Nations, states, businesses and institutions aren’t the only ones “going green” nowadays — supply chain processes are as well. From eco-friendly warehouses to logistics entities investing in all-electric trucks to help with carbon emissions reduction, organizations aren’t just advocating for sustainable supply chain practices, they’re carrying them out by practicing what they support. They also see them as smart for business. In fact, according to a recent survey conducted by McKinsey, nearly 85% of C-suite executives (e.g. CEOs, COOs, etc.) are proponents of environmental, social and corporate governance (ESG) programs and believe they’ll generate more shareholder value in the coming years than they do currently .
For this reason, circular supply chains may soon become the new normal, replacing linear models while improving business outcomes.
What is a circular supply chain?
A circular supply chain is a process wherein business owners reuse, recycle and repurpose products in the manufacture and distribution of goods. For the most part today, the products and resources organizations leverage to get their merchandise into the marketplace is unidirectional. Once merchandise has reached the end of its lifecycle, it’s thrown away by either the manufacturer, the consumer or both. A circular supply chain reuses existing goods by incentivizing customers to recycle the merchandise they no longer have use for. This helps to minimize waste and makes the best use of the earth’s natural resources.
What are the benefits of a circular supply chain?
As the old saying goes, in order to make money, you also need to have it, and the most substantial costs organizations have originate in the manufacture of their products. Instead of being forced to buy all-new raw materials, the reuse of end products naturally lowers what a business spends on production and procurement. Additionally, the refurbishing of discarded products also helps to keep price volatility under control, especially in a hyperinflationary environment.
Massive quantities of materials wind up in landfills every single year. According to the Environmental Protection Agency, of the estimated 292 million tons of trash Americans produce on average in a given year, 136 million tons of it — approximately 50% — goes to landfills. Aside from being unsightly and unpleasant to smell, landfills give off toxins that leach out into the atmosphere, worsening air quality and contributing to pollution.
Circular supply chains help to minimize waste by lengthening the lifespan of materials that are thrown out prematurely or unnecessarily in linear supply chains.
A circular supply chain doesn’t only make sense for the planet and for business owners’ bottom lines, it also helps the bottom lines of the countries that use this approach to production and distribution. Indeed, according to Accenture in its book “Waste to Wealth,” a circular economy has the potential to generate as much as $4.5 trillion in overall work productivity by 2030 from job creation and innovation alone.
If society continues to veer away from fossil fuels in favor of more renewable energy to power work and business processes, a circular supply chain may be a pathway to prosperity for companies — as well as for the planet.