How staying linear creates risks to business

We find ourselves in a time of profound global transformation. The challenges we face are no longer isolated—climate change, geopolitical instability, supply chain disruptions, and the rapid evolution of technology are reshaping industries at an unprecedented pace. The recent global pandemic has exposed vulnerabilities, while the ongoing energy crisis and increasing frequency of extreme weather events remind us that old systems are failing. As we confront these issues, a fundamental shift is underway: the transition from a linear economy to a circular economy is gaining momentum, driven by both necessity and innovation.

This shift is not only about reducing environmental impact but also about creating more resilient supply chains, preserving critical resources, and fostering long-term economic sustainability. But how can businesses, governments, and societies collectively navigate this path toward a circular future?

The United Nations estimates that resource extraction and processing are responsible for up to 50% of global greenhouse gas emissions. According to the 2023 Circularity Gap Report, only 7.2% of the global economy is circular today, down from previous estimates. This highlights a growing divide between the need for sustainable practices and current economic realities.

Where some see waste, others see value and opportunity. As sustainability has become mainstream and consumer expectations around corporate responsibility intensify, businesses face mounting pressure to demonstrate tangible circular performance. Shifting to a circular model is no longer optional but a strategic necessity. Linear business models increasingly expose companies to various market, operational, legal, and financial risks.

Let’s explore four key risks and their implications:

1. Utilizing scarce and non-renewable resources

Non-renewable resources are being depleted faster than anticipated, and the cost of accessing them is rising. Stricter environmental laws and increased climate legislation reflect growing political and social momentum toward a circular economy. Businesses that understand their resource flows can better anticipate challenges, and shifting toward circular systems is critical for decoupling growth from finite resource dependency.

2. Prioritizing sales of virgin/new products

While some reliance on virgin materials remains necessary in certain industries, the shift to circular models is becoming increasingly important. Companies that integrate both new and recycled materials are finding ways to minimize waste and reduce environmental impact while maintaining product performance. As competitors continue to innovate with fully circular models, it is crucial for businesses to evolve, blending the use of essential raw materials with a commitment to recycling and sustainability initiatives. Those that take proactive steps in this direction can not only maintain their market position but also enhance their long-term business resilience.

3. Failing to collaborate

Circularity thrives on partnerships and collaboration across industries and supply chains. Companies that fail to engage in collaborative projects miss out on opportunities to enter new markets or develop disruptive technologies. A lack of collaboration stifles growth and innovation.

4. Failing to innovate and adapt

With market dynamics that disrupt the historical patterns of supply and demand, it is crucial to change the perspective on evolving market conditions. The demand for sustainable solutions is constantly changing and consumers seek more sustainable products and services. Lack of innovation could also mean staying behind the regulation, facing the challenge to attract and hire new talent, and having competitors exploit this circularity gap.

Listed risks are not isolated but interact with each other. Linear risks have systemic impacts as they appear along the entire product life cycle and impact all departments. They affect those in product design, marketing, global affairs, procurement, production, supply chain, finance, legal and human resources. Thus, companies should evaluate business resilience by prioritizing and understanding vulnerabilities within the organization, and the way they can be exploited.

Linear business models may be profitable in the short run, but over time are exposed to market, operational, legal and business risks. There is no doubt that going circular is a way to futureproof the business and the businesses see it as a value creation driver.

Above all, without true circularity, there is no chance to talk about addressing climate emergency, the loss of nature, and growing inequality. It is important to remember that considering linear risks should be regarded beyond simply resource scarcity. It is about sustainable growth that creates economic opportunities, environmental and social benefits, and increases business resilience.

Epilogue:

What does it mean for the building industry?

The building sector remains one of the most resource-intensive industries. In fact, building construction and renovation contribute to nearly 40% of global greenhouse gas emissions. Additionally, construction and demolition waste (CDW) is the largest waste stream, accounting for 35% of all waste in Europe (2020 figures). Transitioning the building industry toward a circular economy requires systemic innovation across the entire value chain. Best management practices for CDW and a shift towards an inflow and outflow reporting mindset are crucial steps in reducing the sector's environmental footprint and ensuring sustainable development.

Find out more about what Swisspacer does to become more sustainable:

https://www.swisspacer.com/en/sustainability

Sources:

“Linear Risks – How Business as usual is a threat to companies and investors”, Circle Economy, PGGM, KPMG, WBCSD, and EBRD, May 2018

“The Circularity Gap Report”, Circle Economy, 2023: https://www.circularity-gap.world/2023

“Circular Economy in the European Construction Sector: A Review of Strategies for Implementation in Building Renovation., June 2022

?Circular Transition Indicators V3.0 Metrics for business, by business”, wbcsd, May 2022

“Drivers and barriers in the transition from a linear economy to a circular economy”, S.A.Neves, A.C. Marques, Journal of Cleaner Production, vol. 341, March 2022

This article was originally drafted by Noemi Macura for Swisspacer in 2022 and edited by Katrin Lückhoff in 2024 for Swisspacer