Confronting Climate Change

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By: Arianne Cohen

Reduce. Reuse. Recycle. It’s the catchphrase of environmentalists pushing to cut back on waste from products of all kinds. Few would have expected it to become a mantra in the corporate world.

In a little-noticed but significant development, governments and stakeholders are becoming dead serious about the so-called circular economy. The change is already becoming a stark reality in clothing retail, where the EU will soon require all new clothes to be sustainable—meaning that they are durable and can be reused, repaired, and recycled. It will be a difficult enough feat for that industry to accomplish, let alone the many other sectors in which the EU will enforce the new rules.

Many details of the rules are still being drawn up, and pressures from a down economy can always slow change. But experts say too many firms are failing to react to a looming reality that seems unavoidable. “Businesses have a choice,” says Andrew Lowe, a partner in the ESG and Sustainability practice at Korn Ferry in London. “They can either stay in reactionary mode, or determine that they need to start building circular frameworks into everything they do.”

Building such frameworks requires a monumental business-model shift—from incurring heavy upfront costs to restructuring to the tricky task of stitching all of this together. It’s the kind of challenge that can sink even the most competent leadership. “Most firms don’t have the labor, resources, or space to do it,” says Caroline Vanderlip, CEO of reusable-container firm Re:Dish. The reality, she says, is that the firms that have tried to make this shift have usually abandoned it.

While it’s the EU’s focus on clothing that has attracted most of the attention, the regulations include seven other priority areas: packaging, plastics, textiles, electronics and technology, vehicles and batteries, construction and buildings, and food. In other countries, such as the US, some high-end retailers are already moving in this direction as a way to court consumers and gain an edge over competitors. But experts say that most global corporate leaders—who have their hands full managing a tough economy and high inflation—are not paying close attention. Lowe encourages firms to engage proactively with regulators as more laws emerge around the world. “It’s being part of it, rather than waiting to be told,” he says.

Vanderlip says smart firms are proceeding incrementally, and outsourcing for partnerships as needed. “Go one bite at a time, rather than failing because you’ve bitten off too much,” she says. To motivate managers, she suggests building circular-initiative incentives into their compensation packages.

Experts warn that firms commonly focus on the logistics of adopting circularity, forgetting that it hinges on changing the hearts and minds of employees, consumers, and stakeholders. This includes educating both the sales team, to help it understand what it’s selling, and customers, so they know how to resell or refurbish items. “It has to become part of the company’s spirit,” says Vanderlip.