5 Ways to Reduce Risk through Circularity

Jun 25, 2021 12:34:34 PM

Supply Chain, Sustainability

Keep hearing about the circular economy? Us too! In fact, one survey conducted by ING found that 62% of American companies now plan to move toward circularity. And they have good reason to. Implementing circularity brings with it many tangible benefits for organizations. Among those benefits are various facets of risk mitigation.

Brand Risk

We consider brand risk the principle risk mitigated by the implementation of circular practices. Brand risk is the risk to the value of a brand due to the adverse fallout caused by an event.  This is because the economic impact of such an event has the potential to be much greater than the costs of fines, cleanups, or recalls. Even if a firm can plausibly deny knowledge of exposing customers to toxic material,, the damage to a brand in terms of public perception is irreparable. Complete knowledge of what is contained within products enables companies to avoid or replace toxins. Public transparency of that knowledge empowers consumers to make their own, informed decisions surrounding the use and safety of products with known toxins. Doing so also reduces the risk of liability, as consumers that choose to engage with toxic materials do so knowingly, of their own volition, and (hopefully) with proper safety equipment.

Price Volatility Risk

The capacity to reclaim raw materials also insulates companies from price volatility risks associated with the need to consistently purchase these materials. Commodity prices have been more volatile in the last decade than they have been in the last century. COVID-19’s effects on commodity markets further exacerbated this issue. Volatile input costs can lead to inconsistent margins and the need to adjust prices. By reclaiming and reusing materials from post-consumer goods, companies can insulate themselves from this risk.

Supply Chain Risk

As the complexity of global supply chains has expanded, so too has supply chain risk. Globalization has enabled producers to increasingly specialize. Businesses today source more from external suppliers than they have in the past. Behind that sourcing are long, elaborate, and sometimes fragile supply chains. Being able to reclaim functional components and materials from post-consumer products lowers the risk that a kink in the supply chain has a substantive effect on the overall business.

Regulatory Risk

Regulatory risk affects all firms. Chemical regulations are constantly changing. Circularity, enabled by knowledge and transparency of product composition, facilitates compliance. The current regulatory trend is towards the curtailing of negative externalities, which often involves product takeback programs. The institution of circular practices will keep firms ahead of this regulatory curve.

Implementing Circularity

For products to be circular, they have to be safe. Designing for circularity requires manufacturers to know what harmful chemicals exist within the materials they’re buying from suppliers. You definitely don't want harmful chemicals in a closed loop system! That's where Toxnot comes in. We'll help you communicate more effectively with your suppliers, helping you gather your product's material ingredient data and automating that data on our platform. This will give you new insight into whether those ingredients are  safe, and if not, Toxnot enables you to find new, safer ingredients. Doing so will add longevity and flexibility to your circular-designed product portfolio.

Over 3,000 users, from startups to Fortune 500 companies are already tackling circularity with Toxnot. Start achieving your circularity goals today! It's as simple as signing up for Toxnot for free right now.

Have questions? We have answers! Our team is standing by to help you accomplish your goals. Whether it's circularity, supply chain management, product compliance, or sustainability reporting, we're here to lend a hand. Let's chat!


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