Why circularity is a smart move for business amid tariffs: PwC

Authors

David Linich, Sustainability Principal, PwC US

Tensie Whelan, Tensie Whelan, Distinguished Professor of Practice at NYU Stern and Founding Director of NYU Stern Center for Sustainable Business

The Trump administration’s tariffs announcements have led to significant uncertainty in global markets and forced companies to rethink their approach to international trade. Public debate has largely centered on the economic and political fallout — volatile stock markets, inflation risks and employment concerns. Yet a less examined but crucial side effect is how sustainability, and in particular circular business models, are being considered as part of companies' responses to tariffs.

The tariffs aim to protect domestic industries and curb reliance on imports — especially from China — but they've done something more by exposing the vulnerabilities of global supply chains enhanced for efficiency, not resilience. Many rely heavily on a few key suppliers or regions now subject to tariffs.

As a result, many businesses are taking a hard look at material sourcing, product design, manufacturing processes and where goods are sold. In turn, that is leading them to reexamine circular business models that focus on putting used products back into new goods, reducing purchases of virgin material and decreasing waste. Instead of winding up in a landfill, circular business models give a variety of materials a second life — and can reduce costs for the manufacturer.

Circularity isn’t new — many companies have explored it before but may have found it too costly or complex. Now, though, shifting market forces are changing the equation. AI, robotics and other technologies are transforming everything from product development and inventory control to the breakdown, sorting and recycling of used materials. At the same time, consumer demand for sustainable goods is surging.

And there is the breakthrough: Amid this disruption — and with a timely trade resolution uncertain — many companies are considering whether circular business models can help them avoid tariff costs while simultaneously sparking innovation, reducing operating costs, building brand value and driving long-term growth.

Circularity gets strategic Turn your products into your supply chain

Companies are assessing the structure and composition of their supply chains and that should serve as a catalyst for circular business model principles. This approach is more than just localizing operations. When companies move production closer to where their goods are consumed to avoid tariff costs, it's an opportunity to re-examine the operational viability of implementing more effective, closed-looped systems such as reusing materials in new products, recycling components and parts, and refurbishing and reselling used products. This can extend product life and help companies avoid purchasing virgin material. In such a model, your sold products eventually become part of your local supply chain, reducing risks inherent in a globalized supply chain. Keep in mind, though, that such a system may require new construction, new operations or new suppliers and vendors that have the capabilities your organization likely does not have.

We see circularity having a profound effect on key stages of a company's supply chain:

Companies that consider circularity are realizing that, regardless of whether they are producing cell phones, computers, cars or clothes, embedded in those goods are many of the resources needed to make another one. Before the tariffs, many companies were already challenged by a geopolitical risky world and resource constraints. By reusing fabric or electronic components, or incorporating recycled materials into design, companies may be able to avoid those risks, reducing some of the costs associated with virgin materials and tariffs.

Consider Apple, whose recent Environmental Progress Report showed it has surpassed a 60% reduction in its global greenhouse gas emissions compared to 2015 levels. Apple has a goal to be carbon neutral across its entire corporate footprint by 2030. To do that, the company has become an industry leader in the refurbished smartphone market. Its Daisy robot disassembles up to 1.2 million iPhones each year, recovering valuable materials like cobalt. The report detailed how the company now uses 99% recycled rare Earth materials in all magnets and 99% recycled cobalt in all company-designed batteries. Earlier this year, the company introduced a new MacBook Air that is constructed from more than 55% recycled materials.¹²³

As tech companies ramp up data centers, Microsoft is partnering with Western Digital and other firms to increase the collection of electronic waste from its centers, allowing it and its business partners to recapture rare Earth elements and other metals like copper, aluminum and steel and incorporate them back into the supply chain.⁴

In construction, home builders and contractors are “urban mining” buildings and infrastructure to reclaim steel, copper, aluminum and more.

Renault, meanwhile, is incorporating refurbished engines, batteries, gearboxes and recycled plastics and metals into its vehicles. The company aims to use 33% recycled materials and cut emissions by 80% per vehicle by 2030 compared with 2019 levels. Renault may not sell cars in the U.S., but the takeaway for industry peers is clear: circularity can be a powerful strategy.⁵

As the case for circularity makes more financial sense, companies may find that a redesigned product may now be the smarter, more cost-effective choice. This is the moment for companies to embed circularity into each stage of design: from materials and packaging to consumer use and end-of-life disposal.

Dell Technologies has been implementing circular practices for more than two decades. Designers use learnings from recyclers and repair professionals so their products can be easily repaired, upgraded or disassembled. By 2030, Dell says more than half of its product content will be from recycled, renewable or reduced carbon emissions material. This corporate mindset carries over to materials sourcing: Dell accepts used computers and electronics for recycling and says its Reconnect program has successfully recovered and recycled more than 635 million pounds of electronics in its 20-year history.⁶⁷

Manufacturing is an important part of a circular business model, allowing companies to reduce material waste and energy demand within factory walls. Digital twins can help improve manufacturing by creating real-time, virtual replicas of physical processes, machines or entire production systems. AI systems can improve design, durability and disassembly and enhance production schedules, detect defects early and adjust machinery to use only the necessary number of materials. Predictive maintenance helps keep equipment running and sensors can adjust lighting usage when areas of a facility are not in use.

Companies should also consider planning and product lifecycle management tools that can provide a greater understanding of where waste is more likely to occur in the manufacturing process so that steps can be taken to help mitigate this risk in advance. These tools can also help organizations make better use of inventory and production line scheduling, while also providing insights into material management to see if substitutes are a viable option.

Boeing employs automated systems that precisely apply carbon fiber, reducing excess material. Scrap aluminum from aircraft production is collected, melted down and reused.⁸ Pepsico aims to replenish back into the local wastershed 100% of the water used during operations in facilities located in high water-risk areas.⁹

So where do companies source reused materials? Many have launched take-back programs that incentivize consumers to return used products for reuse, recycling or refurbishment. These initiatives can be surprisingly cost-effective. With small incentives, companies encourage returns then save money by reducing reliance on virgin materials and avoiding tariff-related costs.

Patagonia's Worn Wear program accepts used clothing, which is then repaired, resold or recycled into new apparel.¹⁰ Renault has created an entirely new business to work with a network of recyclers to get parts from end-of-life vehicles.¹¹

One of the bigger beneficiaries of the tariffs may be second-hand resellers such as ThredUp, who aim to reduce the 73% of apparel that winds up in landfills or is incinerated by recycling and reselling garments. If inflation bubbles up, price-conscious consumers may flock to these types of companies to save money on name brand clothing.¹²

Time to execute Technology, supplier engagement and other tools for successful circularity

True circularity requires coordination, technology and data sharing in each corner of the value chain.

Engagement up and down the value chain can be imperative to a company’s success. Companies will likely need to build new capabilities into their value chain. Start by talking with existing suppliers, vendors and customers to assess if they can source sustainable materials such as recycled fabrics, plastics, metals and bio-based alternatives. Such an assessment may lead companies to a new slate of business partners that can disassemble old products and sort the components for eventual reuse in new goods.

Companies that act can potentially realize significant benefits, especially those in the electronics and consumer goods sectors. AI and digital twins can help companies innovate by reimagining how their products are designed, manufactured and sold. Data analytics can provide valuable insights into how to reduce costs inside a facility or help identify new product opportunities. Our upcoming research shows that products marketed for their sustainability features realize strong sales growth and command price premiums.

Circular business models also offer operational gains such as cutting reliance on costly imported materials, reducing transportation disruptions from extreme weather events and lowering waste at a time when extended producer responsibility laws are an emerging risk.

From cost savings and tariff avoidance to brand differentiation and reduced environmental impact, the case for circularity is strengthening. The companies leading the charge will show that circularity is both practical and profitable.

_{1. Apple surpasses 60 percent reduction in global greenhouse gas emissions. Apple Inc. April 16, 2025.

2. Environmental Progress Report 2025. Apple Inc. April 16, 2025.

3. Apple expands global recycling programs. Apple Inc. April 18, 2019.

4. At-Scale, Hard Disk Drive Rare Earth Material Capture Program Successfully Launched in the United States. Western Digital. April 17, 2025.

5. Renault Group, world leader for sustainable industry in 2030. Renault SA. March 26, 2024..

6. Accelerating the circular economy to reduce waste. Dell Technologies webpage.

7. Dell Reconnect celebrates 20 years of recycling. Dell Technologies. November 15, 2024.

8. 2024 Sustainability and social impact report. The Boeing Company.

9. ESG topics A-Z: Water. PepsiCo webpage.

10. Gear for a Good Time and a Long Time. Patagonia webpage.

11. The activities of The Future is Neutral. Renault SA.

12. Thrifting Can Help Solve the Fashion Waste Crisis. ThredUp webpage.}

Why companies should start to reconsider the business case for circularity

Circularity gets strategic Turn your products into your supply chain

Time to execute Technology, supplier engagement and other tools for successful circularity

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