Article
Transitioning from a take, make, waste economy to a sustainable circular economy.
The main foundation of our global economy is based on a consumption-based linear system, essentially take, make and then waste.
Only a small percentage of the raw materials used in our supply chains (less than 10%) are currently recycled back into the production cycle to reduce waste.
Author:
Craig Hill
Managing Director
19th June 2023
Our current economic model is unsustainable, with rapid increases in population numbers and consumption rates, putting excess pressure on the supply of raw materials.
Our finite resources at some point, in the future, will run out. Examples such as Antimony that is used in multiple products are already in short supply [1].
The increasing demand for diminishing resources can already be seen in volatile commodity prices, as reported recently by the IMF [2], especially critical minerals that will be in huge demand to enable countries and companies to transition to green technologies and achieve their net zero commitments.
Every year we have an Earth Overshoot Day to illustrate in each calendar year when human consumption surpasses supply. For 2023 this point will be the 2nd of August, essentially meaning we use 1.7 Earths worth of resource each year.[3]
What is the concept of a circular economy?
Over the last 10 years momentum has grown on the concept of transitioning to a “Circular economy”, which is an economic system that aims to cut waste and promote the continuous use of resources.
It is designed to be regenerative and sustainable, focusing on reducing the consumption of finite resources and minimizing environmental impact. In a circular economy, the traditional linear model is replaced with a closed-loop model.
The key principles of a circular economy are:
- Designing for reduced waste and pollution
- Keeping products and materials in use
- Regenerating natural systems
- Closing the loop of materials
Implementing a circular economy requires collaboration among various stakeholders, including businesses, policy makers, consumers, and the scientific community. It involves rethinking product design, supply chains, waste management systems, and consumer behaviours.
Benefits of a circular economy include:
- Resource efficiency: By maximizing the use of resources and reducing waste, a circular economy helps conserve natural resources, minimize extraction, and reduce energy consumption.
- Economic growth and job creation: The circular economy can stimulate innovation and new business opportunities. It encourages the development of sustainable products, services, and technologies, leading to economic growth and job creation in sectors such as recycling, repair, and renewable energy.
- Environmental preservation: By reducing pollution, greenhouse gas emissions, and the exploitation of natural resources, a circular economy helps mitigate climate change, protect ecosystems, and preserve biodiversity.
- Increased resilience and competitiveness: A circular economy promotes greater resilience in the face of resource scarcity and price volatility. It reduces dependence on finite resources and vulnerable supply chains, making businesses and economies more adaptable and competitive.
“Only 7.2% of the global economy in 2023 is circular.”
Overall, a circular economy offers a holistic and sustainable approach to production and consumption.
The interest in moving to a circular economy has grown with large organisations championing the topic including the Ellen Macarthur Foundation [4]. However, the rate of transition to a circular economy has been slow and in the last few years the percentage of the global economy has reduced.
A recent study published by the CGRi, estimated that in 2023 only 7.2% of the global economy (7.5% for the UK) is circular, this is a drop from 9.1% in 2018 and 8.6% reported in 2020 [5]
This means that more than 90% of materials are either wasted, lost or remain unavailable for reuse for years as they are locked into long-lasting stock such as buildings and machinery.
Examples of companies and products adopting a circular economy
Despite the low percentage of adoption rates, there are companies that are pathfinders in pushing a circular economy with their products and services:
Food Waste – Tackling unnecessary food waste tech company Winnow Solutions[6] have saved $30 million year in food waste for their clients by inventing a digital food waste management system that allows restaurants to constantly watch their over consumption and waste costs.
Toy Rescue – As a father of two I know first-hand the guilt of buying plastic toys, only to worry about where it will go when the fun is over or worse if it breaks. Company Dagoma [7] have come up with the solution to repair your old toys, by providing downloadable 3D print designs that allow you to replace missing or broken toy pieces, so you can repair and give a second life.
Furniture Design – Ikea has set an ambition to become circular by 2030 [8] with furniture product design factoring in how items can be easily repaired, reused, or recycled. In addition, they have set up a Buyback & Resell programme to allow customers to sell back their items to IKEA who will then sell on to a new customer.
Electronic Equipment – Technology company Dell have also set a 2030 goal to take back as much equipment as they produce, and they aim to achieve this by setting up a recycling service. Since 2007, they have recovered more than 2.5 billion pounds (1.1B kg) of used electronics. [9]
Clothing – Throw away fashion is a major problem, Oxfam estimates that each week 11 million garments end up in landfill. Those offering an alternative to this approach include companies like Rent the Runway offer fashion rental services, moving from an ownership to rental model for high end fashion.
Supply Chain Transparency – An important aspect of transitioning will be the need to improve supply chain transparency to understand the source and path of material and components. Microsoft have gained 92% visibility using its sentient supply chain system and saved $550m inventory risk avoidance. [10]
Paper – Even in a digital world the demand for paper-based products and impact on forests is huge, more companies are seeking alternative to standard paper based products, such as bamboo or 100% recycled paper [11]
What positive role can Procurement play?
To move the economy from linear to circular, it will take the effort of all those involved in the value chain to make a real difference.
Procurement plays a crucial role in supporting a circular economy by leading their organisation to adopt sustainable and circular practices in the purchasing process. Areas to focus on include:
Supplier Search and Selection: Conduct market research to find and contract with suppliers that embrace circular economy principles. This includes suppliers that prioritize recycling, use renewable materials, reduce waste, and have sustainable manufacturing processes.
Strengthen your partnerships: Implement SRM and building long-term relationships with suppliers to encourage an environment that enables procurement to collaborate with suppliers in implementing circular practices. This can involve joint initiatives to reduce inefficiencies and waste, improve product design for recyclability, and explore innovative solutions for closing material loops.
Sustainable Product Design: Collaborate with suppliers and internal stakeholders to influence the design of products and services with circular principles in mind. This includes encouraging designing products for disassembly, the use of recycled materials and promoting product life extension through repair, refurbishment, or remanufacturing.
Stock and Waste Reduction Management: Invest and perfect your inventory management to reduce excess stock ordering and storage, also driving waste reduction by implementing strategies such as bulk purchasing to minimize packaging waste and collaborating with suppliers on take-back programs or recycling initiatives for end-of-life products.
Performance Metrics and Reporting: Establish key performance indicators (KPIs) and metrics to measure the progress and impact of circular procurement initiatives. This can include tracking metrics such as waste reduction, recycled content, product life extension, and supplier compliance with circularity standards. Regular reporting and transparency can help drive continuous improvement and accountability.
Knowledge Sharing: Collaborate with internal stakeholders, industry associations, and sustainability networks to share best practices, lessons learned, and promote knowledge exchange on circular procurement strategies. This collaboration can help drive innovation and accelerate the adoption of circular economy principles.
By integrating circular economy principles into procurement practices, organizations can contribute to a more sustainable and resource-efficient future while also unlocking potential cost savings, reducing environmental impact, and fostering innovation in the supply chain.
Support materials
Education and training on the topic of Circular Economy is essential to raise awareness and support the transition. The following links supply further research, understanding and tools to support your organisations journey.
https://ellenmacarthurfoundation.org/topics/circular-economy-introduction/overview
https://knowledge-hub.circle-lab.com/
Sustainable Procurement Pledge – Let´s drive change. Together (spp.earth)
Alternatively, if you would like to discuss how you can improve your sustainable procurement practice, then please contact us for a conversation.
References
[1] Antimony: The Most Important Mineral You Never Heard Of (forbes.com)
[2] https://www.imf.org/external/np/g20/032823.htm/ml
[3] Earth Overshoot Day Earth Overshoot Day home – #MoveTheDate
[4] How to Build a Circular Economy | Ellen MacArthur Foundation
[5] CGR 2023 (circularity-gap.world)
[6] Winnow | Commercial Food Waste Solutions (winnowsolutions.com)
[7] TOY RESCUE (toy-rescue.com)
[8] Going circular: a future with zero waste – IKEA
[9] Responsible Recovery and Recycling Services | Dell UK
[10] How Microsoft gained 92% visibility with its sentient supply chain system – Supply
[11] Recycled papers made from 100% reclaimed paper | Steinbeis Papier (stp.de)
Disclaimer – The information in this article is for general informational purposes only. Total Procurement Limited makes no representation or warranty, expressed or implied on any of the third party product or services
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