By reassessing where waste is most prevalent in their value chains, companies can learn to close those loops to get more from the resources and materials they use.

circular_economy

Contrary to popular thinking in various companies, the circular economy isn’t the latest sustainability fad and shouldn’t be thought of as a recycling or green program. It requires top-down management and change across a company, including reevaluating product design, business models, and the supply chain. In this episode of the McKinsey Podcast, McKinsey partner Eric Hannon and senior partner Clarisse Magnin explain what the circular economy is and how companies create loops throughout to recapture value that would otherwise be lost.

Interesting quotes on how to implement a circular business model from the podcast:

“A circular economy is not just something you do on the side or one more initiative that you add into your pipeline”

“It’s not that complicated to understand the concept of the circular economy, but people tend to understand it only as being about recycling. Obviously, when you understand the circular economy as being only about recycling, you struggle to see it as a value-creation driver across the different steps of your value chain”.

“It requires realigning the incentives on a different set of key performance indicators (KPIs) and it starts with the top management, meaning, they should have sustainable value-creation KPIs in their performance dialogue and assessment. Then, number three, it is because this is often considered another sustainable initiative, while it should be, once again, a value-creation transformation for the greater good, but also, in economic terms, something that is going to bring a lot of value through savings and through revenue upsides, as well as business continuity or risk mitigation”.

Read or listen the full podcast here.