Circular Supply Chain driving Sustainability
Businesses and manufacturing in particular can not function without raw materials, they are a life blood of any product creation. However, raw materials are expensive and a major cost and environmental footprint for manufacturing, especially in a market with high price volatility.
This is why a shift from the usual or traditional linear ‘design, make and discard’ supply chain, towards a Circular Supply Chain model, one that is based on driving Sustainability and seeing it as a strategic differentiator, not a cost driver.
Circular Supply Chain is a sustainability approach which encourage businesses and organizations to remake or refurbish used products into reusable material and create a closed loop in product making.
Contrary to the traditional linear supply model where products are discarded at the end of their lifecycle, a process that is dated, expensive and with a pollutive dead-end, a Circular Supply Chain model, refurbish used products back into raw material for reuse.
A closed loop approach which decisively cuts down on the cost of material and waste, among several other benefits.
In this piece we look at how Circular Supply Chain approach can enhance business sustainability and strengthen supply-networks.
Circular Supply Chain enable businesses to meet their triple bottom line while addressing both the financial and environmental cost factors.
Fortunately, the Circular Supply Chain approach continues to gain momentum, and a number of top global brands are steadily moving away from the traditional linear supply chain approach, towards a more profitable and sustainable Circular Supply Chain or closed loop operating system.
These global brands include:
▪ On, a Swiss based high-performance sportswear brand, operating around the globe.
The company runs a recycling program that allow customers pay a reasonable monthly subscription fee, and return used up On products (sportswear) back to the company for recycling, this, in exchange for a latest version of the product.
▪ Adidas’ “Take back” program. Where the company accepts items like old footwear which are then recycled for reuse.
A program that has produced 11 million pairs of shoes containing recycled plastic in 2018, 6 million pairs more than it produced in 2018.
▪ Nike’s “Reuse-A-Shoe” program. Where customers recycle their old shoes, which the company transforms back into new shoes for sale, hugely saving the business on material cost, among several other benefits.
▪ Renault, the French car manufacturing company. One of the original businesses to have successfully applied a circular Supply Chain approach.
Decades ago, Renault’s goal was to create a business that could excel in an economy low on raw materials. Now, the company’s major car components are designed in such a way that they are easy to disassemble, in pursuit of its long standing recycle and reuse objective.
Businesses are increasingly understanding that the traditional linear methodology of; make, consume and discard is unsustainable and dated. They recognise and appreciate the many benefits that come with a Circular Supply Chain approach.
The benefits which include the following:
- Cost Savings
It costs less in material, labour, energy and other ancillaries, to recycle or refurbish an item for reuse, than it is to build one from scratch.
Using Circular Supply Chain model, manufacturers collaborate with the designers and users/consumer of the product, in order to create a product that is easy to recycle and fully refurbish for reuse.
By using recycled material, the Circular Supply Chain model significantly reduces the overall costs of production, thereby saving huge sums of money — across the board.
- Stronger Supply Networks
A big shift is currently taking place in Supply Chain management, where businesses are moving away from the current fragmented linear siloed approach, towards a more collaborative, systematically coordinated and operationally transparent supply network system.
A well-integrated Supply network system that builds capacity and enables circularity.
Circular Supply Chain model requires closer engagement and collaboration between parties (i.e. designers, manufacturers and consumers) along the supply network. Over time, these closer collaborations build trust, lead to operational transparency and process visibility hence, strong, agile, and resilient supply-networks.
- Carbon Footprint Reduction
Going green has been the hot topic in every industry for years. Benefit of a healthier environment across the globe are too evident to even debate.
Now and again it has been proven that; the traditional way of dumping used products and scrap has caused untold and serious damage to the environment and its inhabitants.
According to a report by, the United States Environmental Protection Agency (EPA), America produced 262.43 million tons of trash in 2015, which amounts to 3.5 million tons more than in 2014, and trend goes on.
Businesses are therefore expected to play a key role in ensuring that their operations do not continue harming the environment, its fauna, flora and people. The people/customers to whom the business intends selling its products.
Consumers are increasingly becoming conscious of the environment vis-a-vis their health. As such, most are even willing to pay an extra amount for environmentally friendly products.
There can never be a more responsible and sustainable way for a business to make profit and grow, than preserving the environment it operates in.
The Circular Supply Chain approach as a carbon footprint reduction exercise, makes a lot business sense in this regard.
- A Sound Business Strategy
Cost projection is one of key requirements for business planning and budgetary control.
Unfortunately, this is often hampered by constant market volatility and spikes in price, among other supply chain struggles.
By applying the Circular Supply Chain model (through recycling and refurbishing), manufacturers and businesses in general can avoid the full and often disruptive impact of sudden fluctuations in the price of raw materials. As such, they are able to accurately plan their expenditure, therefore maintaining their production and steady flow of goods or services to their customers, at reasonable prices.
Proving that; Circular Supply Chain is indeed a sound business strategy.
- Adherence to Laws and Regulations on Climate Change Prevention
Waste disposal management is generally a thorny issue. Pollutants like; greenhouse gases and poisonous chemicals are often emitted from manufacturing plants, poisoning all sorts of lives along their way. An industrial disaster that if not controlled, will continue worsening the climate change.
Hence, the need for responsible and sustainable operational approaches like; the Circular Supply Chain model, which in essence upholds the laws and regulations aimed at preventing the environment and society at large.
There are too many reports showing how irresponsible businesses are polluting and damaging the environment.
They include:
- The desert sun report on the Rio Nuevo river, along Mexico — US border, where the river seriously contaminated by toxic chemicals from electronic and auto part manufacturing companies around the area.
- An Eco Watch report which estimates; 70 percent of rivers and lakes in China to be contaminated by 2,5 billion gallons of waste water from the textile industry.
- Aljazeera report on Bangladeshi garment factories which are dirtying waterways, and badly impacting the poor masses in the process.
https://www.ecowatch.com/fast-fashion-riverblue-2318389169.html
https://www.aljazeera.com/videos/2019/07/01/bangladeshs-garment-factories-pollute-rivers/
Fortunately, several laws and regulation are in place around the world, aiming at addressing this massive environmental challenge.
Some of the regulations are: -
● EU Packaging Directive, which require EU countries to recycle at least half of their packaging waste.
● UK Landfill Directive, requiring all UK based companies to recycle or treat their waste products.
● Japanese Recycling Laws, which require businesses to recycle their waste products like plastics into something reusable.
Nothing gives a business more peace of mind and pride than its adherence to the governing laws and regulations.
Clearly, Circular Supply Chain, given its win-win approach, is a sustainable model that can assist businesses meet and even exceed environmental protection regulations — total peace of mind this regard.
The traditional ‘made, consume/use, throw away’ approach is a dead-end, wasteful and very expensive.
The Circular Supply Chain’s recycle, refurbish and reuse strategy is the best approach businesses should apply.
A competitive advantage that does not only generate a new source of revenue, but positively contributes toward sustaining the environment, enhance collaborations and strengthens supply networks.
The fact that Circular Supply Chain sustainably design waste out of the product right from the outset, is what results in lower material cost, and therefore affordable good quality products, satisfied consumers and loyal customers, while providing a reasonable return on investment.
No wonder its increasing popularity across industries.
