The term ‘circular economy’ has been increasingly discussed at a local and international level. In the UK, its estimated that transitioning to a circular economy could help meet up to 80% of the country’s carbon budget. Since the supply chain/distribution services sector is the backbone of the economy, playing an essential role in manufacturing, retail, and construction, it’s clear that the principles of the circular economy also affect this sector. In this article, we explain what a circular supply chain is and the benefits of implementing one.
Circular supply chains are an entirely different model from linear supply chains. The latter are based on acquiring raw materials and resources, manufacturing them into products, putting them to market, and disposing of them – traditionally in landfill sites – at the end of their life cycle.
By contrast, a circular supply chain revolves around creating products, using them, and re-using them or recycling them so they can be re-created into other items or materials. Within this model, businesses take action during the creation or manufacturing process to reduce consumption of fossil fuels and other non-renewable resources.
Circular supply chain models are based on the understanding that resources are finite and that all players in the supply chain have an important role to play in optimising the use of those resources.
The circular model is a paradigm change because it creates value out of waste and encourages greater cooperation towards shared goals among businesses in place of pure competition. In turn, this expands the possibilities and sources of income from anyone involved in the supply chain.
What Are The Benefits Of Implementing A Circular Supply Chain?
1) Cost Savings
Once the necessary processes and equipment are implemented, operating within a circular supply chain can be more cost-efficient than linear models. This model results in a significant reduction in the cost of raw materials and creates less dependence on external suppliers. As a result, your business can be better positioned in times of extreme price volatility or supply shortages.
And although implementing circular supply chain practices has an initial cost, the expenses are decreasing since the technology needed is becoming more widely available.
2) Customer Loyalty
A circular supply chain has a real impact in the world, and it also helps build a business reputation aligned with modern consumer values. The percentage of eco-conscious consumers doubled in less than 3 years. In many cases, a company’s stance and actions on this subject affect customer purchasing decisions.
Similarly, suppliers are coming to expect manufacturers and other players in the supply chain to contribute to the circular economy. Taking steps towards a more circular supply chain can help keep you top of mind and increase business value.
3) Better Compliance
The principles of a circular economy are already built into legislation, and their scope will expand in the next few decades as the UK moves towards a zero net carbon economy.
If your company takes action now, you will better prepared to comply with the environmental regulations surrounding the UK’s net zero strategy. In other words, acting now builds resilience capabilities that will help your supply chain operations run smoothly now and in the future.
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