Circular Procurement
Procurement, Technology
Jordanna Marshall
Founder, Managing Director
"Of the 6 metric tonnes of material annually used by the average European, only 40% was recycled or reused. The majority of virgin materials were used only once, before being sent to landfill or incinerated"
— McKinsey, 2020According to research, up to $2.6 trillion worth of material is thrown away and never reused every year (McKinsey, 2016). In a traditional industrial economy, businesses are defined by their ability not only to create products, but to produce them efficiently. Efficient production leads to increasingly improved returns for financial shareholders and corporate growth.
However, in striving to make as much as possible for as little as possible, companies rarely reckon with waste that occurs post-purchase. These high levels of wastage, as well as being unsustainable, are completely unnecessary. Through more circular methods of procurement, material formerly considered ‘waste’ can be reclaimed and revalued for a new consumer.
What Is Circular Procurement?
“The coordinated forward and reverse supply chains via purposeful business ecosystem integration for value creation from products/services, by-products and useful waste flows through prolonged life cycles that improve the economic, social and environmental sustainability of organizations”
— Jia, 2020Essentially, improving circularity is the business solution to the ever-growing pressure being put on the earth’s limited natural resources. A circular supply chain designed to systematically renew and repurpose resources from the waste stream, rather than relying on virgin materials, thus has the potential to be practically waste-free.
By radically changing preconceptions of what ‘waste’ is, value can be recovered from goods that would be simply discarded in the linear supply chain model. In procurement, improving circularity revolves around not only sourcing sustainably-made materials but also considering the durability of these materials to try and extend their life-cycle in industry.
The diagram above shows a model of a circular supply chain method.
As can be seen, waste
material is reused, remanufactured and recycled rather than simply being disposed of, as would be the case
in a linear model. In addition to this, an effort to reduce waste through improved manufacturing methods can
also be seen across the supply chain.
The Key Numbers
Of the 6 metric tonnes of material annually used by the average European, only 40% was recycled or reused. The majority of virgin materials were used only once, before being sent to landfill or incinerated
— McKinsey, 2020- In 2015, more than 6 million tonnes of clothing were consumed in Europe alone. This requires the emission of an excess of 195m tonnes of carbon and the consumption of 46m cubic metres of water
- These methods of consumption are costing Europe around €7.2 trillion annually in just the mobility, food, and the built environment sectors.
- By switching to a more circular supply chain model, annual benefits of up to €1.8 trillion could be yielded by 2030 in Europe alone.
- This comes with a potential 83% drop in carbon emissions by 2050.
How to go about improving circularity?
The radical overhaul of a long-established supply chain model can seem a daunting and difficult task. However, those who work hard to do so are projected to reap the rewards in the near future. Because of this, large companies such as IKEA have committed to achieving 100% circularity by 2030. To do so, they are focusing less on the commercial longevity of their products, Malin Hordin, IKEA Group’s Head of Circular Development insists a consumer can shop sustainably and still change their furniture on a regular basis.
Rather, their development plan rests on the reuse and recycling of already-manufactured raw materials as well as the reclamation and repurposing of their out-of-date products. Smaller businesses committed to sustainability have often been even more radical and innovative in their approach to circularity.
