The global pandemic disrupted the flow and pricing of raw materials and finished products, but circular economy models help build supply chain resilience in the face of such disruptions.
Recent research from Gartner offers guidance to chief supply chain officers (CSCOs) on how to start and advance their circular economy strategies.
This article recaps the key points, edited for clarity and length.
How does the circular economy help supply chain resilience?
In a traditional linear economy, products are made, used, and disposed of. In a circular economy, resources are kept in use for as long as possible to extract the maximum value from them (unlike the traditional make, use, dispose model). At the end of a product’s life, materials are recovered and regenerated.
The circular economy is based on three tenets that support supply chain resilience:
Applying the circular economy could unlock trillions of dollars in the global economy, create hundreds of thousands of jobs and lead to millions of tons of avoided emissions.
So what is holding businesses and economies back from maximizing this opportunity?
Overcoming 3 barriers to a circular economy
Lessons learned from top supply chain companies (top performers in the Gartner Supply Chain Top 25) show that progressive supply chain organizations act to address three potential barriers to a circular economy:
What actions do they take?
Action No. 1: Influence product design early to consider circular economy
When the choice of raw materials is locked in at the design stage, it can complicate end-of-life product management and refurbishment. The supply chain organization must assume the role of a collaborative business partner in the design process to influence raw materials decisions proactively. Provide input to materials selection decisions, outlining opportunities for materials innovation and co-authoring circular economy design principles.
Our research shows that 70% of the Supply Chain Top 25 have included circular economy principles as part of innovation and design.
Common approaches include:
Action No. 2: Drive customer engagement in the circular economy
Transactional business models rely on customers to return end-of-life products or select the most appropriate disposal routes to enable materials recovery. Organizations are leveraging product-as-a-service models to ensure direct access to end-of-life products for refurbishment or recycling.
Some companies use third-party criteria to assess product sustainability and circular economy performance. This looks like an environmental scorecard for each product to support consumer purchasing decision-making processes. Organizations are also offering product repair and maintenance services to keep products in use for as long as possible. This can be achieved through pay-per-repair models or by offering extended product warranties.
Our research shows that 40% of Supply Chain Top 25 organizations publicly outlined some of their approaches to improve customer engagement to drive circular economy outcomes.
Among the actions supply chain organizations can take are:
Action No. 3: Set clear criteria for circular economy partnerships
A circular economy is a system change that relies on collaboration for problem-solving and to achieve scale. Our analysis of the Gartner Top 25 showed that 77% of supply chain organizations are collaborating with at least one of the following groups: Startups, specialist recyclers, foundations, and international groups.
Organizations are also launching a cross-industry collaboration to achieve scalable circular economy solutions. Collaboration requires both time and resources. Supply chain leaders must be clear on the resources required and the return expected from collaborative relationships.
Among the criteria:
The original article by Gartner senior director analysts Sarah Watt and John Blake is here.
The views and opinions expressed in this article are those of the author and do not necessarily reflect those of CDOTrends. Image credit: iStockphoto/BsWei