The circular economy: The future of supply chains

Traditionally, the concern of sourcing materials and products was left to the organisations that managed these supply chains and largely unacknowledged by consumers. However, recent disruptions such as the pandemic and Brexit, and instances such as the blockage of the Suez Canal, have resulted in increased supply chain scrutiny from customers. In fact, our research discovered that 79% of UK consumers today have more awareness of how supply chains impact product availability.

As consumers pay more attention to the supply chains of the brands they engage with, we are seeing a widespread shift in preferences towards organisations that focus on sustainable and ethical sourcing. The demand for products with less environmental impact is now materialising in a willingness from customers to spend more on goods produced by “green” supply chains. This is supported by our research which showed that 83% of consumers would be more likely to buy from a brand that supports and sources from local suppliers and a further 83% would also be willing to compromise for ethically sourced products.

With increased consumer awareness and scrutiny, businesses must address the potential inefficiencies across their supply chains and leverage a better model. This is where the circular economy comes in.

Completing the loop

Transitioning to a supply chain that operates within the circular economy is a powerful sustainability driver. Its very premise is to keep products and materials in use for as long as possible, meaning that businesses can extract the maximum value from them. This could be by sharing, leasing, reusing, repairing, refurbishing, or recycling. Many organisations now operate within this space and big brands are also embracing it, with the likes of Burger King, Adidas and IKEA all developing products or offerings that play into the circular economy in some form. Unsurprisingly the circular economy is one of the key building blocks of the European Green Deal and in achieving the EU’s 2050 climate neutrality target.

While our research revealed that nearly three quarters (73%) of UK consumers are unfamiliar with the circular economy, when explained, the majority agreed that they would be more likely to purchase from brands that are contributing towards it (62%).

Therefore, establishing relationships with suppliers operating in this space can not only create a more sustainable business model, but also help to respond to changing consumer demands.

Becoming circular

It is crucial for brands to understand how they can work with suppliers that operate in the circular economy. The key to this lies in improving visibility into the supply chain to determine who a business’s suppliers are, their operations and ESG goals and, importantly, how they contribute to the circular economy. This visibility can only be achieved through the application of cloud-based technology that moves them away from a traditional linear supply chain model to a digital supply network.

Unlike linear supply chains, supply networks shift away from singular, point-to-point processes to a many-to-many structure that enables 360-degree visibility. Digital supply networks utilise technology and data analytics to provide a continuous flow of information, therefore unlocking holistic insights into all business areas for leaders and decision makers. Not only does this unlock rapid response to changing consumer demands and other unforeseen circumstances, but it also allows organisations to understand what partners they are operating with and their practices. This data is significant; it makes no sense to set sustainable targets for your business if the partners you transact with don’t adhere to them.

Once connected to a network, an organisation can become both a buyer and a supplier. This allows for broad visibility into the interconnected operations of an organisation’s trading partners, including those operating in mines, farms, and other providers of raw materials. This equips organisations with greater transparency to ensure that the company’s ethics and values are not compromised at any stage and enables them to identify and collaborate with new partners, like those in the circular economy.

The circular economy is not only beneficial for society and the wider environment, but it also presents a key business opportunity, particularly in the long term. As consumer interest in sustainability further translates into action, organisations must prioritize their focus and investment in circular procurement practices. Digital supply networks will assist brands to monitor suppliers’ sustainability performance, hold them accountable and replace them with new, circular partners if required.

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