'Circular supply chains could deliver additional $4.5 trillion by 2030'

Will Green is news editor of Supply Management
17 October 2015

The “circular economy” could generate $4.5 trillion (£2.96 trillion) of additional economic output by 2030 if firms rethink their approach to resources and supply chains, according to a new book.

Waste to Wealth by Accenture outlined how traditional industrial policy was informed by 40 years of falling commodity prices to the turn of the millennium, which resulted in a “take, make and waste” approach.

But it suggests firms can “unlock” additional value adopting different business models, including recovering and recycling waste and “circular supply chains" that allow suppliers and partners to use recycled materials repeatedly.

Co-author Peter Lacy, managing director of Accenture Strategy, said: “The take, make and waste approach of traditional, linear business models has now begun to choke economic growth through unpredictable raw material prices and the increased cost of depending on less stable supplies of constrained resources.

“By turning waste into wealth with new business models, companies can boost their competitiveness by reducing dependence on scarce resources and generating new innovative services that grow revenues.”

The book said business models that will drive the circular economy include sharing platforms that “maximise the use of underused assets, such as hotel rooms, vehicles or consumer goods”, noting that 80 per cent of typical household items in mature economies are used only once a month.

“Products-as-a-service” could replace ownership-based models, for example selling driving time rather than cars, and this would encourage companies to maintain products for longer and offer new services, such as predictive maintenance and fuel efficiency support.

Similarly “product life extension” would involve remanufacturing and repairing used products to “give them longer life with existing or new customers”.

Accenture said digital technologies will “underpin the emergence of the circular economy” in ways including matching supply and demand for otherwise underused assets and products.

The company recommends firms “secure circular supplies through redesigning the role of procurement” and create “return chains” with suppliers to “boost the quality and reliability of recycled and remanufactured materials”.

Lacy said: “The driver of the circular economy isn’t scarcity, it’s opportunity. By keeping resources economically productive for as long as possible, companies can achieve greater growth.

“Most companies have waste hotwired into their existing ways of doing business and it will take many steps for most to turn waste into wealth. But those who get there first will achieve circular advantage that differentiates them in their market.”

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