How to Build a Circular Value Chain

April 8, 2022 4 minute read

Blocks made out of wood showing a successful circular value chain.

Global companies can’t afford to focus solely on the short term—not if they hope to be around for the long term. As the world grapples with the fallout from widespread environmental degradation, these companies are rethinking their sustainability practices—not just to become better corporate citizens, but to ensure their long-term future. 

The circular economy is a framework that rewrites the rules of our current take-make-waste economic model, which is fueled by resource extraction and consumption. The circular economy designs out waste and pollution, keeping materials in use and regenerating natural systems.

It offers a path for global companies to deliver differentiated, sustainable value to shareholders and customers alike while building resilience against future uncertainty and maintaining a reliable supply of increasingly scarce resources across their value chains.

Lena Pripp-Kovak, IKEA’s Chief Sustainability Officer, states: 

Being circular is both a responsibility and a good business opportunity. We know that customer behavior is changing and that there is a growing awareness of the impact of wasteful consumption... We also know that resources are limited and that we must find smarter ways to use them.

IKEA is one of the dozens of global companies taking steps now to transition to the circular economy for the long term. Wondering where to start?

Below, we share 7 steps to help companies build and integrate circular economy business models into their value chains. 

Learn How global leaders are using cross-sector collaboration to accelerate the transition to a circular economy.

7 Steps for Building a Circular Value Chain

Here are 7 steps your business can leverage to start building a circular value chain. Throughout, we emphasize the importance of strategic, shared-value partnerships and inclusive innovation to ensure that your strategies gain traction and drive sustainable impact and business results. 

1. Map the Path of Key Raw Materials in Your Value Chain

A first step to creating a more circular value chain is to understand the path key raw materials currently travel through your value chain—from source to sale to post-use disposal. Once you’ve mapped this, you can start to ask how you might eliminate, transform, or close key material loops for products and packaging. 

Understanding the material and waste streams associated with your company’s value chain will help you pinpoint opportunities to streamline materials, repurpose product components or wasted materials, or eliminate waste entirely.

2. Rethink Product Design

Circular value chains work best when products are designed to be durable enough to last a long time and flexible or modular enough to be repurposed in multiple ways. That means asking product designers to go back to the drawing board. Collaborate with product teams to co-create design guidelines that help address key pathways such as how you might use fewer resources, minimize waste, or make it easier to disassemble or reuse various product components once products are no longer usable.

If you’re unsure where to start, open innovation can be an excellent way to crowdsource new designs, solutions, and business models for products that support the circular economy.

3. Co-Create Solutions with Your Suppliers

Circular strategies only work if your key suppliers and manufacturing partners commit to the process, too. 

First, see if you can get your existing suppliers and manufacturers on board with a more circular approach. Ask if they are open to trying new strategies that generate less waste or repurpose it. You may want to employ a facilitator to help everyone design a new process together

If you can’t get good traction with existing partners, look for new suppliers who already use recycled or repurposed materials. Or consider adding additional partners or vendors who can help realize new circular value chain opportunities for previously-wasted materials.

4. Change Up Your Materials

Reexamining your materials is key to developing a successful circular value chain. The raw materials you use—whether they are durable, recyclable, and/or reusable—will make a big difference in whether your products and packaging last and whether they can be transformed into new goods at the end of their useful life. It also matters how you source your materials—wherever you can, replace virgin raw materials with recycled, repurposed, and regenerative options

While switching materials might sometimes mean revisiting your product design (see step 2), in other cases it might be as simple as swapping in another raw material that’s more easily recycled.

5. Reimagine Your Packaging

Eliminate or simplify your product packaging wherever possible. Or, redesign your packaging to allow for reuse instead of disposal. 

Consumers are becoming increasingly aware of how the products they buy are packaged. Streamlining or eliminating your packaging is a must when it comes to zero-waste, circular value chains, but it’s also a great way to build customer loyalty or gain a new audience.

6. Change Your Relationship with Customers

A critical—but difficult—part of a circular value chain is getting consumers to do their part to close the loop. This might be a matter of repairing a product to extend its life, returning a product that could be repurposed, or recycling previously wasted materials/products. True, consumers are increasingly on board with sustainability—but it’s still hard to contend with a linear economic system built on the expectation of simply throwing things away.

Many companies are building engagement strategies into their circular business models, developing incentive and warranty programs to drive product repair or return. New adopters of circular economy business models should test and iterate their plans with consumers to ensure uptake.

7. Change Your Relationship with Your Industry

Zero waste is certainly not a new concept. But developing a global circular economy that accounts for the complexity of today’s supply chains and manufacturing processes is still a massive undertaking. 

Pre-competitive partnerships, co-investment, and information sharing are critical to developing effective practices, building momentum, and leveraging economies of scale for recycled or repurposed materials across sectors and industries. This means collaboratively embracing and testing circular economy business models—and providing details on what works and what doesn’t.

Creating Sustainable Impact with a Circular Value Chain

Creating a circular economy won't happen overnight, but we’re excited to see more companies, across industries, start down the path. Embracing the circular economy in your value chain radically realigns the business’s relationship to the environment and society. This is a transformative vision—but it starts with the steps outlined above.

Looking to build a more circular value chain? Reach out to a Sustainable Impact Expert to get started.

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If you are a corporate leader and would like to be a part of a discussion about these and other issues in the presidential transition, contact Resonance Strategic Partnerships Manager, Seth Olson.