Circular Economy

5 things leaders can do to create a truly circular economy

An elderly woman takes a picture of lit balloons at the former Berlin Wall location near Friedrichstrasse in Berlin November 8, 2014. A part of the inner city of Berlin will be temporarily divided from November 7 to 9, with a light installation 'Lichtgrenze' (Border of Light) featuring 8000 luminous white balloons to commemorate the 25th anniversary of the fall of the Berlin Wall.          REUTERS/Michael Dalder (GERMANY  - Tags: POLITICS ANNIVERSARY SOCIETY)   - RTR4DCZG

Image: REUTERS/Michael Dalder

Joseph Walicki
Vice-President and President, Power Solutions, Johnson Controls
Our Impact
What's the World Economic Forum doing to accelerate action on Circular Economy?
The Big Picture
Explore and monitor how Circular Economy is affecting economies, industries and global issues
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Circular Economy

This article is part of: World Economic Forum Annual Meeting

As the world continues to grow, so does our environmental footprint. Last year, at the G7 Alliance on Resource Efficiency workshop held in Washington, DC, it was noted that three quarters of all raw materials used in industrialized countries end up in landfills in just one year -- that number is staggering and cause for significant concern.

The circular economy can dramatically alter that trend and create a more sustainable and profitable future. However, there are significant barriers that keep us from achieving this. Below are five things we as leaders of the Fourth Industrial Revolution can do to create a true circular economy:

Realize a circle is not a line

We need a fundamental paradigm shift to leave behind linear thinking and not look at the end-of-life of a product as waste, but rather, a critical source of supply for new products. With a circular economy, a supply chain starts and ends at the same place. That may sound simple, but it is a radical concept to many. We must shift our perspective and realize there is no end-of-life for a product, just an end of effective use.

Commit to circular supply chains

To achieve a circular economy, products must be designed with materials that can be economically and responsibly recovered or repurposed. By thinking about the lifecycle of the raw materials as opposed to the finished product, companies can benefit both financially and socially. At Johnson Controls, our conventional automotive batteries have been designed so 99% of the materials can be reused. While this may not be possible in all products, this thinking, coupled with a one-for-one product exchange of old product for new, is critical to creating a circular supply chain.

Enable standardized materials in industries and sectors

Without standardized materials across sectors, a circular system would be limited to only one company or product line. This happened in the 1990s when another battery company introduced non-standard materials into their vehicle batteries. What provided a marginal product improvement caused the entire recycling system to fail since the new product could not be recovered and reused across the sector. Fortunately, market forces drove this marginal product improvement out to ensure the greater value enabled by the circle. Today, while our products are highly differentiated, they use a standard set of materials allowing us to recycle a competitor’s product in our system.

Align the circular system with every part of the business

While new products are delivered and sold, they should also be exchanged for used ones. In this type of scenario, a marketing campaign can impact raw material supply through increasing returns. In terms of logistics, a new system must be put in place to manage the flow of new and used materials at the same time. Additionally, careful planning and execution is needed to ensure recycling facilities are well equipped to supply the manufacturing process.

Address regulatory constraints

Government regulations developed in the functional silos of a linear paradigm can hinder the ability to close the loop and create a circular economy. Manufacturing and distribution regulations vary from country to country, which makes it difficult to create a scalable process for end-of-life and recovery of used products. For example, while the only difference between a new vehicle battery and a used one is it can no longer hold an effective charge, the two products are treated very differently by regulations. Just as the business community must integrate circular thinking, policymakers must also identify and remove regulatory roadblocks.

Our journey to create a closed-loop supply chain at Johnson Controls began when we recycled our first battery in Germany in 1904. Today in the G7 economies, 99% of all used conventional vehicle batteries are responsibly recycled and recovered to create new ones.

In the early 1900s, Henry Ford pioneered vertical integration to supply the growing demand for the Ford Motor Company. As we prepare for the Fourth Industrial Revolution and the consequences that come with it, now is the time for us to pioneer “circular integration.” It has been and can be done.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

Which technologies will enable a cleaner steel industry?

Daniel Boero Vargas and Mandy Chan

April 25, 2024

About Us



Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum