Linear production models based on the availability of abundant and predictable resource flows are less viable.
A new survey finds that 80 percent of executives describe circularity as important or very important to their organization, up from 33 percent three years ago.
Manufacturers face many barriers to becoming more circular.
Companies that are scaling circularity follow a consistent, repeatable approach: quantify, codify and amplify.
The past few years have been a stress test for manufacturing supply chains.
Export controls, commodity price spikes, geopolitical disruption, and competition for critical materials have exposed how quickly constraints on essential inputs can slow growth.
As a result, linear production models based on the availability of abundant and predictable resource flows are less viable. Instead, many manufacturers are shifting to more circular production models.
A circular economy is about more than just PR or sustainability. It can be a source of competitiveness, resilience and growth.
A new survey conducted by the World Economic Forum (WEF) and Bain & Co. bears this out. The organizations surveyed 430 senior executives from manufacturers across 10 industries and seven global regions. The survey found that 80 percent of executives describe circularity as important or very important to their organization, up from 33 percent three years ago.
The survey also found that:
81 percent are likely or extremely likely to pursue circularity because of the rising cost or reduced availability of virgin materials.
77 percent say circularity could substantially address resource security.
70 percent expect circular activities to represent at least 20 percent of revenues.
Why are manufacturing executives thinking more about circularity? Consider electric vehicles. Rare-earth elements are critical to the motors that power EVs, and China is the world’s largest producer of those materials. The WEF estimates that the remaining global supplies of rare-earth elements will cover only 35 percent of demand by 2035, if the supply from China were cut off.
A more circular approach to manufacturing EVs could solve that problem. More than 7.3 million plug-in EVs are on the road in the U.S. Far from being an end unto themselves, those vehicles are rolling resource reservoirs that could be recovered to make new EVs.
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As much as manufacturers might want to be more circular, there is a mismatch between ambition and action. For example, only 26 percent of companies have a clear picture of their exposure to critical raw materials. Other barriers to becoming more circular include:
Challenging economics.
Operational complexity caused by circular flows not yet fitting neatly into systems designed for linear production.
Immature secondary markets.
Fragmented ecosystems.
Corporate governance and culture that are still geared to linear production.
According to the survey, companies that are scaling circularity follow a consistent, repeatable approach. First, these companies quantify their input-risk exposure and the value at stake, turning a diffuse sense of risk into a ranked, financially grounded agenda. Next, they codify the highest-value circular moves across a product’s life cycle. Finally, they amplify those actions by investing in the vital enablers needed for scale. Such enablers include senior governance buy-in; data and technology; ecosystem partnerships; financial investment; and providing input on regulation.
To read the report, click here.