How can Circular Economy Build an Ethical Supply Chain? - YTao

How can Circular Economy Build an Ethical Supply Chain?

Our environment will soon be stressed beyond capacity. Almost 10 billion people will be living on Earth by 2050. Global GDP is set to quadruple. Every resource we use is borrowed from future generations. Based on current consumption patterns, we will soon need three times the amount of natural resources. That means three more planets.

World Economic Forum

We need to transition to a circular economy and move away from a “take-make-waste” linear economy. Every business, large and small, should take responsibility to make sure their supply chain is not causing damage but contributing to positive change.

A circular economy is based on the principles of designing out waste and pollution, keeping products and materials in use, and regenerating natural systems.

Ellen Macarthur Foundation

Moving away from a linear economy

The world currently operates on a linear economy. It starts with resources and sources being supplied for manufacturing. Products and items are created and sold to buyers. Buyers use the item which finishes its life in landfill as waste. All too often the whole timeline from start to finish is a matter of months.

And then the line starts again.

The costs of a linear model are high. Not only do Australians pay billions of dollars every year sending recyclable items like food, clothing, and electronics, to landfills, but the cost to the environment is enormous.

A linear economy is unsustainable. It drains earth’s finite natural resources, it destroys the living systems we depend on and causes climate change which ultimately harms people.

Rethink Global

The only way forward for sustainability of our planet and our people is a circular economy.

Research across the globe has shown how this can be achieved. The Closed Loop Foundation estimated that the circular economy would provide $7 billion in new revenue opportunities from recycling for cities and recyclers.

Moving towards the circular economy

We live in a world where phones are more commonplace than people! A world where some people have more clothes than they could wear in their lifetime. According to Annie Leonard in The Story of Stuff, 99% of the stuff we source and buy is discarded within six months.

Andrew Cairns, CEO of Community Sector Banking, writes in a PRObono Australia article;

“In an economy that is driven by population and consumption growth, we were always going to create more and more waste. Instead of the traditional “take, make and dispose” model of production, we could move towards a circular economic model where used materials are reused, repurposed or recycled.”

A new impetus for the circular economy

The COVID-19 pandemic has nudged us closer or perhaps pushed us with force, to build a better world. Less than 6 months ago it seemed hard to believe that the majority of office workers would be working from home.

Nobody would have imagined a world with barely any air travel, and less manufacturing, and the positive effect on the environment as carbon emissions plummet. As humans, we now see what’s possible.

COVID-19 has shown how fragile global, and in some cases, national supply chains can be. The circular economy provides a solution.

What is a Circular Economy?

Ken Webster, leading circular economy thinker, talking on In the Loop, suggests we should stop asking for examples of how to make a circular economy work. Instead, he says we need to understand the narrative of our business. Thinking of it as two-fold:

  1. “Don’t kill your customer” — make your products safe. Don’t use toxic materials that harm nature, communities in the supply chain, or your buyers.
  2. “Don’t kill their custom” — give people ways to become your customer for life. The economy needs to make sure people have an income so they can buy quality products and services. Make sure your customers love your products for a long time. Offer repairs, upgrades, returns, renting etc.

A circular economy will:

  • Reduce the material impact of our society’s growing consumption
  • Reduce the problem of waste disposal
  • Create new jobs
  • Increase spending in Australian businesses to strengthen our economy
  • In turn, support Australian people and our disadvantaged communities.

Ellen MacArthur Foundation’s report on Completing the Picture: How the Circular Economy Tackles Climate Change (2019) shows that transitioning to a circular economy designs an economy that is restorative and regenerative, creates benefits for society, businesses, and the environment.

Why does this affect you?

It’s easy to bury your head in the sand and feel disconnected. Talk of climate, pollution, waste, and recycling can seem like issues that are much bigger than your business.

In the short term, it may have little impact on your business. But, the circular economy is the way of the future. It’s not a trend. It’s a necessity. It helps your business stay ahead and be resilient. It can help keep your customers, control your costs, and continuously improve your services and products.

Consider these principles from Rethink Global:

1.Reuse and regenerate

Are you using virgin resources or paying a premium for access to virgin materials or recycled products processed overseas? Can you reuse or regenerate materials closer to home?

2. Circular economy

Does your business model rely on selling more products to more people? Is this a model that encourages sustainability? Does it cost you more to find new customers?

The supply chain and circular economy are inextricably linked.

Why your Supply Chain matters

In recent years, governments, NGOs, and consumers have started to demand companies are transparent about their supply chains. This means companies knowing what is happening upstream in the supply chain and being willing to tell others about this, including consumers.

Companies who are not willing to share this information risk their reputation. A significant number of commercial brands have suffered tarnished reputations and revenue-loss because of unethical practices among their suppliers further down the chain.

Companies can be implicated by unintentionally purchasing from unethical or negligent suppliers. Public knowledge of this might lead to business failure and financial disaster. If your supply chain operates across international or national borders, don’t fall for ‘out of sight’ meaning ‘out of mind’. Any unethical issues will be seen as your wrongdoings by your customers.

Coles and Woolworths found this out the hard way in 2016. Both were named and shamed as they had purchased fruit from Australian farmers engaged in the employment of illegal workers from overseas.

A report by the Australian Securities and Investments Commission in 2013, found 44% of businesses in Australia failed because of poor strategic management. According to a survey by Deloitte from 2014, 79% of companies with high-performing supply chains have revenue growth that is significantly above average, compared to 8% of businesses with less capable supply chains.

The benefits of a transparent supply chain are:

  • Enhance company’s reputation as trustworthy and honest
  • Attract and retain employees who are keen to work for responsible companies
  • Increase consumer trust and satisfaction
  • Ability to identify opportunities for improvement.

Consumers are willing to pay more

Supply chain management goes beyond the negative impact on customer satisfaction, poor quality products or service, long delivery lead times. It needs to respond to the growing numbers of discerning consumers who are willing to pay more for products when they know where the products are from, the conditions they were produced and details of the ingredients and materials.

A successful Brand needs an Ethical and Transparent Supply Chain

Whether you’re an entrepreneur starting a new enterprise or the CEO of an expanding company, your success is undoubtedly linked to the management and transparency of your supply chain.

A modern supply chain is only as strong as its weakest link.

Historic Futures believe ‘to make better products tomorrow, we must know where they come from today’. They’ve developed an online tool, String3, to help see each stage of a product’s supply chain.

Is it time for your company to see the supply chain as the life force and backbone of your business success? Alexis Bateman and Leonardo Bonanni provide steps to improve supply chain transparency.

It’s time to clean up our act

Waste is one of the most pressing issues to be addressed in a supply chain and throughout the circular economy.

The decision of Asian countries not to take Australia’s waste as the demand to recycle increases in their own countries has put the responsibility of recycling firmly back with Australia.

Australia released its 2018 National Waste Policy, and supporting Action Plan in 2019. There are a number of ambitious targets highlighting that processing own waste would be an enormous step to achieving a circular economy.

“If we stop looking at waste as something to be disposed of, and instead recognise it as an asset that can be repurposed, we can unlock a whole new waste to asset industry in Australia” Andrew Cairns, Community Sector Banking CEO.

A circular economy seeks to remove as much waste as possible from the start. A ‘closed loop’ is where waste is reduced at every step and the materials circle around the loop being reused, incorporating:

  • Recycle
  • Reuse
  • Repair and Refurbish
  • By-products would be reused. Renewable energy would run manufacturing. Resources would come from recycled materials. Less labour and less energy costs.
  • Ellen MacArthur Foundation 2017

A circular economy provides us with a unique opportunity to create a better future for the next generations. Let’s set the future up so they can enjoy our planet as we have enjoyed the planet.

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