Peter Evans is Chief Strategy Officer, McFadyen Digital; Co-Chair, MIT Platform Strategy Summit and Faculty, Fast Future Executive.
The world is grappling with a sustainability crisis, but the emerging circular economy seems promising as a solution. Circular platforms, which combine digital marketplaces with circular production and consumption models, can play a vital role in increasing the reuse, repair and recycling of valuable resources.
To date, platform markets have largely supported linear consumption, with products and packaging becoming waste after use. With the examples below, I hope to show how companies can use circular platforms in consumer and B2B markets to reduce waste, improve material security and drive innovation.
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Consumer-oriented Circular Platforms
Several circular platforms are emerging that enable sharing, leasing, repairing, refurbishing and recycling in consumer markets. Here are some lessons I think we can learn.
Build community
One benefit of using a circular platform is the opportunity to build community. For example, Poshmark, a popular online marketplace that connects users to buy and sell things like used clothing and beauty products, has a social media-like interface that helps foster a sense of community among its users. Incorporating a community aspect into your platform can improve the overall user experience, increase user loyalty, and increase the visibility of user listings. Look for ways for users to connect, share inspiration, and receive feedback.
To give certainty
Platforms can also help provide quality assurance. Backmarket is an online marketplace for refurbished electronics that guarantees the quality of products sold through its marketplace through rigorous testing and certification processes. This gives buyers confidence in the reliability and performance of refurbished electronics, easing concerns about second-hand purchases.
Offer affordability
Too Good To Go provides a platform to buy food surpluses from local restaurants and supermarkets, reducing food waste and increasing affordability. Any way you can find to increase the accessibility of sustainable options is a smart move in this economy.
Enabling B2B transactions for the circular economy
Circular platforms also facilitate circular transactions between companies. Like their consumer-facing counterparts, platforms can show benefits in the B2B market.
Get data
One of the main things you can take advantage of with platforms is the ability to collect otherwise hard-to-get data. For example, Scrap Monster connects buyers and sellers in the scrap trade and can provide unique data for scrap prices that can’t be found anywhere else.
Improving discovery
Often the “waste” from one industry can be a valuable input for another industry. Platforms can provide search engines that help procurement teams in one industry find useful used materials from another industry. Rheaply, which enables the buying and selling of construction waste, recently expanded to play this discovery role when it acquired Materials Marketplace and its network of 2,600 partners.
Allow cross-broder transactions
Rebound Plastic Exchange is a trading platform for recycled plastics and is just one example of how you can significantly reduce the friction associated with cross-border transactions. As an illustration, Rebound Plastic Exchange provides standardized processes and procedures for listing, communication, pricing and compliance with complex international regulations governing the timing of waste. When it comes to complex processes like this, customers appreciate a platform that can streamline and simplify.
The overall power of platforms
One of the strengths of platform business models is their ability to scale quickly. Because they facilitate user interactions, they can grow quickly and reach large audiences, creating a positive feedback loop where more users attract more users, leading to exponential growth.
You can also use platforms to use discovery engines to reach a wider audience. Discovery engines help users find new content and products, which can drive more traffic to the platform. The use of data and algorithms can personalize recommendations to individual users based on their interests and behavior.
In particular, circular platforms can help respond to the growth of extended producer responsibility (EPR) laws. These laws assign responsibility for managing the environmental impact of a product’s end-of-life to manufacturers or brand owners, easing the burden on taxpayers. Joining a marketplace allows industries to improve recycling rates, reduce resource consumption, and prevent pollution.
Emerging opportunities
In addition to participating in existing circular marketplaces, I see new opportunities emerging to create circular markets. One area is about battery recycling. The shift to electric vehicles is creating significant demand for the materials used to make EV batteries. Ideally, circular platforms can organize battery collection and recycling, reducing the pressure to expand mining capacity.
Another example concerns the recycling of plastics used in the construction of new cars. BMW is already using recycled fishing nets to make headlining and floor mats for a few of their other models. Imagine a marketplace where all car manufacturers participated in a used plastic fair. Given the size of the automotive industry, such a market would create significant demand for plastic waste that is increasingly choking landfills and the oceans.
Challenges
Creating and growing circular marketplaces is not without its challenges. Like traditional platforms, circular platforms also need to overcome the classic “chicken and egg” dilemma to attract enough supply and demand to secure enough transactions.
Circular marketplaces often meet with resistance as they may require changes in traditional procurement and supply chain management. Companies may need to rework business processes and tailor incentives to different stakeholders to create a closed system.
Other barriers to be recognized include the need for trust to ensure the quality and reliability of recycled materials. This requires things like testing and digital twin technology to capture, store and update critical information. Like other marketplaces, circular platforms also need to ensure timely delivery, inventory management, and handling of returns and refunds, all of which can be complex, time-consuming, and resource-intensive.
Circular platforms offer a promising path to a sustainable future by increasing material security, reducing waste and stimulating innovation. While the transition to a fully circular economy may take some time, I believe significant progress can be made by adopting circular platforms. These platforms can encourage companies to design products that are more durable, easier to repair and recyclable. By moving from a linear take-make-throw away economy to circular production and consumption models, we can pave the way for a more sustainable world.
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