Global business and political leaders are coming together again in Davos at the World Economic Forum to discuss how we can work toward a better world. As in prior years, they will define a variety of initiatives of focus.
One of those key initiatives is the so-called Circular Economy. This is an area that has evolved over the years from the roots of basic environmental awareness into a holistic approach that takes all aspects of the economy into consideration.
Unfortunately, when touching on the topic of Circular Economy in discussions with customers, I often see eye-rolling and leaders muttering under their breath that investing in sustainability does not make money.
Admittedly, it seems like it is just old wine in new bottles, but this perception is wrong—in fact, most companies are already heavily engaged in a variety of ways in the space without even realizing it, much less trying to make more out of it.
Taking initiative and developing new strategies around this topic provides tangible benefits.
- Skilled talent is increasingly difficult to attract as potential employees look for companies with a social purpose and that give back to local and global communities as part of their role in the economy.
- The extension of traditional business processes to leverage already existing capacities in smart ways creates access to new revenue streams.
- Facing growing regulatory requirements, business models are evolving and new markets are being created that are open for the acquisition of additional market share.
- Showing thought leadership and leveraging new technologies in new ways is rewarded with recognition in social media channels and industry communities.
Wholesale distributors, with their intermediary role in the global markets, are best-suited to benefit here by defining clear measures on how to address the gaps in the circular economy.
Here are some opportunities that come to mind in the industry context:
Traditionally a product-centric business, distributors should think about ways to extend the product lifecycle. For example, offering repair services, consulting on product upgrades, or data-backed product performance-tuning can significantly reduce waste and at the same time drive customer trust and wallet share. Purchasing used or replaced devices and reselling them into secondary markets leverages existing customer relationships and opens new revenue streams in untapped markets.
Another opportunity fueled by existing customer relationships is to recover usable raw materials or semi-finished components and feed them back into the manufacturing phase of the supply chain. For example, buying certain used automotive parts or disposed electronic components for the extraction of rare metals could be one way to uncover new revenue, while at the same time offering customers value-adding services around product return, disposal, and waste management.
The sharing economy is a model that is normally associated with consumers, but it is gradually moving upstream into the B2B space in more visible ways. Businesses should consider ways to embrace rather than fight it, as it enables lower asset costs and opens up new subscription or services revenue streams. New concepts are evolving in the logistics space where transportation containers and truck capacities as well as parking-as-a-service and storage space-as-a-service offerings improve utilization of existing assets.
To add value in the circular economy, not all contributions need to be product-centric. With business models becoming gradually more fluid, distributors will increasingly struggle with their role in the supply chain. It is not necessary to completely reinvent their business models, but rather to shift the definition to an intermediary between those business partners that have needs and those that can provide them with the outcomes they are looking for. Establishing themselves as a platform that connects business partners will naturally uncover impactful ways to new EXTEND – RECOVER – SHARE scenarios in the circular economy.
This will ultimately position the distributor as a problem-solver and help them to close their own long-existing disintermediation gap.
New concepts should not be considered only in January when global leaders are meeting in Switzerland. Bold industry leaders are acting year around. How is your organization responding?
For more on sustainability in business strategy, read How ‘Sinnfluencers’ Are Shaping The Future Of Sustainability.