We talked to professionals to discover the most common barriers that need to be addressed to start developing circular economy projects in companies, the benefits that can be proposed for why more investment needs to go towards this, and the potential impacts of Covid-19.
Chris Ward, Senior Consultant at Turner & Townsend contract services
Robert Bonnar, global Procurement Director at energy firm SHV
Anish Kumar, Senior Purchase Officer at UAE cable manufacturing firm Ducab
Peter Smith, Procurement Author and founder of consultancy Procurement Excellence
What benefits does circular economy bring to the business?
Bonnar: There’s definitely an upside in terms of perception of the company, impact on customer loyalty, and potential sales, as long as the company isn’t greenwashing.
Internally, it gives a great sense of purpose to the organisation. In my experience, colleagues are interested when we say we’re treating water or using green electricity because they feel the factors paving the organisational changes. You can also unlock different financing opportunities, as many investors focus on purpose and environmental, social and governance criteria (ESGs).
Kumar: The main benefits that we realised were reduced costs, multi-channel availability of components, reduced carbon footprint in terms of manufacturing new products, and an overall reduction in entry of new materials (mined or forested) into the supply chain.
Ward: Circular economy brings the opportunity to collaborate to achieve greater gains for all involved. Working together to push and pull resource at a time that delivers optimum outcomes can only have a positive impact on sustainability.
What are the barriers to overcome around building circular economy into businesses?
Kumar: The fact that organisations and decision-makers perceive higher costs associated with the increased transactions to achieve a circular economy is the number one barrier. Accountability of costs is another – there will be costs associated with segregation and movement of goods back in the supply chain – some of our current financial cost models used in ERPs may need to be tweaked or developed to take this into account.
Government taxation and regulations also play an important role – in some countries, it is easier to dispose of a product to landfill than to recycle it, which means that there are not enough initiatives for consumers and organizations to increase circularity.
Bonnar: There is a lack of awareness of where to start. Don’t be afraid to go for the obvious ways, because that will at least build some momentum (i.e., recycling plastic). Ask yourself how areas like your stationery contract and travel policy. The second challenge is supplier relationship management, and finding a partner that understands the flow and can work strongly and inclusively with you.
Smith: Sometimes there are impossibilities that can only be overcome through collaboration, which takes time and research. For example, if the only packaging you can find that keeps your food product fresh is one that isn’t fully recyclable or reusable, then there’s no easy solution, it requires a lot of R&D.
Cost is also a prohibitive factor for businesses choosing to include circular solutions, and it’s up to the buyer to make it clear that bid proposals with sustainable and circular solutions – which go beyond ticking a box – will be prioritised.
How has Covid impacted sustainable supply chain initiatives?
Smith: It’s a bit of both. I don’t think it’s stopped big companies looking to move to more sustainable energy sources, including tackling deforestation and recyclable packaging. If anything, the pandemic has allowed us all to appreciate the natural world and how important nurses and supermarket workers are, rather than investment bankers.
Risk management has also been heightened as businesses have been forced to be more aware of supplier origin, the need for diversity, and balancing cost of localisation with the overseas supply base risks.
However, there are negatives, firstly, that the vast majority of the PPE used in the last year or so is not recyclable as it has a lot of plastic content and mixed materials. The other danger is if we have an economic downturn or recession companies will be under pressure, and will return to a cost-first approach. With demand dropping and cost of raw materials increasing dramatically, then CFOs and CEOs might start saying to procurement people, ‘we can’t afford to pay 10% more for this stuff this year just for the sake of sustainability’.