1.2 Challenge 2: Spotting highest value Consumer behaviour still favours new products. While 67% of people in one global survey cite environmental motives for adopting circular behaviours, far fewer act, with only 29% buying second-hand furniture and 35% buying secondhand clothing.3 Trust gaps around quality and the appeal of new products persist. Companies are trying to bridge these gaps through discounts, warranties and certifications. At the same time, some circular models remain expensive: reverse logistics, inspection and cleaning erode margins, and rental models often struggle with low uptake. For example, Patagonia’s Worn Wear programme faced initial profitability struggles due to logistics set-up and significant collection, cleaning and repair costs. Over time, the resale programme gained popularity, and operational efficiency improved, shifting economics towards profitability and enhanced customer loyalty.4 1.3 Challenge 3: Getting information right Circular flows need reverse logistics networks, repair facilities and digital systems that many companies simply don’t have. Legacy IT built for linear models may not be able to track products across their life cycle. This undermines the ability to forecast supply and demand, trace circular goods and balance inventory. Automation and AI-enabled sorting are still limited, slowing efficiency. Survey results show logistics and remanufacturing are the steps most hindered by infrastructure gaps. To reassure customers, some platforms collect data. For example, Material Mapper in Norway tracks the origin and estimated emissions savings of building materials, demonstrating the value of transparency. 1.4 Challenge 4: Navigating complex rules Rules designed for traditional systems often hinder circular models. Refurbished goods may have to meet new product standards, creating extra compliance costs, while waste shipment laws complicate cross-border flows. Incentives are uneven; France’s Repair Bonus and “Loi Anti- gaspillage pour une économie circulaire” (AGEC Law) encourage reuse, but most countries provide little support. Inconsistencies force companies into costly workarounds. For example, HP (see full case study in the appendix) must apply the same documentation to refurbished devices as to new ones and, in India, returned products must be refurbished inside country borders, limiting international scale or outsourcing. 1.5 Challenge 5: Putting it all together Scaling circularity exposes skills gaps in collection, testing and remanufacturing. Linear value chains were built for predictable one-way flows, while circularity requires complete reinvention and new expertise. It requires reorganization and a different way of thinking about operations and value creation. Companies also face trade-offs – centralizing or decentralizing, insourcing or outsourcing – that complicate execution. Some pioneers respond with dedicated teams. For example, Hitachi built a specialized unit to remanufacture screw processors, ensuring quality and cost control. Partnerships are essential, yet standards remain scarce, leaving firms struggling with partner evaluation and profit-sharing. Circular Transformation of Industries 9

Circular Transformation of Industries The Art of Scaling Circular Supply Chains 2025