Circular Economy Logistics and Sustainability

Sustainability has skyrocketed in importance for businesses lately, and it’s not just a passing trend. According to Gartner’s recent CEO survey, sustainability has shot up by a staggering 292% since 2021, now securing a spot in the top 10 strategic business priorities. This surge of interest has led many businesses to take a hard look at their supply chains, exploring ways to make them greener. The conversation around sustainable supply chains aligns closely with the growing discourse on the circular economy.

Traditionally, most businesses have followed a linear supply chain model—straight from raw materials to production, distribution, and disposal. However, this linear approach is increasingly seen as inefficient and costly. Reports from Bloomberg suggest that these supply chains often contribute to over 90% of a business’s greenhouse gas emissions and 50-70% of operating costs, according to EY. BCG even points out that they are a significant driver of biodiversity loss. To enhance sustainability, re-evaluating and reimagining these supply chains has become imperative.

The circular economy, as described by the World Economic Forum, is ‘restorative or regenerative by intention and design.’ The Ellen McArthur Foundation emphasizes the goal of preventing waste from being produced in the first place. Unlike linear models that follow the ‘take-make-dispose’ philosophy, circular economy supply chains operate in a closed-loop system, embracing reuse, sharing, repair, refurbishment, remanufacturing, and recycling. Circular economy logistics, including reverse logistics, facilitate this circular flow, connecting resources, products, and consumers.

Benefits of Embracing Circular Economy Supply Chains

Reduced Waste and Emissions: Every year, the Chartered Institute of Procurement and Supply (CIPS) notes that 8% of stock worth over $163 billion is wasted before reaching end customers. Circular economy practices reduce material use, redesign products to be less resource-intensive, and promote the recapture of ‘waste’ for new materials and products. This has the potential to cut greenhouse gas emissions by 39%, according to the Circularity Gap.

Reduced Resource Consumption: Circular economy supply chains minimize raw material extraction, optimizing materials, resources, and processes. By prioritizing durable products and extending life spans through reuse, repair, and remanufacture, they could reduce the total material footprint by 28% by 2032, as per the Circularity Gap.

Boosted Resilience: Improving supply chain resilience is a global priority for 52% of businesses, as reported by Harvard Business Review. Circular supply chains enhance resilience by using fewer raw materials and tapping into nearshore supply chains of recycled materials, reducing exposure to disruptions and volatile material prices.

Reduced Costs: Circular supply chains streamline processes and systems, using materials and resources more efficiently. With lower material costs due to reduced usage or reuse, circular supply chain products can be more cost-effective. Accenture estimates that circular strategies could generate an additional $35 billion in value in consumer goods by 2030. Moreover, by limiting waste, businesses cut down on waste management expenses, and lighter, efficiently packaged products can lower transport costs.

Beyond individual businesses, embracing circularity holds the potential for a global impact. Accenture’s research indicates that the circular economy could generate an extra $4.5 trillion in global economic activity by 2030, primarily through job creation and innovation. The International Labour Organisation (ILO) predicts a net increase of 7-8 million jobs by 2030 in areas like repair, rent, remanufacturing, and recycling. While 71 million jobs might disappear, the circular economy is set to create 78 million jobs, requiring workers to consider upskilling and reskilling to tap into these new opportunities.