December 3, 2019

Why employers should care about the circular economy

It’s here to stay, so what does it mean for the world of work?
Why employers should care about the circular economy

Taking products back for recycling, prioritising access over ownership, repairing and reselling… Circular businesses are on the rise, with new take-back schemes and new technologies to transform waste into value announced every week.

The circular economy will significantly impact the way companies — and employees — think about and deal with work- but just how exactly will it do so, and why should companies care in the first place?

The circular economy is here to stay.

Circularity is gaining momentum around the world, with industry leading the way: an estimated 25% of all manufacturing firms in Belgium, for example, are already applying key circular economy strategies such as repair and maintenance, and the apparel resale market has grown 21x faster than the retail apparel market over the past three years, This is enabling clothes to stay in circulation longer, and is delivering real business value to leading brands such as H&M, Patagonia, and The North Face in the process.

Policy is also catching up: from the European Commission’s circular economy action plan and the Netherlands’ ambition to become 100% circular by 2050, to the China-EU agreement on circular economy cooperation and subsidy schemes for PET recycling in Kenya- incentives for the industry to transition are making it easier than ever to make the switch.

The circular economy requires new skills.

Amidst the wave of new technologies and trends that are disrupting business models today, circularity is also set to widen the skills gap companies need to address in the next few years.

A rise of jobs in the installation, maintenance, and repair sectors — key occupations in the circular economy — will require companies to invest in more technological as well as manual skills. Think of the operatives needed to handle a sorting technology like the Fibersort, for instance, or the seamstresses needed to support a recommerce solution provider like The Renewal Workshop- a set of skills currently difficult to come by in Oregon, where the repair factory is based. This is an issue around the world, where craftsmanship skills are not being passed down generations and have become somewhat of an endangered species.

Occupations that require more complex cognitive and problem-solving skills — such as design, architecture, or business operations — will also need to adapt to new circular business models and strategies. Fairphone’s modular, easy-to-repair design, for example, is by no means an industry standard, and product-as-a-service business models like Bundles’ subscription washing service still have a long way to go before reaching operational cruising altitude.

Whether through hiring new staff or re-training existing employees, companies will need to be proactive in order to ensure their workforce is fit for the transition and that workers are not left behind.

The circular economy requires new mindsets.

A systems-thinking mindset, combined with an eagerness to experiment, fail, learn, and repeat, are crucial in driving circularity adoption across all business functions.

From understanding how a product fits within value networks and the different impacts it will have across its multiple lifecycles, to embracing failure and learning– companies will, more than ever, need to nurture an entrepreneurial culture and emphasise a seeing ‘the forest for the trees’ approach in everything they do.

Without the right leadership, values, and culture, circularity can easily be hijacked as the next big trend in greenwashing– something companies should be wary of.

Whether through training, designing new incentive structures, or hiring new staff with the right mindset, companies will need to make taking part in the transition meaningful for their employees , and prioritise shifting mindsets in their staff at all levels, including leadership.

The circular economy requires new measures of success.

As alternative measures of success that take the social and environmental costs of doing business into account gain in popularity, and as companies move to business models that priorities access over ownership, companies will also need to adapt their financial, operational, and human resource models to embody these changes.

Some of the questions we expect companies to grapple with in the coming years include: how can we track and reward the performance of employees in the absence of a single metric of success? How can we measure shared value creation? How will responsibilities and job descriptions change to support the triple bottom line? What kind of governance structures will we need to put in place to ensure old ways don’t come creeping back in? What markers should we use to hold our leadership to account and ensure commitment to circularity and the needs of the workers at all levels?

When Royal Philips started experimenting with a product-as-a-service business model in their Lighting and Healthcare branches, for example, they translated their circular economy goals into clear incentives for their sales teams:

“As a product manufacturer with a 120 years history, a key challenge to move to circular business models that emphasize access to functionality over ownership of products is to overhaul the incentive schemes within the company and for its sales teams in particular. Personal targets and bonuses of sales managers are linked to turnover and cash flow, which incentivizes a sale of equipment today, rather than a service relationship over the next 10 years, even though the latter would provide more value for the company.” (Source)

What can companies do to get ahead?

Few definitive answers exist to these questions, but a growing number of organisations are working to ensure business and society at large are ready for the transition. Collaborations like PACE, are bringing global leaders from governments, businesses and civil society together to tackle some of circuarity’s biggest challenges, the US Business Roundtable is embracing stakeholder capitalism and companies like Philips are actively working to integrate circularity into their human resource management.

The Jobs & Skills programme at Circle Economy is also exploring these topics and more. We are working to uncover how circularity is changing the world of work through the lens of technology, inclusivity, the quality of work, and skilling the workforce. We are collaborating with the public, private and social sector to ensure the transition to circularity is positive for both work and workers.

Is your company considering or already implementing a circular economy business model and grappling with these questions? Get in touch with us here.

Stay up to date on our work here.

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