Embracing the Circular Economy in the Supply Chain

Tags: Technology , Supply Chain, Sustainability

Thanks to digital technologies like IoT, analytics, and sensors, adoption of circular economy business models has accelerated, moving from a specialized concept to a more mainstream business strategy.

But according to a recent set of insights from Accenture Strategy, too often programs remain “skin deep.” Too few companies are embracing the “full circle” approach to waste elimination in their supply chains, resulting in a missed opportunity to capture the full potential value of the circular economy.

The report from Accenture Strategy found that although most supply chains are prioritizing recycling, few companies are reusing materials they recapture at the end-of-life.

In fact, 94 percent of companies surveyed report implementing one element of circular supply chains, and nearly half (44 percent) name recycling as their priority. However, only 18 percent of companies are refurbishing the products or materials that they’ve recaptured. And when they do recapture parts and material, it’s often only because of competitive pressure or warranty issues.

Although 92 percent of companies surveyed by Accenture Strategy say they are geared up for product life extension, only 30 to 40 percent are doing it. And for resource recovery, four out of 10 programs only recycle base materials, ultimately destroying or disposing of more than 60 percent of products reclaimed—losing all the embedded value.

First movers who go beyond basic recycling in favor of deeper, strategic approaches are achieving significant business value. And they’re using digital technologies to do it. Ninety percent of companies surveyed believe digital technology has influenced their ability to implement operational changes to deliver circular supply chains, product life extension, or waste-to-value capabilities.

For companies to capture the full potential of the growing circular economy, they must focus on higher value initiatives. That means expanding their vision beyond recycling, breaking down silos, and encouraging cooperation within their supply chain functions. The successful companies will be the ones that create cultural changes that start with executive leadership, and leverage digital technologies to embed circularity across operations.

Sudipta Ghosh is a managing director focused on operations strategy at Accenture Strategy.

Harry Morrison is a managing director focused on sustainability at Accenture Strategy.