Procurement’s crucial role in a circular economy

To achieve a true transition to a circular economy, a business needs to engage all parts of the organisation, to eliminate waste, circulate materials and assist in regenerating nature.

The Ellen MacArthur Foundation (EMF) is a non-profit organisation that works with some of the world’s biggest companies to build awareness, education, research and best practice around promoting the circular economy, in order to tackle some of the biggest challenges of our time, including climate change, biodiversity loss, waste and pollution. 

Increasingly based on renewable energy, a circular economy is driven by design to eliminate waste, circulate products and materials, and regenerate nature, to create resilience and prosperity for business, the environment, and people.

The role of the Ellen MacArthur Foundation

“This transition requires systemic change, radical innovation, and global collaboration,” says Andres Oliva Lozano, a Senior Research Analyst at the Ellen MacArthur Foundation (EMF). “To achieve our goal, we have brought together businesses, governments, other charities and academia to create the world’s leading circular economy network.”To do this, the foundation produces research, resources, and tools to explore, develop and support solutions that can help everyone realise a circular transformation. Its vision is an economic system that’s better for people, business, and nature.

The blockers for circular economies 

There are many challenges for procurement and supply chain managers who are attempting to increase the sustainability credentials of their organisations, whilst still holding a competitive business advantage and strong returns. Cindy Venho, who is a Project Manager at EMF, believes they can also be held back from achieving circular economy principles because of out-dated business systems.

“Some of the main challenges supply chain and procurement teams face are legacy team structures and incentives, IT systems and metrics optimised for linear models, high levels of opacity across the supply chain and low visibility on product or material composition and circulation opportunities,” saysVenho.It also requires a radical change in how procurement and supply chain collaborate with other areas of the business.

She adds: “Supply chain teams will need to work more closely with internal teams like product design – to ensure products are made from safe and available circular inputs and can circulate within the supply chain – and external actors like customers – which may become suppliers of used products and components, bypassing the need for new extraction and production.” 

How procurement can drive a circular economy

To try and deliver value in a circular economy, it is important for companies to be bold enough to evaluate business models, supply chain and product designs. These three elements are essential in a circular economy strategy, but it requires strong leadership to ensure that they are effectively delivered.

“The role of circular supply chain and procurement teams in operationalising and scaling such initiatives are becoming ever-more apparent,”  says Lozano.

The role is crucial as supply chain and procurement teams manage the flow or materials through an organisation, so they are regularly the cornerstone of any circular economy plan within a company.

“All of this is managed by supply chain leaders – from the purchase, moving, processing and tracking to the invoicing,” says Lozano. “The skills and knowledge of supply chain leaders are required to transition from linear to circular ways of managing such flows.”

As procurement teams are action-oriented, they have the power to turn a business strategy into something that becomes part of the fabric of a company culture.

“They use their problem-solving and system orchestrating skills to turn high-level business strategies into daily operations, improve procedures, and bridge siloed teams,” Lozano says. “This enables them to operationalise circular economy ambitions and create the resilient, net-zero supply chains of tomorrow.”

Given their connections to other stakeholders, such as suppliers, customers, and policymakers, supply chain leaders influence decisions and behaviours across the system and can play a catalysing role in advancing the circular economy transition.

Circular economy pioneers 

The EMF pairs with companies, academics, charities and governments to further the conversation of circular economy. The likes of Amazon, Danone, Gucci, Nestle, Visa, Coca Cola and Unilever are among its strategic partner network, and it works closely with this group to support them in becoming circular pioneers, with the potential to set the direction in their respective sectors.

“We believe businesses play a crucial role in shifting the system,” explains Venho.

“We recognise that currently many businesses are part of the problem, but given their capacity to innovate and ability to drive change quickly and at scale in global markets, they also need to be part of the solution.”

Key drivers for change 

The Foundation identifies business as the key driver for change, as it can be the force that leads economies away from a ‘take-make-waste’ system towards one that is circular and sustainable.    

Lozano believes that the key focus area for business is product design, and the relationships that it has with procurement and supply chain teams, as innovation solutions lie upstream before the waste and pollution is generated in the first place.

“In our Jeans Redesign project, we brought together more than 100 organisations from across the jeans supply chain to redesign 1.5 million pairs of jeans to be more durable, easier to recycle, have more transparent sourcing, and made using safe materials and processes,” says Lozano.

Procurement strategies and future legislation 

With more companies adopting circular economy principles to create value and help tackle global environmental challenges, there is clearly more progress that can be made in the coming years.

There are ongoing negotiations for a UN treaty to end plastic pollution, and circular economy is a key topic in the European Green Deal, but Venho thinks procurement teams have a vital role to play alongside legislation.  

“Supply chain and procurement professionals can use their overview and control of material flows and their positions of influence within the system to accelerate the ongoing shift from fragile and polluting linear supply chains to resilient and regenerative circular supply chains,” she explains.