Supply Chain Circular Economy

How Supply Chain Professionals Benefit from a Circular Economy

Suppliers are critical to a circular transition as they source, move and transform 100B tonnes of materials through the global economy each year. The Ellen MacArthur Foundation highlights 9 areas for supply chain professionals to address to build circular supply chains.

Published 1 year ago | About a 3 minute read

Image: Ellen MacArthur Foundation

Today, the Ellen MacArthur Foundation has shared new guidance to help supply chain leaders take critical steps to shift away from linear, take-make-waste models of industry toward circular systems that equip them to deal with future global disruptions.

The recommended actions set out in a white paper, produced in collaboration with the Circular Supply Chain Network, come in the wake of both ongoing and new geopolitical shocks and economic uncertainties that continue to highlight the need for resilient supply chains.

Building a Circular Supply Chain (and its accompanying fact sheet) provides insights into the benefits and challenges of moving away from the conventional, linear approach to business and production and shows the crucial role supply chain professionals play in an increasingly changing world.

It highlights that a circular economy, where resources are reused and nature is regenerated, offers businesses the opportunity to redesign their supply chains to build stability and resilience while reducing costs, eliminating waste and pollution, and cutting greenhouse gas emissions.

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“Disruptions such as the COVID-19 pandemic, the Russian invasion of Ukraine and other recent world events have exposed the vulnerabilities of traditional, linear supply chains and the economic impacts of their weaknesses,” says Andres Oliva Lozano, Senior Research Analyst at the Ellen MacArthur Foundation. “While searching for resilience, businesses also want supply chain leaders to deliver lower costs and meet increasing environmental expectations.

“For a typical consumer goods company, the supply chain accounts for more than 80 percent of greenhouse gas emissions,” he added. “By switching to a circular supply chain and decoupling operations from the consumption of natural resources, businesses have the opportunity to reduce their exposure to price volatility, increase material security and help meet their environmental objectives.”

Suppliers are critical in the circular-economy transition as they are responsible for the sourcing, movement and transformation of the 100 billion tonnes of materials that enter the global economy each year.

“Even the best-prepared teams with the strongest partnerships and advanced systems can only do so much against the array of disruptions from unforecasted events,” says Deborah Dull, VP of Global Supply Chain at Genpact and founder of the Circular Supply Chain Network. “Regardless of the cause, the result is a material one — literally. When disruption hits, the impact shows up in inventory: either too much or too little. Circular supply chains offer a strategy to teams looking for new ways to improve the reliability of supply.”

Building a Circular Supply Chain shows how corporate supply chain professionals can build circular supply chains by focusing on nine areas:

5 areas supply chain teams can directly address:

People & structure
Network design
Supplier engagement
Data & quality
Metrics & performance management

And 4 areas that require collaboration with other teams:

Business models & product design
Customer engagement
Financial resources
Policy & legislation

The paper provides recommendations for effectively navigating each area, demonstrating the enormous opportunity for supply chain leaders to deliver economic benefits to businesses and environmental benefits to society.

Abe Eshkenazi, CEO of the Association for Supply Chain Management, said: “Building a circular economic model is the best way to deliver resiliency, ensuring our supply chains withstand and bounce back from inevitable shocks — whether it is disease, disaster or war. Supply chain professionals in partnership with sustainability and compliance professionals must be proactive about making changes to the way our industry functions — for the good of our livelihood and for the planet.”