Gartner: 51% of supply chain pros surveyed expect more focus on circular economy strategies

Fifty-one percent of supply chain professionals expect that the focus on their circular economy strategies will increase over the next two years, according to a survey by analyst company Gartner.

Gartner defines the circular economy as an economic model that separates the ability to achieve economic growth from the consumption of natural resources. Circular economic business models encourage continuous reuse of materials to minimize waste and the demand for additional natural resource consumption.

In May and June 2020, Gartner surveyed 528 supply chain professionals and found that there are two main drivers for the increase: first, consumers may not be willing to make big purchases, resulting in product as a service (PaaS) models becoming more attractive. Secondly, a circular economy has the potential to improve raw material security from end of life products. Chief supply chain officers (CSCOs) can use circular economy strategies to increase their organization’s raw material security in times of disruption.

“The COVID-19 pandemic has shown that the strengths of globalized supply chains can become a weakness when raw material availability and access plummet during a crisis,” says Sarah Watt, senior director analyst with the Gartner Supply Chain Practice. “For CSCOs, the circular economy is a great opportunity to improve raw material resilience and decouple material consumption from financial growth.”

However, organizations still struggle to access and reprocess end-of-life products. Supply chain leaders face a web of complexities that consist of four specific challenges: ownership and control over end-of-life materials; collecting sufficient quantity of materials in an efficient manner; value of raw materials, and; product complexity, with less complex products generally being easier and cheaper to reprocess.

One of the easier methods to overcome complexity is by recycling to reclaim primary materials. However, recycling leads to loss of value, as the manufactured product is being extinguished in the process. Only 24% of survey respondents stated that their organization is involved in refurbishment activities. Refurbishment provides more value than recycling as it typically reduces environmental impact and allows the organization to achieve a quick second sale.

“Product design is crucial to end-of-life management. Poorly designed products with toxic materials can be incredibly difficult and costly to process and put back into the market,” Watt concludes.