UK businesses lag behind in adopting circular economy model

Research from Ivalua reveals that the circular economy model is not widely implemented among UK businesses, with only a quarter of firms adopting the approach.

The study, involving 300 UK supply chain and procurement decision-makers, highlights that circular economy models could be integral in providing UK businesses with solutions for efficiency, cost, and sustainability challenges. Those that have adopted circular economy practices have reported a 56% increase in revenue, more efficient material usage, a reduction in their carbon footprint by 52%, and a decrease in costs by 49%. However, the majority of businesses are facing difficulties in setting up these practices and benefiting from them.

Findings from the research indicate that just 25% of businesses have implemented a circular economy model. Nearly half, at 49%, report that they are either in the process of implementing or planning to do so, while 22% have no such plans at present.

The slow pace of adopting circular economy practices appears to be due to foundational sustainability gaps. Many UK businesses lack complete and operational plans for utilising renewable energy, purchasing recycled materials, and effectively exchanging resources with suppliers, with deficiencies marked at 75%, 76%, and 81% respectively.

Jarrod McAdoo, Director of Product at Ivalua, commented on the necessity for businesses to find ways to optimise their supply chains amid continuing inflation alongside climbing energy and fuel costs. "Against persistent inflation and rising energy and fuel costs, UK businesses must urgently find new ways to optimise their supply chains," McAdoo stated. "In our 'survival of the fittest' economy, circularity will improve the financial and environmental standing of businesses - particularly those who can gain a first-mover advantage. In fact, our data shows more than half (51%) of UK businesses say if they don't implement circular economy models, they'll be overtaken by greener, more efficient competitors."

Resistance to change from suppliers (37%), competing priorities (34%), and a lack of understanding by suppliers of their own environmental impact (31%) are identified as major barriers to the successful implementation of circular economy models.

The difficulties in achieving supplier collaboration on sustainability have led 58% of UK businesses to regard circular economy initiatives as somewhat aspirational. Further data demonstrates that the slowdown in adopting these models is predominantly a top-down issue, with 54% indicating that circular economy models will lack traction without increased support from the C-suite and board.

Despite these challenges, a significant 57% of UK businesses assert that not taking action will ultimately prove more costly than the expenses associated with implementing circular economy initiatives.

McAdoo continued by emphasising the need for securing commitment from leadership and sceptical stakeholders. "To turn this around, businesses must secure buy-in from leadership and sceptical stakeholders, convincing them that circularity aligns with ethical and environmental objectives, while also making the business resilient, regenerative and competitive in today's volatile market," McAdoo explained. "Once buy-in is secured, businesses must invest in the tools and processes needed to enable closer collaboration with suppliers and greater supply chain visibility. Only then can they identify opportunities to minimise resource wastage and their environmental footprint throughout their supply chain lifecycle."

The survey underpinning these findings was conducted by Sapio Research on behalf of Ivalua between late April and early May 2024, involving a sample size of 300 decision-makers in the UK's supply chain and procurement sectors.