ChatGPT & AI in
Procurement Course

Free Preview Lesson

Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Circular Economy — Transforming Sustainable Procurement

Key take-aways

  • Circular economy transforms procurement for sustainability by focusing on reduced waste and maximized resource lifecycle.
  • 10R strategies guide sustainable practices, emphasizing refusal, reduction, reuse, repair, and recycling.
  • Circular procurement supports principles of the circular economy, limiting resource waste and reducing environmental impact.

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. 

As a result, 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. 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. With that, 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. 

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:

Benefits of the Circular Economic Model

Circular Economy has its fair share of benefits. When it’s working right, it can provide the following:

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

Change isn’t always easily accepted. Some resist it because it’s not what they are used to. Same goes with Circular Economy. Here are the challenges it 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 to 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? 

As a result, 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. 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. 

Conclusion

Circular economy in procurement promotes sustainability by emphasizing reducing, reusing, and recycling resources. It aims to intentionally use resources efficiently, minimizing waste. This approach offers an alternative to the linear model, recognizing the limits of resources and addressing environmental, social, and economic challenges. Practical tactics, such as the 10R strategies, guide sustainable procurement with steps like refusal, reduction, reuse, repair, and recycling. Circular procurement aligns with these principles, limiting resource waste and environmental impact for a holistic approach to sustainable practices.

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.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics