“Our marvelous, globalized, interconnected, just-in-time economy has been discovered to be fragile. With companies optimizing for financial efficiency rather than resilience, supply chain disruptions propagated quickly and have been hard to recover from. From parts shortages for iPhones to food rotting in the fields at the same time as people go hungry … it is clear that something has to change.…”– Tim O’Reily, 2020
Businesses in every industry are facing multiple pressures to adapt and innovate their supply chains. With disruptions stemming from economic, pandemic, and political upheaval, to natural disasters, to growing consumer, employee, investor and regulatory demands to be more sustainable, business transformation is imperative.
Business leaders are feeling the urgency, particularly with new entrants across industries disrupting supply chains with more circular business models, it is no wonder executives are reporting plans to double the share of revenue from circular products and services by 2030.
Today we take materials out of the ground, use them to make products and then throw them away. This take-make-waste construct is called the linear economy. The circular economy represents a different model, designed to eliminate (or reduce) waste, circulate materials and products through repurposing, recycling, or reengineering, and regenerate natural systems in the process.
Implementing a circular economy where products are designed for sustainability and recaptured in a closed loop system doesn’t just have social and environmental benefits, it is increasingly a vehicle for driving greater revenues and resilience, while reducing risks and costs. Realizing these benefits requires strategic alignment, robust metrics, and a data-driven understanding of product life cycles.
The Journey Towards Circularity Requires Metrics and Strategic Alignment
Transformation begins with a mindset shift and action. But as the axiom goes, “we cannot manage what we cannot measure,” thus business actions to become more circular require concrete ways of accounting, tracking, and measuring performance and progress. Metrics are also critical for demonstrating impact to procure investment– a top criteria for companies deciding how to allocate sustainability budgets today.
No matter where a company is with respect to circularity, metrics are also essential for setting strategic objectives, and aligning with other strategies such as Sustainability, Product, or Supply Chain. Metrics are also key to connect circularity investments to data and digital strategies, both using digital tools to automate data capture, measurement, and analytics, and as a platform for multi-stakeholder coordination, transparency, and reconciliation across the supply chain.
Depending on where a company sits in the value chain, connecting circularity metrics to strategy can have cascading benefits both to the company itself and across its customers and their respective sectors. Take for example, Jabil. The global packaging and manufacturing services provider is heavily engaged with customers in CPG, Electronics, Food/Bev, Healthcare Devices, Automotive, and more, on how to improve packaging to be designed for recyclability, using the least amount of material possible. “We’re in a position to help accelerate the creation and monetization of circular value streams,” explains Jeff Minnette, Jabil’s Senior Director of Technology & Strategic Development. “By applying material assessment metrics and learnings from projects across multiple sectors, like which materials can be removed, or which packaging styles worked in which applications and industries; by fostering alliances and partnerships with materials reclamation centers; by hosting innovation programs across stakeholders… it’s a natural alliance! We’re not only selling to our customers, we’re partnering with them, then buying back the raw materials and converting them with suppliers.”
“We’re in a position to help accelerate the creation and monetization of circular value streams.”
But connecting circularity metrics to strategy is easier said than done. Although companies can build upon many existing investments and infrastructure for circular flows, and leverage some existing metrics such as brand lift, customer satisfaction, or opportunities identified to boost related awareness and investments, circularity metrics represent a distinctly new area of competency and context.
Common Circularity Metrics
The current state of circularity metrics is evolving rapidly, characterized by an impressive variety of approaches across diverse product and industry contexts, but few shared standards. Indeed, circular business models and supply chains can look very different depending on the materials involved. For example, e-waste (of electronics and technology components) have different material dynamics to consider in repurposing than used oil or chemical recycling of plastic waste. That said, several approaches and metrics are beginning to take shape to help companies take assessment, identify opportunities and gaps, and monitor efforts and change. Here is a partial list applicable to many companies:
There is a growing array of organizations and standards available, such as Circle Economy’s Circle Assessment, Circulytics by the Ellen MacArthur Foundation, or WBCSD’s Circular Transition Indicator (CTI). Organizations can also accelerate learning and discovery in this area through industry consortia, thematic or partnership programs, open data initiatives, as part of innovation programs, and in conjunction with other “tailwinds” like investments in buildings, digitization, compliance or transparency improvements.
Data as a Circularity Enabler
Selecting the right metrics doesn’t just depend on the product and value chain context, it also depends on the availability of data. Sometimes, key data required for the above metrics, like waste flows or the value of recycled feedstocks, may not exist, or it may exist in multiple places. Other times, organizations may have some data in-house, but require some mixture of proprietary or open data sharing across partners for a more accurate and holistic measurement.
The resources required to source these data are also important to evaluate in a broader business context. Consider for example:
- Are those data and metrics available, if imperfect, still indicative and reliable enough to use as a foundational baseline? For both internal and external stakeholders?
- What existing tools or platforms already are collecting, or are capable of collecting these data? How might existing partners accelerate efforts and data quality?
- Which sets of metrics could complement each other, to offer a more comprehensive way of assessing progress and/or accelerate efforts over time?
- What metrics or standards might have cascading benefits, such as improved product reliability, customer experience, brand, supplier relationships, or new revenue opportunities?
Capturing data throughout the product’s supply chain is foundational for more than just circularity. It can seed innovation through differentiation, if for instance, the carbon offset and abatement of extractive mining achieved through recirculation, allows a manufacturer to deliver on performance without environmental harm. Products designed-for-recovery are often more modular, which makes refurbishment or reuse far more cost-efficient, even a revenue generator.
Meanwhile, several emerging technologies are instrumental to data quality and activation challenges across the product lifecycle. For example, software, hardware, sensors and a range of digital platforms and governance architectures unlocking new methods for…
- Measurement itself (through sensors, IoT, and analytics)
- Monitoring and analysis (through automated sampling and data visualization)
- Simulation (through cloud, big data analytics and modeling)
- Re-Collection (through robotics, smart waste software)
- Optimization (through big data, automation, virtualization, and machine learning)
- Data integrity (through distributed tamper-proof ledgers, privacy engineering tech)
- Accountability (through digital IDs, computer vision, blockchain)
- Supplier Matching (through machine learning, digital marketplaces)
- Incentives (through gamification, tokenization, blockchain)
Taking the Fast Lane towards the Smart Circular Economy
Recent research by Bain shows that the most commonly cited challenge for companies pursuing circularity is the lack of a coherent ecosystem of peer companies, suppliers, industry consortia, technology and data partners, NGOs, and regulators. This challenge makes for a unique opportunity in how businesses wield data and digital tools to accelerate their transitions towards circularity for two important reasons:
- Circularity marks a “value-add” opportunity for digital, by leveraging the existing investments organizations have made for the last decade, and extending use cases for data, software, IoT, and more.
- Ecosystem alignment –whether the objective is to innovate, monetize, standardize, reduce emissions, or develop policy– requires data, and is more easily collaborated on and scaled through digital platforms and marketplaces.
Digitization is a way to accelerate the transition to the circular economy because circular business models are about aligning data, metrics, and the ecosystem to eliminate waste, circulate materials, and regenerate the systems on which we all depend.