How to Gain a Competitive Advantage with a Circular Economy Strategy

Everyone working in the cannabis industry knows the industry has a significant negative effect on the environment in numerous ways. But just like any other industry, there are steps your business can take to minimize those effects. In fact, some of these steps can help your business gain a long-term competitive advantage, which will lead to increased sales and revenue.

What is a Circular Economy?

A circular economy changes the take, make, dispose/waste approach to manufacturing, distribution, consumption, and disposal of goods – a linear process – to an approach that keeps materials, products, and services in circulation for as long as possible – a circular process. 

The Ellen Macarthur Foundation explains a circular economy as one that aims to stop waste from being produced by following three design-driven principles:

• Eliminate waste and pollution by designing them out of systems and processes (i.e., how we make products)
• Circulate products and materials (at their highest value) and keep them in use for as long as possible (i.e., how we use products)
• Regenerate nature so it can effectively sustain life in the future (i.e., what we do with materials after we use products)

Shifting from linear to circular strategies not only helps the environment, but it can help cannabis businesses. According to the Rochester Institute of Technology, “The circular economy uncovers new opportunities that may be hidden or closed off in the existing linear economic model. It’s a practical and profitable strategy for businesses to maximize value and sustain growth without the supply risks that come with reliance on finite resources.”

5 Steps to Implement Circular Strategies in Your Cannabis Business

In October 2022, Harvard Business Review published “4 Steps to Drive Effective Circular Strategies for Consumer Goods and Retail Businesses” written by experts from EY. The four imperatives the authors say companies must have in order to successfully implement circular strategies are as follows:

• Understand the material impact and externalities of the business
• Design processes that mitigate business externalities and build cradle-to-cradle applications
• Scale circular processes with a broad ecosystem of partners and advancing technology
• Engage consumers to participate in the circular economy

Let’s break it down. Based on these four “necessities” identified by the EY experts, there are five essential steps that cannabis businesses should take to achieve two critical goals:

• Implement circular economy strategies in their processes and core company culture 
• Gain a competitive advantage that delivers increased sales and revenue for years to come

1. Assess Your Current Business Practices and Environment

The first step to implement circular strategies in your cannabis business is to analyze your internal practices and the external environment to determine where the biggest opportunities to make both an environmental and business impact exist. 

Review your internal processes, product designs, materials, manufacturing, distribution, and so on to fully understand the current state of your business and its broader impact on the world around it. Look end-to-end – across all parts of your business – to find opportunities for improvement. While every opportunity is unlikely to drive significant revenue in the short-term, look beyond quick wins. 

Research shows consumers want to buy from companies that prioritize the environment and follow sustainable business practices. A 2022 report from Morning Consult found that consumers want CEOs and companies to speak out about climate change, which includes the circular economy. 

This number is only likely to grow in the months and years to come. Cannabis businesses that take steps to show consumers they’re prioritizing the climate and circular strategies will be able to carve out strong positions and gain a considerable competitive edge in their markets.

2. Analyze Your Sourcing Practices

Where do you get your company’s materials, tools, equipment, and inputs from? Are the companies you source from following sustainable business practices? Are they prioritizing circular economy strategies? If not, you should talk to them about doing so or find different suppliers. 

The truth is your company’s commitment to a circular economy is only as strong as the supply chain it relies on. If one supplier isn’t taking circularity seriously, your company’s efforts will be for naught. As the results from Morning Consult’s research discussed in #1 above show, U.S. consumers want to buy from companies that walk the walk rather than just talking the talk.

Therefore, it’s the responsibility of your company’s leadership to ensure your sourcing partners meet your customers’ expectations and your company’s requirements for circular processes and practices. You’ll need to monitor your vendors to ensure they consistently meet your requirements.

3. Review Partnerships

As discussed in #2 above, every vendor and partner you work with should adhere to your requirements for circularity, so you can protect your brand reputation. Now is the time to look for partners who share your cannabis business’ commitment to circularity to ensure you’re set up for success in the future. 

Think of it this way. Consumers want to buy from brands that prioritize sustainability and circularity today, but it won’t be long until they demand that businesses do so. We get closer to that time every day, and cannabis companies that wait too long to set up strategic partnerships will undoubtedly pay more and lose sales in the future.

For example, does the packaging company you work with prioritize sustainability and circularity? Are you sure the suppliers your packaging company works with are truly using sustainable materials? Are you 100% certain that they’re taking steps to eliminate waste and pollution, circulate products and materials, and regenerate nature in alignment with the Ellen Macarthur Foundation’s principles for a circular economy?

Another consideration is scalability. Continuing with the packaging example above, in the coming years, the demand for sustainable packaging will grow. In addition, laws will likely be passed requiring companies in all industries to use more sustainable packaging in addition to more sustainable business processes in general. 

Therefore, you need to develop partnerships that ensure your business can scale quickly to meet those future demands and requirements. Your packaging company needs to have the capacity and ability to scale with you.

4. Identify Sustainable Packaging Opportunities

While many sustainability practices that help circularity are not available to cannabis businesses due to state and local regulations, there are ways your company can practice circularity. One of the key ways to do it is by choosing sustainable packaging rather than traditional packaging for your products. 

Sustainable packaging isn’t just about the materials used. For example, purchasing packaging that must be shipped from overseas requires the use of fossil fuels to transport the packaging to your business in the United States, which means it has a bigger environmental impact than packaging purchased in the U.S.  

With that said, sustainable packaging refers to materials, sourcing, transportation, recycling, recovery, and a lot more. The Sustainable Packaging Coalition defines sustainable packaging as follows:

• Beneficial, safe, and healthy for individuals and communities throughout its life cycle
• Meets market criteria for both performance and cost
• Sourced, manufactured, transported, and recycled using renewable energy
• Optimizes the use of renewable or recycled source materials
• Manufactured using clean production technologies and best practices
• Made from materials that are healthy throughout the life cycle
• Physically designed to optimize materials and energy
• Effectively recovered and utilized in biological and/or industrial closed loop cycles

Many people think sustainable packaging that meets all of those requirements will be a lot more expensive than traditional packaging, but it doesn’t have to be. When you work with the right packaging provider, they’ll help you design sustainable packaging that supports a circular economy without adding excessive costs. In other words, you can save money on cannabis packaging using effective design and the right suppliers without sacrificing sustainability and circularity.

5. Educate Employees, Customers, the Community, and More

Education is the key to circularity. Today, people know they should recycle However, not everyone does it because it can be inconvenient. In addition, the recycling process after waste leaves consumers’ hands is far from perfect. 

Of course, recycling is just one part of a circular economy, but it provides a perfect example of why education is so important. It’s your company’s job to ensure your customers know what to do with your packaging after they use it.

Keep in mind, circularity depends on educating not just your customers but also your employees, your community, and more. This is another example of why CEOs and companies must communicate their companies’ commitment to sustainability and the circular economy. 

In addition, every employee will need to support the commitment to a circular economy. Decision-making at every level and across the value chain will have an impact on the company’s ability to execute the commitment and have a measurable impact on the environment, the economy, and its own revenue.

Therefore, internal education should explain that circular strategies will give the cannabis company a competitive edge in the short-term, but in the future, the goal should be to develop circular priorities for your company that are viewed as the industry-leading solution. 

Key Takeaways about Gaining a Competitive Advantage with a Circular Economy Strategy

The cannabis industry was built for the circular economy. The experts from EY state that traceability is a key part of justifying the cost of the investment in sustainability and circularity. They explain, “Companies and their partners can use a growing range of tools to track raw materials, goods, and services, including radio frequency identification, QR codes, internet of things, watermarks, and blockchain. Such technologies enable more transparent supply chains, simplified returns, reverse logistics, better user experience, and more efficient management of redundant materials and products.”

Take a closer look at that list of tools and technologies. The cannabis industry already uses many of them. If there were ever an industry set up for circularity, it’s cannabis! Follow the steps discussed above to ensure your business gains a competitive advantage tomorrow by prioritizing circular economy strategies today.  

Need help implementing circular strategies and sustainable packaging solutions? The team at New World Processing has the experience, expertise, and suppliers to help you do it. Contact us to get started!