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New business model for reverse logistics

DAVOS, Switzerland: A drive by progressive companies and governments to adopt a "circular" approach to economic growth will mean a huge opportunity for the reverse logistics industry.

This new business model effectively decouples growth from rising resource constraints in a world that will add three billion middle-class consumers over the next 15 years according to the World Economic Forum (WEF).

Ellen MacArthurSpeaking at the annual WEF meeting in Davos last week, Ellen MacArthur, founder of the non-profit Ellen MacArthur Foundation, said a circular economy would save US$1 trillion in materials by 2025 "while reconciling the outlook for growth and economic participation with that of environmental prudence and equity."

According to Dominic Waughray, WEF senior director, a shift to reusing, re-manufacturing and recycling products could lead to significant job creation. "In short, the economic case for shifting to a circular economy is compelling. The economic impact of this change would be evident for business and consumers in both industrialized markets and fast-growing economies."

As an example, the WEF cites the growing circular practices of Netherlands-based Heineken: "We started out on this journey responding to pressures from environmental groups, but we soon learned that it makes sense to think holistically about everything we do, from treating the water we use and conserving energy to composting yeast and recycling bottles and aluminium cans," says CEO Jean-François van Boxmeer.

Another Dutch company, Royal Philips, has moved from dealing with hazardous materials and conserving energy to a circular approach that CEO Frans van Houten credits with a number of breakthroughs: "We are a major producer of LED lights, but when we introduced this energy-efficient technology, municipal customers railed against the additional cost for lighting their streets. Our response was to offer them lighting services rather than selling them bulbs, allowing them to take advantage of energy savings without having to pay higher upfront costs."

In her WEF presentation MacArthur said 20 percent of the annual €3.2 trillion European fast-moving consumer goods market could be saved through smart circular practices.

One company that has made a start is retailer H&M. Last year it launched a global in-store collection programme to encourage customers to bring in end-of-use clothes in exchange for a voucher – a move similar to Marks
 & Spencer and Oxfam. H&M's long-term aim is to find a solution for reusing and recycling all textile fibre for new uses and to use yarns made out of collected textiles 
in its products.

To manage downstream processing of the clothes
 H&M collects, the retailer works with Stuttgart-based I:CO, a reverse logistics provider specializing in the apparel sector. I:CO's biggest sorting facility in Germany employs 600 people and it also has plants in India and the U.S.

Of the total clothing it collects, I:CO estimates 40-60 percent is marketed as re-wear worldwide. In addition to H&M, the company's other customers include Puma, Foot Locker, Adidas, Esprit, Adler, C&A and The North Face.

I:CO says its goal is to have all collected textiles and shoes in a recycling process by 2020. On January 15, 2014 the San Francisco Department of the Environment announced it would collaborate with I:CO as part of its goal to be the first major city in the world to achieve zero waste. Currently the city sends almost 20,000 tons of textiles to landfill.

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