Rethinking the future

Our transition towards a circular economy

For a sustainable world, we see the transition from a linear to a circular economy as a necessary boundary condition.

A circular economy aims to decouple economic growth from the use of natural resources and ecosystems by using those resources more effectively. By definition it is a driver for innovation in the areas of material-, component- and product reuse, as well as new business models such as solutions and services. In a circular economy, the more effective use of materials enables to create more value, both by cost savings and by developing new markets or growing existing ones.

The global trends that make a circular economy a business necessity for now and the future

Challenges

Resource availability and pricing

We are at the end of the era of cheap oil and materials. A lack of fossil fuels and finite natural resources across the spectrum, coupled with an increased consumer demand results in challenges to manage our commodities. Simply using less is no longer enough. And with this, increased resource price volatility dampens economic growth, discouraging businesses from taking resource-related risks.

Increase of middle class consumers

The world has experienced two great expansions of the middle class since 1800 and we are living through the third. In Asia alone, 525 million people can already count themselves as middle class; more than the total population of the European Union*. Over the next two decades, it is estimated that the middle class will expand by another three billion people, coming almost exclusively from the emerging world, driving demand and ultimately waste.

*Source: Ernst & Young, 2014, Driving growth – Middle class growth in emerging markets

Circular economy - Middle class consumers

Opportunities

Big data

The emergence of big data has shifted the manner and scale in which problems can be solved, providing deeper market knowledge and increasing consumer-focused solutions. It also offers the intelligence of knowing where things are within the economy, what they are made from and what status they are in, making refining, and optimizing possible and enabling additive rather than subtractive manufacturing.

Changing legislation and governance

More and more companies are responding to sharpened, new legislation and governance models by introducing new innovative designs for their products. These are increasingly inspired and triggered by topics which were previously seen as challenges: such as toxicity levels in different materials or landfill.

Changing models of consumer consumption

We have seen the emergence of a different type of consumer, who is interested in different ownership and business models for example Airbnb, Zipcar, Spotify. These consumers are more driven by access and performance rather than ownership. Services and not goods are helping to redefine the relationship between objects and consumers.

Moving from transaction to relationship

The multi-channel world has also led to new levels of engagement and connectivity with consumers looking for relationships with brands that go beyond the transactional. Online interaction via Facebook, Twitter, and YouTube and brand websites is a growing global phenomenon that will be the new path to relationship for both empowered customers and companies. Companies such as Dell and Starbucks help turn consumer ideas into reality through on-line platforms to generate ideas. Airline company KLM maintains a constant Twitter dialogue with its consumers, providing 24/7 service in ten languages.

The circular revolution

For a sustainable world, the transition from
a linear to a circular economy is essential.

Frans van Houten

Read Frans van Houten's blog

Refurbishing solutions for MRI systems

Refurbished healthcare products offer medical facilities access to high quality systems within budget. They also enabe Philips to reuse vital components, driving circular economy value creation.

Read about our refurbishing business

Global trends and economic value creation

The global trends that make a circular economy a business necessity for now and the future.

Learn more about global trends

Light as a Service - a new way of delivering light to consumers

The new office of the National Union of Students (NUS) uses our lighting throughout a full LED lighting service solution.

Learn about our new lighting services

Connecting to the outside world

Collaboration is one of enablers for a circular economy. Philips is global partner of The Ellen MacArthur Foundation, the leading organization on the concept.

Learn about our partnerships

Recycled materials becoming an integral part of product design

The new SENSEO Up was designed for the use of recycled plastics.

Read more about design for circularity

The time is now

Employees and stakeholders - everyone has a part to play.

Join the journey to rethinking the future