anything that threatens a company’s ability to meet its financial goals. Large companies often have entire departments dedicated to identifying, reducing, and mitigating the various risks that threaten the company’s bottom line.
The linear take-make-waste economy represents a significant amount of business risk that often goes unaccounted for. Here are some common risks found in the linear economy (which the circular economy can reduce or eliminate):
Single-source supply chains are risky if your company is dependent on just that one supplier. A disruption threatens the entire product line.
The price volatility and supply chain disruptions of resource-intensive materials risks your company’s ability to deliver your products.
The unpredictable and fluctuating costs of fossil fuels threatens your company’s ability to set pricing, which affects profitability.
The growing threat of climate change is driving adoption of a carbon tax on emissions, which would force your company to address its carbon footprint.
The unpredictable and more severe weather patterns caused by climate change are threatening to disrupt your operations, driving the need for redundant systems and resiliency planning.
The ever-increasing frequency of hurricanes, wildfires, and floods threatens to leave some of your company assets stranded, further driving the need for change.
In addition, the circular economy offers certain risk reduction advantages over the linear economy, including these:
Having a more robust and sustainable supply chain reduces the risky side effects of your business (pollution, waste, damage) that normally would be ignored in a linear economy model.
By reusing, reselling, and recovering your products, your company can significantly reduce its material costs; using longer lasting materials also reduces customer returns while still under warranty.
Having your customers return your products to you at the end of the product's useful life also improves the quality of your customer interaction and boosts customer loyalty.
A product that’s designed to be repaired or upgraded easily also reduces product complexity and the chance of things going wrong. With the right design, a broken item can be cheaply repaired or replaced with fewer product losses.
Innovating to attract new customers
Creativity, ingenuity, and innovation have always been a great way to attract new customers. The circular economy is a chance to rethink and redesign your entire approach to the value you bring to your customers.
Consumer behavior is continually evolving, driving the need for new ways to stand out from your competition and attract new customers.
The Drive to Be Healthier
More than ever before, consumers have the ability to research and understand what impact your products may be having on their health and wellness. This drive to be healthier can be seen in the growing trends of a still-expanding $84 billion per year yoga industry, a $100 billion fitness industry, and a $200 billion dietary supplements industry.
Lifestyles that foster health and sustainability
The official marketing demographic describing people seeking to take better care and control of their health and their environmental impact is referred to as the lifestyle of health and sustainability — or LOHAS, for short.
The LOHAS community consists of customers who are environmentally aware and socially attuned and who hold a global worldview that takes into consideration the ethical, moral, and political outcomes of their decisions. This market demographic, which is considerably influential, feels that no product or service is incapable of being “greened.”
Central to the LOHAS worldview is the conviction that, by insisting that companies give them a selection of healthier and more environmental choices, customers can contribute to making a positive contribution to the environment in a way that suits their lifestyle. They overwhelmingly care about the environment and regularly boycott a brand or company that has unacceptable business practices.
This group is typically the early adopter of green and sustainable businesses.
Wellness as a priority
Beyond the hard-core LOHAS crowd, you'll find a larger group of regular consumers who prioritize their own health and wellness when it comes to their purchasing decisions.
This wellness industry is now worth $3.4 trillion, making it nearly three times larger than the worldwide pharmaceutical industry. People in this group (which probably includes everyone reading this book) often seek to
Eat healthy, with a focus on nutrition
Balance their weight, with a focus on exercise and movement
Explore preventive health, with a forward-looking approach to disease prevention
Foster beauty and antiaging regimens, with an interest in looking and feeling good
Seek out trusted brands, with less blind allegiance to old brands and a willingness to try new ones
Reduce their environmental impact, with a focus on consuming, owning, and spending less for the benefits that an environmentally conscious effort brings
Share instead of own, with a growing dependence on sharing services for items such as cars, bikes, tools, and more
The Drive to Be in Compliance
Business compliance refers to how a company complies with the laws, regulations, and policies that govern its business. These compliance requirements vary from industry to industry and from location to location. Some industries, such as the chemical industry, are highly regulated because of their potential health risks. Other industries, such as the automotive industry, are highly regulated because of their potential safety risks. Lastly, still other industries, such as the financial industry, are highly regulated because of their potential fraud risks.
Companies with high regulatory requirements tend to have entire teams and departments focused on staying within compliance. Such regulations are enforced to protect the safety of the general public.
Compliance represents an important but expensive aspect of business operations. It sometimes takes a lot of money to stay within compliance, but companies pay up because they don’t want to run afoul of the law. The thing is, companies often assume that the cost of compliance is tied to the cost of doing business, but they rarely step back and question whether there was a better way to avoid the need for this compliance entirely.
For example, a company working with petroleum-based chemicals is highly regulated and needs to remain in compliance. If its leaders were to embrace circular economy principles, they could explore the use of plant-based