More than 100 billion tons of resources enter the global economy every year everything from metals, minerals and fossil fuels to organic materials from plants and animals. The use of these resources has tripled since 1970, and could increase by 70% by 2050 if businesses continue to use resources at this rate.
With many companies continuing to use resources at such a rate there should be more focus on reusing and recycling materials. However, Mark Wass, strategic sales director, UK and North EMEA at CloudBlue, saysless than 9% of all such resources are recycled and used again, contributing to the global waste problem.
This unsustainable rate of consumption has devastating effects on humans, wildlife, and the planet. This mounting waste is quickly becoming unmanageable, with experts believing that we would need 1.7 Earths to make our consumption sustainable at its current rate. So the time to act is now, and companies must fundamentally change how they use resources within their business models, or risk contributing further to the global waste and resource issue.
Combating the ‘use it once’ mentality
It is more urgent than ever to shift from a ‘use it once then discard’ mentality, to a circular economy – where waste and pollution are limited at design stages, products and materials are kept in use longer, and natural systems can regenerate.
The Ellen McArthur Foundation describes the circular economy as “gradually decoupling economic activity from the consumption of finite resources and designing waste out of the system”.
There is not a limitless supply of materials and because of this, many businesses have begun to turn to the circular economy model to change our discard mentality. Every year, more businesses embrace this platform and transition to a circular economy system of production to become more sustainable and reduce long-term operating costs.
In a report entitled “Waste to Wealth”, Accenture estimated that moving to a circular economic model could add $4.5 trillion (€4.51 trillion) in economic output by 2030. This is between 4-5% of the projected global gross domestic product (GDP). So moving to a circular-based supply chain model, would not only benefit the planet but would also help businesses save time and money on new resources.
Adapting the linear supply chain model
Past supply chains were built in a linear fashion, with manufacturing facilities turning raw materials into finished goods that are often disposed of after use. The workflow was point-to-point, and products were typically discarded after a single use.
Today’s supply chains are becoming circular by adding a link to create a closed-loop system. This link encompasses returns and recycling, taking waste materials and returned goods and turning them into products which can be resold. Reclaiming components and materials from end-of-life products to make new products is not the same as procuring virgin materials and new components for manufacturing operations. Supply is subject to the availability of materials from waste streams, which can vary.
Circular supply chain models are based on a ‘make-use-return’ philosophy. This philosophy outlined how used products or components may come in different forms and must be moved between various nodes, storage points, recycling centres, or manufacturing plants. So, the logistics of a circular supply chain model must consider the location of each recycled product and allow time for this product to be collected within production schedules.
Establishing efficient return channels for used products is a significant challenge, especially in consumer markets. Some companies are exploring the use of e-commerce returns services as convenient channels for collecting end-of-life products.
Moving circular supply chains into the mainstream consumer supply chain model requires combining the expertise gained in the linear model with new thinking in supply chain management.
What the future holds for a product-as-a-service model
A circular economy also requires enterprises to rethink their business model to not only build value into producing and commissioning products, but also in decommissioning and recycling the products.
To participate in a circular economy, businesses must evaluate alternative revenue streams besides producing new products, including revenue generated from the embedded value in products. A circular business model is sustainable only if embedded value can be economically recovered from the product. The embedded value of a product can be realised by reusing or recycling the materials. As a result of the Product-as-a-service (PaaS) model, businesses are investing in processes to extend product life, make them easier to recycle and offer consumers incentives to return used products. Redesigning a product to have an extended life cycle enables manufacturers to realise more revenue from offering their product-as-a-service, rather than from selling the product. As a result, the service economy is having a positive impact on the circular economy, and a PaaS model is a shift away from the “buy and waste” approach.
Collaboration needed to drive change
While PaaS models are driving innovation and electronic offerings can have a high embedded value, the costs of returns and recycling can also be high. Collaborative initiatives and innovative approaches are required to reduce these costs and incentivise end-of-life returns of electronics, which have already become the world’s fastest-growing waste stream, with less than 20% of global e-waste being formally collected and recycled.
For example, each year, more than 1.5 billion mobile phones are manufactured worldwide yet just 12% of these phones are recycled globally.
Innovative and automated systems that combine hardware and software can speed up the rate of device grading, the process of grading devices so they can be resold, reused or recycles if they are a lower grade. In addition to speeding up the rate of device grading, these systems can also improve cost-effectiveness and accuracy. These systems can perform highly accurate and fast cosmetic grading on returned and refurbished devices to help prolong device lifetimes and improve the global waste issue.
Future-focused companies know that value exists in the circular economy and are moving toward sustainable processes and products. It is imperative that businesses work towards adopting a circular economy to tackle the rising global waste problem. We can all make a world of difference and new models will help us do it together.
The author is Mark Wass, strategic sales director, UK and North EMEA at CloudBlue.
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