How to apply Circular Economy concept in supply chain
The economic development witnessed in recent years has brought a series of benefits for companies, such as the implementation of new technologies, which has promoted considerable gains in productivity. However, large-scale production has also caused an uncomfortable “side effect”: the increasing generation of waste, which is discarded after its useful life.When buying a new appliance, for example, how do you deal with the old equipment? Do you have any concerns about its reuse? In addition, do you imagine what happens to the waste generated by it?
Many experts argue that this model of buying and generating waste will not work in the long run. That is, it will be necessary to create ideas focused on rethinking and redesigning the products and their components.
Among the many possibilities, the concept of Circular Economy (CE) gains relevance in academic studies and in the practices of organizations. Follow this post to learn more about this important subject and see how it can be applied in the context of supply chains, the purchasing department and your personal life.
Concepts and trends
According to a study developed by Ellen Macarthur Foundation, one of the main organizations on the subject, the concept of circular economy brings an alternative to the economic model “extract, produce and waste”, which shows signs of exhaustion. In this context, it is essential to think of ways to separate economic activity from the production of finite resources and reduce the generation of waste.
The circular economy is based on three main principles: eliminate waste and pollution, keep products and materials in use and regenerate natural systems. In addition, it can be applied at different scales – for small and large companies, those operating locally or globally, among others.
The case studies produced by the Foundation indicate four basic elements for the consolidation of a circular economy:
- Development of circular design skills to facilitate reuse, recycling and the use of materials at different stages of production. Circular design can be understood as a new mindset for the creation of products and services, focusing mainly on creative solutions that generate competitiveness for companies and the regeneration of the planet. The diagram below shows the different stages of circular design:
Image credit: RSA Great Recovery.
- Creation of innovative business models, from different areas, which have the circular economy as a central element, replacing the existing options and capturing future opportunities. These models can be created by companies that already have market shares, as well as entrepreneurs, inspiring the development of new initiatives;
- Use of materials in multiple reverse cycles and their return to the industrial production system, involving the logistics of the delivery chain, separation, storage, management of possible risks from the adoption of this model, power generation, among other points;
- Establishment of enabling conditions and favorable systemic conditions, such as collaboration, financial incentives, creation of environmental laws, among others.
Elements and challenges to adopt the Circular Economy concept
Bringing the discussion to a supply chain perspective, there is a concern to switch its orientation, previously focused on costs, turning it to the value generated by the investments made. As a consequence, it’s possible to observe an increase in the search for sustainable models, innovation and less impact on the environment and society, that is, other advantages acquired in addition to possible savings in the short term.
The concern is already felt in the daily lives of companies: according to a survey by Gartner consultancy published this year, half of the professionals in this area believe that the search for a circular economy model will increase over the next two years.
To this end, supply chains need to adapt to the CE model, monitoring the environmental and economic impacts in real time of their decisions, monitoring the use of reusable materials, using and sharing data with everyone involved to improve processes and setting standards and rules to be adopted.
It is important to note that there are challenges to be faced in implementing the concepts of sustainability and circular economy in supply chains. According to research carried out by PwC consultancy, the main three are:
- the alignment between performance and incentives for results;
- measurement and monitoring;
- the development of a strategy and its clear communication
What is the role of the purchasing department?
The concept of circular economy involves the adoption of a series of measures in order to eliminate the production of waste. This is a complex task, as it involves the engagement of many parties involved in the production process.
The purchasing department of a company, responsible for the purchase of indirect materials, can contribute through some actions:
- Certification check: make sure your suppliers are aware of these important issues and what they are doing to reduce the impact of waste generation in the supply chain. Choose those that already manage to reuse produced materials or that use renewable energy.
- Check the need for purchases: always keep in touch with the area responsible for the company’s stock and see if there is any similar material already available in the warehouses. This avoids the unnecessary purchase of materials and the disposal of parts that are stored for a long time, making them unusable. Find out more in our inventory management text.
- Reuse of parts: this tip cannot be applied in all contexts, but, if the possibility exists, evaluate with the maintenance sector and consider the purchase of previously used parts. This way, they save more time in the production cycle.
Check other tips in the post on sustainable purchases.
How can you, as a consumer, contribute?
Being aware of these changes in the ways of production, use and disposal of a product is important nowadays. Follow trends related to circular economy and sustainable practices and purchase goods from companies that are concerned with these issues and engaged in finding possible solutions.
As mentioned, there are many variables and parts involved in a transition to circular and sustainable models.
However, it is important that we do our part, reducing the waste generated and discarded in the environment and encouraging producers to adopt measures to help solve this problem. For example, we must adopt practices for recycling and reusing materials and correctly disposing of products such as household appliances, batteries, among other devices that are harmful to the environment.
Keep following Soluparts blog to learn about global trends regarding supply chains and best practices needed for purchasing departments in the new era.
To go deeper into the topic of circular economy and contribute even more to this new system visit the website of The Great Recovery Project.