How Marketplaces are Powering the Circular Economy

This article was originally published in Navigating Commerce.

The concept of a circular economy has been gaining momentum in recent years as a way to minimize waste and optimize resource usage to combat climate change. And with an impressive projected global value of $4.5 trillion by 2030, it’s an emerging economic sector. 

At its core, a circular economy is an economic system aimed at eliminating waste. It is characterized by closing the loop on product life cycles through reuse, recycling, and recovery, rather than following the traditional linear economy of ‘take, make, and dispose’.

A key player in this landscape is the platform-model ecommerce business—especially online marketplaces. These platforms, which connect buyers and sellers, offer unique opportunities for promoting reuse and recycling in a way that brick-and-mortar retailers simply can’t. This article explores how online marketplaces drive circularity, regulatory and compliance motives, and the five major types of circular platforms.

The role of online marketplaces in the circular economy

Marketplaces in the United States alone will account for approximately $385 billion in sales in 2023, exploding to over $600 billion in 2027. It’s no stretch to say that online marketplaces have fundamentally transformed the way people buy and sell goods. They have also democratized commerce and created a platform for the exchange of used goods. This model is inherently conducive to the circular economy.

By facilitating the buying and selling of pre-owned items, online marketplaces extend the lifecycle of products, reduce the demand for new goods, and minimize waste. This means less production, less extraction of raw materials, and less energy used in manufacturing–all of which contribute to the reduction of carbon emissions and environmental impacts.

Regulatory and compliance motives

Online marketplaces also serve as platforms for complying with regulatory measures that promote a circular economy. For example, the European Union’s Circular Economy Action Plan mandates increased product durability, reparability, and recyclability, along with waste reduction. Online marketplaces can play a crucial role in meeting these requirements by promoting the sale and purchase of used, repaired, and refurbished goods.

Additionally, online marketplaces can comply with Extended Producer Responsibility (EPR) regulations by enabling manufacturers to take back products at the end of their lifecycle for reuse or recycling.

5 Examples of circular platforms

There are five key types of circular platforms:

• Product & Material Exchanges
• Reuse & Resale Marketplaces
• Sharing Platforms
• Circular Supply Chain Networks
• Sustainable Logistics Platforms

Each serves a unique role in fostering a more sustainable and efficient economy, redefining our understanding of value creation and resource optimization in an increasingly interconnected world.

As these platforms gain momentum with both sellers and buyers, network effects increase—resulting in a positive impact on business growth and the environment. 

1)‎ Product & Material Exchanges

These platforms connect businesses to exchange surplus or waste materials that can be used as inputs for manufacturing other products. This reduces waste and keeps materials circulating in use. Examples include:

• Globechain: An innovative online reuse platform that connects businesses, charities, and individuals to enable them to reuse unwanted items, significantly reducing waste while creating a positive social impact.
• The Materials Marketplace: A US-based platform that facilitates cross-industry material reuse by connecting businesses with waste and by-product materials to new product, revenue, and savings opportunities.

2)‎ Reuse & Resale Marketplaces

Online marketplaces for selling or giving away used consumer products help extend product lifecycles. Companies can partner with these marketplaces to resell returned or used products.

Examples include:

• Poshmark: Poshmark is a fashion-focused, social resale marketplace, where sellers can post goods to their "closet", facilitating the resale of secondhand style.
• The RealReal: This luxury consignment store provides an online marketplace for authenticated, consigned luxury goods, emphasizing sustainability by extending the lifecycle of luxury items.

3)‎ Sharing Platforms

Companies can participate in sharing platforms for assets like cars, equipment, spaces, and more. This promotes efficient asset utilization and reduces idle capacity. 

Examples include:

• Airbnb: An online marketplace that connects people who want to rent out their homes with people who are looking for accommodations, Airbnb exemplifies the sharing economy on a global scale.
• Uber: Uber connects individuals who need transportation with drivers who offer their personal vehicles for rides. This peer-to-peer model allows people to share rides and reduce the number of cars on the road, promoting more efficient resource utilization. Plus, Uber is now also used for food delivery.

4)‎ Circular Supply Chain Networks

Companies can join a network of suppliers committed to circular practices like take-back programs, recycled inputs, waste reduction, and more. This amplifies sustainability efforts across supply chains. 

Examples include:

• Circulor: Offering supply chain traceability, Circulor aims to improve transparency and accountability in raw material supply chains to promote responsible sourcing and circular practices.
• Provenance: Provenance is a platform that empowers brands to take steps toward greater transparency by tracing the origins and histories of products, contributing to more sustainable and ethical supply chains.

5)‎ Sustainable Logistics Platforms

Collaborating with other shippers on logistics optimization, backhauling, asset sharing, and more helps to reduce empty miles and carbon emissions. More partners increase efficiency and impact.​

Examples include:

• Flexport: As a digital freight-forwarding and logistics platform, Flexport is dedicated to making global trade easier and more sustainable for everyone by optimizing routes and consolidating shipments.
• Auto Hauler Exchange: A platform that connects vehicle haulers directly with shippers so that they can maximize their capacity and reduce empty miles at the same time.

The Future is Circular

Research from Material Economics shows that circularity could reduce Europe’s industrial carbon dioxide emissions by 56% by 2050. It's clear that the potential benefits of embracing circular platforms are great. Widespread adoption will require vision, collaboration, and the audacity to rewrite old rules. But if we do, we will not only ensure the longevity of our businesses but also of our planet. The future is circular; let’s be the architects of its design.

Author bio: Peter Evans is the Chief Strategy Officer at McFadyen Digital & Tom Gaydos is the Chief Marketing Officer at McFadyen Digital. McFadyen Digital is the leading global marketplace strategy and implementation agency that creates award-winning online marketplace and ecommerce experiences for the world’s most prominent brands. 

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