A Gartner survey found that 74% of supply chain leaders expect profits to increase between now and 2025 because of applying circular economy principles. On average, supply chain organisations have been applying circular economy principles for three years to approximately 16% of their product portfolio.
“There is still such a great deal of untapped potential in the circular economy. Supply chain leaders can use the inflationary environment as a catalyst to reshape their relationship with materials. Instead of losing materials out of the economy in the form of waste, the circular economy helps capture value,” said Sarah Watt, VP analyst with the Gartner supply chain practice.
The circular economy is a system which decouples resource consumption from business value and growth. This is achieved by designing products and materials for reuse, keeping materials in use at their highest quality for as long as possible, and applying new business models. When materials can no longer be used, materials are returned to the environment in a way that does not cause harm.
Benefits and barriers of circular economy
The survey revealed the top 3 circular economy benefits that have been realised in the previous years are the minimization of negative environmental impacts, shorter and compact supply chains, as well as enhanced customer insights.
Commonly observed barriers to applying circular principles include the application of technology to advance circular economy activities, partnering with stakeholders and measuring the results of circular economy approaches.
“The circular economy represents systems-change; it is rare to be able to scale circular activities in isolation. Scalability will depend on overcoming the barriers. Technology will speed up activity, create visibility and automate decision-making. Partnerships can help to bridge knowledge gaps and create shared value. Measurement is essential to showing progress to stakeholders, maintaining buy-in and goodwill."
Sarah Watt
Procurement is critical for scaling circular economy models
Watts cautioned that the scalability of the circular economy is going to rely on changing the ways of working.
The survey showed that respondents are making changes to the supply chain including integrating circular economy products into the planning process (54%), adding new capabilities to existing manufacturing sites (42%), and adding new locations for repair/ remanufacturing and waste management which are company owned (36%).
Looking out over the next three years, the focus will increase on procurement, with buyers being incentivized to purchase circular materials (41%).
