INSIGHT by Kyriakos Triantafyllidis, Head of Growth and Strategy, Centre for Advanced Manufacturing and Supply Chains, World Economic Forum; Tessa Bysong, Partner, Bain & Company; Josh Hinkel Senior Partner, Bain & Company. This article was originally published on the World Economic Forum.
〉Circular transformation brings a wide range of economic and environmental benefits.
〉Circular partnerships offer a scalable way to achieve sustainability with a range of different stakeholders.
〉We outline key examples of successful partnerships and three objectives to achieve similar results.
For decades, circularity has been recognized as a tool for sustainability, e.g. by reusing waste as a feedstock source or building longer lasting products. More recently, companies are starting to leverage circularity as a driver to achieve strategic business objectives including increased resilience, new revenue streams, and resource efficiency.
If circularity can result in such a wide variety of economic and environmental benefits, why has it not been scaled?
Businesses are only incrementally progressing toward circularity, trying to re-optimize a linear model for circularity. However, systematic changes are needed to unleash the benefits of circular transformations. To support the necessary changes, we looked for and identified six enablers through a quantitative survey and discussions with leading executives in line with the Circular Transformation Framework.
| The value of partnering for circularity
To achieve successful circular transformation, companies will need partnerships. This notion has been supported by our survey and discussions with executives, who indicated that partnerships are a key enabler for circular transformation.
In a 2022 survey with 378 executives, the majority of respondents indicated that partnerships are valuable for circularity. Moreover, 94% of respondents indicated that they were part of some form of partnership. Vertical partnerships and industry coalitions were viewed as the most important partnerships types. Furthermore, discussions with executives confirmed these results.
| What’s unique about circular partnerships?
The set-up and management of this multi-stakeholder partnership presented several challenges, including how to structure decision-making mechanisms and drive alignment among partners. The pre-competitive nature of GBA enabled the organization to address these complexities by allowing the founding partners to define partnership parameters, e.g. those surrounding data and IP sharing, funding and decision making.
For governance, the GBA implemented a 20-person board elected every two years. The board consists of 10 corporate members and 10 non-corporate members, overseeing changes to the charter that defines the GBA body and go-forward procedures. Ample attention is devoted to having an agenda that reflects collective priorities without favouring any specific industry or organization (e.g. giving the board power to review applications).
To effectively progress the agenda, minimize attrition among partners, and ensure priorities are always satisfied, the GBA leverages the Systemic Konsensing Principles as a decision-making mechanism. This methodology uses resistance of all group members as a tool for exploring challenges that arise, improving upon initial proposals and settling on durable solutions.
Another example of a circular partnership is between Rockwell Automation, an industrial automation and information company, and the packaging company Sealed Air to enhance circular machinery solutions.
These companies worked towards repurposing existing packaging manufacturing equipment to utilize new, more sustainable inputs, such as paper. These sustainable inputs often require an additional level of machine control; however, creating new machines from scratch is neither cost-efficient nor environmentally-friendly. Therefore, Rockwell and Sealed Air opted for revamping old machines to execute new functionalities. To achieve this goal, both companies bring separate expertise; Rockwell’s senior global OEM technical consultants possess the required knowledge and capabilities of industrial automation and controls programming, and Sealed Air’s engineers know how to convert machinery code and automation equipment.
When choosing a partner for this endeavour, Rockwell prioritized a company where they had a pre-existing relationship, leveraging it to act quickly and progressively scale up, and where they knew the partnership could have a big impact. Sealed Air will be able to deliver desired results for their customers, including major CPG companies, which often seek more sustainable packaging for their products. Furthermore, Rockwell will similarly derive additional sources of value from the partnership, as they are strategically developing capabilities for sustainable manufacturing, an industry for which demand may explode in the future.
| What will success look like?
In the future, companies globally will face issues like raw materials scarcities and supply chain disruptions. Organizations like Rockwell, Sealed Air, and the GBA are taking action to scale circular models and best position themselves, as well as the entire value chain, for resiliency against these unavoidable future outcomes. Partnering with other companies throughout and beyond your value chain can provide the capabilities needed to accomplish circular transformation and obtain the wide range of associated benefits, both economic and sustainability.
To achieve similar results, we propose three practical next steps:
〉Clearly determine the structure of the multi-stakeholder ecosystem that you want: who needs to be included, and why?
〉Be precise in defining upfront the mechanisms for managing the partnership, e.g. incentives, decision rights, and new members.
〉Be well-prepared but start small, embedding in the model rapid iterations to grow, without over-preparing for a “big-bang” losing the opportunity to act.
It is pivotal to begin considering the partnerships you need to secure a more resilient and prosperous future. The World Economic Forum together with Bain & Company and the University of Cambridge is driving the Circular Transformation of Industries initiative to help companies start and scale-up their circular transformation.
Learn more and join the CTI initiative to begin taking steps towards a more circular future.
| The views expressed in this article are those of the author alone and not the World Economic Forum.
| All opinions expressed are those of the author and/or quoted sources. investESG.eu is an independent and neutral platform dedicated to generating debate around ESG investing topics.