Global developments are increasingly shaped by uncertainty. How can circular economy initiatives be important tools in creating stability?

With COVID-19, climate change, and geopolitical instability, we’ve seen firsthand how fragile global supply chains are. Both companies and governments are focusing on reshoring industries or diversifying suppliers to increase resilience. This doesn’t reduce overall demand for or dependency on raw materials. We believe the circular economy can help address this challenge by extending the lifespan and control of materials. The circular mantra of ‘Reduce, reuse, recycle’ reduces vulnerability to unstable markets while also strengthening industrial competitiveness.

How are different regions responding to these challenges?

In the U.S., initiatives like Build America, Buy America direct federal projects to boost domestic supply chains and manufacturing for critical materials. This shift toward economic regionalism influences global trade patterns. It may also have environmental ripple effects. Shorter supply chains and localized production have the potential to reduce emissions. Although not designed as climate policies, such shifts can reshape emissions simply by changing production locations.

The EU’s Clean Industrial Deal includes continuous support towards the transition to a European circular economy. In addition, the “Build Europe, Buy Europe” movement is gaining momentum, with calls for stronger EU support of local businesses and investments to enhance technological autonomy.

While these initiatives aim to bring production closer to home rather than explicitly advancing circularity, localized economies could impact circular practices, which rely on tight value chain cooperation. Accelerating circularity requires expanding knowledge-sharing and innovation across industries, breaking down information silos to better meet critical resource demands and build resilient economies.

What key lessons have you learned from working with circularity?

One thing we’ve noticed is that many companies have a mental model of the circular economy as just one big loop to close. In reality, there are multiple smaller loops within a system, each requiring its own approach and timeline.

Using a strategic innovation process works well to disentangle and make sense of all these smaller, interrelated loops. What is needed is usually a portfolio of solutions. By mapping out the value chain, we can uncover hidden circular opportunities that lead to new business models, cost savings, and competitive advantages. For example, we’ve worked with companies that lost bids due to inefficient packaging of their products. A more circular approach to packaging in combination with other measures could have helped them stay competitive.

Can you explain how Value Chain Days help address these challenges?

A few years ago, ÆRA began working with the concept of "Value Chain Days." It started when we were invited to facilitate this by a customer. We saw its potential and immediately recognized its value.

For those unfamiliar with the concept, Value Chain Days are structured sessions where suppliers, partners, and sometimes customers come together to explore circular solutions. We collaborate to map material flows and identify opportunities to reduce waste, extend product life, and reuse resources. For example, a supplier might propose a new material that could make products more circular or reduce emissions in other places in the value chain. Grasping its potential may be different until understanding how it fits into the larger value chain. Similarly, logistics partners often suggest ways to optimize transportation routes and reduce emissions across the supply chain.

These sessions help uncover opportunities that might otherwise be missed. They create a shared roadmap, giving everyone involved a clearer picture of how they fit into the broader circular strategy. Ultimately, it’s about fostering empathy within the value chain—understanding, caring for, and collaborating with all stakeholders.

What have you learned from ÆRA’s experience working with industrial companies on circularity?

First of all, our experience has taught us that circularity requires collaboration over time. Through Value Chain Days, we focus on sharing perspectives across value chains, but this exchange is also required across functions within a company. Designers and engineers, for instance, need to consider the future use of products and design with the entire lifecycle in mind. Meanwhile, supply chain managers work to keep resources in play. Communication teams also play a key role in educating stakeholders about the benefits and challenges of circularity.

When it comes to business models, transitioning to circularity challenges traditional ownership-based approaches. Models like product-as-a-service or material-as-a-service are reshaping how consumers interact with goods, potentially encouraging more sustainable practices. This is something we have worked on within very different industries such as textiles, consumer goods, and the construction industry.

Some companies aim for large-scale growth without designing their products for these changing business models. If you design for ownership rather than leasing or service, you may, unintendedly or unconsciously, make component or design choices that are less suitable for leasing. But once companies have incentives to make products last longer and reuse components for cost efficiency, circular ideas naturally emerge.

All this means that embracing circularity is complex and requires well-managed transformation processes. Some solutions require substantial initial investments, and it can take years to break even. Companies must adopt a long-term perspective, especially as stakeholder expectations, regulatory pressures, and broader economic and political conditions continue to evolve. This is why we think strategic innovation tools and principles are key to managing this shift and creating long-term value for the organization.

What are the biggest challenges holding back circular adoption?

Several barriers remain. One big challenge is logistics and tracing. Circular supply chains require new systems for tracking, sorting, and processing materials. Establishing and maintaining these systems is complex and demands long-term investment.

Another challenge is that current economic structures favor virgin materials. Extracting new resources is often cheaper than using recycled ones due to subsidies and market imbalances. Policy interventions—such as extended producer responsibility programs and tax incentives for recycled content—are needed to level the playing field.

An often-overlooked aspect is that circularity isn’t just a technological shift—it’s a cultural one. Both internal and external stakeholders need to be educated and encouraged to prioritize long-lasting materials and products over new ones. We’re still operating in a hybrid world, with one toe in the circular economy and two feet in traditional linear systems. The way we measure success, set KPIs, and assess financial viability must evolve to reflect circular principles.

Perhaps now is the time to view the circular economy not just as a more sustainable approach but as a way to consider geopolitical changes while embracing local markets, capable of withstanding the increased market volatility and uncertainty shaping our world today.

If you were to give one concrete advice to management teams setting out on their circular transformation, what would it be?

It’s really crucial to think of this transformation as a portfolio of solutions, initiatives, and concepts that help you reach your strategic goals. This portfolio needs to be managed over time. We have all the tools to do this, but there is no single silver bullet.

Even though Value Chain Days are incredibly useful as strategy tools, the key is to get started: invite key partners, especially suppliers, but also customers if possible, and start a structured discussion on strategic topics. And, don’t try to solve everything at once. Focus on some specific questions and start untangling potential problems together. There is usually a lot of mutual interest and other advantages to be gained from this. In short, it is a low-hanging fruit that adds value in the short and long term. Based on this, you can start untangling the bigger strategic topics.