What are the challenges and solutions for implementing circular economy principles within an organisational setting?
We asked Protokol Advisory Board Member and Ex-Director of ESG Reporting at luxury goods group Richemont, Matthew Kilgarriff, to help shed some light on this topic in an exclusive interview.
This interview dives into the EU legislation driving the shift towards the circular economy, the biggest challenges for businesses implementing circular economy principles, inserting sustainability into boardroom thinking, how technologies like Digital Product Passports can be a tool for sustainability leaders to help drive ESG initiatives within their organisations, and more.
What pieces of EU legislation are the biggest drivers of the circular economy today?
Matthew Kilgarriff: The EU has been building its Circular Economy foundations for many years. Those foundations comprise structural programmes and initiatives, such as the European Green Deal (2019), and more recent elements which seek to accelerate the shift towards a climate-neutral continent.
Those elements include the Circular Economy Action Plan (2020) and the Ecodesign for Sustainable Products Regulation (ESPR), 2024. The Eco-design Regulation comprises framework legislation, multi-annual working plans and product-specific measures.
Taken together, these foundational programmes and additional elements will drive Circular Economy innovation at industry levels.
What are the biggest challenges for organisations in implementing circular economy principles?
Matthew Kilgarriff: When it comes to transitioning from a carbon-intensive, linear business model to circular models, organisations face the usual challenges of adaptation.
Beyond a handful of in-house experts familiarising themselves with new legislation and its implications, there are challenges linked to:
- the range of internal responses, which may be either narrow or widespread
- the speed of those responses, which may be ‘early-adopter’ through to ‘last-minute’ compliance
Leading organisations anticipate circular economy principles and have working groups and task forces in place long before any regulations are finalised.
An early-adopter culture ensures a widespread response, encompassing not only product design and materials, but also after-sales services for repairs, maintenance and even facilitating a secondary market for pre-owned products.
Did you gain any further insights into this from your leadership role in ESG at Richemont?
Matthew Kilgarriff: We began implementing widespread programmes based on circular economy principles some 15 years ago.
These ranged from raw materials, such as the gold in our Maisons’ fine jewellery and watches, to the progressive elimination of non-recyclable materials from packaging. In addition, Richemont had established repair service centres around the world for its products.
Such service centres have helped to keep its products in constant use not just for years but for decades and, in some cases, centuries. Lastly, Richemont acquired a pre-owned retailer (Watchfinder) to formalise the international, secondary market for fine watches.
Together, these widespread and early-adoption programmes place Richemont in an advantageous position for most legislative developments in the Circular Economy.
How do you get board members to consider implementing sustainability measures organisationally, effectively inserting sustainability legislation into boardroom thinking?
Matthew Kilgarriff: There are two approaches to board-level adoption:
- Preventive Governance
- Sustainable Business Model Innovation
Preventive Governance recognises the collective responsibility of board directors for compliance with all laws and regulations.
However, the Preventive Governance approach is unlikely to engage directors’ personal interest as regulatory developments are an endless stream, are unlikely to bring competitive advantage, and are typically delegated to a Chief Compliance Officer.
On the other hand, Sustainable Business Model Innovation is likely to engage members’ interest, is future-focused and should deliver competitive advantage.
Innovation for sustainability can be owned by a dedicated working group under a specific executive, who reports on progress and implications to the board members.
Jargon such as Circular Economy and Eco-design should be avoided as it can create confusion and be a distraction to decision-making processes.
Rather, the commercial and reputational benefits of innovation should be presented in the usual manner, including estimates of greenhouse gas emission reductions in the proposed business model.
In this preferred approach, innovation for sustainable, competitive advantage becomes the primary concern for boardroom thinking, whereas compliance with sustainability legislation is a secondary concern, if at all.
What skill sets are required within organisations to ensure the application of circular economy principles?
Matthew Kilgarriff: To implement circular economy principles, organisations require a combination of technical, business, social, and systems skills, with a strong emphasis on innovation. Specific skills include:
- Circular Design – organisations need to design their products and services for durability, repairability, recyclability, and resource efficiency. Behind those design skills are a reasonable understanding of material science, product life cycle analysis, and waste management strategies.
- Systems Thinking – organisations need the ability to analyse complex systems, understand interdependencies, and identify opportunities for circularity through the entire value chain.
- Business Model Innovation – organisations will need to develop product-as-a-service, leasing, and performance-based business models.
- Digital Skills – the organisation must know how to use digital technologies for tracking resources, optimising supply chains, and enabling circular solutions.
By developing these diverse skill sets, organisations can integrate circular economy principles into their operations.
What is the role of enriched sustainability data in achieving organisational sustainability goals?
Matthew Kilgarriff: Enriched sustainability data is a foundation for an organisation to achieve its sustainability goals. The date provides evidence-based insights to:
- Track progress and identify areas for improvement
- Establish baselines, track performance against targets, and monitor progress towards organisational sustainability goals. Familiar examples include energy consumption, greenhouse gas emissions and waste generation.
- Make informed decisions
- Provide insights across functions. For example, data on supply chain practices can inform decisions about sourcing sustainable materials or choosing more environmentally friendly transportation modes.
- Enhance transparency
- Report on key performance indicators (KPIs) to stakeholders, including customers, investors, and employees. Transparency builds trust and accountability with stakeholders.
- Drive innovation
- Inspire innovation by revealing unmet needs, market gaps, and opportunities for disruptive solutions. For example, data about consumer preferences for sustainable products can drive the development of innovative products and services.
What technologies are likely to be key drivers of circular economy implementation?
Matthew Kilgarriff: Several technologies are key drivers for implementing a circular economy. These include:
- Artificial Intelligence (AI) – algorithms can analyse vast datasets to optimise resource allocation, improve product design for circularity, and predict material needs.
- Internet of Things (IoT) – devices, such as sensors and trackers, can monitor products and materials throughout their lifecycle, providing valuable data for optimising logistics, predicting maintenance needs and facilitating efficient recycling.
- Blockchain technology – this offers a transparent and secure way to track products and materials, ensuring accountability and traceability in supply chains. This can help build trust among consumers and businesses regarding the circularity of products.
- Digital Twins – virtual representations of physical objects or systems, can be used to simulate certain aspects of the circular economy, including material flows, product lifecycles, and waste management strategies.
- Digital Product Passports – DPPs provide a powerful tool for sustainability leaders to navigate EU regulations, ensuring compliance, promoting circularity, and driving transparency throughout the product lifecycle.
How can Digital Product Passports be utilised as a tool for sustainability leaders to ensure compliance with upcoming EU sustainability regulations?
Matthew Kilgarriff: Digital Product Passports (DPPs) are crucial for sustainability leaders to navigate EU regulations. They provide a digital record of a product’s lifecycle, enabling compliance with regulations like the ESPR and the Circular Economy Action Plan.
Regarding compliance with ESPR, DPPs offer a structured way to manage and track data, such as energy efficiency, recyclability, and material composition. DPPs enable businesses to collect the necessary data for sustainability reporting required by the EU and other jurisdictions.
DPPs increase transparency by making product information accessible to consumers and other stakeholders, promoting more informed choices. In a broader sense, DPPs support the Circular Economy by providing information on product lifespan, repair, and recycling. Thus, they help to reduce waste and promote resource efficiency.
Other benefits of DPPs stem from their open and accessible nature. They include:
- improved supply chain management and end-of-life product management
- promoting transparency and system collaboration
- empowering consumer choice
How might DPPs enhance board decision-making around sustainability initiatives and funding?
Matthew Kilgarriff: DPPs can significantly enhance board decision-making around sustainability initiatives and funding. They provide a comprehensive, transparent, and data-driven framework for assessing environmental impact and circularity throughout a product’s lifecycle.
This improved visibility allows boards to make more informed decisions on resource allocation and strategic planning related to sustainability.
At the product level, DPPs offer a structured way to gather and analyse data about a product’s materials, manufacturing processes, and supply chain from origin to end-of-life. This data provides insights into resource consumption, waste generation, and potential for recycling or reuse.
Accordingly, DPPs can help boards to demonstrate compliance with environmental regulations and standards, mitigating potential legal and reputational risks. Moreover, DPPs can facilitate communication and engagement with stakeholders about a product’s sustainability credentials, fostering trust and building a positive image.
At the strategic level, DPPs can inform investment decisions by providing data on the environmental footprint of different products or production processes, allowing boards to prioritise investments in sustainable options. Accordingly, DPPs can guide the allocation of resources to initiatives that reduce environmental impact and improve circularity.
By providing insights into material flows, waste streams, and potential for product life extension, DPPs can drive innovation. These enable companies to develop new business models focused on circularity. If identified opportunities can reduce material consumption and minimise waste, then DPPs can lead to cost savings and improved profitability too.
Furthermore, DPPs can help companies mitigate financial risks associated with non-compliance, reputational damage, and supply chain disruptions.
Any final thoughts?
Matthew Kilgarriff: We’ve covered a lot today, so I’ll just say that to prepare for future EU sustainability compliance, organisations should adopt a comprehensive strategy that includes mapping obligations, strengthening supply chain oversight, and investing in data management and technology.
All organisations should review existing due diligence processes to ensure they identify, assess, and mitigate risks related to human rights and environmental impacts across their entire supply chain.
Investment in DPPs will help facilitate these preparations. Alongside being mandated for compliance, DPPs enable boards to move beyond a reactive approach to sustainability, enabling them to proactively integrate sustainability into business strategy, drive innovation, and create long-term value while contributing to a more sustainable future.
Looking to implement Digital Product Passports for your organisation? Check out Protokol’s Digital Product Passport platform.