Circular economy is still often mistakenly seen as an expensive cost. The reality is more nuanced: companies that close cycles can save substantially on raw materials and strengthen their competitive position, but the transition requires smart investments and realistic expectations. Therefore, the question is no longer whether you can afford it, but how you strategically approach the transition.
The economic potential: more than just direct returns
The circular economy offers mainly indirect economic benefits: saved costs, reduced vulnerability to resource scarcity, and lower environmental and social costs. Aluminum recycling, for example, provides 95% energy savings over production from bauxite.
Ducky Dons[AR1], one of our clients, grew to become the Dutch market leader in comforters and pillows thanks to their circular business model. Signify no longer sells lamps but provides light as a service. Patagonia built a global brand around repairing and reselling used clothing.
Realism is needed, however: recycled materials are not always cheaper, and some circular processes require more energy. The trick is to strategically choose where circularity really adds value.
The three pillars of circular profitability
1. Cost savings through smart use of materials
More efficient use of raw materials reduces both material costs and energy consumption in most cases. Hydro’s recycled aluminum, for example, has a CO₂ footprint that is eight times lower than the industry average. According to the World Economic Forum recycling and reuse can save up to $1 trillion in wasted resources worldwide annually.
Important in this regard: circular is not automatically sustainable. Some recycling processes require more energy than the production of new material. A thorough analysis per material stream is therefore essential.
2. New revenue models that multiply value
Circular business models create ongoing value streams rather than one-time sales. This often yields higher margins and more predictable revenues. The main revenue models are:
- Product as a service – The product remains the property of the provider, customers pay for use. This encourages sustainable design and ensures stable monthly revenue. Think Swapfiets with bike rentals or Spotify with music subscriptions.
- Circular resource flows – Organizations earn from recovering and reusing materials. TerraCycle bills companies per kilogram of processed waste that is converted into new raw materials.
- Life Extension – Income from repair, refurbishment and spare parts. Fairphone earns income not only from new devices, but also from refurbishing used phones and selling parts.
- Platform and sharing models – Facilitate reuse through second-hand markets or matching supply and demand, often combined with premium services.
- Price premiums – Customers pay more for products with long-term warranties or for products made from recycled materials.
These models retain value longer in the system. The challenge is in the transition: high initial investments in sustainable design and logistics, and building sufficient scale. But the financial benefits accumulate as the customer base grows and resources become scarcer.
3. Mitigate risk as a competitive advantage
Global material demand is tripling by 2050, while legislation is becoming increasingly stringent. The European Union is playing a leading role in this with the Circular Economy Action Plan (CEAP) and the upcoming Circular Economy Act (CEA 2026). This legislation includes stricter requirements for product design (ecodesign), introduces the digital product passport for better traceability, and creates repair rights for consumers.
Companies already committed to circular strategies are protecting themselves from three major risks. First, resource scarcity and price volatility. By reusing or recycling materials, you become less dependent on volatile commodity markets. Second: regulations. Those who respond early to upcoming requirements such as the digital product passport get ahead of competitors and avoid costly last-minute adjustments. Third: reputation and market access. Customers and investors are increasingly demanding sustainability.
A British study of industrial symbiosis showed it saved €1.3 billion in costs and prevented 42 million tons of CO₂ emissions. IKEA is also anticipating this with buy-back programs and second-hand furniture sales.
The bottom line: companies that leverage all three pillars – cost reduction, new revenue models and risk mitigation structurally create more value than organizations that deploy only one or two pillars.
From ambition to action: a practical roadmap
1. The exploration phase
Every transformation begins with insight. In a few weeks, an organization can identify its greatest opportunities by answering three questions: what are we throwing away and at what cost? What purchased materials are expensive, scarce or risky? And what do customers really want: possession, use or access?
An electronics manufacturer thus discovered that discarded circuit boards contained millions in precious metals. A furniture manufacturer realized that customers primarily sought flexibility rather than ownership. Such insights form the basis for circular initiatives with short payback periods.
2. Develop business case
Be honest about transition costs. Circular transformation often requires higher initial investments, can lead to higher operational costs, and requires behavioral change throughout the organization. At the same time, there are indirect disadvantages: more complex processes, reliance on new supply chains, and sometimes higher prices for finished products.
Also important are the indirect benefits that almost always accompany ESG: you have fewer problems from rising carbon prices, you receive more favorable financing terms, and you benefit from customers’ willingness to pay extra for circular products.
3. Pilot and validation.
The best way to learn is through pilots. Start small, with one product line or location, measure the baseline and implement circular interventions. A successful pilot delivers at least 20% cost reduction or revenue growth and proves that scaling up is feasible.
Note that many circular initiatives remain stuck in the pilot phase. The Circularity Gap Report shows that only a small percentage of circular pilots successfully scale up. Why? Often a clear scale-up plan is lacking, the business case is insufficiently robust, or internal resistance is underestimated.
4. Scaling up to organization-wide transformation
Scaling up from pilot to full transformation is not a matter of pushing harder, but of understanding what stage you are in. Lucas Simons and André Nijhof describe in their book Changing the Game four phases that every market transformation goes through. Each phase requires different actions from different stakeholders.
- Inception: In this phase, pioneers are experimenting with new circular solutions. It’s about proving that it can be done technically and economically. Pilots show that alternative business models work. The challenge is building credibility and convincing investors.
- First Movers: Early adopters see the business case and step in. Competition arises between different circular solutions. More visibility is coming, but also resistance from the existing system. Now is the time to protect your distinctive approach while sharing knowledge to strengthen the movement.
- Critical Mass: The tilt. Enough actors join in making cooperation more rewarding than competition. Standards emerge, infrastructure is built, supply chains adapt. Focus shifts from “why should you” to “how to do it right.” Those not participating now are falling behind.
- Institutionalization: Circular is becoming the new norm. Legislation follows practice, education integrates it, funding is natural. The old linear model becomes the alternative, not the other way around. The transformation is complete.
The trick is to recognize which phase your sector or organization is in and take the right steps. Those who try to standardize in the Inception phase fail, just as those who are still experimenting in the Critical Mass phase arrive too late.
To measure is to know
New KPIs are needed to drive circular performance. Examples include:
- Material Productivity Rate: revenue per kilogram of material input.
- Circular Revenue Share: percentage of revenue from circular models.Ó
- Total Cost of Ownership: life-cycle cost rather than just purchase price.
- Circular Material Use Rate: proportion of materials reused.
- Product Lifetime Extension: actual useful life.
- Supply Chain Resilience Score: resilience to disruptions.
- Green Finance Access: access to more favorable financing.
- Brand Value Premium: added value that customers attribute to circular propositions.
The momentum is now
The circular economy is gaining ground worldwide because it offers both economic opportunities and environmental benefits. Technology is accelerating the transition: digital product passports make chains more transparent, AI optimizes material flows and blockchain guarantees origin and quality.
Yet realism is called for. The transition to a circular economy requires time, money and perseverance. Many initiatives fail or get stuck in the pilot phase. But companies that do make the transition successfully are building a future-proof organization. So the choice is simple: move with the transition, or stay behind.