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The UK Circularity Gap report

Virtuous circles: how the circular economy can be a key driver of business growth

The application of circular principles offers significant potential for organisations to achieve corporate objectives, including value chain resilience, cost reductions, and net zero targets. Becoming more circular is a challenge that requires engagement from functions right across the business—from operations to finance and logistics. But it also provides a unique opportunity to become more innovative, experimental and collaborative. The current, predominantly linear, economy already poses risks for businesses—and these are only likely to increase over time. For example, supply chain risks, especially for some critical raw materials, are leaving businesses exposed.

Implementing a comprehensive circular economy package could add a total value of £75 billion to the UK economy, reduce 33 million tonnes of CO₂eq emissions per year directly related to UK product consumption and create up to half a million new job opportunities by 2030.

Authored by Circle Economy, the first UK Circularity Gap Report was created in collaboration with Deloitte and aims to provide a baseline and start a discussion among business, government, academia, and NGOs. The report has shown that the UK Circularity Metric sits at 7.5%—leaving a Circularity Gap of 92.5%. This means that the vast majority of material inputs to the UK economy come from virgin sources.

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The benefits of going circular: savings, resilience and competitive advantage

The circular economy provides businesses with the opportunity to become more innovative, experimental and collaborative. The current, predominantly linear, economy already poses risks for businesses—and these are only likely to increase over time.

For example, price volatility and supply chain risks, especially for some critical raw materials, are leaving businesses exposed, while the legislative agenda is evolving, leaving companies underprepared to invest in and adapt to a new normal. It is now also common to see consumers demanding lower carbon products and increased transparency. Indeed, the broader reality is that without the application of circularity principles it will be a challenge for most businesses to meet their net zero targets.

The long-term winners here will be those businesses able to see a way to derive profit from the new services, products and operating models that reduce material consumption. And while the will to do so remains sporadic across most sectors, the direction of travel has been set. This means those businesses who act decisively stand to gain most by leading—rather than following—us into a more circular future.

Applying circularity across businesses

The application of circular principles offers significant potential for organisations to achieve corporate objectives, including value chain resilience, cost reductions, and net zero targets. Becoming more circular is challenging, requiring engagement from functions right across the business—from operations to finance and logistics. It also relies on wider systemic change, meaning that there are often factors which fall outside a company’s direct sphere of control. Shifting to a more circular economy will require experimentation with new approaches and business models, for which collaboration across value chains and innovative pilots will be invaluable.

By taking a structured approach to piloting and scaling, businesses can reduce risk and improve the success of a transition to a circular economy, unlocking the commercial and sustainability opportunity it presents.

The opportunity

The UK Circularity Gap Report presents six scenarios that can help the UK significantly cut its material and carbon footprints, advance resource efficiency, and substantially increase material circulation in the economy. Bringing the country from theory to action in order to realise a circular economy will require a systemic shift. These six ‘what-if’ scenarios are:

Interventions include optimising building stock expansion, creating energy-efficient building stock and shifting to resource-efficient buildings. The impact of this could result in the reduction of material footprint by 10.1% and the reduction of carbon footprint by 19.2%. With co-benefits ranging from a reduction in energy consumption to new business and job opportunities.

Interventions include endorsing a balanced diet, cutting food waste and shifting to more sustainable food production. The impact of this could result in a reduction of material footprint by 5.1% and a reduction in carbon footprint by 3.3.%. With co-benefits ranging from reduced energy consumption to strengthened resilience and competitiveness.

Interventions include implementing resource efficient manufacturing and employing R strategies for machinery, equipment and vehicles. The impact of this could be a reduction in material footprint by 5.1% and a reduction in carbon footprint by 3.3.%. With co-benefits ranging from reduced energy consumption, strengthen resilience and competitiveness.

Interventions include reducing or avoiding the need to travel and driving efficient energy efficient vehicles. The impacts of this could be a reduction in material footprint by 7% and a reduction in carbon footprint by 8.4%. With co-benefits ranging from improved air quality, great access to mobility and improved public transport.

Interventions include embracing a ‘material sufficient’ lifestyle. The impact of this could be a reduction in material footprint by 13.2% and a reduction in carbon footprint by 11.5%. With co-benefits ranging from less waste to litter pollution and resilient communities.

Interventions include shifting away from high-impact imports. The impact of this could be a reduction in material footprint by 8.4% and a reduction in carbon footprint by 3.3%. With co-benefits ranging from reduced environmental degradation to waste and pollution.

The way ahead

Each sector has its own challenges and barriers in the application of circular principles, and therefore each will follow a different path forward. Still, there are a number of actions that could be considered by all businesses as next steps in the transition towards a more circular economy:

Create a national shared approach: develop an integrated and inclusive circular economy approach.
Develop a set of indicators and targets: create a comprehensive set of indicators and targets to guide and embed the transition.
Develop a circular economy policy framework: shape a level playing field through a fit-for-purpose policy framework.
Upgrade product standards: enhance product standards to improve end-products as well as intermediate materials.
Further enhance government buy-in: harness Government power to drive action.
Drive business transformation: encourage businesses in key sectors to lead from the frontline.
Collective citizen-centric actions: ensure action is diverse and citizen-centric

Overall, there is a huge opportunity for the UK; not to mention the potentially consequential risks of missing out.