturcken, Managing Director, Environmental Defense Fund.

The transition to a more circular economy needs to go well beyond simple material efficiency and traditional recycling – it requires rethinking traditional linear models of production and consumption and adopting a more sustainable, closed-loop system to affect all aspects of resource use and economic activities, from resource extraction to product design, manufacturing, distribution, use, and disposal. Circular economy interventions should focus on all aspects of the product lifecycle, including the design and use of the product, not just a product’s end-of-life.          

The report finds that the potential for climate progress through circularity is especially high impact for the textiles, packaging, and automotive industries. Key examples of environmental and business opportunities include:

• Textiles: 400 percent more clothes are produced now than 20 years ago, yet clothing utilization has declined by almost 40 percent during the same period. The textile industry could generate $700 billion in economic value by 2030 through a transformation towards circular business models.
• Packaging: Only 14 percent of current plastic packaging is recycled, despite 70 percent of plastic packaging being reusable or recyclable, equating to a loss of $80-120 billion per year. Leading circular strategies within the plastic packaging industry include redesigning and reusing and recycling packaging.
• Automotive: Circularity could reduce automotive carbon emissions by up to 75 percent and resource consumption by up to 80 percent per passenger kilometer by 2030.

“When done well, circularity initiatives can help businesses benefit financially. Companies can use fewer resources, reduce waste disposal costs, and generate new revenue streams. On top of it, they reduce emissions, waste less, and improve the livelihoods of impacted communities,” said Kyle Tanger, Managing Director, Deloitte Consulting LLP.

Using and wasting fewer resources – the essence of ‘circularity’ – is a critical part of climate solutions that can simultaneously improve human well-being and planetary health. Companies setting net zero goals must consider circular approaches to product design and waste to achieve climate commitments. Today nine out of ten products do not come from circular sources. However, leading companies are showing that reuse business models are possible and scalable.

“This is a massive climate opportunity, and one that we cannot afford to miss. Transitioning away from linear business models is possible. If we can scale this solution the circular economy could reduce emissions by an estimated 39 percent,” said Sturcken. “But businesses and policy makers need to act now.”