The Importance of the Circular Economy to Business Expected to Double in Next Two Years, According to New Research by UPS and...
22 Mars 2016 - 2:00PM
(NYSE:UPS) Nearly nine out of 10 (86 percent) of
sustainability executives surveyed believe that circular economy
will be important to their business two years from now, nearly
double from two years ago when just 47 percent felt them important,
according to findings of the 2016 UPS/GreenBiz Circular Economy
Research Study released today. Respondents project the
biggest growth in the adoption of the circular economy model will
come from the technology sector, especially electronics such as
computers and cell phones, as take-back systems and product reuse
are most easily integrated in those models.
The online study, conducted by GreenBiz Group in partnership
with UPS, captures the sentiments of sustainability executives and
thought leaders to provide a deeper understanding of the business
drivers and challenges associated with the circular economy. The
circular economy is defined as an alternative to a traditional
linear economy (make-use-dispose) in which we keep resources in use
for as long as possible, extract the maximum value from them while
in use, then recover and regenerate products and materials at the
end of each service life.
Awareness of the Circular Economy is
Expanding
Nearly three in five respondents state that their organization
is implementing circular economy principles in at least one of its
product lines or service offerings.
“We are not surprised to see the growing importance of circular
economy concepts to business,” said Ed Rogers, UPS senior director
of global sustainability. “Our customers are recognizing the
environmental and social impact of their products and operations
across the entire value chain, from raw materials and design
through manufacturing and logistics. They recognize the opportunity
to move toward a model that keeps resources in use for as long as
possible.”
Yet despite the prevalence of circular economy principles
integrated into products and services, few companies stand out as
leaders. Interface (21 percent) and Patagonia (16 percent) were the
only two companies referenced with unaided recall when asked to
identify companies that come to mind when thinking about circular
economy.
Logistics are Critical to a Sustainable Circular
Strategy
Logistics plays a critical role in implementing a successful and
sustainable circular strategy. Nearly unanimous, 97 percent of
respondents claim logistics as either very important (87 percent)
or somewhat important (10 percent) to transitioning to a circular
economy.
Respondents stated that logistics companies can offer customers
unique value by incentivizing greater participation in the circular
economy through a seamless and convenient take-back model.
Offerings such as pre-paid shipping labels, smart packaging and
convenient take-back mechanisms help fuel market demand.
Additionally, consumer and customer costs can be reduced through
the use of backhauling as well as through load and route
optimization.
“At UPS, we use our expertise in logistics to help enable and
facilitate the circular economy,” said Rogers. “As this research
shows, focusing on ‘first mile’ logistics is crucial to helping
businesses implement a cost-effective circular economy. UPS
partners with customers to implement seamless take-back systems
that include turnkey packaging, pickup services and pre-paid return
labels. Taken together, all of these assist in the reverse
logistics processes needed for a successful circular economy.”
Need for Business Case is Both the Biggest Opportunity
and Biggest Barrier
While there is great promise in the fundamental principles of a
circular economy and keeping resources and materials in play
endlessly, this alone won’t bring the circular economy to market or
scale. The study suggests that for this concept to be embraced,
businesses will need to address existing challenges and identify a
better business case, and generate market demand through incentives
focused on cost and convenience.
An insufficient business case was cited as the greatest barrier
to implementing an effective, global circular economy. Other key
barriers respondents identified include:
- Logistics costs to reclaim used goods (36%)
- Lack of executive leadership understanding/education (36%)
- Lack of consumer understanding/education (36%)
- Other business objectives taking priority (30%)
Creating market demand will be critical for widespread adoption
of circular economy principles. Twenty-six percent of respondents
identified customer and consumer demand for products that are
recoverable, recyclable or refurbishable as the most important
factor for adoption. The second most important factor is related to
demand, as 18 percent of respondents cited the need for a market
for reused products or recaptured materials and resources.
“Companies have many reasons to consider moving away from the
traditional ‘make-use-dispose’ economic model to a circular one,”
said John Davies, GreenBiz Group vice president and senior analyst.
“In addition to growing demand among consumers who value
sustainable businesses and products, businesses are also being
motivated by factors such as resource scarcity and climate change.
Our research shows that rethinking processes surrounding material
inputs, product design and logistics will all be necessary to move
toward a more regenerative, circular economy.”
Cost Savings and Convenience are Key
Incentives
According to the study, both business customers and consumers
are motivated by the same factors: cost savings and convenience.
Respondents believe the best incentives to ensure the return and
the reuse of consumer products or their components and materials at
the end of its period of primary use include:
- Rebate in the form of cash back (56%)
- Convenience of returning a product at a brick-and-mortar
location (47%)
- Ability to return a product using pre-paid shipping (42%)
- Discounts towards a future purchase (40%)
Respondents also stated that the best incentives to ensure the
return and thereafter the reuse of industrial (B2B) products or
their components and materials at the end of its period of primary
use include:
- Producer or distributor physically reclaims product (59%)
- Turnkey packaging and pickup service (51%)
- Manufacturer refurbishes product and returns for continued use
(48%)
- Discounts towards a future purchase (38%)
- Rebate in the form of cash back (34%)
The 2016 UPS & GreenBiz Circular Economy Research Study
presents the findings of an online survey conducted by GreenBiz
Group in December 2015 among a sample of 423 respondents within the
GreenBiz Intelligence Panel. [The margin of error is ± 5% at a 95%
level of confidence]. To download the white paper and full research
study results, please visit ups.com/sustainability.
About UPS
UPS (NYSE: UPS) is a global leader in logistics, offering a
broad range of solutions including transporting packages and
freight; facilitating international trade, and deploying advanced
technology to more efficiently manage the world of business. UPS is
committed to operating more sustainably – for customers, the
environment and the communities we serve around the world. Learn
more about our efforts at ups.com/sustainability. Headquartered in
Atlanta, UPS serves more than 220 countries and territories
worldwide. The company can be found on the web at ups.com® and its
corporate blog can be found at longitudes.ups.com. To get UPS news
direct, visit www.pressroom.ups.com.
About GreenBiz Group
GreenBiz Group’s mission is to define and accelerate the
business of sustainability. It does this through a wide range of
products and services, including its acclaimed website GreenBiz.com
and e-newsletters, GreenBuzz and VERGE Weekly; webcasts on topics
of importance to sustainability and energy executives; research
reports, including the annual State of Green Business; the GreenBiz
Executive Network, a membership-based, peer-to-peer learning forum
for sustainability executives; and its annual GreenBiz forum and
VERGE conferences.
Kristen Petrella
404-828-4182
kpetrella@ups.com
United Parcel Service (NYSE:UPS)
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