The Circular Economy Could Unlock $4.5 trillion of Economic Growth, Finds New Book by Accenture
September 28 2015 - 8:03AM
Business Wire
Waste to Wealth, by Accenture Strategy,
identifies five business models for circular advantage
The Circular Economy could generate $4.5 trillion of additional
economic output by 2030, according to new Accenture (NYSE:ACN)
research that identifies circular business models that will help
decouple economic growth and natural resource consumption while
driving greater competitiveness.
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The circular economy could unlock $4.5
trillion in growth, according to Waste to Wealth from Accenture
Strategy
The Accenture Strategy research unveiled in a new book, Waste to
Wealth, published by Palgrave Macmillan, reveals that today’s
business practices will contribute to a global gap of eight billion
tons between the supply and demand of natural resources by 2030.
This is equal to the total resource usage in North America in 2014
and translates to $4.5 trillion of lost economic growth by 2030 and
as much as $25 trillion by 2050.
Waste to Wealth notes that for the forty years until the turn of
the millennium, the real price of commodities fell despite rising
demand, resulting in various forms of waste: wasted energy and
materials that are only used once, wasted lifecycles where products
are discarded after a short time, and wasted assets, such as cars,
that stand idle for much of their lives. In the last fifteen years,
however, commodity prices have begun to rise and become more
volatile, reflecting the uncertainty of supply of many natural
resources caused by the growth of the global population, the
consumer economy and urbanization.
“The take, make and waste approach of traditional, linear
business models has now begun to choke economic growth through
unpredictable raw material prices and the increased cost of
depending on less stable supplies of constrained resources,” said
Peter Lacy, managing director, Accenture Strategy and co-author of
the book. “By turning waste into wealth with new business models,
companies can boost their competitiveness by reducing dependence on
scarce resources and generating new innovative services that grow
revenues.”
The Accenture Strategy book identifies five business models that
will drive the circular economy: 1. Sharing Platforms use
digital technologies to maximize the use of underused assets, such
as hotel rooms, vehicles or consumer goods. The authors note that
80 percent of typical household items in mature economies are used
only once a month. 2. Products-as-a-Service replace ownership-based
models with usage based services, such as selling driving time
instead of selling cars. These encourage companies to maintain
products for longer and offer new services, such as predictive
maintenance or fuel efficiency support. 3. Product Life Extension
relies on remanufacturing and repairing used products to give them
a longer life with existing or new customers. 4. Circular Supply
Chains allow suppliers and partners to use recycled materials
repeatedly, saving costs and bringing predictability to supply
chains e.g. a clothing company using new materials to avoid the
environmental damage and risks associated with cotton cultivation.
5. Recovery and Recycling saves costs and reduces the volume of
waste and landfill. Some major companies now re-use 100 percent of
the waste generated at certain manufacturing plants.
Digital strategies underpin the circular economy
Advances in digital technologies will underpin the emergence of
the circular economy, according to the book. For instance, many
companies are using combinations of mobile, machine-to-machine and
data analytics to match the supply and demand for otherwise
underused assets and products.
“While a number of pioneers have achieved successful examples of
the circular economy, new digital technologies now offer an
opportunity for all companies to put circular business models at
the core of their global strategies,” said Jakob Rutqvist, senior
manager, Accenture Strategy and co-author of Waste to Wealth. “To
achieve large scale adoption, organizations also have to deploy new
functional capabilities across their value chains.”
Waste to Wealth recommends that companies consider implementing
the following capabilities to support their circular economy
models:
- Manage complex circular networks in
which suppliers and partners collaborate to gain value from
waste
- Design products fit for multiple
lifecycles and develop services based on the re-use of products.
This requires closer links between product design and after sales
services.
- Secure circular supplies through
redesigning the role of procurement and ensuring manufacturing
processes can make use of repurposed materials.
- Invest in continuous customer
engagement to create a receptive market for re-purposed products
and to compete effectively in the shared economy.
- Create ‘return chains’ with partners
and suppliers to boost the quality and reliability of recycled and
remanufactured materials.
“The driver of the circular economy isn’t scarcity, it’s
opportunity,” said Lacy. “By keeping resources economically
productive for as long as possible, companies can achieve greater
growth. Most companies have waste hotwired into their existing ways
of doing business and it will take many steps for most to turn
waste into wealth. But those who get there first will achieve
circular advantage that differentiates them in their market.”
Waste to Wealth is based on research across 120 companies and 50
executives and is the first book to establish the global economic
opportunity presented by the circular economy. It contains a large
number of case studies that explain how pioneers have succeeded
across multiple industries. It is available in the UK, China and
Germany and will be published in the US on September 25, 2015. It
can be purchased through amazon.com, amazon.co.uk and other
retailers. Read more at www.accenture.com/Waste2Wealth.
About Accenture
Accenture is a global management consulting, technology services
and outsourcing company, with more than 358,000 people serving
clients in more than 120 countries. Combining unparalleled
experience, comprehensive capabilities across all industries and
business functions, and extensive research on the world’s most
successful companies, Accenture collaborates with clients to help
them become high-performance businesses and governments. The
company generated net revenues of US$31.0 billion for the fiscal
year ended Aug. 31, 2015. Its home page is
www.accenture.com.
Accenture Strategy operates at the intersection of business and
technology. We bring together our capabilities in business,
technology, operations and function strategy to help our clients
envision and execute industry-specific strategies that support
enterprise wide transformation. Our focus on issues related to
digital disruption, competitiveness, global operating models,
talent and leadership help drive both efficiencies and growth. For
more information, follow @AccentureStrat or visit
www.accenture.com/strategy.
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AccentureMatthew McGuinness,
917-282-7187matthew.mcguinness@accenture.com
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