Earlier this month I received notice from our manufacturer that the development of our second product is on hold, as they cannot get their hands on vital raw materials. Of course the reason for this is clear. The impact of COVID-19 on supply chains, coupled with a spike in consumer demand in our sector, again prompted by COVID-19.
It made me think about what happens when COVID-19 (or another hopefully short term explanation) is not the cause and the reason is simply that there are insufficient raw materials to service the demand. In other words, we’ve used up what the world has to offer to make the stuff we want.
As we edge ever closer to this position I believe we will see a number of things.
1) Market forces will push up the cost of materials and trigger behaviour changes.
2) There will be an acceleration in production innovation, creating new materials and producing in new ways.
3) Reuse business models will become more prevalent.
4) Acceptance of recommerce (aka second hand) in many more sectors, shaking off the stigma.
5) New legislation will be enacted to force the hand of companies and consumers.
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6) Materials formally considered to be waste will be reclassified as assets.
7) We’ll start digging up landfill sites?
It is the basic supply and demand principle, as things become scarce the price goes up. We’ve all seen the news stories in the last decade about copper theft as it became more scarce and therefore more valuable; people stripping metal from railways and buildings to sell, causing major disruptions.
Companies are already working hard to create new materials and produce in new ways. Whether that is replacing finite resources with renewable resources to make things, making with brand new materials or producing products from 100% recycled materials. How about a t-shirt made of algae that you can bury in your garden when you’re done? Or a long-lasting bag from Herd Bags made from 100% recycled materials that you can return to them when you no longer want it?
We will see more innovative business models take hold that allow us to still get “our fix” of the products and services we demand but in a new way. Rental rather than owning is on the rise in new sectors. In the fashion sector, companies like Onloan (women’s fashion) and Garmentory (men’s fashion) allow you to rent and return clothes rather than buying them and letting most gather dust in the back of your wardrobe. Companies like thelittleloop and Bundle ‘n Joy are applying the same business model to the parenthood sector with children’s clothes and maternity wear respectively. And the business model extends beyond apparel and fashion, with Fat Llama letting you rent pretty much anything!
(Business models that include rental are a key pillar of the circular economy. It is worth noting however that right now, startups using this business model are at a serious disadvantage due to not being able to use the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS). These schemes help startups get access to investment from angel investors. Legislation that was not intended to catch them does so inadvertently because these business models did not exist when it was enacted.)
The refill revolution will continue to be propelled. From home products to beauty to food, we will obtain more of the goods we need (or want) without the plastic. Charrli and Refill Drop deliver eco-friendly products to your doorstep and collect the empties (like the milkman of days gone by) and Spruce has developed their own range of refillable non toxic cleaning products.
Recommerce has always been accepted and even “cool” when shopping for vintage clothes or for antiques but we will see it hit new and unexpected sectors. For example, in top end fashion, where it has always been considered damaging to the brand – Burberry admitted that it destroyed around £30 million worth of stock in a year to protect its brand. In that sector, as well as newer businesses such as Sign of the Times, we are now seeing established brands like Gucci delve into the world of recommerce, hopefully paving the way for others in this and other industries.
My hope is that Government will step up to support the companies leading the charge. On the consumer side, we know that price and convenience are key, and we have seen the success of the penalising 5p (soon to be 10p) carrier bag charge. But instead of penalising, what about incentivising consumers to buy from those companies investing heavily in doing things the right way? At the moment, companies operating just above the law will always win on price and for consumers who buy based on price (41% of the population according to a 2020 Research Insights Report from IBM), this will always be the divisive factor. But is the playing field level?
The UK is shuffling forward with environmental legislation; earlier this month, a decade was shaved off the deadline for manufacturers to stop selling new petrol and diesel cars (now 2030). Last month the ban on single use plastic straws came into force and next spring sees the plastic tax to penalise plastic manufacturers where the recycled content is less than 30%. These types of laws drive innovation and in respect of new plastic laws particularly, they help to propel the refill revolution.
As raw materials become more scarce, it is likely that we will see a new value in waste and some categories of waste being reclassified as assets. Waste tech is already established as an investable sector, with VCs providing significant backing to companies operating in this area, including Olio and Winnow. As the old saying goes, ‘one man’s trash is another man’s treasure’.
Over the last decade, Elvis and Kresse has rescued 200 tons of fire-hose from the London Fire Brigade, transforming it into luxury lifestyle accessories – and donating 50% of profits back to charities. This ‘waste’ would otherwise have ended up in landfill. Noma Swimwear makes swimwear that is protective for children. It is gender neutral so it can be passed between siblings and it is made from ghost nets, retrieved from the ocean. In the US, Slash Objects uses recycled rubber from old tyres to make furniture and accessories and Rareform are making bags and accessories from the used vinyl from billboard ads.
When it comes to waste food, Toast has made a business from using surplus fresh bread to make ale and Nibs etc are using waste carrot, apple and ginger pulp to make new food products, such as granola. There is also a wave of fashion companies making clothes from rubbish and using that as a USP – Rapanui and tbfuk are both showing that traditional waste has value.
We might soon enter an era where landfill sites start being seen as the new coal face, with significant value sitting preserved under foot. We have all seen the horrific images of rubbish pickers scouring enormous landfill sites around the world. Maybe we will see the emergence of a more sophisticated and efficient version of this that achieves the same result? We know that robots will soon be doing our recycling and this is not such a great leap on.
Instead of looking at the future outcomes, what’s to be done now? I believe that one answer lies in companies, at the point of production, thinking about what happens to the products they make when the person that bought them no longer wants them. Do they biodegrade fast? Can they easily be taken apart and recycled? Can they be refurbished or re purposed and sold on? This is known as cradle-to-cradle thinking and is another key pillar of the circular economy. But of course, we loop back to resources and staying competitive; there is a business cost to operating in this way. It is very exciting to see companies like Niaga designing products for circularity, so that materials can be easily reused. One challenge for reuse is how to undo the process of combining one material with another material. Niaga are focussing on simple designs, clean materials and reversible connections to overcome this.
Transparency is another challenge. The person that has the product when it reaches the end of its life needs to know what to do with it. You may have heard of ‘product passports’ which can convey the materials the product is made from, how it can be recycled or the existence of any manufacturer take-back schemes.
I’ll finish with a quote that rings very true at this point. “It is pretty amazing that our society has reached a point where the effort necessary to extract oil from the ground, ship it to a refinery, turn it into plastic, shape it appropriately, truck it to a store, buy it and bring it home – is considered to be less effort than what it takes to just wash the spoon when you're done with it.”