If good intentions alone could build a responsible future, then every organization would do it. But we all know that this is hard work. It involves threading sustainability into the business through supporting net-zero operations, building customer and employee trust, and developing circular economy practices.

Here’s the thing about procurement organizations and circularity. While CPOs are in a great position to lead the charge, most can benefit from more education about the circular economy. The good news for business and the planet? Forward-thinking CPOs are starting to ask questions, make plans and take action.

What is the circular economy?

As the world looks beyond the current COVID-19 pandemic, the task of rebuilding for better, including the need for more resilient and sustainable supply chains, heightens the focus on circularity even further.

But ask CPOs to define circular economy, and you’ll get many different definitions. So in the spirit of level setting, think of it like this—the circular economy is a systemic approach to economic development designed to benefit businesses, society and the environment.

Circularity is the polar opposite of the traditional “take-make-waste” linear model. Because they are regenerative by design, circular economy practices decouple growth from the consumption of finite resources. Companies across industries are setting circularity targets as there’s a profound case for doing so. According to Accenture research, $20 trillion in value is at risk due to sustainability challenges.

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Throwing away take-make-waste

Of course, circular economy models look very different from “how things have always been done.” They are characterized by several principles. Not every principle is present in every circular solution:

•   Circular inputs that use renewable or recycled raw materials in the production process
•   Sharing platforms that optimize product and asset utilization through shared ownership
•   Product as a service models where companies retain ownership and sell benefits as a service
•   Product use extension where a product’s application is purposefully extended
•   Resource recovery where the value of a product’s materials is captured at the end of its use

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Running in circles

Many innovative programs are bringing these principles to life. Swiss footwear company, On Running and their launch of the Cyclon high-performance shoe is a good example. It’s an intriguing model that’s set on shaking up how runners buy running shoes while supporting sustainability goals. Consumers pay a monthly fee to participate. When their shoes wear out, On sends subscribers a new pair and takes the old ones back. And, yes, the Cyclon is 100% recyclable. [1]

Taking a leadership role

While product engineers and marketers are front and center in developing and launching a product like the Cyclon, procurement plays an unsung role. It frankly doesn’t happen without their  experience in sourcing circular inputs. This gets to the heart of our message to CPOs. You are uniquely positioned to help companies reach the potential of the circular economy across direct and indirect purchasing. 

This can happen through a reactive or proactive dynamic. In the former, the business drives circular design and production processes, which creates new requirements to which procurement should respond. The latter goes beyond reacting to what the business does. In this dynamic, procurement takes the lead. Procurement helps set the circularity agenda by tapping into its knowledge—such as its understanding of raw materials and the supplier base. It’s yet another way that procurement continues its evolution from a purely cost-cutting mindset to a value-adding one. 

As companies develop and expand their circular initiatives, we see three areas where CPOs can help scale the impact right now:

  1. Double down on sourcing. Procurement’s commodity buying knowledge has an important role to play in the circular future. The function can prove clear value by assessing the movement of the relevant commodity markets, understanding how suppliers are advancing their own circular agendas, and knowing the best places to source the circular inputs that fit with engineering specifications and circular goals. There are opportunities to tap into AI-powered tools to speed market scans, which could be a game changer. In this lead role, the CPO comes to the business with an action plan backed up by a strong business case. 
  2. Build bridges inside and out. Procurement’s role as an ecosystem builder is a critical foundation. This connecting capability applies both within the organization and with suppliers. While CPOs are not designing new products to bring to market, they should align with those in the company who are involved with new product development. There are also opportunities to establish open or closed loop raw materials sourcing systems with suppliers, collaborate with them across technology platforms that assist circular ways of working, and hold them to bold sustainability commitments.
  3. Create a domino effect. Taking action to educate suppliers on circularity goes steps further than simply collaborating with them. Progressive companies could take a co-innovation approach, helping to educate suppliers about additional circularity aspects that they need to develop and prioritize. By making a concerted effort to drive best practices across the value chain and collaborate to verify these aspects are developed, procurement is creating its own “virtuous circle” of approaches that benefit business, society and the environment.

    In case you missed them, take a few minutes to explore earlier blogs in our building a responsible future series. These include our thoughts on net-zero operations and consumer and employee trust.


    [1] Cyclon: Subscribing to the Future at https://www.on-running.com/en-us/articles/subscribing-to-the-future

    Chad Gottesman

    Managing Director – Operations, Procurement Business Process Services

    Justin Keeble

    Managing Director – Strategy & Consulting, Sustainability Strategy Lead, Europe

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