Making The Circular Economy Profitable

Making The Circular Economy Profitable

Fears and misconceptions have long hampered the supply chain’s ability to launch a circular economy. Yet, if your company needs an incentive to buy into circular economy practices, think about the recent wildfire smoke that descended on the Northeast. Climate change is here now, and sustainable practices all along the supply chain can no longer be put off. The good news is that adopting circular economy practices can lead to substantial profitability—as high as 60 percent by 2026, according to a recent report from Gartner.

Understanding Circular Economy

First, it’s important to understand exactly how a circular economy works and what its principles are. The concept is simple—separating consumption from growth. To do so, a circular economy requires that businesses design out waste, keep materials in use at the highest quality level for the longest period possible, and return materials to the environment in a positive manner. Achieving this state is well within reach, but the supply chain must debunk common misconceptions to get there.

One of the first misconceptions is that now is not the right time to launch a circular economy approach—opponents argue the supply chain remains in a disrupted state, so changing practices is ill advised. The truth is that there’s no better time to try new things than in the midst of disruption. Case in point—if you are a big outdoors gear company struggling to get your supplies into stores, a good solution is creating a used gear market. Your customers will be able to find the products they want, products stay out of landfills, and you can still make a profit. The approach will create customer loyalty, as well, for both the environmental friendliness and the fact that customers can find what they’re looking for.

Another misconception is that, by offering circular products, customers will lose their appetite for new, more profitable goods. While there may be some teeth to this concern, it misses opportunities. With some market analysis, companies can identify key customer bases who embrace circular products and aggressively go after that market. Back to the example of outdoor gear—this is a customer base that has long pushed for the idea of circular products and will throw its loyalty quickly to the companies that respond. There are more out there.

Many companies also grapple with a third misconception, which is the idea that the immediate costs of launching a circular economy will be greater than the long-term benefits. There are upfront costs to embrace a circular economy, to be sure. But supply chain consultants can help you analyze and determine the best practices to meet the circular economy in a way that results in long-term profitability. The revenue advantages from a circular approach offer many, often unexpected, opportunities to override costs. In many cases, this can be realized sooner than later.

We’ve arrived now, where every company must take a good look at how to enter the circular economy. The results may surprise you. Contact OPSdesign today for all your supply chain consulting needs.