McKinsey has long taken an interest in how business can be more environmentally
sustainable, and manage the growing pressures on global resource systems. For example, we have analyzed topics such as solar energy and the economics of water. One big idea now being explored cuts across sectors: how to make the transition from the traditional linear model of production and consumption—inputs in, waste out—to a circular model, based on reusing resources, regenerating natural capital, and designing for reuse. recent report by the Ellen MacArthur Foundation, for which McKinsey provided analysis, focused on applying circular principles to the consumer-goods sector, and estimated that US$700 billion in savings are available globaly for businesses that rethink their linear approaches.
Martin Stuchtey, a global leader in McKinsey’s Sustainability & Resource Productivity Practice, believes these savings could be attained in 10 to 20 years. “There are reasons the linear model of production established itself so strongly over the last century” he concludes. “Where resource prices are low and there are few penalties on hard-to-dispose waste, this might still be the superior answer. But I feel the markets where this assumption still holds are getting fewer.”
In the questions and answers that follow, Stuchtey offers his perspective on prospects for the circular economy.