Under increasing public scrutiny, companies large and small are experimenting with building strategies circular economywhich focuses on regenerative activities that reuse materials as much as possible to eliminate the waste stream.
“Consumer expectations, regulations and market demands are putting pressure on business leaders to step up their sustainability game,” said Scott Russell, executive board member for customer success at Waldorf, a German enterprise software company. SAP. “Logistics and distribution systems throughout the supply chain are obvious places to implement new standards.”
FreightWaves interviewed Russell to better understand what it takes to transition to a closed economy.
The interview has been edited for clarity and length.
FREIGHTWAVES: What is your background and knowledge of closed economies?
RUSSELL: “One of my top priorities is helping customers build more resilient and sustainable supply chains by incorporating circularity into product development, manufacturing and logistics processes.
“Success circular economy model depends on three main elements: first, products must be designed with the future in mind, which includes the use of renewable, reusable and non-toxic resources. Second, it requires a change in mindset. Waste is a resource; it must be recovered for reuse and recycling, which in turn requires adequate infrastructure. Finally, these new business models require digital technologies that can track, monitor and analyze relevant data throughout the process.”
FREIGHTWAVES: What market signals have triggered the transition to a closed-loop economy?
Russell: “Sustainable development is now a business imperative. We have found that consumers, investors, regulators and employees are increasingly demanding more responsible products and services that take into account the principles of cyclicality.
“Strengthening regulation has played a key role in the practice of the circular economy. Extended producer responsibility laws help ensure that the manufacturer of a product is responsible for its final recycling, reuse or disposal.
“There has also been a surge in plastic taxes, which are levied on companies that use materials that do not contain a certain amount of recycled content.”
FREIGHTWAVES: How are companies responding to this idea?
Russell: “Manufacturers used to develop products based on cost and performance, but going forward they will focus on sustainability and recyclability, new regulatory environments and new technologies. Companies continue to launch new products that allow manufacturers in various sectors to also reap the benefits of the circular economy.
“One company we’ve seen does this well Schneider Electric Company. Their energy and automation technologies have enabled customers to avoid 302 million tons of carbon emissions since 2018.
“One of the ways the company achieves this goal is to offer an end-of-life return service that recycles, returns or destroys sulfur hexafluoride gas contained in customers’ electrical equipment.
“Furthermore, rent-to-renovate and resale models have seen success in the retail industry. For example, SAP customer Ikea launched several resale of pilots over the past few years. And Lizee, a reselling software company, is on a mission to “transform the retail industry.” from linear to circular,” helping retailers move from rental sale and resale.”
FREIGHTWAVES: Which sectors are currently using circular design the most?
Russell: “The packaging is large. This frustrates manufacturers, retailers and consumers and causes untold damage to the environment. However, the good news is that circular business principles are being applied in this space to ensure that packaging is designed with reuse and recycling in mind.
“The company I’ve seen is doing it well LimeLoop, which offers retailers everything they need, including reusable packaging, reverse logistics, visibility and analytics. They have helped divert over 1 million single-use bags from landfills.
“Manufacturers, transport and logistics are industries that apply the principles of the circular economy. In manufacturing, we are seeing more and more companies building new business models where they produce goods once and customers reuse them.
“They are also developing alternatives to sourcing raw materials by recovering valuable materials from complex products, a practice that is particularly prevalent in electronics. In some cases, extracting and reusing resources can be more cost-effective as well as more environmentally friendly than extracting raw materials.”
FREIGHTWAVES: How do cyclical practices affect costs and logistics?
Russell: “Traditionally, supply chains have been linear and unidirectional, but this is being disrupted by reverse logistics and circular supply chains.
“Circular supply chains enable organizations to recover as much as possible and realize the value of end-of-life products. This can help reduce costs and gain significant value extraction of secondary raw materials from products.
“Reverse logistics, on the other hand, pose some challenges as they most often come in the form of customer returns. Estimates show that the total amount of profit from e-commerce will exceed 1 trillion dollars over the next decade. Transporting returned goods creates more than 15 million metric tons of carbon dioxide in the US alone.”
FREIGHTWAVES: What are the benefits and challenges of the circular economy?
Russell: “The whole planet will benefit from the circular economy. Every person, business, plant, and creature benefits from an economic system that creates less waste and pollution, keeps products and materials usable longer, and restores natural ecosystems.
“While there is enormous potential, it is not without its challenges, including:
- “The provision. Large producers can face problems because different regions have different regulations regarding products.
- “Complex old systems. As manufacturers undergo digital transformation, complex supply chains, heavy assets, and outdated technology can hold them back from adopting circular economy practices.
- “General management. Controlling the lifecycles of thousands of products and materials across hundreds of regulatory systems around the world is arguably one of the biggest challenges brands will face.
“While it will certainly face challenges, implementing these practices will be beneficial in the long run.”
FREIGHTWAVES: What advice do you have for companies planning to go circular?
Russell: “Think about every aspect of the business. A left-to-right view of vision and strategy all the way to the customer value proposition will enable companies to more effectively take this step towards a circular business.
“Leaders looking to adopt a circular business model should consider:
- “Using Digital Technologies to Enhance and Authenticate Cyclicality. The ability to control the identity, location and condition of individual components and products is enhanced by the increasingly digital nature of supply chains.
- “Investment in circular initiatives. Demonstrate the value it will bring to the business in the long term.
- “Spreading responsibility for making materials more sustainable across the organization, from purchasing to design and manufacturing.
“The transition to cyclical practices offers great social and economic opportunities. As demands to become more sustainable increase, shipping and logistics are becoming obvious ways to implement green measures.
“This will go a long way in creating a competitive advantage as companies spend less money on delivery, use less energy and other resources, get better returns on their investments such as truck fleets and identify better delivery methods.”