Circular Economy for Net-Zero Industry Transition

In collaboration with McKinsey & Company

Circular Economy for Net-Zero Industry Transition

In collaboration with
McKinsey & Company

After the power sector, heavy industry is the second-largest source of CO2​ emissions, accounting for 27 percent of all CO2​ emissions worldwide. Four materials – steel, cement, aluminium, and chemicals – are responsible for 60 percent of current industry emissions, a total of 7.1 Gt CO2​ per year.

However, as demand for these materials is expected to increase, current decarbonization measures related to renewable energy and production efficiency will be quickly outpaced by increasing emissions from higher production.

This emissions reduction gap needs to be closed to reach the targets of the Paris Agreement. This can be achieved by effectively transitioning towards new and more circular business practices. Four distinct circular strategies can help to reduce emissions along materials’ life cycles:

  • Increase product utilization​ by maximizing the use cycles of products and components, increasing the intensity of use, ensuring reuse and repurposing, and thus reducing the need for new products
  • Replace materials or products​ with more circular alternatives
  • Reduce the amount of material​ needed per product, e.g., through optimized product design or more efficient production
  • Recycle material​ for new products and thereby reduce the need for virgin material

These approaches, however, are often difficult for individual companies to implement alone. In many cases they involve multiple players at different points of the value chain, and sometimes across industries, that traditionally have limited interaction. Industry collaborations are therefore key to implementing and scaling up circular solutions. ​

For the four focus materials, this means bringing together material producers with large industrial users of these materials, namely from the built environment/infrastructure, transportation, consumer goods, packaging, and machinery/mechanical engineering sectors. In addition to industry collaborations, technological innovations and a favorable policy environment are essential to scaling up circular solutions. ​


The decarbonization challenge for hard-to-abate materials

Barriers to implementing Circular Economy approaches

Radical collaboration for a Circular Economy

Some examples of collaborative approaches for circular solutions already exist in practice

Circular Economy case examples for hard-to-abate materials

Several companies have already put circularity at the core of their business model, in many cases through innovative partnerships and collaboration.

While by far not an exhaustive list, the following examples represent a selection of case studies, highlighting the implementation of circular solutions at various points of the value chain and through different levers.

Those circular solutions were achieved through new collaborations, as well as technical innovation and can serve as inspiration across industries.