World Economic Forum Expert: “Circularity” Can Drive Growth

Hernan Saenz, MBA/MILR '98, (left) leads a discussion on circularity in business at the World Economic Forum.
Businesses stand to benefit when they embrace “circularity as the new engine for growth,” advised Hernán J.F. Saenz III, MBA/MILR ’98, visiting senior lecturer at the Cornell SC Johnson College of Business and senior partner at Bain & Co. At the World Economic Forum (WEF) in Davos, Switzerland, on January 22, Saenz presented the paper “Circular Transformation of Industries: Unlocking Economic Value” and moderated a panel discussion with chief strategists and sustainability officers from the German food, beverage, and pharmaceutical company GEA; HP; the British software company Aveva; Trane Technologies; and Siemens.
“Linear supply chains have begun to run their course, as material scarcity is creating resilience issues and limiting growth,” said Saenz, a member of both the Cornell Board of Trustees and the SC Johnson College Leadership Council. “In response, circularity is moving to the forefront of global supply chain design.”
Circularity refers to business models and practices that minimize waste, maximize product lifecycles, and separate economic growth from resource consumption. Businesses across a wide range of industries, from luxury fashion to rail transport, are adopting these approaches not only to increase sustainability, but to reduce costs, grow revenue, and build resiliency, said Saenz.
More than 70 percent of businesses surveyed expect significant revenue growth from their circularity initiatives in the next three years, according to the paper, which Saenz wrote with colleagues from the World Economic Forum, the University of Cambridge, and Bain & Co. Ninety-five percent expect circularity to be critically important to their business model three years from now, compared to less than 50 percent three years ago.
“Circularity has tended to be equated to recycling,” said Saenz. “Yes, recycling is important, but it is only one of multiple circular models.”
Economic structures and operating models need to transform, according to the paper. For example, designing products with durable materials and reusable components enables planned repair and refurbishment instead of disposal. But this requires deemphasizing sales of physical products and instead favoring service contracts that extend the product lifespan while still generating revenue. For many of these models, it is critical to develop a robust supply chain for discarded materials, whether they’re disposed consumer goods or manufacturing waste. In addition to reducing waste, using repurposed materials buffers against geopolitical, environmental, and economic shocks, the authors write.
Companies are already implementing circular approaches, and many examples are cited in the paper. Ralph Lauren piloted a digital product identification system to allow resellers to validate product authenticity with a QR code. The results: higher value for the used product and brand protection. Agilent, a global manufacturer of scientific equipment and software, offers customers who return used products payment or credit for future purchases. They even accept some competitors’ products. The returned equipment can either be refurbished or disassembled into reusable parts.
Saenz acknowledged that only a few companies are building circular business practices at scale. Cost, expertise, and time are major barriers to adoption. “It often requires leaving behind successful linear models and adopting new ones,” he said. “Businesses need to reorganize internally, develop partnership ecosystems, and deploy data and technology.”
Saenz said he coauthored the paper and moderated the WEF conversation to help create an active dialogue and share lessons learned so business leaders can take action in the future.
“The move to circularity requires a true transformation,” he said.
