How Can Supply Chains Re-Align to Embrace Circular & Shared Economies?

December 14, 2015

Estimated to be worth $4.5trillion per annum and capable of removing all new CO2 emissions generated by global GDP growth over the next 15 years (Solutions COP21) it is no surprise that the Circular Economy (CE) seems to be coming of age here at COP21 in Paris.

CE means that we reuse, repair, or recycle all materials in our industrial processes, increasingly important as we accelerate into a period of declining natural resource and social, political and environmental intolerance to waste and pollution.

Alongside CE sits the ‘sharing economy’, and together they represent a radical departure from the inefficient and linear industrial process of: extract,sell, use (own) and throw away. Think of the sharing economy as another super efficient model designed to optimise asset reuse enabled by shared ownership. manufacture, 

Together they are introducing very disruptive new business models. (Just consider the fact that the world’s largest hotel company owns no property (Airbnb), and the world’s largest taxi company (Uber) owns no cars.)

It’s not surprising then that they represent a major challenge to how companies manage their value-chains from: organising end-of-life collection or ‘take back’ as it is sometimes called, to building new capabilities amongst suppliers so they can handle refurbished, or recycled materials, instead of raw.

Our experience of helping collaboration across a value chain where the participants are trying to transform a product from being ‘disposable’ to circular suggests that it requires every link in the value chain to make at least some adjustment. It is therefore impossible without wide and deep collaboration.

(For an example of an industry that has got to grips with those challenges look at automotive manufacturing. Renault now boasts that 30% of the materials in a new car are from circular sources (refurbished or recycled) and 90% of a car is recyclable at end of life. Furthermore, its recycling plants are amongst its most efficient and profitable.)

The size of the prize is significant but so is the challenge. So as pressure builds post COP21 for companies to embrace the CE how should they start? It is obvious to me that it requires a multi-disciplinary approach with various functions from marketing, design, manufacturing, sourcing and supplier management to work together; and of course it requires a heightened level of collaboration with suppliers and customers.

But I don’t claim to have all the answers, so I invite others with insight and opinion to share their thoughts.