The Circular Economy for Supply Chains

In working in Fast Moving Consumer Goods, supply chain links need to to adapt over time. Reading articles regarding the circular economy principles definitely broaden my knowledge to look at it holistically. Four core steps that can lead to circular supply chain models that drive sustainability progress according to Aron Cramer are:

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.