Peter C. Evans is Chief Strategy Officer at McFadyen Digital. He has over 25 years of experience leading teams in identifying, framing, and assessing marketplace trends and disruptions that support business planning and investment prioritization. He has held senior strategy at large global enterprises (former partner at KPMG, senior director, strategy and analytics at GE). Evans is the co-chair of the MIT Platform Strategy Summit and the NTWK Summit in Barcelona, Spain and serves as an Advisory Board member to Marketplace Risk. Evans received his BA from Hampshire College and his master’s degree and PhD degree from the Massachusetts Institute of Technology. Evans is the co-chair of the May 28th and 29th NTWK conference in Barcelona and on May 30 will offer a masterclass on circular logistics and platform strategy with Rich Bulger, a globally recognized expert on circular logistics. The course is designed to provide actionable insights for senior executives who are developing initiatives that aim to boost revenue, enhance customer experience, and align with the circular economy. He recently spoke to The Innovator about the circular economy and how corporates can create a circular logistics and platform strategy that creates unique competitive advantage.
Q: There is a lot of talk about marketplace platforms and about the circular economy but not the way they intersect. Why do you think that is?
PE: Let’s start with some important context. The global economic system runs on linear transactions or what is often referred to as the “take, make, use and then waste,” model. Very little of what is bought and sold is reused, refurbished, repaired or recycled. The most recent analysis suggests that global circularity has actually declined from 9.1% to 7.2% over the past six years. This news comes at a time when demand for materials is on the rise as the world population grows from 8 billion to 9 billion people. One area of particular concern is the rapidly growing demand for critical materials needed to support the solar, wind, batteries and other clean energy technologies. The International Energy Agency anticipates shortfalls starting as early as 2028 in critical technology manufacturing materials such as lithium, copper, and cobalt.
All of this calls for a more focused effort to promote circular and not just linear transactions. This is where circular marketplaces can help. A circular marketplace is a digital platform that enables the exchange, reuse, repair, and recycling of products and materials, promoting a circular economy model focused on minimizing waste and extending product lifespans. It connects various stakeholders, including manufacturers, service providers, recyclers, enterprises, and customers, offering benefits such as lower transaction costs, sustainability, supply chain transparency, and new revenue opportunities.
There’s an opportunity for platforms to be incredible engines for driving a more circular economy, not just the linear economy. The world’s largest linear e-commerce platforms understand this. Alibaba operates a peer-to-peer marketplace called Xianyu or Idle Fish, Amazon has launched a program called Renewed, eBay runs a program called Refurbished. Walmart has recently started a program called Restored. While these companies do not provide separate financial reporting on their circular programs, collectively they likely facilitate around $50 billion in circular transactions a year. This is relatively small compared to their linear businesses, but they will all grow. The recommerce market is projected to see substantial growth over the next five to ten years, driven by growing consumer adoption and the expansion of resale into new product categories.
Apart from the largest platforms, there are a growing number of specialized B2B marketplaces emerging to serve circular transactions between companies. ne example is The Excess Materials Exchange, a digital marketplace founded in Amsterdam in 2017. This platform focuses on discovering and matching material between companies and industries. Airports are one type of user that have joined the platform to resell materials generated from remodeling projects. Circunomics is another example. This German company facilitates circular economy transactions for used electric vehicle (EV) batteries. Their platform connects various stakeholders, such as EV manufacturers, battery recyclers, and second-life battery users, enabling the reuse, refurbishment, and recycling of EV batteries. By promoting the circular lifecycle of these batteries, Circunomics aims to reduce waste, conserve resources, and create new economic opportunities within the sustainable mobility sector.
Q: Are there other interesting examples?
PE: Sure. Take the electronics sector. Today there are around 330 million mobile phones traded on secondary market but there are 6 billion phones with plans with telecoms. The gap between the number of phones sold and those going circular remains very large creating a large opportunity for greater secondary transactions.. Not surprisingly we are seeing a lot of investment and activity in creating circular marketplaces for this space. Last year, six startups with circular marketplace business models located in Europe, Asia and the Middle East collectively received $100 million in funding.
But circular economy opportunities don’t stop with consumer devices. The GSMA, which has a membership base of more than 1000 mobile operators and equipment manufacturers, in February announced the GSMA Equipment Marketplace. The goal of this marketplace is to help telecommunication providers around the world more easily resell or recycle equipment used in fixed, mobile or private networks. In the process this marketplace aims to create new revenue streams as well as help the sector to reduce carbon emissions and minimize extraction of environmentally damaging raw materials used to make equipment. The GSMA estimates that manufacturing network equipment (including materials extraction and processing) and constructing network sites and mobile masts accounts for more than 30 million tons CO2 per year. Supply chain emissions represent the largest share of a telecommunication network operator’s carbon footprint, reaching over 80% of the total in some cases. The new marketplace is designed help to reduce these figures by enabling operators to reuse and recycle more of their assets, while helping the industry’s ambition to be Net Zero by 2050 at the latest.
Other examples include scrap metal, which is now being digitized. Startups, such as Metaloop Austria and METYCLE in Germany are preparing to help companies meet new European standards that require manufacturers to use more recycled materials in their production process. The automotive industry will be a buyer in this space but also lots of other industries as well. The reason that digital marketplaces are interesting in this space is that they service not just a place to access material but also to prove their origin.
Raw materials, such as lithium, cobalt and nickel, account for a large part of the costs in the manufacturing of lithium-ion cells. But as up to 95% of a battery’s chemical elements can be recovered and recycled into the battery production process, it’s essential to also develop solutions that enable automated recycling of these batteries. Utility companies need batteries for storage capacity so it would make sense to connect them with manufacturers of electric vehicles, two industries that aren’t necessarily connected now. While nascent today EV battery recycling could exceed a total addressable market of $200 billion post 2050, according to Goldman Sachs research.
The electronics and the auto industries are other sectors benefiting from the circular economy. The global refurbished electronics market, is expected to grow from $85 billion in 2021 to $272.91 billion by 2031, according to Goldman Sachs. Auto parts remanufacturing was valued at $60.8 billion in 2022, and is expected to grow to $126.4 billion by 2030, according to the investment bank’s research. Drivers of growth for automotive market remanufacturing include a shortage of raw materials, increased demand for low-cost vehicle replacement parts (which can cost 20%-50% less than new parts), and sustainability benefits versus new parts.
Marketplaces are going to be an increasingly important way that circularity is achieved because of their ability to scale and the network effects. Everywhere there can be a marketplace for the circular economy there will be a marketplace.
Q: How big is the opportunity?
PE: My strategy team at McFadyen Digital has been exploring what contribution marketplaces will make to the growth of the circular economy. Our analysis suggests it will be substantial. Today’s circular economy has a global value of nearly $410 billion, with platforms accounting for roughly a quarter of that. By 2030 the circular economy should be worth $1.5 trillion and circular platforms will account for nearly 60% of that, or $863 billion. The reason is that marketplaces are very efficient at facilitating discovery, matching, payments and other features that substantially reduce the friction associated with circular transactions. As platform business models also enable positive network effects. As a result, there is great potential for the same flywheel effects we have seen power linear marketplaces to power circular marketplaces.
Q: What advice do you have for corporates?
PE: It is no longer a question of whether companies go circular. It is really a question of how. The good news is that there are growing number of options and services that can help companies build robust circular strategies. Master reverse logistics in your sector. Rethink metrics, incentives, and organizational structures. Get your procurement department thinking about how you can create value by using or selling recycled materials. Some companies have rigorous requirements on the procurement side that make it difficult to take advantage of secondary markets that will need to be changed. Decide which circular business model is right for you. Acquire the right talent.
This is an area where Europe could take a leadership role. There are already 68 circular marketplaces in Europe (out of a global total of 170). Let’s celebrate that success and grow circular marketplaces. They are good for economic efficiency, the environment, and help reduce critical material supply gap concerns. The combination of lower transaction costs, positive network effects and the agility to adopt new technologies like tracing and AI uniquely empower circular marketplaces to catalyze the transition to a more resource-efficient and sustainable economic model, while helping both traditional companies and startups generate new revenue streams from new business models.
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