How Circular Supply Chains Can Drive Sustainability & Profitability
By Samantha Dersarkissian
Recently, customers have become more aware of the global impact unchecked consumerism has had on the planet. They’ve used their wallets to pressure businesses to adopt more eco-friendly business practices. In response, brands began replacing traditional business practices with more sustainable ones.
Executives could benefit from investigating these solutions to learn how circular supply chains can increase sustainability without sacrificing profits. The future of a circular economy looks like products that can be reused or repaired. Brands can keep up with government sustainability regulations by making products that meet these demands.
What Is a Circular Supply Chain vs. Linear Supply Chain?
A linear supply chain is a directional flow of resources from manufacturer to distributor to customer. Everything always moves in A-to-B-to-C succession, aka “take, make, and waste” and rarely skips around or moves backward.
Circular supply chains connect every point of production to create more value for end customers. The circular model allows customers to supply manufacturers directly through recycling or by connecting with suppliers.
The key difference between circular and linear supply chains is how communication and synergy are used. In a linear system, each point only needs to track its supplies’ origins and destinations. The dairy farmer only needs to deal with who buys his cows and to who he sells the milk. The circular chain requires much more communication and cooperation.
Further down the dairy chain, there’s a perfect illustration of how the circular chain complicates communication: glass milk bottles. A new glass bottle is used for the first time by the customer. Now, it needs to be returned to the dairy supplier to get back into the supply chain for reuse. If the dairy supplier wants to reuse milk bottles, it needs to let the people who buy them know how and why they should return them.
How Circular Supply Chains Contribute to Sustainability
The main way circular supply chains support sustainability is through more efficient use of materials. Keeping materials revolving means less need for new raw materials and reduces the number of used items that become waste.
There are many different ways that resources can move through the supply chain, not just through consumers using and then recycling a product. Clothing companies with lots of returned inventory are partnering with brands like Trove to clean, inventory, and resell apparel back to their customers. This creates a more sustainable system by getting more use out of what we produce.
Positive Social Impact on Brands
“Show don’t tell” has become a maxim to live by concerning brand activism. Developing and using circular supply chains promotes sustainability and demonstrates a willingness to lessen environmental impact regardless of the bottom line.
Working to find real solutions and compromises is more effective than simply posting on Instagram, and it can help protect your brand from being accused of virtue signaling. If your business relies heavily on its brand image for sales, as many fashion brands do, then creating a circular supply chain could help increase sales or prevent losses from negative publicity.
The Circular Economy
A circular economy uses practices such as circular supply chains to promote sustainability and regeneration.
The holistic goals of a circular economy include:
- Reducing or eliminating waste
- Extending a product’s lifespan
- Rebalancing natural systems by reducing the use of raw materials
Five business models are needed to create a circular economy.
1. Circular Supply Chains
Circular supply chains help reduce the number of single-use products by returning products to the supply chain. This helps reduce waste and unnecessary raw material use.
2. Resource Recovery
Most waste contains reusable resource materials. If the waste isn’t reusable there may be other ways it could be converted into energy. Resource recovery allows brands to gather and leverage these materials.
3. Product Life Extension
Product life extension models start from the product design stage. Brands should prioritize designing products for longer life that can be repaired or upgraded. By doing this, products can be recirculated into the economy extending and maximizing their use.
Creating product designed to have longer lifespans will lead to bigger changes. If brands consider creating products designed to last multiple lifetimes, they leverage branded resale strategies to monetize second and third sales in a truly circular model.
4. Sharing Platforms
A major part of sustainability is getting the most out of a product or resource. Sharing a product or resource increases its overall utilization. For example, carpooling reduces fuel usage. Sharing platforms connect people to make product sharing easier.
5. Products as a Service
The most common example of a product as a service is a Wi-Fi router supplied by your internet provider. You get a tangible product, but its use works more like a service because you return it when you’re no longer a customer. This helps create sustainability by incentivizing service providers to create products with longer lifespans and repair or upgrade used products.
Help Brands Meet Environmental Regulations
One of the main incentives for companies to implement circular supply chains is to meet government regulations. It’s not hard to see more regulation is on the horizon by looking at recent EU and French laws around producer responsibility, more circular models, or current SEC regulations around GHG disclosures currently under review. Meeting these requirements could be difficult without using circular systems.
Are Circular Supply Chains the Future?
With increased environmental consciousness in customers and global initiatives to promote sustainability and lessen environmental impacts, circular supply chains are the future. Constantly buying, using, and trashing products is no longer a model customers are content with. Additionally, it’s not a model that can compete with supply demands.
Here are some ways executives can start working on creating supply chain sustainability:
- Learn more about circular supply chains in your industry
- Contact circular technology and solution companies
- Inform others about the benefits and the need for circular supply chains
C-suite executives must consider how they can implement circular ideas and improve supply chain sustainability if they want their brand to survive in the circular economy. Start by learning more about what other brands are doing.