From Pepsi to Unilever, 5 circular economy strategies for consumer goods
Do you remember when Patagonia told us, “Don’t buy this jacket” and started focusing on repairing, reusing and recycling used gear?
Patagonia’s Common Threads Initiative is a great example of “circular economy” or “closed loop” principles at work; when people no longer need their Patagonia gear, the company takes it back and makes it into new gear.
The resources invested into making the initial products, and the products themselves, are cycled back into production of new products of similar value and utility.
Levi’s is another excellent example of a clothing company that is successfully employing circular economy principles. Levi’s vision is to eliminate a culture of waste, facilitating practical and creative ways to extend the life of jeans, repurpose them, and/or recover and reprocess the fibers into raw material for a next generation of Levi’s.
Beyond clothing, a number of durable products companies have embraced a circular economic model.
Dell is a standout example. The company implemented a major circular economy redesign across its entire business and now collects damaged and used products from consumers to reprocess plastics and use them in the manufacture of new products.
Caterpillar is another company that has embraced the circular economy. The company created a remanufacturing division in 1972 and now brings hundreds of refurbished parts back into the marketplace every year.
And Rolls Royce remanufactures marine engines and sells them to companies like Thames Clippers, which uses the refurbished engines to power 20 of its water taxis that cruise tourists along the Thames River in London.
In total, the Ellen MacArthur Foundation estimates that the transition to a circular economy represents a US$1 trillion opportunity for the global economy.
But, here’s the question: Can circular economy principles apply to the $753 billion consumer packaged goods (CPG) industry, when consumables, by definition, cannot be recovered for revalorization?
Absolutely. Here are the top five value-adding circular economy strategies for CPG companies:
1. Zero in on zero waste
By diverting 98 percent of waste generated from manufacturing plants and business facilities away from landfills, CPG companies can achieve zero waste (in accordance with the most widely accepted definition).
One way to do this, as exemplified by Unilever, is to use circular economy strategies, which helped the company become the first to send zero non-hazardous waste to landfill from its entire manufacturing network of 240 factories in 67 countries.
Unilever also does more than divert generated waste from landfills; it strives to eliminate the concept of waste entirely by making smart sourcing a number one priority and ensuring any materials not used up in the manufacturing process are reused. Some materials are reused on site, some traded into other industrial supply chains, and the organics are composted. Achieving zero waste in Unilever factories has saved the company $226 million.
Even Unilever, however, has not achieved zero waste throughout its supply chain. Like most companies, its efforts have focused on its owned and controlled facilities.
The next step for leadership companies should be to drive zero waste goals to their suppliers, through strict supplier standards that incorporate circular economy concepts and guidance.
2. Find a buyer for by-products
Material reuse or revalorization synergies occur when a company sells by-products and off-spec items from its manufacturing process to another company for use in that company’s production of goods.
This strategy can be applied during the sourcing, manufacturing and post-use phases of a product’s life cycle.
Start with the sourcing phase. PepsiCo, for example, recognizes that the most significant environmental impacts associated with the food and beverage products it sells results from agricultural processes and practices. So, the company is working back through its supply chain to identify opportunities to revalorize agricultural waste and by-products.
Employing cross-farm collaboration, PepsiCo uses slurry from Dutch and Belgian dairy and pig farms as a natural fertilizer on potato farms, which reduces the need for chemical-based soil enhancers and associated carbon emissions. This is a big win for the company, since 40 to 50 percent of its potato-based products’ carbon footprint comes from traditional fertilizers. PepsiCo is also extending this type of agriculture by-product exchange to reduce impacts associated with its orange juice supply chain in Florida.
When it comes to the manufacturing phase, Proctor and Gamble (P&G) is among the growing number of companies that cascade production by-products into material resources sold into other industry sectors.
The company’s Global Asset Recovery Purchases (GARP) team has identified many opportunities, including selling unusable fibers and manufacturing from a Charmin toilet-paper plant in Mexico to a local company that uses it in manufacturing low-cost roof tiles. Additionally, a P&G Pampers plant in the U.S. sells scrap generated during the production of baby wipes into the furniture industry for use as upholstery filling. The company also sells mascara by-products for tire shine and other beauty care product scraps for leather care products.
In an illustration of the potential for the post-use phase of consumer products, the Global Soap Project of Atlanta, Georgia, developed an innovative program for giving new life to soap bars that are only partially used by hotel guests.
The organization arranges for volunteers to collect, clean, and reprocess used hotel soap from across the United States, and then sends the soap to Haiti, Uganda, Kenya, and other impoverished nations.
3. Go for the total package
Packaging offers a major circular economy opportunity for CPG companies. Product packaging should be designed for recovery, and then reused, repurposed or recycled, in that order of priority.
A leading example in this space is The Coca-Cola Company.
It practices circular economy packaging in at least five significant ways: cleaning and reusing recovered glass bottles in some markets; repurposing recovered PET bottles and aluminum cans into highly desirable, upscale products through its collaboration with will.i.am and Ekocycle; facilitating recovery of beverage containers by participating in the Closed Loop Fund, Keep America Beautiful’s recycling bin grant program and regional recycling joint ventures; building and supporting the market for rPET by increasing its use of recycled content in packaging; and introducing the plant bottle technology – recyclable PET made from agricultural by-products like sugarcane waste.
4. Compost more
Composting revalorizes biomaterials and organics used in consumable products and their packaging, returning them back to the biosphere for reuse in new products.
Unfortunately, there are too few industrial compost facilities in most parts of the U.S. and elsewhere today. So the first step CPG companies can and should take is to advocate for, and invest in, the construction of more facilities. Collaborating to establish a dedicated fund to increase access to composting would be a great start.
Absent a robust composting infrastructure, some companies have found other ways to keep biodegradable by-products from their supply chains to cycle through the biosphere.
For example, Frito-Lay facilities in Turkey process waste from potatoes, corn, and broken chips in an anaerobic digester to produce biogas and organic digestate. The biogas generates 35 percent of the facilities’ power needs. The digestate is converted to compost and used to enrich soil for local orchards.
5. Forge unusual partnerships
Adopting circular economy principles is often about creative collaboration, as seen with the great work being done by the Starbucks Coffee Company.
Starbucks works with a Japanese contact lens manufacturer to repurpose spent coffee grounds into livestock feed, making those grounds even more valuable than garden compost. Lorries that deliver daily supplies to local Starbucks stores pick up the spent coffee grounds and bring them to a special recycling center.
At that center, Menicon, the contact lens manufacturer, uses a lactic acid fermentation technique to infuse the grounds with nutrients. Starbucks then feeds those enhanced grounds to the dairy cows that produce its regional dairy products.
Use these strategies to develop your own circular economic model for consumables. Consider additional strategies too. After all, the circular economy is about innovation and rethinking products and processes.
When you expand your horizons through a circular economy lens, you might discover your own breakthrough insights. As will.i.am of the Black Eyed Peas has often said, "waste is only waste if we waste it."