How Can Process Industries Profit from Circularity and Avoid Material Shortages?

Why Is the Circular Economy Failing Despite Growing Demand for Green Products?

Boston Consulting Group reveals that global circularity has dropped to 7.2%, wasting $200 billion in materials annually. Discover the four critical steps process industries must take to secure scrap supply, overcome systemic inertia, and capture the growing market for sustainable products.

With raw material extraction set to nearly double by 2060, relying on old models is a guaranteed path to obsolescence. Continue reading to assess your company’s readiness with our six-point checklist and learn how to secure the strategic partnerships needed to survive the shift.

Recommendation

Shifting toward more circular practices could benefit companies and meet green consumer demand, yet the vast majority of valuable recyclable materials end up in landfills. However, while many companies fail to seize the potential of circularity, those that put circularity at the center of their operating models will have a competitive edge. Boston Consulting Group researchers share timely, applicable insights into the obstacles companies must navigate to shift toward circularity while sharing four action steps companies can take to boost both sustainability and profitability.

Take-Aways

• There’s a business case for circularity, but it requires companies to act interdependently.
• Embrace circularity and capture green demand by taking four action steps.
• Assess your readiness for the shift toward circularity by asking the right questions.

Summary

There’s a business case for circularity, but it requires companies to act interdependently.

Nearly $200 billion worth of recyclable materials end up in the trash every year, almost $70 billion of which is copper and $50 billion of which is plastic. Moving toward a circular economy isn’t just beneficial from an environmental perspective — when companies embrace circularity it benefits business too.

But the global economy is actually becoming more extractive and less circular. In 2023, only 7.2% of materials were derived from circular sources, a dip from slightly over 9% in 2018. In fact, if humanity remains on its current course, raw materials extraction is expected to climb to 167 gigatons in 2060 from 96 gigatons in 2000.

“Circularity is like many other big societal and business challenges: There are limits to what companies can accomplish on their own.”

If companies want to embrace circularity, they must navigate the following barriers: economic barriers, as processing materials can cost more than the recycled materials themselves; technical barriers, related to finding sorting or technical solutions; capacity barriers, as there’s a limited number of recycling facilities available; and systemic inertia, as it can be difficult to change corporate behaviors. Making the shift toward circularity requires understanding that your company is interdependent and doesn’t exist in a vacuum: Companies must create ecosystems in which they work together, with government support, to collect, recycle, and reuse waste.

Embrace circularity and capture green demand by taking four action steps.

Boston Consulting Group research identifies four different opportunities process companies can seize to become more circular:

1. Secure scrap supply — Recognize the value of scrap as a strategic resource, securing your supply of quality scrap materials, as demand for scrap (such as steel and copper scrap) is likely to outpace supply by 2030.
2. Tackle upstream fragmentation — Waste is often collected by thousands of small, local operators, which means companies must often partner with multiple fragmented operators to ensure scrap supply. Create ecosystems to manage fragmentation in waste collection and processing.
3. Leverage technological solutions — Boost material recycling by innovating in, and using, sorting, and processing technologies. For example, robotic sorting technologies can separate waste materials from valuable ones, keeping materials such as aluminum and copper out of landfills.
4. Design for circularity — Make circularity integral to your company’s operating model and strategy. Circularity can give you a competitive edge, as increasing the use of recycled materials in your product and creating product traceability can help you stand out from your competitors and win green markets.

Assess your readiness for the shift toward circularity by asking the right questions.

Companies that endeavor to seize the potential of circularity should ask themselves the following reflective questions:

• Are you committed to circularity? — Have you fully integrated your commitment to circularity into your decision-making process?
• Are you ready for circularity? — Do you have the right technology in place? Have you examined your product and operations portfolio to determine your strengths and areas for improvement as you shift toward circularity?
• Will your portfolio survive? — What expectations do your customers have, and how might the shift toward increased sustainability impact your business?
• How can you seize circularity’s commercial potential? — Have you considered opportunities, such as introducing price premiums on green products?
• Are there bottlenecks in your value chain? — Are you experiencing bottlenecks that prevent reuse (for example, at the sorting or processing stage)?
• Where can you form partnerships? — Building a more robust circular ecosystem requires companies to collaborate with consumers, competitors, tech companies, and suppliers. For example, the Belgium-based clean technology, circularity, and recycling company Umicore launched the Global Battery Alliance to trace the lifecycles of batteries, partnering with automakers such as BMW and Audi to improve battery recycling throughout the processing stages of their chains.

About the Authors

Karthik Valluru, Martin Feth, Cornelius Pieper, Janice Lee, Gaurav Jindal, Tian Feng, and Shaun Knowles are professionals at Boston Consulting Group.