From linear to circular
Ana Birliga Sutherland and Megan Murdie
The global economy is at a critical inflexion point. With resource consumption projected to nearly double by 20601 and climate risks intensifying, the need for sustainable transformation has never been greater. Businesses face mounting pressure to align with global sustainability goals, yet much of the conversation around circularity has focused on startups and niche innovations. While these new models are essential for progress, the greatest potential lies in reimagining the operations of large, established businesses that dominate global supply chains.
Transforming linear businesses—those based on the ‘take, make, waste’ model—into circular leaders is an underexplored lever for systemic change. These corporations have the scale, reach, and resources to drive meaningful shifts across entire industries. For example, global sectors such as textiles, manufacturing, and the built environment could achieve far-reaching impacts by embedding circular principles into their value chains.
However, this transition requires businesses to move beyond traditional sustainability measures and explore deeper strategies, such as double materiality assessments, value chain redesign, and compliance with frameworks like the Corporate Sustainability Reporting Directive (CSRD).
Forward-thinking companies are already realising that circularity isn’t just an environmental imperative—it can also be a way to cut costs. By reducing resource dependency, innovating in material reuse, and enhancing transparency, businesses can future-proof their operations against economic volatility and regulatory changes. The path is clear: businesses that embrace circularity now are not only safeguarding their own futures but contributing to a global economic transformation that benefits society as a whole.
Why the transition needs to focus on the largest polluters
The scale and reach of large linear businesses are overwhelming, so much so that a fifth of global emissions can be tied to the supply chains of multinationals, including Coca-Cola, Samsung and Walmart2. Let’s put this in perspective: emissions from the supply chain of Coca-Cola alone match that of China’s entire food sector.
Globally, a handful of businesses account for the majority of industrial resource consumption—and the scale of waste and emissions they generate dwarfs that of smaller startups. Transitioning these businesses could shift the needle far more effectively than pushing for smaller, newer companies to adopt circular business models.
Larger businesses are also better positioned to implement circular solutions at scale: unlike smaller companies, which may struggle with limited capital, established corporations have the resources to invest in infrastructure, research, and large-scale innovation. Their extensive supply chains mean that even incremental changes—such as shifting to recycled inputs or redesigning products for longevity—can create ripple effects across entire industries.
What’s more, these corporations wield major influence over policymakers and consumers worldwide, allowing them to accelerate systemic change in ways that smaller initiatives cannot. Including circularity in their core strategies could mean setting new industry standards, consumer behaviours and regulatory shifts across the board.
Barriers to transitioning linear businesses: businesses are backsliding due to regressive political agendas
Let’s be clear: the current political climate is making change sluggish. As things are now, it pays to pollute: fossil fuel subsidies surged to a record US$7 trillion (or about 7% of global economic output) in 2022.
While explicit subsidies (direct government financial support) reached US$1.3 trillion, the vast majority are implicit subsidies that include the unpriced environmental and social costs of fossil fuel use like air pollution, climate degradation, and loss of potential tax revenue3.
With a relatively unstable regulatory landscape and oscillating government priorities, many businesses may be hesitant to invest in transforming their operations and supply chains. The recent revival of the Trump administration heralded a wave of deregulatory policies4, for example, rolling back environmental protections and even promoting new oil and gas development—in the process reminding us of the volatility inherent to relying solely on policy for progress on sustainability.
The creeping onslaught of deregulatory policy in certain parts of the world is also seeing big businesses backsliding on sustainability commitments5. In 2024 alone, Canada’s six largest oil sands companies wiped decarbonisation goals from their websites in response to the country’s new anti-greenwashing legislation, Nike laid off sustainability managers, and Coca-Cola and Nestle delayed targets once again after flying past plastic-reduction goals.
For many businesses, it’s easy to gain positive media attention by setting bold long-term goals—only to quietly abandon them years later. As we enter 2025, this trend shows no signs of slowing.
This may be tied to broader political changes: the US Republicans’ anti-ESG movement—a wave of state-level legislation aimed at removing environmental considerations from investment decisions connected with government funds—succeeded in rolling out more than 30 rules, guidelines and laws to foil ESG goals, for example, while implicitly supporting inherently linear industries6.
This has effectively dampened corporate sustainability initiatives—and the relative underperformance of ESG equity funds compared to traditional funds hasn’t helped, with the former suffering a net outflow of US$ 40 billion in 2024—the vast majority stemming from US investors7.
While this may be more indicative of investors’ reactivity to market volatility and short-term underperformance than long-term trends, the figures do point to a key barrier amongst businesses: the fear that embracing sustainable and circular practices will dampen profits, especially as the transition itself will require up-front costs to kickstart new systems, materials and supply chains.
It’s important to note, however, that many ESG initiatives do not even address resource use or consider their direct impact on climate change goals, meaning they are not directly aligned with circular economy principles.
The reality is that businesses that delay circular transitions are not avoiding costs—they are only postponing them until they become unavoidable. While regulatory frameworks remain a critical driver, businesses that proactively adopt circular economy strategies position themselves as leaders in sustainability and bolster long-term competitiveness.
The path is clear: businesses that embrace circularity now are not only safeguarding their own futures but contributing to a global economic transformation that benefits society as a whole
EU policy is redefining the business landscape
While the regulatory environment—especially in the US—has seen changes that have discouraged investment in circularity amongst businesses, other regions are strengthening legislation: the EU’s recent wave of green legislation, from the CSRD to the Corporate Sustainability Due Diligence Directive (CSDDD), is strengthening ESG requirements for businesses. The CSRD, for example, has expanded its scope as of early this year, applying to an additional 39,000 companies across Europe8—as well as approximately 10,000 non-EU entities with significant operations in Europe9.
Companies will soon be required to report on sustainability data (including circular economy performance) across the value chain, not just for direct operations10. This may involve more rigorous supplier audits to ensure adherence to ESG standards and will cover the practices of suppliers, contractors and partners in areas ranging from emissions and resource use to labour practices.
What’s more, the upcoming EU Carbon Border Adjustment Mechanism (CBAM), set to go into force in 2026, could make sustainable investing lucrative in the future by putting a price on embodied carbon for key industry inputs flowing into Europe. Businesses relying on emissions-intensive supply chains will face higher costs, while those that transition to lower-carbon models will gain a competitive advantage. This will directly benefit the circular economy.
By rethinking (and ultimately reducing) material and energy use and boosting efficiency, circular economy strategies have deep emissions-reduction potential—and companies that proactively adopt them can avoid potential fines and tariffs in the future, where compliance will soon be non-negotiable.
EU Commission research found that 97% of emissions covered by the tariff are produced by just 20% of the companies covered by the scheme11, once again underscoring the importance of transitioning big business. The Commission may consider scaling back the levy to apply only to this 20%, lightening the administrative burden for the 80% of smaller companies contributing minimal emissions.
Importantly, this won’t just affect European entities: non-EU producers exporting goods to the EU will also be subject to fees12, with the mechanism’s implementation expected to reverberate across global supply chains. What’s more, non-EU businesses with carbon-intensive production processes can expect less competitiveness in the EU market13, pressuring non-EU exporters to decarbonise their production processes—potentially spurring the wider adoption of low-carbon technologies and influencing environmental policies in key trading nations.
Times are changing: it’s time for companies—and especially big businesses—to rethink their goals and approach sustainability in a way that delivers results for the environment and investors: after all, despite short-term fluctuations, research shows that up to 89% of investors factor ESG criteria into their decisions, while only 13% see ESG as a ‘passing fad that will eventually go out of fashion’14. The real question is not whether businesses will need to transition to a circular model but whether they will do it proactively or be forced into it under crisis conditions.
Practical steps to start the circular transition
1. Use the CSRD as a roadmap. The directive will kick in this year for large EU companies, with first reports due in 2026: but, as noted, requirements will extend far beyond Europe. Non-EU companies with significant operations or market listings in Europe will be expected to provide their first reports in 2029. Big businesses must take first steps now.
Self-assessment tools, such as those developed by Circle Economy and CircularIQ, can help businesses take their first steps towards compliance. These intermediary years offer a perfect opportunity for businesses to examine their supply chains, uncover data gaps, and future-proof their operations.
The upcoming publication of first reports will also serve to provide real-world examples of how companies have interpreted these—often complex—standards, clarifying uncertainties and establishing helpful precedents.
2. Complete a double materiality assessment and conduct a value chain analysis. The first step in the CSRD reporting process is to complete a double materiality assessment, which helps businesses identify which sustainability topics should be included in their reports.
This assessment requires companies to determine whether a topic is relevant from two perspectives: how the company’s actions impact people and the environment and how sustainability-related developments—such as climate change or supply chain disruptions—impact the company itself, presenting either risks or opportunities.
By discerning which sustainability matters are ‘material’ from these perspectives, businesses can filter out less relevant topics and focus on the most critical areas.
Businesses must also carry out a value chain analysis, as most environmental impacts for most companies lie beyond their direct operations. In sectors like agriculture, mining, and fashion, for example, approximately 90% of emissions are embedded in Scope 315—emissions produced upstream or downstream in the value chain.
These hidden emissions represent a significant risk to investors and are a core focus of the IFRS Sustainability Disclosure Standards and the CSRD, both of which require Scope 3 reporting to ensure transparency and limit greenwashing. Companies must track emissions across 15 categories, including purchased goods, transportation, and distribution, collaborating with suppliers to gather accurate data or using industry proxies if supplier data is unavailable. Early action on this will help avoid future penalties, build resilience, and offer a competitive advantage.
It’s important to note that value chain mapping doesn’t just apply to emissions; it can also help pinpoint hotspots of resource overconsumption, inefficiencies like production losses or overpackaging, and waste. This comprehensive approach will empower businesses to improve sustainability throughout their entire value chain.
3. Understand that reporting is only a first step: don’t rest on your laurels yet. Measurement is an important first step, but it goes without saying: action can’t end there. Amid concerns that focusing on compliance risks distracts from actually implementing sustainability measures16, it’s important that companies act on the data they collect about material use and emissions. This also means setting measurable targets to reduce waste, bolster material efficiency and reduce emissions across their supply chains.
How could this look? Imagine an electronics company that wants to become more circular. They’ve completed a double materiality assessment and pinpointed areas to focus on through a value chain mapping exercise. They’ve identified a strong reliance on critical raw materials and rare earth elements, discovered high emissions from energy-intensive manufacturing, and failed to find efficient e-waste recycling options. They also note that their products are often discarded incorrectly, with many high-value, recoverable materials going to waste.
Their next steps could include shifting to more secondary material streams to cut reliance on virgin inputs, implementing more energy-efficient production processes on-site and choosing lower-carbon supply chain partners, and launching a take-back and refurbishment programme that allows customers to trade in their old devices for repair, resale or recovery—keeping valuable materials in the loop.
The circular transition is no longer optional
To truly achieve circularity at scale, high-impact businesses must take bold action. While startups and smaller-scale innovations remain vital to progress and can be inspiring to larger organisations, transforming the corporations that dominate global supply chains will have the most significant impact.
The transition from a linear to a circular economy is no longer optional—it is necessary for long-term resilience and regulatory compliance. Companies that act now to leverage the CSRD, conduct double materiality assessments and map their value chains will not only future-proof their operations but also drive positive systemic change.
That being said, businesses cannot drive this shift alone: policy still plays a key role in levelling the playing field—and crucially, emissions and material use need to be taxed to create real financial incentives for companies to shift their priorities. The time for baby steps is over—major corporations must set the pace for a new economic model that benefits both people and the planet.
ABOUT THE AUTHORS
Ana Birliga Sutherland and Megan Murdie are with Circle Economy, a global impact organisation that empowers businesses, cities and nations with practical and scalable solutions to put the circular economy into action. Circle Economy’s vision is an economic system that ensures the planet and all people can thrive. To avoid climate breakdown, its goal is to double global circularity by 2032.
Endnotes
1. (2018). Raw materials use to double by 2060 with severe environmental consequences. MRS Bulletin 43, 914. doi:10.1557/mrs.2018.308.
2. Win, T (2020, September 8). Multinational companies account for nearly a fifth of global CO2 emissions, researchers say. National Post. Retrieved from: National Post website.
3. International Monetary Fund. (2023, August 24). Fossil fuel subsidies surged to record $7 trillion. International Monetary Fund. Retrieved from: IMF website.
4. Gardner, T, Volcovici, V, & Renshaw, J (2025, January 21). Trump says he will unleash American fossil fuels, halt climate cooperation. Reuters. Retrieved from: Reuters website.
5. Pucker, K (2024, August 20). Companies are scaling back sustainability pledged. Here’s what they should do instead. Harvard Business Review. Retrieved from: Harvard Business Review website.
6. Field, C & Hanawalt, C (2024, October 25). The anti-ESG movement has not fared well in court, but critical decisions are pending. Columbia Law School. Retrieved from: Columbia Law website.
7. Temple-West, P & Schmitt, W (2024, June 5). Investors pull cash from ESG funds as performance lags. Financial Times. Retrieved from: Financial Times website.
8. Charluet, C (2024, December 12). What you need to know to start reporting on CSRD from 2025 onwards. Coolset. Retrieved from: Coolset website.
9. Watershed. (2024, September 10). Corporate Sustainability Reporting Directive (CSRD): A guide for companies. Watershed. Retrieved from: Watershed website.
10. As of late February 20205, these requirements have been significantly watered down amid pushback from EU member states and businesses, and fear that President Trump may retaliate against EU directives. Companies that were due to start reporting will need to assess if they still remain in scope. Source: Khan, Y (2025, February 26). Europe waters down flagship climate accounting policy. The Wall Street Journal. Retrieved from: WSJ website.
11. Abnett, K (2025, February 7). EU considers exempting most companies from carbon border levy. Reuters. Retrieved from: Reuters website.
12. Buysing Damsté, C, Prepscius, J, & Banks, J (2024, February 27). The EU Carbon Border Adjustment Mechanism (CBAM): Implications for supply chains. PWC. Retrieved from: PWC website.
13. SupplyOn. (2024, September 27). The CBAM impact on non-EU producers: Challenges and opportunities. SupplyOn. Retrieved from: SupplyOn website.
14. Baker, B (2023, January 31). ESG investing statistics 2023. Bankrate. Retrieved from: Bankrate website.
15. Ng, C (2023, February 8). Fossil-linked energy firms have high emissions and the room for denial is shrinking. Institute for Energy Economics and Financial Analysis. Retrieved from: IEEFA website.
16. Balch, O (2025, February 27). Wave of regulation drives demand for sustainability advice. Financial Times. Retrieved from: Financial Times website.
