Companies from Apple to Adidas have turned to circular production models that aim to profit from repurposing products for resale, minimizing waste in the process.
Over a series of episodes on the Climate Rising podcast last year, Harvard Business School Professor Michael Toffel hosted leaders working to achieve circular economies at scale. Toffel is faculty chair of the HBS Business and Environment Initiative. Here’s what we heard.
1. Reju’s Patrik Frisk: AI could align inventories with demand
Reju turns discarded apparel made of polyester blends into new polyester, keeping the material out of landfills and incinerators. Textiles have long been sorted by hand throughout the world, opening an opportunity for Reju to build the infrastructure with more efficient processing, with conveyor belts, optical scanners, and other technology.
However, CEO Patrik Frisk predicts that AI could improve production, bring the output closer to customers, and align inventories with demand.
“This is actually something that we think is inevitable,” Frisk says. “If you are on this from the get-go, you're going to have an advantage certainly down the road.”
2. Vytal’s Fabian Barthel: Sensors can help nudge container reuse
Vytal has built a “borrow-and-return” food container system for restaurants, canteens, and major events in Germany and more than 20 other countries, including the US. When customers buy food or beverages in Vytal containers, they have 14 days to return the vessels or they can keep them and their original payment method will be charged.
“We get a return rate of more than 99 percent,” says CEO Fabian Barthel. “Our containers can be used much more often and save more resources than based on a deposit scheme.”
The company’s approach has worked best in closed-loop operations, such as college campuses, and helps buyers reduce waste costs. In markets where the deposit model is less effective, Vytal plans to use its sensor technology to incentivize people to return containers. At a concert, for example, Vytal might entice a customer to return a container by offering merchandise or drink vouchers.
3. ThredUp’s James Reinhart: AI could revamp shopping for used goods
The core thesis behind ThredUp was to make it easy for people to get rid of clothes they no longer wear and to feel good about it by providing transparency as to what clothing is resold or recycled. ThredUp has since expanded to “resale as a service” and now works with close to 50 brands, including J.Crew and Reformation, says CEO James Reinhart.
Reinhart says ThredUp has started to integrate AI to improve its product experience, enabling the company to upgrade its core search features. The company is prototyping how AI might help customers send more information about goods they’re sending. In the future, the technology might help buyers create outfits using ThredUp inventory and their own closets.
“We spent years building a tagging infrastructure in our distribution center to tag clothing with all the attributes that a customer would search,” he says. “In about two days, we were able to use AI to do that better.”
4. Ikea's Karen Pflug: You can think long term, but act now
Karen Pflug, chief sustainability officer at Ikea parent Ingka Group, shares how it embeds circularity throughout its Ikea business. For example, Ikea’s iconic Billy bookcase has been redesigned to make it easier to disassemble and repair.
Ingka has also invested in RetourMatras, a Dutch company that has recycled one million mattresses. The Netherlands’ policies made it a natural place to start in advancing mattress recycling.
“We expand in the area where it makes good business sense today,” Pflug says. “And the other part of what we do is work with our public affairs team and with other companies to advocate for policy change” in areas where landfills or incineration are more common.
Ikea reinvests 85% of its revenue into its business, and directs the other 15% to its foundation. This unique setup enables Ikea to focus on the long term rather than chase quarterly gains for shareholders.
“We can think in generations,” Pflug says. “We make money before we spend it, and that helps us guide our decisions.”
5. Closed Loop's Lauren Rodriguez: AI industry will yield opportunities
Closed Loop Partners buys and builds businesses enabling the circular economy, such as Circular Services. Lauren Rodriguez, head of partnerships at Circular Services, discussed the investment models and infrastructure that could support expansion.
The Closed Loop Infrastructure Fund began in 2014 with the thesis that recycling infrastructure in the US is viewed as risky for traditional capital, with unclear rates of return. But through more flexible financing, city and county municipal waste commissions can purchase equipment to collect materials from people’s homes and process it, returning the materials to industrial supply chains.
Beyond improving the sorting infrastructure, Rodriguez expects the AI industry itself to create new opportunities for the circular economy.
“There's a tremendous amount of electronic waste that exists today, and it's going to only grow as server farms continue to expand to keep up with computing needs,” she says.
Closed Loop Partners’ venture group has invested in Molg, a company that uses autonomous robots to disassemble complex components of computers.
“They could take a laptop or a phone or a server and disassemble it with incredible speed and precision, and extract the valuable components of it that can be reused,” Rodriguez says.
Image by Unsplash/Mika Ruusunen
