Consumers Goods Firms Could Save $700 Billion With Circular Economy

by | Jan 28, 2013

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The global consumer goods industry could save $700 billion by adopting a circular economy, in which products are designed so their materials can either be recycled or reused, according to a report by the Ellen MacArthur Foundation.

Towards the Circular Economy,” which focuses on the $3.2 trillion global market for food and beverages, textiles and associated packaging, aims to make the case for faster adoption and to quantify the economic benefits of a circular economy. McKinsey & Co. provided the analysis for the report.

Consumer goods accounts for about 60 percent of total consumer spending, 35 percent of material inputs in the economy and 75 percent of municipal waste, said the report.

Yet only about 20 percent of consumers goods materials are recovered, largely through recycling and the cascading of waste and byproducts through adjacent supply chains, the report said. The value that can be recovered could be increased to 50 percent in the near term without the dramatic application of bio-based products and the full redesign of supply chains.

For instance, retailers such as Marks & Spencer, Uniqlo, Puma, H&M and Patagonia currently have campaigns to increase in-store collection of clothing, which is then donated.

The report also highlights opportunities for businesses in the textile and beverage industries as well as for municipalities to recover value.

For instance, an income stream of $1.5 billion could be generated annually for municipalities and investors by separately collecting household food waste in the UK and processing it in line with circular principles, to generate biogas and return nutrients to agricultural soils.

An additional profit of $1.90 to $2 per hectoliter of beer could be created in Brazil by selling brewers’ spent grains to farmers in the fish and livestock sectors, the report said.

However, the consumer goods industry faces significant hurdles as it tries to break out of the linear model, in which goods are made from raw materials, sold, used and then discarded as waste, the report said.

The foundation’s work with existing founding partners B&Q, BT/Cisco, National Grid and Renault has triggered circular economy initiatives that target more than $1 billion in resource savings and new revenues. The Ellen MacArthur Foundation is set to expand on that progress next month by launching the Circular Economy 100, a global alliance of companies aimed at creating commercial opportunities from circular economy initiatives.

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