2024 was the warmest calendar year on record, with global temperatures soaring 1.55°C above pre-industrial levels. The urgency of climate action is clearer than ever. New regulatory frameworks are reinforcing this urgency. For example, the EU’s Corporate Sustainability Reporting Directive (CSRD) frameworks are already demanding greater transparency around environmental impact.
Urgency to act
This pressure to act is particularly intense within retail, an industry responsible for a large share of global waste and carbon emissions. Traditionally, businesses operate under a ‘linear model’, following a simple but waste-heavy cycle: take, make, dispose. But every stage of this process presents an opportunity to embed sustainability. A circular supply chain – one that keeps products and materials in use for as long as possible – offers a more responsible and resilient alternative. By repairing, refurbishing, recycling or reselling, businesses can dramatically reduce waste and minimise climate impact.
Despite growing awareness, circularity is far from the norm. In the global economy, currently more than 90% of materials are wasted, lost or unavailable for reuse. But change is coming. By 2026, 60% of enterprises will be positioned to drive profitable growth through circular supply chain practices. The benefits are clear: lower costs, new revenue streams, improved brand reputation and minimised environmental consequence.
The transition to circularity isn’t just an environmental necessity, it’s a business opportunity. The question is no longer why, but how quickly businesses can make the shift.
Building circular supply chains
A truly circular supply chain starts with product design. When designed to last longer, or be easily repaired or recycled, the entire supply chain benefits. Businesses should use recyclable or biodegradable materials, creating modular designs for easy disassembly or reducing material variation to simplify recycling.
Some companies are already using Product Lifecycle Management (PLM) tools to track materials and make sure products are designed with circularity in mind. Simultaneously, emerging technologies, such as AI-driven simulations and digital twins, are helping businesses test different end-of-life scenarios, optimising product design choices for sustainability.
Beyond design, smarter inventory and production management are key to reducing waste. Overproduction has long been a challenge for retailers, with an estimated 594,000 tonnes of unworn textiles destroyed in Europe every year.
While demand forecasting has always been possible, traditional methods were limited by time, data availability, and manual input constraints. AI-powered forecasting is revolutionising this process, not just by making it faster, but by dramatically improving accuracy and scale. By analysing past sales data, customer behaviour and seasonal trends in real time, retailers can make more precise production decisions. This allows them to avoid costly overstocking while also meeting consumer needs more effectively.
The benefits of circularity extend beyond manufacturing and inventory to product management following a sale. A major challenge in retail is the sheer volume of returns, with a fifth of non-food purchases being sent back. Though viewed as a necessary part of business, they create significant waste and emissions. Brands can address this by implementing AI-driven return policies that discourage excessive returns by personalising costs based on customer behaviour. Encouraging customers to return products in-store rather than through delivery services can also reduce emissions, while providing an opportunity to re-engage them with new stock.
Next steps
For many retailers, there is a huge untapped opportunity in circular supply chains, especially in refurbishment and re-commerce. Research suggests that the sector could be missing out on as much as £850 million each year by not making the most of refurbishment programmes. High-end fashion labels, electronics brands, and even furniture retailers have launched repair and refurbishment initiatives that extend the life of their products and open up fresh revenue streams.
Both Patagonia and IKEA have successfully rolled out repair services, while brands like Nike and H&M are leaning into take-back schemes and rewarding customers with store credit when they return used items. It is a win-win for businesses and consumers alike.
The urgency for circular supply chains is growing. Sustainability is about more than compliance or staying competitive; it’s also about corporate responsibility and leading the charge for a more sustainable future. Companies that fail to embrace circularity risk falling behind as regulations tighten, consumer preferences shift, and costs rise.
Younger consumers, in particular, are actively seeking brands that offer circular experiences, making this more than just an environmental or efficiency issue: it’s a consumer expectation. In contrast, those that act now will not only gain a competitive edge but also set the standard for ethical and responsible business practices.
Failing to adapt means missing out on a generation of conscious consumers. By leveraging AI, IoT and data-driven insights, retailers can transform their operations, cut waste, and drive meaningful environmental impact.
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