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Gartner survey: Supply chain leaders should understand circular economy helps capture value

Some 74% of supply chain leaders expect profit to increase between now and 2025 as a result of applying circular economy principles.

According to research from analyst group Gartner, the average supply chain organisation has been applying circular economy principles for three years to approximately 16% of their product portfolio.

Conducted during June and July 2022 among 258 respondents from North America, Western Europe, and Asia/Pacific, the survey showed the top three circular economy benefits to have been realised recently are the minimisation of negative environmental impacts, shorter and compact supply chains, and enhanced customer insights.

Common observed barriers to applying circular principles include the application of technology to advance circular economy activities, partnering with stakeholders, and measuring the results of circular economy approaches.

Three-quarters of the respondents worked in supply chain, and the remainder represented IT, product development, and sustainability roles.

Sarah Watt, analyst with the Gartner Supply Chain practice, said: “There is still such a great deal of untapped potential in the circular economy.

“Supply chain leaders can use the inflationary environment as a catalyst to reshape their relationship with materials. Instead of losing materials out of the economy in the form of waste, the circular economy helps capture value.”

Gartner’s definition of the circular economy is a system which decouples resource consumption from business value and growth, and says this is achieved by designing products and materials for reuse, keeping materials in use at their highest quality for as long as possible, and by applying new business models.

The overarching factor of a circular economy is that when materials can no longer be used, they are returned to the environment in a way that does not cause harm.

“The circular economy represents systems-change; it is rare to be able to scale circular activities in isolation,” Watt explained.

“Scalability will depend on overcoming the barriers. Technology will speed up activity, create visibility and automate decision making. Partnerships can help to bridge knowledge gaps and create shared value. Measurement is essential to showing progress to stakeholders, maintaining buy-in and good will.”

The survey showed supply chain leaders are integrating circular economy products into the planning process (54%), adding new capabilities to existing manufacturing sites (42%), and adding new locations for repair/remanufacturing and waste management which are company owned (36%).

Looking out over the next three years, according to the survey, the focus will increase on procurement, with buyers being incentivised to purchase circular materials (41%).

Read some examples of circular thinking in retail on Green Retail World

[Image credit: Green Retail World

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