K3 Business Technology : The psychology of creating a circular economy

K3's latest research found that consumers increasingly want retailers to do more for the environment. Indeed, 2 in 5 of them want to see more upcycling schemes implemented while 36% wish for more second-hand goods to be resold.

These statistics mirror whatDr. Kerli Kant Hvass, Circular Economy Researcher and Consultant has been saying for a long time. She believes it's time to trade in our throw-away mentality for a circular economy. But where does that leave mainstream retailers? We sat down to discuss… 

What are circular economies, and why should retailers be taking notice of them?

We have a 'take, make, waste' rationale, where we take raw materials, make them into products, use them and then dispose. That's a linear economy, but in the ideal circular economy, products would be designed and circulated so that we don't create waste. They'd get reused and recycled back in the economy. Of course, that sounds very idealistic, but that's what's needed. We simply can't continue to operate on a linear model because there aren't enough resources to supply our rate of consumption. At the same time, landfills and waste piles are growing out of control. We could start to solve both of these problems if we could divert resources on their way to landfill back into the economy.

For retailers, governments have made it clear that the circular economy has come to stay. The EU for example, has the Green Deal and the Circular Economy Action Plan. The UK has WRAP mobilising circularity. Governments are under a lot of pressure to address the climate crisis, and a big part of this will involve taking a full lifecycle perspective on the way we consume. For retailers this new era brings both challenges and opportunities.

The idea of circular economy seems to fly in the face of current retail model, how would this alter the role of the retailer?

Yes, you are right. Retailers have a crucial role in the circular economy as they are gatekeepers between products and consumers. The call for sustainability is pushing retailers out of their comfort zone. Their role in our economy today is to sell a product - the more they sell the better it is. A sustainable approach might not be profitable in the short-term, but retailers have to look critically at their value proposition and figure out how it fits into a future economy and circular context.

At the moment, most retailers don't have a relationship with their products past the point of sale. A circular economy requires that they expand that and build a more intimate relationship both with their product and their customer.

What could the customer journey look like in a circular economy?

Business models are trending towards recommerce, repair and leasing, especially in the fashion world, so we have a few examples already. Take Levi's second-hand collection, or the renew initiatives from Tommy Hilfiger and Northface. Denim brands like Nudie Jeans from Sweden offer free repairs, or if you live far away, they send you a repair kit.

MUD Jeans are a Dutch company with a cult following, they have been testing the leasing model for a number of years. So instead of buying a pair of jeans, you pay a monthly fee, and when you don't need them anymore, you send them back. You can also give them back to be resold, buy them out, or buy a new pair. They've been piloting this hybrid circular business model now for a number of years and have built a really strong sense of community around it.

What psychological shifts do you think need to happen in both consumers but also in retailers to bring about a circular economy?

The psychological aspect is extremely important, research has shown that the way businesses and people think are the main barriers to shifting to a circular model. Ultimately, it's up to the individual whether a t-shirt with a hole in it goes in the landfill, gets recycled, or is used for something else. In that way, consumers are gatekeepers. They need to take care of products, repair them when possible, and make responsible decisions when they're done with something either to re-use or recycle.

In return, brands and retailers need to produce and sell products that can be repaired, reused and recycled, and they need to make it easy for consumers to make sustainable choices. If they have all the information, and the solutions are attractive, transparent and convenient, it can be a really symbiotic relationship. For example, Adidas is partnering with Stuffsr, one of the top 50 global retail tech start-ups in 2020. Their app can be integrated on any retailers' website to track the value of your purchase over time, and let you sell back unwanted clothing for store credit. Technology is a powerful tool to help consumers circulate products and give them a new life. Retailers have a role to play in guiding and educating, and they can see circular initiatives as an opportunity to build customer loyalty.

Interested in reading more eye-opening stats? Discover more here or fill in the form to download a copy of our research

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