What Does a Circular Supply Chain Look Like?

It’s no secret that manufacturers, intermediaries, buyers, and suppliers throughout all global supply chains are facing increased pressure from consumers, activists, and government regulators. Not only are markets more turbulent due to increased costs and geopolitical conflicts, but the widespread push towards finding waste-reducing and environmentally friendly solutions has also reached the ‘crucial’ and ‘imperative’ stages. Could a circular supply chain be the answer?

While the advent of innovative technology can help streamline efficiency in supply chains, curb rising costs and reduce some bottlenecks, there are lingering doubts among experts on whether this is sufficient. The global average temperature rise is expected to climb above 1.5°C between 2026 and 2042, despite this being deemed as the ‘bare minimum’ limit for any rises and many nations’ concerted efforts to achieve net zero emissions by 2050. 

“The reduction won’t be sufficient enough to limit temperature increases”

It’s been said that even if existing commitments, targets, and pledges to reduce greenhouse gas emissions (GHGs) are achieved, the reduction won’t be sufficient to limit temperature increases this much. Contributing to these excess GHG emissions are unsustainable global waste management policies, with plastic production statistically reaching a staggering 400.3 million metric tonnes in 2022 (increasing 1.6% from last year) and skyrocketing since the 1950s.

Talk of transitioning to a circular economy has begun to gain traction, as this has a key role in reducing GHGs by minimising those which stem from material extraction (not just plastic production). By targeting unsustainable practices in key sectors, circular economy strategies can cut emissions drastically, not to mention reduce the demand for new products and raw materials. Doubling this with energy efficiency and renewable energy, and the path towards net zero doesn’t look as rocky as it does with the traditional linear supply chain model.

Put simply, a circular supply chain represents a huge paradigm shift, where products and materials are kept in use for as long as possible while maximising resource efficiency and minimising waste.

The Concept of a Circular Supply Chain

A circular supply chain is a system that aims to eliminate waste by continuously reusing and recycling materials. Unlike the traditional linear model, where products are manufactured, used, and then discarded, a circular supply chain focuses on the following key principles:

• Designing products for longevity and recyclability
• Maximising the use of renewable and recycled materials
• Recovering and reusing products and components at the end of their lifecycle
• Minimising the consumption of resources and the production of waste

In a linear supply chain, a product flows from supplier to manufacturer, distributor, retailer, and eventually the consumer. Also, in these conventional models, consumers dispose of packaging instead of recycling it, with waste ending up in landfills where the process of decomposition takes time (not to mention emitting harmful chemicals into the atmosphere). In contrast, in circular supply chains, materials are recycled rather than immediately disposed of, reducing human-made waste in landfills and destroying natural habitats. 

Benefits of a Circular Supply Chain

Embracing a circular supply chain model offers numerous benefits. Most of the circular supply chain benefits are environmental, but experts have also pointed to many other business benefits as well. Here is a snapshot of the advantages of this model:

• Reduced waste, lower greenhouse gas emissions, and conservation of natural resources
• Lower spending on finite raw materials and the preservation of rare, precious and non-renewable materials
• Cost savings from energy consumption, as well as potential revenue streams from resale or recycling
• Reduced expenditure on waste collection, transport and reprocessing
• Appealing to more environmentally conscious consumers and shareholders
• Alignment with evolving supply chain regulations like ESG (Environmental, Social, and Governance) standards
• Greater resilience to supply chain disruptions

A Shining Example of Circular E-Commerce

MPB, an FT1000-ranked digital camera retailer that allows users to buy, sell, and trade products, has embraced the circular supply chain model with remarkable success. As one of Europe’s fastest-growing companies in 2024, MPB recirculated an impressive 485,000 items of photo and video gear in 2023, a 39% increase from the previous year.

In addition to their commitment to recirculating products, MPB has taken significant strides towards sustainability. The company sourced 45% of its electricity from renewable sources last year and maintained plastic-free packaging throughout, while sending zero waste to landfill.

MPB’s business model serves as a powerful example of how a circular chain can not only reduce environmental impact but also drive growth and innovation. As Craig Chapman, Senior Manager, states:

“At MPB, we believe that the future of sustainable business lies in embracing a circular e-commerce model. By keeping products in circulation for as long as possible and minimising waste, we can create a more environmentally friendly and economically viable supply chain. It’s one of many reasons that MPB was able to achieve such huge growth in 2023.“

This is just one example of how businesses can transition to a circular supply chain and, with the help of digitisation, technology and knowledge, achieve and exceed business goals for the benefit of their brands, consumers and the environment. 

Strategies for Implementing a Circular Supply Chain

Transitioning from a linear to a circular or closed-loop supply chain requires extensive rethinking and planning. Manufacturers and suppliers must make crucial decisions about each aspect of their operations. In a nutshell, here is a strategy that businesses can adopt as they re-think their supply chain model:

Product Design 

• Embrace modular design principles for easy disassembly, recycling and repair.
• Incorporate recycled or renewable materials into product development.
• Develop products as services, enabling leasing or renting options as a way to encourage better responsibility.

Reverse Logistics 

• Establish efficient systems for collecting and sorting products at the end of their lifecycle.
• Implement profitable reverse logistics processes for refurbishing and recycling.

Sustainable Procurement

• Source materials and components from sustainable or eco-minded suppliers and vendors.
• Prioritise renewable, recycled, and biodegradable materials that won’t emit harmful chemicals.
• Engage with suppliers to promote circular practices throughout the supply chain.

Consumer Engagement 

• Raise awareness about the benefits of a circular economy and sustainable consumption.
• Provide guidance on proper and safe product maintenance, repair, and disposal.
• Be transparent about your circular practices, the suppliers and also the materials you use.

Technology

• Use technology to keep track of product recycling and reuse and provide more insights.
• Use IoT (Internet of Things) technology to monitor perishables in transit and prevent spoiling and waste.
• Optimise routes and deliveries for minimal fuel consumption.

The Future of Circular Supply Chains

As global awareness of sustainability, climate change and global warming intensifies, businesses and individuals have crucial decisions to make in the coming months and years. Circular supply chains – and, by extension, a circular economy – require meaningful initiatives and policies implemented by leaders and decision-makers if we are to see tangible progress. 

The rise of digitisation and innovative technologies will undoubtedly play a crucial role in enabling and optimising circular supply chains, enabling even better resource management and recovery. The second-hand market is thriving due to this emergence, where the resale, rental and sharing of products are championed thus empowering consumers to embrace more sustainable activities. 

However, the most decisive and meaningful change can only happen with those at the top committed to preserving the environment’s resources and promoting better circularity. It requires substantial effort and collaboration if businesses, society, consumers, and also the environment are to witness the real benefits of this model.