High hopes for the circular economy to add to corporate profits

A recent survey by Gartner found that 74% of supply chain leaders expect profits to increase between now and 2025 as a result of applying circular economy principles. On average, supply chain organizations have been applying circular economy principles for three years to approximately 16% of their product portfolio.

The circular economy is a system that decouples resource consumption from business value and growth. This is achieved by designing products and materials for reuse, keeping materials in use at their highest quality for as long as possible, and by applying new business models. When materials can no longer be used, materials are returned to the environment in a way that does not cause harm.

The survey was conducted during June and July 2022 and had 258 respondents from North America, Western Europe, and Asia/Pacific. Seventy-four percent of respondents worked in supply chain, and the remainder represented IT, product development and sustainability roles.

“There is still such a great deal of untapped potential in the circular economy. Supply chain leaders can use the inflationary environment as a catalyst to reshape their relationship with materials. Instead of losing materials out of the economy in the form of waste, the circular economy helps capture value,” said Sarah Watt, vice president analyst with the Gartner Supply Chain practice.

Top circular economy benefits

According to the survey, the top 3 circular economy benefits that have been realized in the previous years are the minimization of negative environmental impacts, shorter and compact supply chains, as well as enhanced customer insights. Common observed barriers to applying circular principles include the application of technology to advance circular economy activities, partnering with stakeholders and measuring the results of circular economy approaches.

“The circular economy represents systems-change; it is rare to be able to scale circular activities in isolation. Scalability will depend on overcoming the barriers. Technology will speed up activity, create visibility and automate decision making. Partnerships can help to bridge knowledge gaps and create shared value. Measurement is essential to showing progress to stakeholders, maintaining buy-in and good will,” Watt said.

“Scalability of the circular economy is going to rely on changing the ways of working,” Watt said.

The survey showed that respondents are making changes to the supply chain including integrating circular economy products into the planning process (54%), adding new capabilities to existing manufacturing sites (42%), and adding new locations for repair/ remanufacturing and waste management which are company owned (36%). Looking out over the next three years, the focus will increase on procurement, with buyers being incentivized to purchase circular materials (41%).

More information will be available in the webinar “Virtual Briefing: 3 Supply Chain Strategies to Scale Circular Economy”.

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