Implementing Circular Economy Models & Embracing Sustainability in Asian Retail.

A lot has been said and written about the circular economy. There are multiple ways to look at, perceive, and implement it. But all of those ways point towards one thing: the circular economy is here to stay.

Circular economy models present a framework to identify and classify economic activities that facilitate the transition towards a circular economy, where products are designed for longevity, materials can be reused, repaired, recycled and recovered to reduce waste, and processes rely on renewable energy.

With most consumers adopting a more sustainable, climate-friendly mindset, retailers worldwide have no choice but to deploy circular economy models that align with their business strategies.

In this article, we will delve into the different models available in the market and the innovative ways in which Asian brands are embracing those models. But let’s first look at why it has become imperative for retailers to adopt circular economy models and how beneficial they are.

Why implement circular economy models?

The world's finite resources are under growing pressure, leading to scarcity and price fluctuations. The Circularity Gap Report 2023 reveals that a mere 7.2% of global material inputs are cycled back after use, highlighting the urgency for businesses to transition to circular models.

By reducing dependency on virgin materials and reusing resources, retailers can slash input costs and shield themselves from price volatility in an increasingly resource-constrained world. This approach not only cuts waste and associated expenses but also builds resilience against supply chain disruptions—a critical advantage in today's unpredictable global market.

Circular practices also align perfectly with growing consumer demand for sustainable products, boosting brand reputation and fostering customer loyalty. At the same time, circular models can help retailers stay ahead of tightening environmental regulations and potentially access government incentives.

Perhaps most excitingly, these models can open doors to innovation, creating new revenue streams through product-as-service offerings or waste-to-value initiatives. This isn't just good for the bottom line, it's a path to enhanced competitiveness, attracting both consumers and investors who prioritise sustainability.

Many retailers in Asian countries have already begun their transition to circular business models. While the approaches to adopting circularity vary among retailers, it's helpful to examine the established circular economy models to understand the diverse strategies being implemented across the retail sector in Asia.

Circular Economy Models

We can categorise circular economy models based on different parameters, such as stage in the value chain, business model, impact area, or level of circularity. However, the most prominent way of segregating them is through the European Commission's circular economy categorisation system which organises them into four high-level groups.

Circular Design and Production Models: Rethink & Reduce

The guiding principle of these models is to design products and materials sustainably with the aim of long-term value retention.

This includes sustainable product design for durability, repairability and recyclability; resource-efficient production processes that reduce the use of virgin materials by substituting them with secondary raw materials or by-products and utilising materials that are reusable, recyclable and compostable; and waste minimisation through efficiency improvements in the production process.

For instance, Japanese retail giant Uniqlo designs products for durability and repairability, uses sustainable and recycled materials and offers repair services for its products. Along the same lines, Japan’s largest cosmetics giant Shiseido uses bio-based and post-consumer recycled materials for packaging and offers refillable packaging to reduce resource use and encourage the reuse of main packaging. This approach lessens the amount of plastic used for packaging and curtails waste from empty bottles.

On the other end of the spectrum are the new-age companies like Thaley and Neeman’s that manufacture shoes from plastic waste in India. Thaley converts discarded plastic bags and bottles into sneakers, whereas Neeman’s uses scrap tyres and 100% recycled PET bottles as raw materials to do the same. Another Indian upstart Edible Cutlery produces edible cutlery made from millet and other grains, reducing waste and providing a nutritious alternative to disposable plastic cutlery.

Overall, circular design models focus on creating products in ways that enhance resource efficiency and promote the use of recycled materials.

Circular Use and Consumption Models: Refurbish, ReUse, RePurpose.

The guiding principle here is to promote product reuse, repair, repurposing, refurbishing and remanufacturing and advocate innovative business approaches such as product-as-a-service, sharing platforms, and rental services to extend the product lifespan.

For instance, Singapore-based online marketplace Carousell facilitates the buying and selling of second-hand items including clothes, luxury goods, electronic gadgets, furniture, bikes and cars, promoting reuse and reducing waste. Along the same lines, Singapore’s Refash is a platform for upcycled clothes, accessories and jewellery. It sells collections of artisans, designers and brands, which create fashion products from old materials, reducing textile waste and promoting a circular economy in the fashion industry.

A plethora of rental services and sharing platforms have also cropped up in recent years across Asia, enabling people to lease stuff rather than own it for efficient use of resources and reducing waste. The list includes Anywheel, a Singapore-based bike-sharing platform offering an eco-friendly first and last-mile mode of transport for daily convenience, Luxclusif, a Hong Kong-based resale-as-a-service in luxury space that operates a B2B marketplace for pre-owned luxury handbags and accessories and runs buyback programs for luxury brands, and Flyrobe, an Indian fashion rental platform offering occasion wear and accessories on rent for men and women.

These optimal-use models emphasise the reuse, repair, and refurbishment of products to extend their lifecycle and lessen waste generation.

Circular Value Chain Resource Management Models: ReCycle

The guiding principle here is to capture the value of products after user life and restore natural resources. The emphasis is on resource recovery, industrial symbiosis, waste prevention and using renewable energy.

Creating a circular supply chain is a crucial component of these models. This includes initiatives like recovering and recycling materials from waste streams and collaborating with suppliers and partners to create closed-loop systems so that resources can be continuously cycled and reused while waste generation and environmental impact can be curtailed.

Japanese technology company Ricoh, primarily known for its electronic products such as cameras and office equipment including printers, photocopiers, and fax machines, has created a "Comet Circle" program to promote circular supply chains, where the company collaborates with suppliers and partners to design products for disassembly, reuse, and recycling, minimising waste and extending the life of materials.

It reuses parts and products in remanufacturing, recycles materials that can be used in other Ricoh products as well as products of other brands and uses plastic waste as raw materials for chemicals.

India-based Recykal is another apt example. It is a waste management company that operates a B2B digital marketplace for waste materials like plastic, paper, electronics and metals, facilitating a self-sustaining circular economy by helping companies dispose of manufacturing and product-related waste and sell it to recyclers.

Ultimately, these models integrate processes that minimise environmental impact and protect and regenerate natural systems.

Circular Enabling Technologies and Data Models-Refuse Linear, Embrace Digital

The guiding principle here is to use digital tools and platforms that drive the circular economy. It includes applications that facilitate reverse logistics, such as tracking and managing product returns for reuse, repair or recycling. Additionally, it covers digital solutions that enhance resource efficiency. Virtual marketplaces for secondary raw materials, second-hand goods, and refurbished products also fall within this category, enabling the exchange and trade of resources within a circular economy framework.

These circular support models also entail activities that support the transition to a circular economy, such as digitalisation, data management, process management and innovative financing models.

Vaayu, a Berlin-based company working with retailers globally, is perhaps the world’s first automated software empowering brands to track and cut their carbon and environmental impact in real-time. It leverages AI and machine learning technology to calculate emissions as well as water and waste across products, packaging and logistics to provide granular insights and drive data-driven decision-making.

Similarly, London-based Greyparrot offers retailers comprehensive AI waste analytics, automating sorting facilities to provide intelligent insights on waste stream composition and financial value while increasing transparency throughout their global value chain.

Back in Asia, many retailers are leveraging tech solutions specifically to reduce food waste. Thailand’s largest supermarket chain Central Food Group is one such example. It has implemented an AI-based system to identify products nearing their expiration date to minimise food waste. It strategically prices them with discounts of 20% to 40%, while determining the best recycling channel for unused products.

Asian brands are increasingly utilising similar tools and platforms as a cornerstone in their implementation of circular economy strategies.

Roadblocks To A Circular Economy

Adopting circularity across the value chain is harder said than done. There are practical challenges retailers have to work around to find the right balance between shifting to circular models and maintaining profitability.

The initial investment in new technologies, infrastructure, and processes can be substantial, often deterring businesses due to the perceived long payback periods and operational shifts. Redesigning products and supply chains to fit circular models incurs additional costs, and collecting, sorting, and processing used products can be expensive, especially in regions with underdeveloped recycling infrastructure. Furthermore, the complexity of coordinating and aligning with various stakeholders across global supply chains poses a challenge, and the lack of clear and consistent regulations and standards creates uncertainty. Technological limitations in tracking products, monitoring processes, and recycling certain materials can also present barriers. Additionally, consumer perception and education play a crucial role, as some may be hesitant to embrace circular products without proper awareness and understanding of the benefits

Actionables For Embracing Circular Models

As a retailer, how can you begin adopting circularity in your business? There is no set playbook for this, but there are best practices that can be adopted across the value chain.

1. Incorporate Circular Design Principles

Work with suppliers and manufacturers to redesign products for durability, repairability and recyclability. Create products with longer lifespans, modular components that can be easily replaced, and materials that can be recycled or repurposed. Along with it, leverage services and marketplaces that can help in sourcing recycled materials and finding outlets for waste streams. This approach can reduce the reliance on virgin resources and create a more sustainable supply chain.

Offer repair and maintenance services for customers to prolong the product lifespan and reduce the need for replacements. Parallelly, engage with customers to educate them about the benefits of circular economy models and motivate them to participate in recycling and reuse initiatives.

2. Implement Reverse Logistics and Recycling Programs

Incorporate take-back and recycling programs, collecting used products like clothes, shoes, electronic items, etc. at the end of their life from customers and sorting them for reuse, remanufacturing, recycling or recovering valuable materials. Offer customers incentives such as discounts or rewards for returning used products, encouraging participation in take-back programs. This can help brands keep products and materials in circulation longer, reducing waste and promoting a circular economy.

3. Keep an Open Mind towards New Business Models

Developing new circular products, services and business models can unlock fresh revenue streams and market opportunities. Aside from digital stores, brands can opt to operate refurbishment and resale platforms that can allow customers to sell their old items, which can then be refurbished and resold. Similarly, offering products through rental, leasing, or subscription models can bring in additional revenues and incentivise durability.

4. Leverage Technology and Data

Utilise digital tools to track products throughout their lifecycle. This will help identify areas where waste can be reduced, materials can be reused and products can be designed for longevity and recyclability. Digital systems can also help trace the origin and composition of materials, track returned products and enable the trade of secondary raw materials and upcycled products to facilitate reuse and recycling of resources. Meanwhile, developing data-driven solutions and leveraging data analytics to find inefficiencies and optimise resource use can improve the overall circularity of operations.

Transitioning to circular economy models is not just an environmental imperative but also a strategic business decision with far-reaching benefits. By embracing circularity, retailers can reduce costs, strengthen supply chain resilience, enhance brand image and attract a growing base of environmentally conscious consumers. Embracing circular practices goes beyond ensuring operational resilience; it's a path towards a more sustainable and prosperous future for both business & society.