The circular transformation of industries: Unlocking economic value

We are experiencing a transformation of business models as many linear value chains reach their limits.

Traditional, linear value chains can be described as a straightforward, sequential process where materials and goods move from sourcing through production and consumption to disposal in a direct path. Such value chains are challenged by shortages of inputs, global disruptions and the triple planetary crisis (climate change, pollution and biodiversity loss).

Circularity, when products and materials are kept in circulation at their highest value, offers a path forward and can unlock growth and substantial value across stakeholders.

The shift toward a circular economy is a multifaceted process that requires multiple participants, from policymakers and academics to scientists, innovators and the entire value chain. Businesses are uniquely positioned to accelerate the momentum for circular transformations as they can influence suppliers and customers to adopt circular practices.

While linear business models are unlikely to disappear, the need for transformative change has never been more pressing. Circular business models are emerging as a new way to generate economic value.

Businesses across industries are increasingly pursuing circularity and expect it to gain importance in the future, according to a survey of 420 top executives engaged in circularity from 10 manufacturing industries across the globe, conducted by the World Economic Forum, Bain & Company and the University of Cambridge.

The survey found that only around 40% of businesses considered circularity important or extremely important three years ago. Today, that number has risen to around 75% and it is expected to reach around 95% in three years.

Historically, many firms have considered circularity mostly through the lens of recycling, increasing sustainability or complying with regulations.

While recycling and compliance are important, circularity has economic value that extends further to revenue growth, increased resilience and profitability in support of long-term competitiveness. The survey results make clear that executives understand the broad value creation opportunity that circularity can provide.

They show that businesses pursue circular solutions for broad reasons and expect to unlock positive economic value across four dimensions: revenues, resilience, sustainability (GHG emissions) and costs.

While generating economic value from circular solutions at scale is not without challenges, leading multinational businesses already show that it is possible today with executive leadership buy-in, a strong cross-functional mandate and value chain engagement.

The following case studies illustrate how selected circularity thought leaders overcame challenges and unlocked economic value from circular solutions.

In 2023, HP Inc, a global manufacturer of personal IT equipment, launched its HP Renew Solutions business. This recently created organization sources and refurbishes IT devices sold as HP Certified Refurbished Hardware.

HP Renew Solutions attracts customer demand for solutions that combine new and multi-lifecycle IT products driven by new regulations, sustainable procurement requirements and lower total cost of ownership targets.

Demonstrating the broad positive impact of HP Renew Solutions on the company and its customers was crucial for securing a strong leadership buy-in. This paved the way for a strategic investment to establish a dedicated business unit focused on developing and selling circular solutions.

“We must continue to pursue sustainability in our industry knowing that for lasting change, organizations need to tie their actions to business benefits," said Dave Shull, president of HP Solutions.

“For the HP Renew Solutions business, our vision is clear: support our customers' sustainability and affordability goals with flexible IT solutions in a profitable manner."

Cisco, a global technology company, also employed a broad set of tactics to engage stakeholders while taking a different approach to unlocking economic value through circularity.

Cisco developed 25 Circular Design Principles – for example, “ensure product structure allows for identification and accessibility of valuable components” – and has a public goal of incorporating them into 100% of its new products and packaging by fiscal 2025.

To accelerate implementation and foster buy-in across functions and levels, Cisco developed a scoring methodology that enables the company to track progress and recognize employees for circular design innovation.

Additionally, as of fiscal 2024, over 7,000 employees had completed a dedicated circular design training. This broad set of engagement measures allowed Cisco to integrate circular design principles into its product design process.

“At Cisco, we embed circularity across product lifecycles. Alongside our goal to integrate Circular Design Principles into 100% of our new products and packaging by fiscal 2025, we run a take-back programme to reuse, refurbish, and recycle used products at their initial end-of-life,” said Mary de Wysocki, chief sustainability officer at Cisco.

In addition to executive leadership buy-in and cross-functional mandates, upstream and downstream value chain engagement plays a vital role when establishing a circular business model.

Agilent Technologies, a global provider of instruments, software, services and consumables for laboratories, identified downstream customer engagement as an important enabler for selling refurbished laboratory equipment at scale.

Agilent offers several incentives to increase the number of customers that return used products, including paying a residual value or, where possible, collecting used products from competitors.

The company focuses on strengthening the value proposition of refurbished products for customers by offering the same warranties for their refurbished products and investing in substantial quality controls.

Additionally, they are collaborating with the non-profit organization My Green Lab, whose ACT (accountability, consistency and transparency) Ecolabel programme provides third-party verification of Agilent’s equipment’s environmental impact, helping users make informed, sustainable choices.

Aimee Whaley, associate vice president and general manager of Certified Pre-Owned Instruments at Agilent, said: “By offering instrument buybacks and credit towards future purchases, we have given customers the incentive to return 10,300 instruments between 2021 and 2023.

“Additionally, we have refurbished 14,000 instruments and harvested parts from 2,700 legacy products. It is a win-win for customers and the circular economy.”

While leadership buy-in, a cross-functional mandate and value chain engagement are key enablers, additional levers are required to take action and scale circular solutions.

A forthcoming whitepaper by the Forum, Bain & Company and the University of Cambridge to be published on the side of the Annual Meeting 2025 in Davos, Switzerland, additionally outlines detailed, actionable strategies by type of circular solution applicable to multiple industry sectors.

It addresses key challenges, highlights industry-proof points from circularity thought leaders and details how, when done right, circular solutions unlock substantial economic value.

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