In a world grappling with environmental challenges and resource scarcity, it has become imperative for businesses across sectors to rethink their operating models. Consumer goods businesses stand on the cusp of a paradigm shift that offers a chance to contribute to global sustainability efforts and a significant opportunity to drive meaningful innovation and profitable growth. This shift towards the circular economy, where resources are continually reused, and waste is systematically eliminated, is increasingly becoming a business imperative.
Why transition to circular business models?
The global economy has been built on a linear "take-make-waste" model, where natural resources are extracted, used to manufacture products, and discarded after use. However, this model is no longer sustainable due to the finite nature of raw materials and the escalating environmental challenges we face, such as climate change, biodiversity loss, and pollution.
The circular economy offers a practical and promising alternative. In circular systems, materials and products are kept in use for as long as possible, extracting the maximum value from them and then recovering and regenerating products and materials at the end of each service life. This model represents a systemic shift that builds long-term resilience, generates business and economic opportunities, and provides environmental and societal benefits.
As a consumer goods manufacturer, embracing a circular economy means reevaluating how you design, produce, sell, and dispose of your products. It involves prioritizing regenerative resources, preserving what's already made, using waste as a resource, rethinking the business model, and collaborating to create joint value. By transitioning to a circular model, you're not just helping to preserve the environment. You're also opening doors to innovation, reducing costs, meeting evolving consumer demands, strengthening supply chains, and building a resilient and future-proof business.
Several alternative and complementary strategies are available such as product life extension, retaining the ownership of the product (aka selling the product as a service), designing products for reuse or recycling, and improving material recovery or using more recycled raw materials in the production process. This guide offers a comprehensive 8-step strategic process for making sense of the opportunities available, integrating the circular economy principles into your business model, and preparing an actionable strategy and roadmap to transition into the circular economy.
Credit: Vojtech Vosecky
The upcoming chapters will delve into each step of developing a circular economy strategy for your business. This won't be a light read, but we promise that if you follow the process, you will come out with a clear grasp of how to redefine your corporate strategy around the circular economy and implement a circular business model in a sustainable, resilient, and profitable manner.
The 8-step process to develop circular economy strategies
In our experience helping consumer goods companies develop circular economy strategies, the following 8-step process, when properly facilitated and with significant involvement of key stakeholders across the organization, results in a clear strategy and action plan with buy-in across the organization and a clear focus on implementation.
Understand the current situation and set goals: Understand your current situation, align with your corporate vision and mission, and define clear, ambitious, yet achievable financial and non-financial goals for your transition to a circular economy.
Analyze market opportunities: Conduct a comprehensive analysis of market opportunities and industry trends related to the circular economy. This should include customer preference analysis, assessment of the market size and growth, evaluation of circular business models, analysis of the regulatory landscape, and sustainability trends analysis.
Analyze the competitive landscape and your ability to compete: Evaluate your competitive positioning and assess your organization's ability to compete in the circular economy. This involves competitor profiling, competitive factor analysis, and evaluating your capabilities and resources.
Develop and test alternative approaches and scenarios: Based on the insights gathered, brainstorm strategic initiatives that align with your goals and capabilities, evaluate these initiatives for feasibility and potential impact, consider different future scenarios, and prioritize your efforts.
Define the operating model, capabilities, and resources requirements: Understand what capabilities you need to develop or acquire in-house, what you can outsource, and where you can leverage partnerships. This includes consideration of supply chain transformation, capacity building, technology requirements, and partnerships or alliances.
Develop an implementation plan and define milestones: Develop detailed implementation plans for your prioritized strategic initiatives. Break down each initiative into specific tasks or projects, determine the resources required, develop a timeline, identify potential risks and mitigation strategies, and assign responsibility for each job.
Communicate clearly across the organization internally and externally to ensure proper buy-in: Develop a comprehensive communication plan to ensure all stakeholders understand the new strategy, why it's essential, and their role in implementing it.
Monitor, learn, and continuously improve: Implement mechanisms for monitoring progress, learning from experience, and constantly improving your strategy and execution.
Remember that even though the steps are presented in a sequence, you might learn something in a step, forcing you to go back and readjust your conclusions in a previous step. In other words, the process can be iterative.
For example, you might have defined an initiative for product life extension in a particular business unit to contribute toward achieving an overall goal of carbon emissions reduction by a certain amount, but then moving on to operating model design, realize that the product life extension is not feasible without significant changes across the production process and supply chain which will take a longer time. You would then need to decide whether to continue this initiative for the long term and look for shorter-term initiatives to achieve your goals in parallel or change your approach altogether.
This guide will help you formalize your process and systematically define your strategy, but ultimately strategy is about choices and decision-making. By following this process, we believe the decisions will be fact-based, and your circular economy strategy will be set up for success.
Let's go through how to complete each step in detail.
Step 1: Understand the Current Situation and Set Goals
Defining your goals is the first step of the strategy process. Start by thoroughly defining your current situation, then determine your long-term vision and mission of where you want to be as a company and your long-term impact. Finally, set clear goals to bridge the gap between the two states.
Understanding the Current Situation
This involves assessing your current performance, both financial and non-financial. This baseline will help you determine where you want to go and how ambitious your goals should be. Examining the present state of your business also involves understanding the maturity of your circular economy practices, the extent of circular economy integration in your business, and identifying the existing gaps. Defining what percentages of your current actions are circular is a good starting point.
Align with Corporate Vision and Mission
If your company does not have an up-to-date vision and mission statement, define those first. Your vision statement outlines what your organization wants to be or how you want the world you operate to look like. For example, an apparel company might have a bold vision statement of a textile industry with net-zero carbon emissions. A vision concentrates on the future. It can be emotive and a source of inspiration. It should also be aspirational.
A mission statement, on the other hand, defines your company's purpose. It tells you what the organization is doing daily to reach its vision. A company's mission might be to transition to a circular economy model or to reduce waste or greenhouse gas emissions by 50% over the next decade.
These types of clear, ambitious vision and mission statements will drive your goal-setting for your circular economy strategy. Aligning your financial and non-financial goals with your company's broader vision and mission ensures cohesion and relevancy of the goals set.
Defining Clear Financial and Non-Financial Goals
You can now set your financial and non-financial goals based on your current situation, corporate vision, and mission. Your financial goals could include targets related to revenue growth, cost savings from waste reduction, or profits derived from circular business models. Non-financial goals might encompass sustainability metrics, such as reducing your carbon footprint, increasing the percentage of recycled materials used, or launching a certain number of circular economy-based business models. It's often important to reiterate what is your company's circular economy objective at this stage of the process.
Remember that your goals should be concrete and measurable. They should also be defined for a period of your circular economy strategy, usually a 5-year plan is an appropriate period, but you might even create a 3-year strategy depending on the size of the business, the ongoing changes in your current market situation, and the overall speed of circular transformation in your industry.
Ultimately, defining goals is iterative, and you should return to them as you proceed toward the next steps of the circular economy strategy development process. Goals may need to be adjusted as you learn more and identify new market conditions or needs from your operating model.
Making sure you have completed Step 1
The output of Step 1 should provide clear and tangible targets your business wants to achieve. These targets should be aligned with your company's vision and mission and derived from a strong understanding of your current situation.
At the end of Step 1, you should have a clear answer to the question, "What are concrete and measurable goals over the strategy period that align with our mission and vision for the circular economy?" These should encapsulate your financial and non-financial goals, such as revenue growth, cost savings, sustainability targets, and performance benchmarks for circular economy initiatives.
With clear goals, you have a target to work towards and a benchmark against which you can measure your progress. This sets the foundation for Step 2, where you analyze market opportunities and industry trends to identify the strategies and actions to help you achieve your goals.
Step 2: Analyze market opportunities
Market and industry analysis is a multifaceted task. It's not just about determining the market size but also understanding trends, customer preferences, competitive landscape, regulatory environment, and technological advancements. The circular economy market size is expected to grow substantially in several industries ranging from electronics to furniture and apparel.
To ensure the development of comprehensive and robust circular economy strategies, it is key to complete several pieces of analysis to assess opportunities from different perspectives. Here is a description of the most important analyses to complete in this step.
Industry trends and regulatory environment analysis
You need to identify trends within your industry and the regulatory environment, as these can significantly impact your market opportunities. Look at broad trends related to sustainability and the circular economy — for example, changes in consumer preferences towards sustainable products, the rise of sharing economy models, and technological advancements enabling better recycling or repurposing of materials.
Also, understand the regulatory landscape. Are there any existing or upcoming regulations that encourage or enforce circular economy practices? For instance, the European Union has regulations under its Circular Economy Action Plan, which impose extended producer responsibility and regulate waste management.
Customer preferences and demand analysis:
Next, understand your customers. How much do they value sustainability? Are they willing to pay more for sustainable products or participate in circular business models like rentals or product-as-a-service subscriptions? Critical tools here include market research, surveys, focus groups, or analysis of sales data and customer feedback.
The general consumer trend towards sustainability is clear. For example, a McKinsey report from 2020 showed that consumers increasingly see sustainability as an important factor in their purchasing decisions. However, in this step, you need to go deeper into the customer preferences and demand drivers of your specific industry and customer base to identify the underlying dynamics, which will help you recognize opportunities or threats for your circular economy strategies.
To size the market opportunity, you'll need to determine the potential number of customers for your sustainable business model or products and their potential value. This can be done using market data, industry reports, and your sales data.
For instance, if you are considering a rental or subscription model, estimate the number of potential customers, the price they'd be willing to pay, and the frequency of their transactions. For improving product durability, evaluate the potential cost savings from reduced returns or warranty claims and whether you could charge a premium for more durable products.
Competitive landscape analysis
Identify your competitors in the circular economy space. These might not be your traditional competitors but could be new entrants focused on sustainable products or a specific circular business model. Analyze their offerings, business models, pricing, and customer experience. This can help you identify gaps in the market, potential challenges, and best practices.
Circular business model opportunities analysis
Assess the potential of different circular business models. For each, consider the potential market size, the investment required, the feasibility given your current capabilities and resources, and the potential benefits — both financial and in terms of sustainability.
You have many different business model options to choose from. In this blog, you will find several examples of circular economy in the business world where companies focus on slowing and closing material loops by building long-lasting products, developing sharing-based business models, and extending product lifecycles by offering repair, buyback, and resell programs.
Remember that sustainability strategies differ from traditional linear economy ones, and you might find economic growth not just from a new business model but also from a new product design process using more sustainable materials or a more efficient way to use raw materials.
Supply chain and production process analysis
Analyze your current production processes and supply chain. Identify opportunities for using more recycled materials, reducing waste, or improving durability. Look at both the cost implications and the potential market benefits — could these changes lead to cost savings or allow you to charge a premium? Could they attract new customers or improve your brand image?
For instance, IKEA has committed to becoming a circular and climate-positive business by 2030, which includes designing products to be repurposed, repaired, reused, resold, or recycled.
Product recyclability analysis
Consider opportunities for improving product recyclability and material recovery. This could involve design changes, choice of materials, or providing recycling services. Analyze the costs, regulatory implications (e.g., disposal fees), and potential market benefits.
Making sure you have completed Step 2
At the end of Step 2, you should comprehensively understand the potential for integrating circular economy principles into your business. You should have identified key opportunities and challenges for your business in the context of industry trends, customer preferences, the competitive landscape, potential circular business models, supply chain transformations, and product recyclability improvements.
You should also clearly understand the size and nature of each opportunity. These insights will guide you in selecting your strategic initiatives. Revisiting Step 1, your strategic goals, is recommended to ensure you are still aligned with them.
Step 3: Analyze the competitive landscape and your ability to compete
Based on our experience developing circular economy strategies for consumer goods companies, a good approach starts from identifying competitive factors and mapping competitors and your organization on those same factors.
Identify key competitive factors
Identify the key competitive factors in your industry, especially in transitioning towards a circular economy. These can include but are not limited to:
Pricing and affordability of products
Product quality and durability
Brand reputation for sustainability
Availability of circular economy models (e.g., rentals, subscriptions, buybacks, resales)
Use of recycled or sustainable materials
Supply chain sustainability
After-sales services and product lifecycle management
Innovation capability in sustainable solutions
Customer preferences should also inform these factors. Market research, customer feedback, and industry reports can provide valuable insights. But it would be best to consider other stakeholders, such as regulators or investors, and their growing focus on sustainability.
Identify your existing competitors, emerging competitors, and potential future competitors. Consider not only your traditional competitors but also startups or companies from adjacent industries that might enter your market. For instance, Patagonia might traditionally consider other outdoor apparel companies as its competitors. Still, in a circular economy context, the company might consider rental services or second-hand marketplaces competitors.
Analyze each competitor based on the competitive factors you've identified. What is their pricing strategy? What circular economy business models do they offer? What is their brand reputation? This will give you a better understanding of their current positioning and strategy in the market.
Consider using a tool like a competitive matrix to plot each competitor against these factors. This can help visualize where your company stands compared to the competition and identify gaps or opportunities.
Future competition analysis
Considering future competition can be more speculative, but it's essential given the rapid pace of change in sustainability and circular economy models. You can use scenario planning techniques to explore potential future developments. For instance, what if a major tech company entered your market with a disruptive circular economy model? Or what if a new startup developed a game-changing technology for recycling or repurposing materials?
Assessing your ability to compete
Finally, assess your company's ability to compete based on your identified competitive factors. This involves a deep internal analysis, looking at your strengths and weaknesses. Here, it is critical to try to be unbiased and rely solely on external data points; what do customers, industry analysts, or even your competitors say about your abilities and the value you provide? For example, you might have a strong brand reputation and a history of product quality but struggle with high costs or a lack of expertise in specific circular economy models.
You could consider many details, but this process should provide a good starting point for analyzing your competitive landscape and assessing your ability to win in the transition to a circular economy.
Making sure you have completed Step 3
Now you should clearly understand where your company stands compared to competitors within the circular economy context. You should have identified the unique value proposition your company brings, your competitive advantages and disadvantages, and potential opportunities and threats in the market resulting from the competitive dynamics.
You should also possess a view of your company's distinct capabilities and market positioning compared to competitors and have already identified potential areas of growth or points of vulnerability in the evolving market.
By understanding the competitive landscape, recognizing your strengths and weaknesses, and knowing what your customers want, you're better equipped to move to Step 4, which involves developing strategic approaches to become more circular. With these insights, it is time to brainstorm and evaluate potential strategic initiatives that align with your company's capabilities and goals and respond to market trends and customer preferences.
Step 4: Develop and test alternative approaches and scenarios
Step 4 in your strategy process, developing and testing alternative approaches (including scenario planning), is all about translating the insights and conclusions from previous steps into strategic initiatives or potential avenues for the company to pursue. Here, we recommend the following process:
Brainstorming strategic initiatives
Based on the goals you've set and the analysis you've conducted, brainstorm potential strategic initiatives that could help you achieve your goals and capture identified market opportunities. Strategic initiatives might involve launching new business models (e.g., rental, subscription, buyback, resale), using more recycled materials, improving product durability, or making products more reusable or recyclable (e.g., through more modular design) or, through some other means, decreasing resource use across the production process.
In practice, at this stage of the process, the level of granularity when defining these initiatives may vary. Still, you should be specific enough to articulate clearly what the initiative entails and broad enough to allow flexibility in execution.
For example, instead of saying, "Launch a rental service," you might say, "Launch a rental business model in [specific business segment], targeting [specific customer segment] with [defined] price positioning, [solution for] logistics, and [identified] implications for product design."
Evaluating strategic initiatives
Next, evaluate each initiative based on its potential to help achieve your goals, alignment with your company's capabilities and resources, and fit with the market and competitive dynamics. This is where the competitive analysis comes into play — you need to consider the attractiveness of the market opportunity and your ability to compete and win.
A valuable tool for this evaluation is a strategic options matrix, where you plot initiatives based on their potential impact (which could be a combination of financial return, alignment with goals, and market attractiveness) and your company's ability to deliver (which incorporates factors such as resources, capabilities, and competitive positioning).
Scenario planning is beneficial in situations of high uncertainty or volatility. For a company looking to transition to a circular economy, such uncertainty could come from regulatory changes, shifts in consumer behavior, technological advancements, or resource availability or costs.
You may need to define scenarios based on critical uncertainties or variables that could significantly impact your business's journey to circularity. For instance, one multinational consumer goods company modeled the potential impact of a few scenarios, including "High Regulation," where national governments around the world introduce strict regulations encouraging circular economy practices, and "Consumer Apathy," where consumer interest in sustainability remains low.
Once you've defined your scenarios, you can test each strategic initiative under these conditions. This helps identify which initiatives are robust across multiple scenarios, which are high-risk/high-reward, and which are dependent on specific conditions. This can inform both your strategic decisions and your risk management efforts.
Remember, scenario planning aims not to predict the future but to understand the range of possible futures better and make your strategy more resilient and adaptable.
Prioritization of strategic initiatives
You can prioritize your strategic initiatives based on evaluation and scenario testing. This will involve trade-offs and strategic decisions. Not all initiatives can be pursued at once, and you will need to consider the impact of each initiative vis-à-vis your goal, the magnitude of the market opportunity, your ability to win (given the competitiveness) as well as some insights around factors like resource allocation, strategic focus, and timing.
Remember to involve key stakeholders in this process to ensure buy-in and to benefit from different perspectives. Once you've prioritized your initiatives, these will form the core of your strategic approach, which will be further detailed and operationalized in subsequent steps of your strategy process.
Making sure you have completed Step 4
At the end of Step 4, you should have a clear strategic path that details what specific initiatives your organization should focus on to achieve its goals in the circular economy. The prioritized strategic initiatives should align with your goals, fit within your capabilities and resources, and be designed to address the market opportunities and competitive dynamics you've identified.
You should also understand how different future scenarios might affect these initiatives and have some ideas for mitigating potential risks and leveraging potential opportunities.
To ensure you are ready to move on to the next step, comprehensively answer the question: "What are the key strategic initiatives we will pursue to achieve our circular economy goals?"
Step 5: Defining the operating model, capabilities, and resource requirements
With a view to your strategic initiatives, it's time to start assessing operating model requirements. An operating model refers to how a business is organized, resourced, and operates to deliver its value proposition and strategic objectives. It includes key components like organizational structure, core processes, technology, and people capabilities, outlining how these elements interact and collaborate to deliver on the company's strategic initiatives, mission, and vision. In Step 5, we define the required operating model change, outlining how the company needs to change how it operates to fulfill its strategy.
Understanding the current operating model
Begin by mapping your current operating model, which typically includes key processes, resources, technologies, and capabilities. This should also encompass the supply chain and partner ecosystems. This mapping will give you a clear understanding of your starting point.
Mapping strategic initiatives to Operating model components
Next, for each strategic initiative identified in Step 4, map out the required changes to your operating model. This would cover areas like:
Processes: What new approaches are needed, or how must current methods be modified? For instance, if you plan to introduce a buyback program for electronics, you'll need product returns, inspection, refurbishment, and resale processes.
Capabilities: What new capabilities need to be built or acquired? If you plan to use more recycled materials in production, you might need capabilities in sourcing and integrating these materials.
Technology: What technology changes are required? If introducing a new circular business model, you might need a circular commerce platform to manage inventory, orders, and payments.
Organizational structure: Are any changes required in roles, responsibilities, or the organization structure? For instance, transitioning to a circular economy might necessitate a dedicated sustainability function within your organization.
Partnerships: What new partnerships or alliances need to be built? You might need to form new partnerships that have the capacity to support you throughout the entire value chain, from sourcing materials to refurbishing and recycling used products.
Identifying changes and gaps
Now, compare your current operating model with the one required to deliver your strategic initiatives. This will highlight changes needed and identify gaps in resources, capabilities, and technology.
Developing a list of required actions
Develop an action list for bridging these gaps and making the required changes. This will include what will be done in-house, what will be outsourced, and where you can leverage partnerships or alliances.
For example, Rab, an outdoor clothing and equipment company, launched a rental program where customers can rent equipment for their adventures from Rab's online store for up to 21 days. Even though Rab had years of experience repairing and maintaining equipment, they still had to develop reverse logistics processes and acquire a new software platform for managing circular transactions.
Making sure you have completed Step 5
You should have a picture of the operational changes to execute your strategic initiatives effectively.
You should be able to answer the question: "What changes to our operating model, and what new capabilities, resources, partnerships, and technologies are necessary to execute our circular economy strategic initiatives successfully?"
With this phase completed, you can move to Step 6 and develop your implementation plan.
Step 6: Develop an implementation plan and define milestones
Creating a roadmap with milestones for implementing strategic initiatives and operating model changes is crucial to the strategic planning process. Without proper implementation, your strategy is just a piece of paper. The following recipe ensures a proper implementation plan.
Align initiatives with goals
Begin by revisiting your financial and non-financial goals established in Step 1. Ensure each strategic initiative or change in the operating model contributes to achieving these goals.
Assign an owner and possibly a team for each strategic initiative or operational change. These individuals and support teams will execute the initiatives and changes. This assignment could be based on functional expertise, availability of resources, or strategic importance. Ownership promotes accountability and streamlines decision-making; it is the most crucial part of successful implementation.
Some initiatives will be foundational and should be implemented before others. Sequencing your initiatives based on dependencies and priorities will give you a rough roadmap.
For each initiative, define measurable milestones that can be tracked over time. These could be tied to particular stages of implementation, specific outcomes, or time frames.
Identify metrics and KPIs
Identify key performance indicators (KPIs) to help measure progress toward your goals. These could be financial metrics (like revenue or cost savings), operational metrics (like productivity or efficiency), or sustainability metrics (like waste reduction or increased use of recycled materials).
Build flexibility into the roadmap
Given that the circular economy is still evolving, your roadmap should allow adjustments and recalibration as new information or trends emerge.
In general, the best level of granularity, and the best approach to implementing the resulting roadmap, depends on the size and complexity of the organization and the circular strategic initiatives involved. For large, complex organizations or those implementing significant changes, creating a separate strategy implementation roadmap and establishing a strategy function or PMO to manage the strategy implementation through various programs might be beneficial. It might be more effective for other businesses to integrate it into regular functional operational planning, where the roadmap will be implemented as part of functional operational plans. In this way, each department or function can develop more detailed plans aligned with the overall strategy, and there will 'automatically' be more buy-in and ownership.
Making sure you have completed Step 6
Upon completing Step 6, you should have a detailed implementation plan with clearly defined initiatives, ownership, milestones, metrics, and a communication strategy. Your organization should be prepared to execute the strategy and clearly understand what needs to be done, by whom, and when.
With this, you're well-positioned to proceed to Step 7, where you'll focus on embedding the strategy and new operating model within your organization.
Step 7: Communicate clearly across the organization internally and externally to ensure proper buy-in
Communication is a critical step in strategy implementation because it ensures that all stakeholders are aligned and understand the direction the company is taking. Clear communication helps build support for the strategy, provides clarity around individual and team roles, and helps motivate and engage employees in the transformation.
Here's a detailed guide to communicating the new strategy:
The main objectives for internal communication are to ensure understanding, secure buy-in, provide clarity around roles and responsibilities, and motivate and engage employees. Here are some of the things to consider:
Identify the Audience: Start by mapping out the internal stakeholders: employees at all levels, managers, executives, the board, etc. Each group will need a tailored message relevant to their role and how the strategy affects them.
Craft the Message: Each message should include the "what" (the strategy and its components), the "why" (rationale behind the strategy, the expected benefits), and the "how" (their role in implementation, what will change). Ensure the message is clear, concise, and resonates with each stakeholder group.
Choose the Right Channels: Use multiple communication channels to disseminate your message — town halls, internal newsletters, team meetings, intranet updates, etc. Leadership should be visible and active in these channels to demonstrate their commitment.
Provide Opportunities for Dialogue: Communication should be a two-way street. Provide opportunities for questions, feedback, and suggestions, such as Q&A sessions, surveys, and suggestion boxes.
Train the Team: Provide training sessions, workshops, and educational materials to help employees understand the new strategy and their role in implementing it.
Reinforce the Message: The strategy should be regularly reinforced, and updates should be provided on its implementation.
Good communication in this context is consistent, clear, engaging, tailored to each audience, and open to feedback. It involves the company's leadership and results in widespread understanding and support for the strategy among all employees. Your organization should feel confident that it has a plan that aligns with the goals and understands the steps to implement the strategy effectively. Moreover, everyone involved should clearly understand their roles and responsibilities.
For external communication, the objectives are to keep external stakeholders informed, to protect and enhance the company's reputation, to maintain strong relationships with partners and customers, and to attract potential investors or partners. The following steps provide a good framework:
Identify the Audience: External stakeholders include customers, investors, partners, suppliers, regulators, industry groups, the local community, and the media.
Craft the Message: The message should highlight the company's commitment to the circular economy, explain the new strategy, and detail the benefits to each stakeholder group.
Choose the Right Channels: These could include press releases, public statements, investor calls, social media, newsletters, and the company website.
Stakeholder engagement: This can involve Q&A sessions with the media, town halls with the local community, and meetings with partners and investors.
Making sure you have completed Step 7
After Step 7, your circular strategy should have been effectively communicated to all relevant internal and external stakeholders. Successful communication will result in broad awareness and understanding of the new strategy, increased employee engagement and motivation, positive feedback from external stakeholders, and, in the longer term, smooth implementation.
Following the initial communication push after launching the new strategy, consider conducting regular surveys to gauge understanding and buy-in from internal and external stakeholders. Monitor engagement rates with communication channels, collect feedback, and adjust your approach as needed. In the outer realm, monitor media coverage and customer, investor, and partner reactions to assess the success of your communication strategy.
You are now ready to move on to the next step — the actual implementation of your strategic initiatives and the ongoing monitoring of your progress toward your defined goals.
Step 8: Monitor, learn, and continuously improve
As you start implementing your strategy per the implementation plan, it's crucial to keep a close eye on its execution and outcomes. Monitoring and striving for continuous improvement is key because it ensures that your strategic initiatives are carried out as planned and yield the intended results. It also provides you with the data and information necessary to adjust and refine your strategy, react to changes in the external environment, and make the most of new opportunities.
As the circular strategy implementation begins, the following aspects will help you tremendously.
Processes to track performance
Consider creating a specific forum for strategic progress review that complements your typical operational performance review meetings. This forum could be a monthly or quarterly strategic review meeting with cross-functional teams present.
Accountability and roles
Accountability for monitoring and improvement should be assigned to a designated strategy team or individual(s), such as a chief strategy officer or a similar role. In a smaller business, this could very well be the CEO. This does not absolve other business unit leaders of their responsibilities; instead, it ensures a dedicated role or team is ensuring that the strategy stays on track.
Key Performance Indicators (KPIs)
Decide on a set of KPIs to track the progress of your strategic initiatives. These KPIs should be aligned with your financial and non-financial goals. For example, if a company aims to reduce waste by 30%, it should measure the amount generated monthly or quarterly.
Keep a constant watch on the external environment and industry trends. This may involve keeping track of key industry reports, news, regulation changes, market fluctuations, and competitors' actions.
Reaction positive and negative signals
Positive signals could be improved operational efficiencies, cost reductions, increased sales, customer retention, etc., indicating you're on the right path. On the other hand, declining sales, customer complaints, increased costs, or decreased market share could serve as warning signs.
Adjusting the course as necessary
If you see negative trends, it's crucial to analyze their cause. For example, if sales are declining, it may be due to a new competitor, a shift in customer preferences, or an internal issue like product quality.
For example, a consumer electronics manufacturer transitioning to a circular business model launched a product take-back program. After a few quarters, the business noticed that the return rates were consistently lower than expected. The company identified several plausible reasons, such as:
Customer communication is not effective enough, so marketing and customer communications plans would have to be revisited.
Incentives or processes for returning products might not be appealing enough for customers, requiring adjustments to program design.
The market or customers may not be as ready for a circular business model as anticipated, indicating a need to reevaluate market research or the strategy itself.
The root cause analysis is critical to identify the appropriate response and adjustments to your strategy and execution.
Finally, it's important to remember that the goal of monitoring and continuously improving is not to punish missteps but to learn from them and adapt. The ability to adjust quickly and learn from successes and failures will be a key determinant of your strategy's success.
Throughout this guide, we have endeavored to offer a comprehensive and robust process to aid any consumer goods business define a strategy for transitioning into the circular economy. By navigating the 8-step process, you should now be equipped with a well-articulated strategy that aligns with your corporate vision, appropriately responds to market dynamics and competitive landscape, and incorporates a feasible and actionable implementation plan.
Your newly minted strategy should be responsive to changing conditions while taking advantage of opportunities, harnessing the power of circular economy principles. As your business embarks on this journey, you will likely discover that the transition to a circular economy is not merely a business necessity in a resource-constrained world but also a powerful catalyst for innovation and sustainable growth.
Remember, the process doesn't stop here. This strategic journey is iterative and requires continuous monitoring, learning, and refining. Your business should be prepared to adapt and adjust as you gather insights, confront challenges, and seize new opportunities. Promoting a culture of learning, agility, and openness to change ensures your organization's long-term success in the circular economy.
The circular transformation may not be easy, but the rewards — both for your business and our planet — are immense. Good luck on your journey towards circularity, sustainable growth, and lasting positive impact.