Circular economy is one of those buzzwords we have been hearing a lot of in the last few years, but what is it, really?
According to the European Parliament, the circular economy is a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. The aim is to extend the product life and reduce waste to a minimum. When a product reaches the end of its life, its materials are kept within the economy wherever possible. These can be productively used again and again, thereby creating further value.
The circular economy is therefore related to the push for a more sustainable consumption and the environmental awareness of the recent years. Consumer preferences have been shifting in the last couple of years: from fashion and apparel to consumer electronics, consumers have indicated a strong sustainability awareness. However, this is not always translating into a more sustainable purchase behavior, at least for the time being. Generation Z, followed by Millennials, are the most focused consumers on sustainable retail and demand clear sustainable practices from companies, being willing to spend up to 10% more on sustainable products.
Companies have been responding to this demand in various ways. The most common examples are the online fashion resellers. There are online marketplaces to sell pre-owned fashion items. Social media have also been following this trend, with Facebook launching in 2016 the Facebook Marketplace, where users can buy, sell and exchange goods.
For consumer electronics, reusing or reselling is still largely informal, through platforms such as eBay, but there is the possibility to take control of the reselling process. For instance, phone carriers offer the possibility to return mobile phones that will then be refurbished and reenter the market.
Renting and sharing are other aspects of the circular economy and many firms are realizing their business ideas in this space. An example are the mobility sharing platforms and the appliance renting platforms.
We are expecting the activity in these sectors to increase in the future, and are monitoring both the private and the public equity space to identify the winners in the sustainability race.
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