Welcome to the seventh installment of our ten-part series on transitioning from the traditional linear supply chain to a zero waste, fully circular, and ultimately net-zero performing supply chain. This series is designed to help businesses with complex supply chains, including multi-site retail operations, achieve their sustainability goals. In this installment, we’ll explore the circular supply chain models that are making a difference around the world.
The Closed-Loop Supply Chain
The closed-loop supply chain is a cornerstone of circularity. This model emphasizes the continuous flow of materials through reuse, remanufacturing, and recycling. Companies like Caterpillar have championed this approach, remanufacturing heavy machinery parts to reduce raw material consumption and decrease environmental impact. Similarly, EcoTrax has embraced reusable pallets, reusable containers, and reusable pallet wraps, thereby minimizing waste and reducing the need for single-use materials. The beauty of this model lies in its dual benefits: cost savings from reduced raw material needs and enhanced customer loyalty through sustainable practices.
The Industrial Symbiosis Model
Industrial symbiosis takes circularity to another level by fostering collaboration between different industries. In this model, the waste or by-products of one company become the raw materials for another. The Kalundborg Symbiosis in Denmark is a prime example, where multiple companies share resources like water, energy, and waste, creating a network of interdependencies that drive both economic and environmental benefits. EcoTrax has also adopted this model by collaborating with local farmers and food-waste up-cyclers to reclaim organic waste from their operations, converting it into valuable agricultural inputs or animal feed, thereby closing the loop in food production and waste management.
The Product-as-a-Service Model
In the Product-as-a-Service (PaaS) model, companies retain ownership of their products and offer them as services rather than selling them outright. This shift changes the focus from volume sales to product longevity and lifecycle management. Philips has successfully implemented this model with its lighting solutions, providing lighting as a service to cities and businesses. Green Spider, a partner of EcoTrax, offers reusable pallet wraps as a service, allowing businesses to reduce waste (up to 1,000 reuses) and ensure optimal use and return of these wraps. This approach not only reduces waste but also ensures continuous revenue streams and stronger customer relationships.
The Circular Procurement Model
Circular procurement integrates circular economy principles into the purchasing process. By prioritizing products and services that support reuse, repair, and recycling, businesses can drive demand for circular solutions. IKEA has made significant strides in this area, committing to using only renewable or recycled materials by 2030. This model encourages suppliers to innovate and align with circular principles, creating a ripple effect throughout the supply chain.
The Modular Design Model
Modular design focuses on creating products that can be easily disassembled and upgraded, extending their lifespan and simplifying recycling processes. Fairphone is a pioneer in this space, offering smartphones designed for easy repair and component replacement. EcoTrax employs modular design in their reusable pallet systems, allowing individual components to be replaced or upgraded without discarding the entire pallet. This model not only supports sustainability but also empowers consumers to take an active role in product lifecycle management, fostering a deeper connection with the brand.
Comparative Insights
While each of these models offers unique advantages, their effectiveness often depends on the specific industry and organizational context. Closed-loop supply chains are ideal for sectors with high material costs and significant environmental impact, such as manufacturing and automotive. Industrial symbiosis thrives in regions with diverse industrial activities, promoting local economic resilience. PaaS is particularly effective for high-value, durable goods where maintenance and upgrades are critical. Circular procurement and modular design, on the other hand, are versatile models that can be adapted across various sectors to drive systemic change.
Strategic Imperatives for Leaders
For executives, CFOs, and Chief Supply Chain and Sustainability Officers, adopting circular supply chain models is not merely a sustainability initiative—it is a strategic imperative. These models offer pathways to reduce costs, drive innovation, and build resilient, future-proof businesses. As the global landscape continues to evolve, the shift towards circularity will be a defining factor in maintaining competitive advantage and achieving long-term success.
Getting Started
Embracing circular supply chain models is a powerful strategy for businesses committed to leading in sustainability and innovation. The most difficult change management focus should be to capture the hearts and minds of each stakeholder group. Success will be determined by an unmovable force-of-will, across the organization to do-more-good for the environment.
Next week, we’ll focus on Repurposing Waste. Stay tuned as we continue to explore practical strategies for achieving a zero waste, circular, and net-zero performing supply chain.
About EcoTrax
EcoTrax is a technology-enabled supply chain solutions company focusing on a mission-critical yet under-resourced area of supply chains – the recyclables, reusables, and waste produced by distribution centers. Our purpose-built platform and team of industry experts deliver solutions that increase the value and sustainability performance of recyclables (pallets, OCC bales, plastics, food waste) while simplifying and modernizing the management of returnable containers (totes, pooled pallets, etc.). We digitally integrate and synchronize all internal stakeholders and external partners and automate workflow through a single platform. This single point of truth reveals real-time, actionable data and insights, reducing environmental impact while improving fiscal performance.