How companies benefit from circular economy

Converting a company to a circular economy is an important step but many business leaders aren't sure what the consequences will be. This article shows the positive financial, macroeconomic and productive impact that the circular economy can have on companies.

Studies confirm the circular economies' benefits

Research still paints an ambiguous picture of the impact of companies’ incorporation of sustainability and circular economy goals on their financial performance. Nevertheless, a 2020 study by Accenture and others on responsible leadership has shown a correlation between high environmental, social, and corporate governance (ESG) performance ratings and a high operating margin and annual returns to shareholders, clearly leaving low ESG performers behind. With the growth of circular economy business models, we can expect this impact on financial performance to increase.

A circular economy influences economic growth and renewal

A study by Material Economics found a positive macroeconomic impact of the circular economy. In the EU, their findings predict the creation of as many as 700 000 netjobs by 2030 and a reduction of up to 535 billion Euro per year of the total cost of providing goods and services in several key value chains such as mobility, housing, and food. This translates into a productivity increase of 15 % in the value chains that account for 60 % of household spending. According to McKinsey & Company Europe’s circular economy opportunity report, the modeling for 2030 suggests that the disposable income of European house-holds could be as much as 11 % higher in the circular scenario relative to the current development path, or 7 % higher in GDP terms, thus making the transition towards a circular economy an important factor to generate economic growth and renewal.

Industry leaders also capture these economic opportunities for a circular economy. Renault, for example, has opened a so-called Re-Factory in Flins, the world's first ‘‘Circular Factory’’, and announced an economic target from their circular economy activities of 1 billion euro by 2030. Volkswagen opened its first battery recycling facility in 2021 and is considering treating its battery and battery recycling business divisions as separate companies – even taking them public.

There are also several studies indicating that switching to a circular economy is a promising approach to meet the requirements of a more climate-friendly economy.