Chris Cunnane, Research Director Supply Chain, ARC Advisory Group. Chris Leads Supply Chain … [+] Sustainability Research at ARC.
ARC Advisory Group
Supply chain sustainability is increasingly important for the future of business and the world as a whole. Companies are investing more money into sustainability initiatives, seeking to reduce waste and carbon emissions. As my colleague Chris Cunnane has written about a number of times before, global companies are looking at various initiatives when it comes to sustainability, including energy efficiency, product packaging, alternative fuels, optimized routes, and returns management. More recently, we have seen a push towards building a circular supply chain to eliminate waste and build a continual use of resources.
The Circular Supply Chain
The Sustainable Supply Chain
Supply chain sustainability takes on a lot of forms. The United Nations (UN) has outlined Sustainable Development Goals (SDGs) for global supply chains. These SDGs are a collection of 17 interlinked global goals designed to be a “blueprint to achieve a better and more sustainable future for all”. The SDGs were set up in 2015 by the United Nations General Assembly and are intended to be achieved by the year 2030 and are included in a UN Resolution called the 2030 Agenda.
The 17 SDGs are: (1) No Poverty, (2) Zero Hunger, (3) Good Health and Well-being, (4) Quality Education, (5) Gender Equality, (6) Clean Water and Sanitation, (7) Affordable and Clean Energy, (8) Decent Work and Economic Growth, (9) Industry, Innovation and Infrastructure, (10) Reducing Inequality, (11) Sustainable Cities and Communities, (12) Responsible Consumption and Production, (13) Climate Action, (14) Life Below Water, (15) Life On Land, (16) Peace, Justice, and Strong Institutions, (17) Partnerships for the Goals.
More and more companies are examining how their business can use the SDGs to improve sustainability practices. For example, Mars is looking at climate action, no poverty, and partnerships as part of its sustainability plans. These three SDGs, combined with the company’s plan to eliminate single-use plastics in its packaging, are helping it work towards a circular supply chain.
The Circular Economy
A circular economy is an economic system aimed at eliminating waste and the continual use of resources. Circular systems employ re-use, sharing, repair, refurbishment, re-manufacturing, and recycling to create a closed-loop system to minimize resource inputs and reduce waste, pollution, and carbon emissions. The key to building this economy is to keep products, equipment, and infrastructure in use for longer periods of time, which makes these critical resources more valuable.
In Logistics Viewpoints’ news roundup two weeks ago, Mr. Cunnane highlighted the circular supply chain that Intel is building. In an interview with Supply Chain Brain, Intel Supply Chain Manager Greg Skrovan gave a very clear answer for how Intel defines the circular economy. Mr. Skrovan said that the new focus is transforming the company’s reverse logistics supply chain, making it a “circular economy.” According to Mr. Skrovan, a circular economy is the transformation from “make, use, dispose” to “make, use, recover, reuse, reclaim.” When the company can no longer reuse an item, it will find a sustainable way to the dispose of them.
This way of thinking is certainly not unique to Intel. More and more companies are outlining strategies for employing a circular economy and measuring its impact on supply chain operations. These initiatives span a variety of businesses. One of the best examples of large global companies coming together to support the circular supply chain is the InBev 100+ Accelerator. The 100+ Accelerator was launched in 2018 as a global incubator program to help solve supply chain challenges across water stewardship, circular economy, sustainable agriculture, and climate action. The partners help to fund and pilot start-ups in their sustainability innovation plans. So far, the 100+ Accelerators start-ups have green cleaning solutions to reduce water waste and energy use, collected more than 1,000 tons of glass waste, recycled electric vehicle batteries that store renewable electricity, and installed the first solar thermal system at an AB InBev plant. This year, Coca-Cola, Colgate-Palmolive, and Unilever joined the 100+ Accelerator.
There are more examples of companies looking to reduce waste across a wide variety of retail and direct to consumer channels. IKEA has launched a program to buy back used furniture to refurbish and resell. Nike has announced that it will start refurbishing sneakers that have been returned by customers and sell them at cheaper prices. Nestlé has signed the European Plastics Pact, to make 100 percent of its packaging recyclable or reusable and reduce its use of virgin plastics by one third by 2025.
The Circular Supply Chain
As highlighted above, more and more companies are looking to reduce waste and turn their supply chain operations into a circular economy. There are a few ways companies are able to achieve this goal using reverse logistics and returns management. In a survey on returns management, Mr. Cunnane explored which sustainability practices organizations used when it came to returns.
Companies need to decide what they will do with the returned item, which will vary based on the type of product. Per ARC Advisory Group’s survey, 64.2 percent of respondents indicated they re-use the returned item, and sell it “as is.” This is common for apparel and other non-electronic items, where it is easier to get an item back into a selling channel. For consumer electronics, things are a little trickier. Here, 53.5 percent refurbish the item and then sell it, while 26.7 percent remanufacture the item, which means the item is held to higher standards than refurbishing. When an item cannot be salvaged, 60.7 percent of respondents recycle it.
The decision to re-use, refurbish, re-manufacture, or recycle goes a long way to improving sustainable supply chain operations and building a circular economy. However, looking at these numbers, it is clear that more work needs to be done. For those items that cannot be salvaged, close to 40 percent are still be discarded rather than recycled. To truly build a circular supply chain, companies need to make the commitment to re-using, refurbishing, re-manufacturing, and recycling. Otherwise, nothing is going to change.
Chris Cunnane is the primary author of this article. At ARC’s user conference this February, Accelerating a Digital Supply Chain Transformation and Sustainability, Mr. Cunnane will moderate several panels on sustainability.