The Circular Economy: Unlocking New Potential for Supply Chains

November 23, 2015
  • Aron Cramer portrait

    Aron Cramer

    President and CEO, BSR

Over the past quarter-century, little has changed business, or the global economy, more than the rise of supply chains as the core organizing principle for production and distribution of everyday products.

It is likely that in the next 25 years, fundamental changes in consumer expectations, natural resource constraints, and technology advances will remake every aspect of business, not least for supply chain models.

One approach for staying ahead of these changes is circular economy thinking. The circular economy holds the potential to revolutionize the production model the world relies upon. This is no small thing: CDP, for example, estimates that 50 percent of the average company’s carbon emissions are embedded in its supply chain.

What, then, are some examples of what can—and should—change?

Four core steps can lead to circular supply chain models that drive sustainability progress.

The first step requires a change in thinking. Circular economy principles envision a departure from the traditional “take-make-dispose” model in favor of a system that radically reduces—or eliminates—waste. As is so often the case, it is as much the “software” of our thinking as the “hardware” of our practices that drives or prevents change.

Second, circular supply chains require changes in product design. Everything from automobile components to athletic footwear can be re-imagined to ensure that components have fewer toxic elements and can be easily reused or recycled.

Third, circular supply chains require radical collaboration. Too often, production capacity is used inefficiently. Competitors share facilities but in many cases fail to coordinate production, resulting in excess—or strained—capacity. Companies are increasingly looking to manage their costs, and connected machines drive greater efficiencies. The obvious competitive issues that prevent optimizing capacity may be a luxury that companies can no longer afford.

Finally, the reverse cycle to reclaim materials is a fundamental element of the circular production model. The creation of reverse logistics not only reduces or eliminates waste, but also brings economic opportunities from the repurposing of scarce natural resources, which can generate new enterprises, as well as additional employment for people populating these efforts.

One thing to note is that, on its own, this model may not address ongoing issues regarding supply chain labor practices. That said, greater coordination among buyers could result in more concerted efforts to ensure the fair treatment of workers, as well as a material reduction of the production spikes that cause overwork in export facilities.

Circular economy principles have always made sense in terms of wise use of natural resources, and this remains true, now more than ever. And with increasing imperatives to reduce waste, more openness for collaboration among buyers, and growing ambition regarding companies’ climate pledges, the time is right to use circular economy principles to redefine supply chains for the next quarter-century.

BSR is increasing its focus on circular economy, working with our member companies to help them integrate circular economy into their strategies.  We have also established a partnership with the Ellen MacArthur Foundation to maximize the impact of these efforts and draw on the important research undertaken by the Foundation. Additionally, BSR is an institutional partner of the Sustainable Innovation Forum (SIF15), the largest business-focused event taking place during COP21, which will feature a keynote session on this topic.

Let’s talk about how BSR can help you to transform your business and achieve your sustainability goals.

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