Circular economy: is this a model advertisers can successfully embrace?

The cost-of-living crisis shows little sign of abating and consumers are increasingly seeking to rent, repair and re-sell their items - thus feeding into a circular economy.

Brands have been quick to offer schemes that support this way of thinking - IKEA, H&M and adidas among them. They're offering 'product sell-back', pledging for greater sustainability and aiming to reduce plastic. Many P&G brands are also now working on producing refillable options. But are brands going far enough, and can thinking circularly actually be profitable?

We ask how a circular economy model could be better embedded into the ad industry.

Laura Jordan Bambach, president and chief creative officer, Grey London

The cost-of -living crisis has meant many brands doubling down efforts in terms of feeding into the circular economy, and this is a global trend we’re seeing across many verticals.

From high street heroes like John Lewis now offering rental fashion services, M&S Food having loose produce, no plastic lids and refill options available in flagship stores, H&M’s experiments with reimagining old garments into new ones and P&Gs efforts around refills (check out its phenomenal work in India where supermarket customers can take home product of any volume, in any container), it’s definitely serving a need to consumers and starting to break out of the specialist store context.

But there’s so much more to do and proving profitability is key when brands are also being hit with higher production costs and the case has yet to be played out in mass market environments. Investment is still required and experiments in this area are sure to have mixed results for a while yet. However those brands making inroads now will be in a strong leadership position as consumer desires continue to accelerate around sustainability and affordability in the future. It’s still the realm of brave brands, but I’m hopeful we’re going to see a lot of larger-scale change over the coming years.

Sarah Oberman, co-founder and strategy partner, The Or

If a cost-of-living crisis has a silver lining, then perhaps a greater emphasis on sustainability is it. Whilst many brands are keen to get green, it’s not always with the purest of intentions. Businesses need to be more forthcoming about how they can help people, but not fall foul of greenwashing. There’s no perfect solution, but if you’re going to adopt circularity, you need to back it up. If you’re misleading a consumer, you’ll be called out, like Coca-Cola’s misleading environmental claims.

Patagonia do it well. It puts its money where its mouth is and give back. It owns up to when it's less than perfect and creates solutions for people to do their best, like its product life extension programme.

But most brands aren’t starting there. Being more circular means rethinking everything, from product design and supply chain to marketing. This change is costly and doesn’t happen overnight. So whilst making these major changes, there are more tactical things brands can (and should) do in parallel. Like partnerships with platforms like Depop or Vinted. Like education or inventive reuse or recycle of your product on TikTok. Or like Reformation, being open and transparent about the journey you are on. We all have a responsibility to start somewhere.

Dean Matthewson, strategy director, BBH London

From fashion to telco, the cost of living crisis has seen rapid circular innovation in product categories that previously sought repeat purchase of new.

But let’s not pretend it’s the prospect of ‘doing good’ that’s driving either brands or customers. When the cost of buying new becomes too high, as it has in the cost of living crisis, the ‘nearly or like new’ at a lower cost point becomes very attractive - giving the brand and the customer a purchase they otherwise wouldn’t have made.

Let’s be honest, this type of thinking isn’t revolutionary. Higher cost categories, like automotive, have been using this model for years.

The nub of the matter is that sustainable practices will become more commonplace when there is a cost benefit in doing so at minimal to no product performance difference. So buying a two-year-old refurbished car or mobile phone provides a cost-benefit, with limited discernible difference in product performance.

This proves that thinking circularly can be profitable, and protect otherwise threatened revenue streams. But it’s not just profit that’s driving brands to be more sustainable. Companies that can point to circular practices demand a much higher multiple than those that can’t. So it’ll keep the investors happy too.

Frederica Procopé, strategy director, adam&eveDDB

Circularity is all the rage in brand-land right now. Considering the recent news that companies will face stricter rules against greenwashing, more brands committing to pursuing circular practices feels like a positive step in the right direction.

However, these schemes only scratch the service of massive, systemic problems. Circular initiatives are all about waste reduction but unfortunately these tend to centre on the waste that we can physically see and are familiar with, such as plastic coffee cups and worn-out clothes. Yet the broader enemies of the planet are the wasteful systems that make far-reaching and devastating impact: Energy and water wasted for production. Petrol wasted for transportation. Green spaces wasted for warehouses. Data wasted for online platforms... the environment needs to be given the time and the space to fight back from this onslaught. Corporate systems need to be installed to give nature a chance to repair and regenerate.

Therefore brands need to go much further; to shift their approach from doing less harm to setting up permanent, positive structures with the planet front and centre. A company's first thought should be how it is contributing to the planet’s recovery and giving back more than it is taking – rather than just reducing damage.

The problem is that this kind of radical rethinking is expensive. It costs a lot to make significant structural change, not to mention the intellectual effort required to devise truly regenerative solutions. We arrive again at the eternal question: How willing are brands to put long-term purpose before short-term profits?

Dan Tendler, strategy director, Wunderman Thompson UK

The cost-of-living crisis and the environmental crisis are intrinsically linked, but whereas ‘sustainable products’ are (rightly or wrongly) often the more expensive option, consumers undertaking ‘sustainable behaviours’ often tend to save money. This is epitomised by the rise of the circular economy, demonstrated through the meteoric rise of second-hand platforms such as Vinted.

While the circular economy is being driven by brands rather than consumers, there’s a risk that we end up with multiple smaller competing solutions, which are confusing for consumers to navigate. The circular economy provides an opportunity to work together, an uncomfortable prospect for some brands. But it’s time to think beyond being the first-mover, and to understand that we only win when entire industries move forward.

If reaching out to competitors is too daunting, there are also huge opportunities in fighting the climate crisis through radical transparency - and open sourcing what works. For example when Volvo shared its seatbelt patent, or Channel 4 opened its menopause HR policy (and others since) for others to copy.

Whether specifically talking about the climate or the cost-of-living crisis, brands need to think bigger, look beyond their own four wall and look to benefit their entire industry.

Ed Palmer, managing director, St. Luke's

Initiatives like H&M’s JV with Looper are making great strides in advancing the circular economy, but we’re a long way from meaningfully reducing the carbon footprint of the things we buy. We’re producing double the amount of clothing we did in 2000, for example, and 57 per cent still ends up in landfill.

For years now, Patagonia has been leading the way in the complex task of scaling regenerative models. It aims to take full responsibility of disposing of products at the end of life, so designs that into the garment from the outset.

The challenge for brands and therefore the advertising challenge is to explain the concept of circularity and make it motivating to buyers. It can also play an important role in justifying the price premium associated with it: Patagonia has shown you can command a healthy premium despite the cost-of-living challenges, and is unapologetically a for-profit company. But the lure of ultra cheap fast fashion is just too tempting for many of us, and I fear meaningful change will only happen when regulation forces others to follow in Patagonia’s footsteps.

Will Railton, strategy lead, MSQ/Sustain

Circularity is not new, it is just more urgent as it becomes clear that the linear model of take-make-waste is completely unviable. Forget asking the question if circularity is profitable, but if linearity is liveable. After all, there is no business on a dead planet, so all industry needs to look to circularity.

The good news is that all brands and businesses can reduce waste and pollution – indeed some can completely avoid products going to landfill and massively reduce carbon emissions which are driving the climate crisis. This demands thinking and acting quite differently whereby all elements of a supply chain are redesigned. If recycling is downstream then think of circularity as upstream – and so from the start of a process the mindset is different – where waste becomes a feedstock, where commodities are regenerative and all the parts can be fixed indefinitely.

If we embed this thinking into industries we start to see radical change and with it, innovation - and here there are new ideas and new stories to tell. Advertisers can look on these changes as part of the next industrial revolution, which can offer brands myriad competitive advantages. Laggards will not only be left behind, destined to be culturally irrelevant, but they put all our futures at risk. One cannot say how punished they will be by their customer base. Furthermore, ‘green’ efforts made by some today will soon be looked upon as token gestures, open to a criticism of greenwashing. And so, the change accelerator must be put to the floor and businesses and brands need to be all in – no matter how painful in the short term.