Growth of the Circular Supply Chain

Growth of the Circular Supply Chain

Sustainability is a growing trend embraced by all companies, countries, and institutions. Global companies are heavily investing capital towards sustainable initiatives, seeking to minimize their waste, carbon footprint, and alleviate today’s world damage for tomorrow’s generations.

 However, existing patterns of production, consumption, and supply chain still remain dangerously unsustainable. The rate at which we are consuming resources, the world will deplete many natural resources in the foreseeable future. We need to change the way we consume, the way products are sourced, produced, delivered, used, reclaimed and regenerated.

 Multinationals such as Ikea, Coca Cola, and Nike have launched innovative programs including using alternative fuels, becoming energy sufficient, changing their product packaging, and most recently, pushing towards building a circular supply chain. Let us understand what entails a Circular supply chain? It is a recent practice that involves eliminating the percentage of waste and reaching continual use of resources. Circular supply chain aims to keep products, components, and materials at their highest utility and value at all times in both biological and technical cycles. This means biological ingredients or nutrients are safely returned back to the biosphere to enhance natural capital and technical nutrients are designed for recovery (remanufacturing, refurbishing, and recycling). They are maintained within the Technosphere by circulating in and contributing to the economy with minimal wastages.

 Circular supply chain involves return management and reverse logistics that allows companies to ‘re-use’ as much as possible, and not to have to dispose off as frequently, thus minimising wastages. More and more companies are employing the circular supply chain within their businesses to minimize their impact. Large institutions such as the United Nations are also propelling the circular economy.

 In 2015, the Sustainable Development Goals (SDGs) were established for global supply chains. Companies worldwide are examining how to use the SDGs to improve their practices. They are effectively working on the majority of SDGs, not as a cost item but as a business model. However, this same action is labelled differently in different countries. In some, it is referred to as actions under the framework of the SDGs; in other countries, climate issues are the dominant driver for these actions. Nestle for instance has made their packing 100% recyclable and reusable, to reduce the use of plastics and to give a second life to products creating a positive contribution to SDG 12 and SDG13.

 Sustainability has become a key concern for conscious consumers, and this has been having a knock-on effect on brands. The key to this strategy is to create a closed-loop structure, to eventually diminish resource inputs, waste, and carbon footprint. Addidas launched its FUTURECRAFT.LOOP project which is aimed at tackling the problem of plastic waste, enabling a “closed loop” or circular manufacturing model, where the raw materials can be repurposed again and again. Nike also, for instance, used the circular supply chain practice as a competitive advantage to lower the prices, thus increasing consumption. Their plan is to refurbish returned trainers and sell them at lower: more affordable prices. Thus, overall, extending product life and reducing unnecessary waste. At the same time, this helps in increasing engagement with customers and empowering individuals to become part of the stainable movement. Thus, increasing consumer loyalty.

 The market for circular economy is estimated to reach $4.5 trillion by 2030. More and more companies are outlining strategies for employing a circular economy and measuring its impact on supply chain operations. Creating a successful circular supply chain and to accelerate related initiatives requires policy level decisions, rethinking of business models, and building a solution canvas for digital transformation. To implement these strategies, organizations can leverage design thinking across all stages of product development and implementation. Companies can use intelligent connected ecosystems such as IOT and cloud technologies, digital twins and leverage the benefits of blockchain. Thus, successful adoption and implementation depends upon the right mix of contextual, industry-relevant knowledge, creative and inclusive design practices.

 Additionally, companies will have to navigate through a large number of changes in business operations and management direction to efficiently implement circular supply chain while optimising financial returns on investment. Sustainability platform such as Corpstage, provides advisory services and platform to enable corporates to launch their transformative strategies and adopt circular supply chain models while focusing on financial benefits. Companies can evaluate their entire value chain and launch, manage, and monitor their new sustainable initiatives in addition to collaborating with service providers/vendors in the ecosystem.

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