Originally published in Daily Pioneer here
Written by Sourajit Aiyer
Economic growth occurs with the activities of production and consumption. So far, circular economy has largely concentrated on the production aspect, by redesigning processes so that they become restorative and regenerative in view of the increasing depletion of our natural resources and detrimental impact on our social ecosystems. There have wins in terms of introducing circular business models that go beyond recycling, which use minimal resources along the value-chain, maximise their time in circulation and recover and reuse the product’s elements after its end-of-life. Europe has been the hotbed for such production innovations, Norway’s Tomra introducing a plastic recycling machine and the UK’s Jaguar’s using recycled aluminium for their vehicles just being two examples.
But economic growth is as much about consumers as it is about producers, especially in large-population emerging markets which are now the epicentre of market opportunities for global producers. Thus, the applicability of circular economy to consumers can be no exception. They are the very agents through whom the components of circularity are often achieved. Thus, it necessary now to look at the consumers’ perspective too, i.e. the ways in which consumer behaviour and demand can be moulded to create a faster migration towards circular economy products.
Involving consumers into the circular model
One requirement is the ability of the producers to understand and incorporate the customers’ product-related behaviour and expectations into the redesigned (circular) product and value-chain. This would require continuous dialogue, user-testing and iterations during production planning. The successful convergence of the product’s circular features with the customer’s requirements would aid long-term customer loyalty.
Several consumers, especially millennials who comprise the lion’s share of the base in emerging economies, are becoming increasingly aware of sustainability and climate change. They seem willing to change their buying habits and preferences, even if it means paying a higher price. But there is still a large section who remain unaware.
This situation holds twin-implications for businesses attempting to involve consumers in the circular model. One, they need to incorporate consumers’ expectations and preferences into their redesigned product, thus going back to the point mentioned previously.
Second, it implies a need for education and awareness-building to mould the preferences of those hitherto unaware or unappreciative of circularity, towards circular products. The objective is to create the buzz about all the pieces of the circular model, like reduce, reuse, recycle and repair. That would speed up the migration towards redesigned products, which would not only help businesses win market-share but would also help reduce the price-point of such redesigned products for the middle-class consumers, thus democratising its demand through better affordability.
At the same time, producers’ attitude towards circular economy would depend on the arithmetic, i.e. the cost of incorporating circularity vs. its benefits and its impact on short-term profitability. This is despite the fact some circular economy products can have exponential value in the long-term, if one incorporates the value created by all the peripheral activities like repair, maintenance and reuse. Till this arithmetic is in the red, the long-term sustainability of our natural and social ecosystems would remain at risk. Resultantly, consumer education and awareness that creates a faster migration towards the circular economy would result in higher projections in terms of the business volumes, which would augur well both for those ecosystems and the longevity of the business.
Lastly, influencing consumer behaviour towards circular products would also require stricter policies and enforcement of product labelling. It should not offer loopholes to producers to influence consumer behaviour through inaccurate or misleading labelling. That would create a negative perception stalling client migration.
Creating the initial trigger
Businesses incorporating consumers into the circularity story can leverage the existing brand-value of their products to influence consumer behaviour. For instance, some products are deemed aspirational, thus many buyers are willing to pay a premium for it. But the consumers who are unable to pay that premium price, may otherwise be willing to pay a perhaps lower price for the reused or repaired version of it, just to enjoy the brand’s aspirational quotient. Take the case of pricey cars in the market. Thus, products that enjoy immense brand-value and aspiration can create that initial trigger of influencing the consumers to start thinking about circular economy and products. As demand unfolds following that initial trigger, it could influence further migration towards a broader suite of products.
At the end, the circular economy offers significant headroom for growth, both from the core product and from peripheral pieces in the value chain. For instance, repair and maintenance may become a major job-driver since circularity is all about keeping the products in circulation longer. But involving the consumers in the circular economy flow would be as instrumental as the producers to realize that growth!.
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