In a world of rising tariffs and supply chain disruption, could circularity be one of the smartest business moves a company can make? Danielle Holly, the Ellen MacArthur Foundation’s North America Lead, is joined by Tensie Whelan, founder of the Center for Sustainable Business at NYU Stern and former President of the Rainforest Alliance, to explore this and more.
In a world of rising tariffs and supply chain disruption, could circularity be one of the smartest business moves a company can make? Danielle Holly, the Ellen MacArthur Foundation’s North America Lead, is joined by Tensie Whelan, founder of the Center for Sustainable Business at NYU Stern and former President of the Rainforest Alliance, to explore this and more.
Tensie explains the ROSI (Return on Sustainability Investment) framework, developed at NYU Stern to help companies track and monetise the full value of sustainability strategies. This includes operational efficiency, risk reduction, new revenue and customer loyalty. Together, they explore how circular approaches can shorten supply chains and reduce exposure to tariffs and geopolitical shocks.
They also tackle the harder questions: why do most companies still not act, even when the numbers stack up? And what will it take to bring finance, governance and the boardroom along for the journey?
Sign up to the Ellen MacArthur Foundation's North America newsletter to keep up with the latest on circularity in North America. And if you enjoyed this episode, please leave a review or share it with a colleague to help us spread the word.
[00:00:00.400] - Tensie Whelan
Circularity to me is a superpower.
[00:00:04.960] - Danielle Holly
From geopolitical tensions to tariff shocks, global supply chains are under pressure. For many organisations, the question is no longer whether disruption will happen, but how to build resilience into the system. I'm Danielle and as Executive Lead for North America at the Ellen MacArthur Foundation, I'm constantly having conversations with business leaders about the role Circularity can play in building that resilience.
[00:00:30.030] - Danielle Holly
Today, I'm joined by Tensie Whelan, the Founding Director of NYU Stern Centre for Sustainable Business, where she now serves as a senior advisor. We'll talk about how Circularity can help reduce geopolitical risks, what her research tells us about value drivers associated with the circular economy and how measurement can help.
[00:00:53.870] - Danielle Holly
Welcome Tensie to the show. So excited to have you. This has been a long time coming, and I would love to start with you and your career. You've had such an illustrious career. You helped grow and scale the Rainforest Alliance, you founded the Centre for Sustainable Business at NYU, have served as an advisor board member for many organisations across industry and sector. What is the through line of your career? What really drives you and what comes next?
[00:01:28.670] - Tensie Whelan
Well, I think the thing that drives me, which is what drives you and your foundation, is impact. I just want to congratulate you on all the great work that you all are doing in the Circularity arena. But for me, it's been a career where I've been focusing on how do we leverage corporate supply chains, communications, investment to drive better sustainability performance for people and for the planet throughout the value chain. From my work at Rainforest Alliance, from small cocoa farmers or forest dwellers, to brokers, to brands, to retailers, to the customer.
[00:02:14.030] - Tensie Whelan
It's been fascinating work because it's been at the same time when everybody's been innovating around this whole arena. Circularity to me is a fascinating area because it really is about innovation and delighted to have been to be working with you all in some of our work together as well as learning from the work that you've been doing around how you can use Circularity to drive better environmental, social and financial performance.
[00:02:48.920] - Danielle Holly
I would love to dig into that a little bit. You have in our conversations, actually just before we hit record here, but also have written extensively around how the circular economy can support the response to geopolitical shocks. Natural disasters, last year it was tariffs, all levels of shocks to the system. Say a little bit more about that. What does that mean? What do you see in that?
[00:03:17.910] - Tensie Whelan
I've been both working at the field level with companies, with people and with doing research with corporates for 30, 40 years and mapping the benefits of different sustainability strategies from decarbonization to water conservation, et cetera. Circularity to me is a superpower. It's fascinating. It's fascinating because Circularity drives less virgin input cost, it drives less waste disposal cost, as well as less waste. It drives opportunities for resale, reuse. In other words, making more money off of the thing that you developed in the first place.
[00:04:07.730] - Tensie Whelan
It's got a series of different financial benefits to Circularity that we can talk more about as we have our conversation. One really interesting benefit is that it helps you with supply chain resiliency. Because if you're putting used product, reused product, recycled product back into a new product or reselling it, you are shortening your supply chain, and bringing it much, much closer to you. What is the impact of that? Well, one impact is, for example, if you're a US based company, and you're importing virgin product components for something you're manufacturing, you are less exposed to tariffs because you're putting used product that you're collecting in the US back into your product.
[00:05:05.020] - Tensie Whelan
As an example, GM, General Motors took a billion dollar right down to the tariffs. Billion dollars. They currently have a very small kind of reuse component programme. But if you look at Renault in Europe, they're designing their cars to be 85% plus recoverable. They've created two new businesses to actually bring in the old product, the old components, and another business to refurbish them and put them into new cars. They're now, I think, between 35 and 40% used car components in new cars.
[00:05:45.350] - Tensie Whelan
If GM had 40% used car components in new cars, it would have been that much less exposed to the tariffs. I would also say, sticking with the automotive example, it's not only about tariffs, it's about supply chain challenges, as we have big geopolitical challenges around the planet. When I was sitting on the board of Aston Martin, if we couldn't get one car component, we couldn't build the car. So again, if you're reusing products, you're less dependent on those globalised supply chains. You never get away from it completely, but you do reduce your risk.
[00:06:25.060] - Danielle Holly
Do you think that some of the activity we've seen, like the tariffs are actually going to drive Circularity forward? Like in that example, it would make sense for now GM to respond with circular economy approaches. What is the dynamic that's unfolding there?
[00:06:45.300] - Tensie Whelan
I think it'll happen a little bit. I think unfortunately many companies do not yet understand the superpower that is Circularity. So, they don't see this as an option because you do have to put in place the infrastructure, like Renault has done. There is upfront investment to go out and collect all this used product to refurbish it.
[00:07:05.280] - Tensie Whelan
That said, I'll give you an apparel example of someone I spoke to at an apparel company and typically that company, when there's a defect in their handbags, they incinerate them. This is very common in the industry. With the tariffs, it's now gotten too expensive for them to do that, so they're actually repairing them. I do think that there is some recognition. But where you need more investment in infrastructure and people who are sophisticated enough to understand all the financial benefits that make it worth it, I think we have a ways to go there.
[00:07:44.790] - Danielle Holly
Yeah, and we're seeing this across all of our missions, all of our material streams. We were talking about electronics before. A theme across all of them is that there is increasing business value right now that is becoming clear. I don't know if it's increasing itself, or it's just increasingly becoming clear, but we don't have the infrastructure at scale that we need to process these material streams, whether it's textiles or electronics or plastics. I mean we have them the innovation and the technology exist, we just don't have them in the right places and at scale. I think one of the opportunities for this moment is to showcase that need and that demand that we have.
[00:08:31.980] - Tensie Whelan
Absolutely. I think, you know, we have plenty of examples. I mean, if you look at eBay, for example, they've become a master in reverse logistics. They sell those preloved apparel or preloved products all over the world. They're now co-branding with companies where they have the platform. So Lululemon comes on and eBay basically does everything for them. I think what we need is more platforms like that for different industries. For automotive, or whatever type of manufacturing might be, critical minerals, you need to either have a company who sees this as a business model that I'm going to be a service to all this particular sector, or you have the sector come together and invest in one themselves.
[00:09:21.580] - Tensie Whelan
I think absolutely there's an opportunity here. Generally it'd be helpful to have government policy and subsidies to help start it, to get it off the ground.
[00:09:31.260] - Danielle Holly
Right. Because it really is a different capability that we need to stand up.
[00:09:36.700] - Tensie Whelan
It is, but we have the technology. The technologies are all there. Twenty years ago, no, now they are.
[00:09:43.930] - Danielle Holly
So, it's just a matter of actually making the business model work and having that technology be in the right hands. Tell me about the ROSI model. This is a model that you helped stand up while you were at NYU, and it helps unpack, essentially, the business value of some of these models. Can you give us a bit of the story of how it was created, what it helps do, what case studies you've seen?
[00:10:09.780] - Tensie Whelan
Yeah, absolutely. I came to Stern to found the Centre for Sustainable Business there because I was so interested in the business case for sustainability from my work at Rainforest Alliance. I saw so much value being created throughout the whole value chain, but nobody tracking it. I saw, as well because nobody was tracking it, we weren't adapting it at the speed and scale we needed because these are, this is capitalist system, these are companies that need to make their profit margins. And so if you don't understand where the financial benefit is, you're going to stay at the margins, and not invest at full force as you need to.
[00:10:50.380] - Tensie Whelan
We developed this Return on Sustainability Investment methodology, or ROSI, and identified nine drivers of better financial performance that will unlock value when you embed sustainability into your business strategy. Those nine drivers include operational efficiency, which is a huge one, which we'll come back to for Circularity, innovation and growth, also great for Circularity, reduced risk of all types, market, regulatory, reputational, also relevant for Circularity, sales and marketing, customer loyalty, benefits, employee retention, recruitment and a series of other drivers of better financial performance.
[00:11:38.280] - Tensie Whelan
Obviously any kind of good management can drive innovation and growth or operational efficiency. But what we see is that, for example, the typical sort of optimisation, supply chain optimisation, operational efficiency courses do not include sustainability even today in their teaching. When you look at what waste is, basically it's the ultimate in an operational inefficiency. You're buying more than you need to pay to dispose of what's left over. Case closed. That is the holy grail of operational inefficiency. But that is not how it's seen today with both virgin inputs and commodities being coming, more expensive, waste disposal becoming more expensive, energy and water as inputs into the manufacturing process becoming more expensive.
[00:12:35.880] - Tensie Whelan
I think the mindset is beginning to shift, but we have a number of areas where it's hold people back from that. The ROSI work is really looking at, how do we actually move from understanding those drivers of better financial performance using for example Circularity or decarbonization, et cetera, in different areas? What are the benefits? And then how do you begin to monetize those benefits? I'm going to use a decarbonization example for a minute just because it illustrates how people don't really think the whole thing through.
[00:13:06.760] - Tensie Whelan
Let's say you are decarbonizing a facility by putting in LED lighting. You're going to have energy savings, but you're also going to have avoidance of energy pricing volatility. We are in a moment right now where that's a clear benefit. You will have avoidance of future regulatory risk, carbon border adjustment tax for the products produced out of that factory, for example. You will have, and here's where companies don't even think about this, reduced maintenance costs. When you put in LED lighting, you don't have to climb way up in the ceiling regularly to go change those light bulbs.
[00:13:45.400] - Tensie Whelan
You can reduce your maintenance cost by 50% plus, you can also improve productivity significantly. If you're in a factory, you may have lower incident level rate. These are all things that nobody looks at when they're looking at, "Oh well, you know, it's going to cost me, I'm going to have a payback period of five years to put in these LED lights. So I'm not going to do it."
[00:14:07.160] - Tensie Whelan
The ROSI framework is really about getting into that and really understanding these drivers and how you actually monetize all the benefits of employing different sustainability strategies to tackle material ESG issues for your industry. Any industry that manufactures anything is dealing with all of these challenges. And which is where Circularity can come in. We can talk more about that.
[00:14:31.210] - Danielle Holly
It's on the cost and on the revenue side, right? Because some of it is the reduction of costs. One of the things that we spend a lot of time thinking about is how do we decouple revenue from production. The circular economy is not an anti growth agenda. It is about how do we tease apart those two things so that companies and industries can still be profitable while reducing what you explained so brilliantly, this operational inefficiency by design. Does ROSI get into the revenue side of the equation as well?
[00:15:12.450] - Tensie Whelan
Absolutely. Yeah. Let's just look at, for example, we did a deep dive into automotive Circularity, an example. We looked at this in Europe where this particular company was reusing 2.5% of used car components, putting it back into new cars and selling 10% to recyclers and paying to dispose of the rest. Because in Europe you're responsible for the end of life of the vehicle. So this company had not tracked those financial returns which this is what I find over and over and over again with every single company that we talk to. They have not tracked the financial returns. They thought it was a compliance issue. They weren't tracking it.
[00:15:55.250] - Tensie Whelan
They were netting $100 million from that and did not know it. Partially from sales of the 10% recycling product to recyclers. Also through cost avoidance, through the 2.5% they were putting back into new cars, and cost avoidance from energy and water use, et cetera, manufacturing that they no longer had to do. There were a series of different benefits. Another example would be we worked with two apparel companies, both Eileen Fisher and Reformation, to look at the financial returns associated with them having purchase of used apparel and resale of it.
[00:16:37.640] - Tensie Whelan
Eileen Fisher did it on their own in a renew programme, Reformation did it with ThredUp, a platform. What we found in both cases is that they were netting close to $2 million, which for companies of their size was quite beneficial from their reuse programmes. They were benefiting from it in a variety of different ways. There was the direct sales of the used products. In other words, you're getting a second bite of the apple. There was the benefits, in order to incentivize this, they provided coupons, so people coming back to buy more product with the coupons, so they had incremental sales.
[00:17:16.760] - Tensie Whelan
The most important one, particularly for Eileen Fisher, but also for Reformation, was bringing in new customers with next to no acquisition cost. We actually monetized what it would have cost them to acquire these people, which they basically acquired through them just having this programme. They also got a lot of free earned media which they would have had to pay for otherwise. So we also looked and monetized that to find out what it would cost them to have paid for that. When you look at all those things together, really significant benefit for them.
[00:17:51.650] - Tensie Whelan
The final example I'll give you is less a revenue example, but more a cost efficiency example. Healthcare industry in the United States responsible for more than 8% of greenhouse gas emissions. Globally it's 4.5%. In the US, of course, we do everything bigger, but not necessarily better. Anyway, so part of the problem, there's many problems. One is just this is off-topic but really interesting is that the type of anaesthesia you use, some of it is like a huge greenhouse gas emitter and some isn't. And it's sort of nobody's-
[00:18:26.640] - Danielle Holly
Interesting.
[00:18:27.650] - Tensie Whelan
Putting that in as a design criteria. Anyway. But one is, a big area is of course all the single use products. We worked with a company, I think this was with Gundersen, to help them assess if they put in place a refurbishment programme of medical devices, rather than buying new all the time, what the financial benefit would be for them. For the cost of half a million dollars, one time, they were netting $3.5 million annually of financial benefit. So, again, every single example, you look at this, and I can keep talking about it, it's fascinating to see how from both a revenue and a cost efficiency perspective, Circularity really is a financial superpower.
[00:19:20.470] - Danielle Holly
Once that business case is made, I think we both have been exposed to that's not it, right? There is still very much a leadership and a cultural shift that is needed to move a lot of this into practise. I'd just be curious what in your mind needs to happen in addition to the business case and some of these companies and when we're thinking about industry overall and moving the needle?
[00:19:53.730] - Tensie Whelan
I think first and foremost we need to involve, educate, engage finance, the finance function. And we actually need to change our accounting systems. Because, and this is true not just for sustainability, finance doesn't track avoided cost, period. Again, nothing to do with sustainability. That's not part of how they analyse. But when you're talking about, for large companies, hundreds of millions of dollars of avoided cost, for medium and small companies, millions, and you're not tracking it, you have a big blind spot in your decision-making and in your investment pathways and your innovation pathways.
[00:20:39.160] - Tensie Whelan
I have a colleague, he's retired now, but at Stern, he did a lot of research into intangibles and how you better account for them. The challenge with companies today is, in the 70s, 80% of a company's valuation was in tangible assets, like their stuff. Today, it's more than 80%, 85%, 90% in intangible assets, which is their reputation, their people, their IP, et cetera. So our accounting is not fit for purpose, generally. And it's not fit for purpose for sustainability either. So, I think one area that is really important is to have, in addition to engaging finance, helping them understand this challenge of actually beginning to track of what it costs as well as revenues and all the other things that you do also not applying a different lens.
[00:21:31.150] - Tensie Whelan
Here's one of the other things that happens with finance and everybody else in corporate leadership, is that they apply a different lens to sustainability than anything else. If we look at all the money going into AI right now and how much money is being wasted on the idea that, "Well, some of this is going to pay me back at some point." But when you talk about sustainability, it's like, "Well, no, it's going to cost too much. I don't believe your projections around risk or your projections around. I'm just going to focus on cost." I have had so many conversations with companies who say, "Well, it's going to cost X, but not what the..." Haven't really looked into what the benefits would be.
[00:22:08.110] - Tensie Whelan
When you dig deeper, and you say, "Look, you put forward projections around marketing, right? And sometimes they're wrong and sometimes they're right. You're used to doing projections. Why can't you do projections with sustainability? It's like you're applying a completely different set of rules." Because of that, I think, you need a governance system that includes the board with, at least until it sort of gets embedded into the organisation, an aligned financial sort of investment process, where you can support sustainability linked innovation and investments with a more robust analysis and with executive leadership and board support as a way to make the transition happen.
[00:22:55.110] - Tensie Whelan
They're doing that in a way for AI right now. There's no reason why they shouldn't be doing it or couldn't be doing it for sustainability. Some companies are, but I think we need more of that.
[00:23:03.990] - Danielle Holly
Right. I mean, much more to say on that, but in our final moments together, and maybe we'll have you back to continue that piece of the conversation, because I do think that's one of those how do we level the playing field and just shift mindset and how we're looking at the risk and value return. But in the meantime, bring us into your crystal ball. What do you think is next over the two to three years in North America and globally on circular economy, on sustainability?
[00:23:37.410] - Tensie Whelan
Well, I mean, as you know better than I, we're only using reusing, recycling, upcycling, less than 7% of all of the materials that we extract every year. That has just accelerated exponentially over the last couple of years. Alongside of that, we have energy volatility, lack of water access and then geopolitical volatility around, we were talking about earlier critical minerals, et cetera. In this world of extreme volatility and more challenging access to raw materials, as well as more and more concern about the disposal of those materials from a waste perspective and the impacts on our health, and therefore costs going up, I see companies beginning to take more seriously the opportunity to reuse and put product back into their manufacturing processes, packaging processes, et cetera.
[00:24:47.740] - Tensie Whelan
We've seen it in areas like aluminium and steel and that's going to accelerate as we see the carbon border adjustment tax in the EU and other areas, but also as just the finances of it make sense. Energy again with manufacturing you have so much energy and water costs going into the virgin stuff, far more than the reupcycling. I do think that the economics of this are going to drive more focus on it if in fact they get the sort of understanding and training that actually this is an opportunity because still a lot of companies just don't get it, do not understand it and haven't really thought about it this way.
[00:25:24.350] - Tensie Whelan
But I do think that that is a huge opportunity. As you mentioned earlier, I do agree with you that critical minerals is a huge area for all the reasons that we know. And I would say that we're seeing that in the consumer facing arena that in fact apparel is doing really well with this model. I think moving outward from apparel to electronics, to cars, to other things that consumers start to feel safer about because I think there's been questions like, well, if I have a car made of used components, or I have electronics made of used components is not going to work as well as the new one.
[00:26:10.520] - Tensie Whelan
I think as adoption grows and spreads out and also the costs lower for the customer. So it's not just virtue signalling, it's actually this is a great opportunity for me to get a product that is just as good but a lower price and then for the companies to do really well on it as well. I think we're going to continue to see growth of this. And then the final thing I would say on that too is that what's been interesting about the eBay model is that they have depth in emerging economies and developing markets.
[00:26:45.130] - Tensie Whelan
Those markets can't generally pay as much as we do for virgin products. But if you start to expand your offerings into these used products that are good quality, very important, you'll start to be able to reach a broader demographic around the world, which I think any multinational company could get excited about.
[00:27:05.720] - Danielle Holly
Absolutely. Wonderful. Thank you so much. You know, I think right now we are thinking a lot about what you just talked about. Moving from these proof points, these business cases that are made, this increased comfort in particular companies, industries, models and figuring out how to scale that. And that is really... The raw material is there, it's just a matter of getting it broader and broader. That hand gesture will stay with me, Tensie, for a while. I think that is the circular economy future in mime. Thank you so much for joining us today, taking your precious time and really eager to continue the conversation. We'll talk again soon.
[00:27:50.610] - Danielle Holly
So, we've heard that the circular economy is a superpower in a moment of geopolitical turbulence, that we're not fully capturing the value that circular economy is already delivering for our businesses, and that for the most part, the technology and innovation we need already exists. We just need to scale it. Thanks for listening to this episode of the Circular Economy Show. If you enjoyed it, then please share it with someone who might like it too, and we'll see you next time.