This site depends on JavaScript to run. Please enable it or upgrade to a modern browser that supports it.

ASCM Insights

Sustainable Supply Chains Via the Circular Economy

title

The linear economy of “take, make and waste” unfortunately remains the status-quo, despite being inherently unsustainable. The United Nations has identified the circular economy as a crucial tool for meeting Paris climate goals, although making the shift involves several challenges. A 2019 report by Circle Economy found that “just 9% of the 92.8 billion tonnes of minerals, fossil fuels, metals and biomass that enter the economy are circular, or reused annually.

I had the opportunity to interview strategic supply chain risk expert Omera Khan and circular economy strategist and CEO of Coreo, Ashleigh Morris, to learn about the model’s benefits and challenges, as well as the industries with the potential to go circular.

Rennie: What are the benefits of the circular economy?

Morris: A circular economy is made up of three ideas: firstly, it designs out waste and pollution from our world. Secondly, it keeps products and materials at their high value for as long as possible. And finally, it regenerates our natural systems. … It serves people and nature, as opposed to our current linear economy, which people and nature serve. It’s an economy where purposeful business can thrive.

But the circular economy is more than a cool idea; it’s critical to our future. The global population is projected to reach nearly 10 billion people by 2050. Research tells us that moving to renewable energy and implementing energy efficiency measures can address 55% of global greenhouse gas emissions, but this isn’t enough. To complete the picture and achieve the UN climate goals, we must implement the circular economy with a particular focus on how we produce and consume key materials.

Khan: A circular economy provides a framework for producing a more sustainable, resilient, and regenerative ecosystem. Shifting from the traditional linear extractive model to a more circular economy — which focuses on eliminating waste, keeping materials in use for longer and avoiding the consumption of finite resources — will enable a more restorative and regenerative economy. Fundamentally, it will support the health and wellbeing of our planet. 

Rennie: What are the key challenges involved?

Morris: The biggest challenge is changing the mindsets of not only consumers, but businesses and their supply chains, governments and their policies. Support needs to come from the top. Currently, the incentives to be more sustainable are only peripheral; people feel like they are contributing by installing solar panels on the roof or recycling garbage in the correct bins. But this is too little.

We need a fundamental change in behavior. Incentives to do so must be supported by governments, because you can expect little progress if electrifying and greening our lives is costly for households. Businesses must also do more: Throw-away fashion, for example, should be eliminated; businesses that contribute to waste should be penalized; and there needs to be commitment from raw material source providers to move toward a sustainable, regenerative design. … Currently, we have islands of excellence and isolated glimmers of hope. What we need is a much more coordinated circular economy approach.

Khan: The hidden metric involved in accelerating a circular economy is the shared understanding of the need to act: Linear thinking is the barrier to shared understanding. We are caught in a disillusion that our systems are immovable, inflexible and prohibit the lateral creation of new stories with collective endings. This is not the case. If we change the story, we change the system.

Meaningful action toward a circular economy is being held back by a paralyzing fear of failure. With so many armchair critics looking on; so many nay-sayers highlighting why something may not work; and so many short-term cycles for policymakers, company executives, and government agency funding, it is a brave leader who takes up the mantle to do something differently and turn the tide.

While environmental, social and governance frameworks and corporate social responsibility programs are gaining traction, there aren’t many leaders truly embracing a systems-based solution such as circularity, even though it’s the only way to tackle systemic problems.

To encourage circular projects, innovative financing models are needed to reward desirable developments and limit undesirable ones. It will also require the average CFO to broaden their definition of value.

We need a long-term perspective and to crunch the numbers within the existing financial frameworks for that cost-benefit analysis, but new financing models may need to be developed for circular projects. Can we adapt the system so that circular projects qualify for new specialized funding, financing, grants, or tax concessions? What can public authorities and funders do to help advance circular projects, given their social and environmental value, sustainability, and long-term resilience?

Rennie: Which industries have the most potential to go circular?

Khan: The shift to a circular economy won’t happen all at once. Rather, it is likely to happen industry-by-industry. For instance, going circular in the fashion industry means reusing and mending clothes, eliminating the throw-away culture, and bringing in a heritage/retro culture where second-hand clothes are seen as trendy and cool. We also need to use better material to produce clothing that lasts longer.

Morris: The mining industry is well-positioned to shift from an extractive and transactive model to a resource development industry. Precious metals are precious because they are finite, and yet their value is infinite — meaning, they never break down or lose their core worth. The industry is beginning to adopt circular economy initiatives that are moving from downstream measures such as recycling, to upstream material design innovations. We’re seeing nanolaminated materials that outperform conventional metal, and the capture of value from tailings and slags, to new strategic partnerships underpinned by low-carbon values alignment by the likes of Tesla and BHP.”

Morris: A recent editorial in the Guardian UK explored the conundrum facing the construction industry: tearing down an old structure and building a new one is cheaper than refurbishment or remodeling. Yet doing so churns through fossil fuels, contributes to climate change, and creates mountains of rubble waste.

The industry stands to harness extensive beneficial outcomes and have a transformative impact on cities by adopting the circular economy. Modular materials and 3D printing are already enhancing productivity and driving down costs. On the planning side, building information modelling and lean construction provide the insights and tools to more efficiently plan, design, construct, and manage buildings and infrastructure.

Adoption of IT solutions and collaborative processes can help unlock the benefits of the circular economy, saving businesses money, making businesses money and rebooting how the industry works.

Glimmers of hope

The good news is that public awareness of the need for a circular economy is growing fast. Concern and press coverage are rising about problems including plastic waste, inefficient packaging, and e-waste. Meanwhile, China and other Asian economies have stopped taking the world’s trash, which will force Western economies to find more innovative ways to deal with their waste. 

We simply must rethink the industrial models of the past. The circular economy provides a new model to fundamentally change our behaviors and make this goal a reality.

Sustainability is one of the learning pillars at the 2022 ASCM CONNECT Annual Conference. Visit the ASCM CONNECT Annual Conference web site to view educational sessions.

About the Author

Elizabeth Rennie Editor-in-Chief, SCM Now magazine, ASCM

Elizabeth Rennie is Editor-in-Chief at ASCM. She may be contacted at editorial@ascm.org.

Use of Cookies

We use cookies to personalize our website’s content and ads, to provide social media features and to analyze our traffic. We also share information about your use of our site with our social media, advertising and analytics partners who may combine it with other information that you’ve provided to them or that they’ve collected from your use of their services. You consent to our cookies if you continue to use our website.