18 Must-Have Negotiation Skills For Procurement Professionals

Circular Economy Transforming Sustainable Procurement

The circular economy is gaining traction throughout the years and many businesses are adopting it. Circularity is acknowledged as the most promising solution to sustainability issues around the world. However, what is it? 

This article will tackle what a circular economy is. We will tell you how it works and its importance nowadays. Also, we will tell you the advantages and the barriers it faces today. Furthermore, we will discuss how it affects procurement. 

Once you finish reading this article, you will have the knowledge of why many people acknowledge circularity as the new way to transform the world by utilizing it as a solution for sustainable issues. 

Circular Economy: What is it? 

The circular economy is a system of resource utilization where “reduce, reuse, and recycle” rules. However, you must take note that a circular economy is more than the “three Rs” approach to saving the planet.

According to the definition of the World Economic Forum, the circular economy is restorative or regenerative by intention and design. This is due to the fact that the circular economy closes the loop of the normal landscape which is the linear economy. 

To simplify, the circular economy is a system where resources and waste are reused instead of getting rid of them by incineration or by sending to a landfill.

It closes the loop through the “take-create, consume-disposal” pattern by retaining the highest utility and value of components, materials, and products for as long as possible. 

With a circular economy, we can lessen waste to a minimum because everything that businesses produce and sell to their consumers is transferred and used somewhere else continuously. 

Additionally, it promotes the use of many biodegradable materials in manufacturing products to lessen their negative environmental impacts.

Unlike other economic models, circularity is a substantial improvement common to both businesses and their consumers. Businesses using this approach are proving that reused resources are more cost-effective than creating them from scratch. 

Thus, production prices decrease so that the sale price can be reduced which will benefit the consumers. 

How Does Circularity Work?

As we said earlier, the circular economy is an economic model that is focused on reducing waste and maximizing the lifecycle of resources.

It works by keeping the materials in use for as long as possible which greatly reduces the need for acquiring new resources and reducing waste.

To achieve this economic model, businesses, governments, and consumers need to work together to ensure that products are created and designed to be reusable, materials can be recovered and recycled, and waste is lessened. 

Thus, the adoption of new business models that focus on innovation, resource efficiency, and collaboration is needed.  

The Importance of Circular Economy 

The circular economy aims not just to reduce waste but to throw away nothing. Thus, reducing the need to use more resources. 

It offers an alternative to the linear model which runs on the assumption that there will always be an unlimited supply of resources to turn into products and always has a place somewhere to put the waste. 

As the population continues to grow, we are realizing that the assumption that the linear model has is untrue. Thus, many are accepting that a circular economy is needed to protect our finite resources. 

Furthermore, the circular economy is important as it offers a more resilient and sustainable economic model that can solve environmental, social, and economic challenges. 


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Circular Economy Tactics For Procurement

For you to understand how to achieve sustainability in business and procurement better, we will tell you these 10R strategies that you can use in any area of your value chain:

1. R0 – Refuse

To achieve this, we need to make a use-and-throw product or make products redundant by abandoning their function or by offering the same function with a radically different product. 

2. R1 – Rethink

This can be achieved by making the use of the products more intensive. When we think about a circularity strategy for refrigerators, we must consider the use and service contract which includes maintenance, repairs, and refurbishing. 

3. R2 – Reduce

For you to Reduce the consumption of natural resources you must increase the efficiency of manufacturing. For example, in my time as a procurement manager, I decreased the use of plastic in plastic rice bags by eliminating the empty ‘air space’ in the bags of rice. 

4. R3 – Reuse

Reusing is the principle of using products more than once. For example, you can buy eco-bags and be able to use them again and again when you go to the market and buy your needs. 

5. R4 – Repair

R4 is the Repair and maintenance of defective products so they can be used with their original function. Thus, it simply means fixing the products instead of throwing them away. An easy example of this would be your clothes. Instead of throwing away your clothes that have a small cut, you can go to a repair shop or do it on your own so that you may be able to wear them. 

6. R5 – Refurbish

R5 is to Refurbish and restore an old product and bring it up to date. Again, an example about refrigerators: the company can replace old parts with modern ones and sell the refurbished devices 

7. R6 – Remanufacture

R6 is to Remanufacture this can be done by using parts of discarded products in a new product with the same function. Continuing with the fridge example, an intermediate uses old parts which still work to repair broken-down or new devices, and unused parts can be sent to a recycling facility.

8. R7 – Repurpose

R7 is to Repurpose discarded products or their parts in a new product with a different function.

9. R8 – Recycle

R8 is to Recycle materials and by-products through innovative ways to obtain value or use them as raw materials. It also means turning products into new products once it has reached their lifecycle. For example, instead of throwing water bottles, you can recycle them as plant pots. 

10. R9 – Recovery

R9 is the Recovery of every resource possible to reduce what is disposed of as waste. In the case of the fridge, an example could be energy recovery from incineration.

Benefits of the Circular Economic Model

1. Environmental Benefits

The circular economy aims to make every product transformed and nothing goes to waste. Thus, it reduces the excessive consumption of finite resources and the generation of waste. 

Additionally, it reduces greenhouse gas emissions as the resources being used are all recycled which can help the world heal. 

2. Economic Benefits

A circular economic model can create new business opportunities, jobs, and cost savings. As you are using recycled materials, you can lower the cost associated with raw materials and generate more profit. 

Also, refurbishing and manufacturing products can create jobs in the service and manufacturing sectors. 

3. Social Benefits

As the circular economic model aims to reduce waste and the usage of new resources, there will be a reduction in waste and pollution that can improve air and water quality. Thus, it improves the health and well-being of the people within a community.

The Challenges the Circular Economy Faces Today

1. Promoting Circular Behavior

Consumers play an important role in the transition toward this economic model. However, it is hard to promote a circular economy to people, especially those who prioritize convenience. 

For example, many stores have eco-bags where they put all the procured products of their customers. However, how willing are their customers to reuse those eco-bags, especially if it has the added inconvenience of bringing them from time to time when they are shopping? 

Thus, the actions of consumers do matter and they also have a part to play in order to achieve a circular economy. 

2. Lack of Infrastructure for Waste Treatment

Not many countries have sufficient waste treatment facilities to ensure that the waste materials can be recycled into something. If there are no sufficient facilities for this, then we can expect that waste will just continue to accumulate in landfill or be dumped into the sea. 

3. Lack of Recycling Capacity

Just like the lack of infrastructure for waste treatment, many countries also lack sufficient facilities to recycle materials. In addition to this, many recycling facilities are already old and there are materials that need higher recycling capacity. 

To achieve a circular economy, we need to ensure that the technologies needed are available to recycle the materials.

4. Existing Business Models are not Compatible With Circularity

Collaboration is the key when it comes to making the existing business models compatible with the circular economy. However, not many businesses are willing to spend more for the transition to this economic model. 

Additionally, a circular product will not always win when it comes to internal decision-makers of a company, especially if it will defeat the success of the same firm’s product.  

5. Government Regulations

Many existing policies and regulations are still geared towards the linear model. For example, expiration date labels are often required by law to protect consumers. 

However, it does not consider differences in how the food is stored. Thus, the date label on a certain food may be labeled for pantry storage but will last longer when refrigerated. 

Circular Procurement: What is it? 

Circular procurement is a term used relating to purchases that support the principles of the circular economic model. It is an approach that aims to limit the waste of resources and reduce the environmental impact. 

Circular procurement has the potential to deliver multiple benefits such as allowing buyers to focus on needs fulfillment and providing a holistic consideration of environmental impacts across the whole lifecycle of goods and services. 

Frequentlyasked questions

+ What is Circular Economy

It is a system where resources and waste are reused instead of getting rid of by incineration or by sending them to a landfill.

+ Why is it important?

It is important as it offers a more resilient and sustainable economic model that can solve environmental, social, and economic challenges. 

+ What is circular procurement?

It is a term used relating to purchases that support the principles of the circular economic model.

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