How to capture the potential of the circular economy?

Many of the larger product-based companies have invested to put in place circular supply chains for recovery and recycling. But to fully deliver value to people and the planet- circular efforts need to expand beyond the low-hanging fruit like recycling and more to other circular business models. To capture the full potential of the circular economy, companies need to widen their circle by asking questions and pursuing higher and more complex value initiatives:

START THE CIRCLE FROM THE TOP

Leadership at the very top of the company must create business imperatives, cultural changes, and governance to promote circular objectives—and integrated goals and metrics. That requires taking traditional metrics—like EBITDA, gross margin, etc.—and blending them with new metrics including take-back quantities, the degree to which materials were effectively refurbished or reused, and resource productivity.

QUESTIONS TO ASK:

• What does success look like in the long term?

• How do we know our efforts are achieving their goals?

• What are the new metrics we need to measure circular impact?

BREAK DOWN SILOS

Companies that will gain the greatest value from circular will be those that look for opportunities that impact the very core of their operating models and seek to build an ecosystem of partners across multiple functions

QUESTIONS TO ASK:

• Which parts of the company need to work together to bring circular initiatives to fruition?

• What external partnerships could enable and bring value to the circular business model?

• Do we have the right capabilities that effectively deploy and operate circular economy principles?

LEVERAGE DIGITAL

Technologies like IoT, RFID, and analytics are critical for embedding circularity across operations and ecosystems to increase the ability to track resources and monitor things like utilization and waste capacity. Digital allows companies to have a much more granular understanding of the value of materials, and to gauge the condition of assets and products—determining when they’ll need service or replacement, for example. Gaining these capabilities is quickly becoming “table stakes” to engage in a fuller circular economy supply chain.

QUESTIONS TO ASK:

• Which technologies can we leverage to enable circular business models including resource recovery, product life extension, and products as a service?

• What do we need more insight into (i.e., tracking products, waste), and how can we get it?

CAPTURE THE FULL VALUE OF CIRCULAR TRANSFORMATION

Companies need to focus on innovation for sustainable business models. This includes owning the full cycle, the whole cycle of the product, and thinking about designing for reusability. Then how can they think about re-localizing or re-regionalizing the supply chains today that are stretched all around the world leading to building a sustainable supply chain?

QUESTIONS TO ASK:

• What are the largest areas of waste in the supply chain and how can we extract value from them?

• Where are low-cost rivals encroaching on our territory?

• Which resource-related bottleneck of the linear model can be addressed through a new business model

Sources/Notes: Accenture Circular Economy in Supply Chain

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