7 Surprising Business Benefits of Circular Economy Practices in the Supply Chain

Jul 26, 2023 1:15:15 PM

Circularity, Toxnot

Many companies dismiss supply chain circularity as a simple “feel-good” enterprise: something that lets them brag about their sustainability efforts without providing any real benefit.

But as more of the industry adopts circular strategies, the benefits of a circular economy are becoming clear.

Modern supply chain professionals are looking for innovative strategies that allow them to get more from company resources. Businesses are moving towards a circular supply chain model for some very good reasons, and those who don't consider circularity are doing so at their own peril.

So what are the benefits of adopting circular supply chains? What's the business case to be made? And how can businesses keep up as the industry moves forward?

We're going to dive into a slew of tangible benefits that real companies are enjoying right now. We'll also discuss the future of supply chain management and how we see circularity becoming an essential element for businesses to survive.

Benefit 1: Increased efficiency

When companies know how to design for the circular supply chain, they're able to create products and processes with ongoing value. They also get the most value for processes like storing and transporting goods.

That's because circularity aims to get the most possible value out of all resources, including materials and fuel. Rather than being sold once, then exiting the supply chain, products can return to the chain and cycle forward to new applications and products.

In order to gain these efficiencies, suppliers must pay careful attention to the materials they are using and the composition of their products, optimizing them for reuse across a variety of industries and regions. This information needs to travel with the product so that potential buyers know what they're getting and can safely repurpose the materials. (See how 3E Exchange's material passport program simplifies collecting and communicating accurate data for all of your products.)

Part of circularity efforts involve carefully tracking all of the resources used to manufacture and transport products. This kind of tracking becomes crucial as costs fluctuate over time, allowing businesses to spot places where

Benefit 2: Cost savings

Effectively tapping into the circular supply chain offers many potential opportunities to reduce costs. There are the costs of new and raw materials, to begin with. Starting with used materials may present its own challenges, of course. However, once the right processes are in place, re-using existing materials is often more cost-effective in the long run.

Carefully tracking the product's journey can also help companies work to reduce costly waste in other areas, such as transportation. And by finding buyers who can continue the product's journey on a circular supply chain, companies can continue to reap benefits from the same resources.

Benefit 3: Improved supply chain resilience

In the past, materials and products have often been designed for an extremely specific, linear pipeline. As the industry moves towards a circular supply chain model, there's been a shift towards products with a more flexible set of potential uses.

Using recycled materials requires careful tracking of components, substances, and materials used in the original product, as well as any alterations along the way. This need for high-quality data is why technology in circular supply chain management is such a crucial component.

New technologies make it easier to record information and have it travel along the supply chain, maximizing the potential applications, even if there's a disruption to the usual next step.

As the global pandemic highlighted, companies need to be flexible and prepared for disruptions to global supply chain operations. Supply chain resilience must be a key part of any business's strategy moving forward. And a supply chain with the option to reuse products and materials is a major factor in resilience.

Benefit 4: Minimizing waste

Reducing or eliminating waste is at the heart of the circular supply chain strategy. This not only saves on cost, but it also helps businesses future-proof their model as more regions of the world look to adopt policies featuring EPR (extended producer responsibility). Under these policies, manufacturers bear responsibility for the product's entire use cycle, from manufacturing through (and including) final disposal.

Rather than waiting for regulations to tighten, businesses can take advantage of the opportunity to get ahead of the legislation. This can also open up opportunities for expansion in other regions that may have stricter requirements for producers than your current region.

Benefit 5: Reduced environmental impact

Reducing harm to the environment is one of the biggest benefits of circularity. In a circular supply chain, materials are used more thoughtfully, with a plan for their entire life cycle, rather than being produced with an "end goal" of being disposed of in a landfill. Circularity classifies the creation of waste as a flaw in the process.

Traditional, linear industrial practices affect human health, food production, and the overall environment in three main ways:

  • Through the harvesting of natural resources for materials.
  • Through the creation of CO2 emissions and greenhouse gasses during production and transportation.
  • Through the creation of toxic waste and byproducts that cannot be recycled effectively.

Embracing circularity requires businesses to proactively measure each of these impacts, then work to minimize them. For example, materials should be collected in a sustainable way that allows the cycle to continue, rather than over-harvested in a way that depletes their ability to regenerate. And because material reuse requires clean inputs, the materials chosen must also be safe for people and the environment. (Exchange by 3E can help identify potentially toxic ingredients, as well as potential alternatives.)

The long-term health of companies (including their financial health) requires a sustainable business model. As regulations change, this will increasingly mean that businesses make their manufacturing, transportation, and materials processes environmentally sustainable, too.

Benefit 6: Increased preparedness for the future

Building a circular supply chain is strategically positioning your company to thrive for years to come. The business environment that has allowed the linear supply chain to thrive is shifting quickly, and companies ignore the change in the wind at their own peril.

Circular supply chain practices prepare companies for the future by:

  • Creating a diversity of material inputs, adding resilience to the supply chain and cushioning the impact of disruptions.
  • Working in advance of regulations to establish industry best practices, rather than scrambling to keep up with changes
  • Reducing waste and harmful byproducts, creating a positive environmental impact that benefits employees, consumers, and the community.
  • Maintaining a competitive advantage over competitors in the case of volatility in raw material input costs.
The old assumptions that suppliers rely on today won't always hold true. In order to maintain a competitive advantage, companies must begin to consider the landscape they will be navigating in the future and prepare for that today.

Benefit 7: Improved brand reputation

Many consumers are interested in purchasing from companies and brands that consider their impact on the environment and seek to reduce harm. As awareness about brands that overstate their sustainability commitments grows, companies cultivating a reputation for eco-friendly policies will need to offer transparent, quantitative data measuring the effectiveness of their efforts.

Additionally, suppliers will find that building circularity into their supply chain model may also boost their reputation within the industry and with large-scale buyers. Passing along high-quality product information, including material passports, will increase your reputation for being easy to work with. Buyers will know to expect all the data they need from you.

The bottom line on circular supply chain benefits

Embracing a circular supply chain model offers a slew of economic, practical, brand, and reputational benefits for companies, as well as creating a long-term competitive advantage over competitors who stay stuck in the old linear model. As global supply chains continue to change and shift, we predict that companies who begin preparing now will reap both immediate and long-term rewards.

Get ready for the future of circular supply chains: Exchange by 3E

Exchange by 3E automates circularity, sustainability, and compliance tasks for you. Safely and securely collect and track materials information to identify opportunities and risks. Share and import "product passports" to build transparency around the supply chain.

If you want to see for yourself how our software is leading the industry in data infrastructure and materials tracking for the circular economy, set up a free account here.


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