74% of Supply Chain Leaders Expect Circular Economy to Increase Profits Through 2025

74% of Supply Chain Leaders Expect Circular Economy to Increase Profits Through 2025

Oct. 3, 2022
The inflationary environment can be used as a catalyst to alter losing materials to waste and instead reuse, says Gartner Report.

The majority of supply chain leaders, 74%, expect profits to increase between now and 2025 as a result of applying circular economy principles, according to a recent survey from Gartner. On average, supply chain organizations have been applying circular economy principles for three years to approximately 16% of their product portfolio.

“There is still such a great deal of untapped potential in the circular economy. Supply chain leaders can use the inflationary environment as a catalyst to reshape their relationship with materials. Instead of losing materials out of the economy in the form of waste, the circular economy helps capture value,” said Sarah Watt,  vice president analyst with the Gartner Supply Chain practice, in a statement at the Gartner Supply Chain Symposium/Xpo held recently.

The circular economy is a system that decouples resource consumption from business value and growth. This is achieved by designing products and materials for reuse, keeping materials in use at their highest quality for as long as possible, and applying new business models. When materials can no longer be used, materials are returned to the environment in a way that does not cause harm.

Benefits and Barriers of Circular Economy

According to the survey, the top three circular economy benefits that have been realized in the previous years are the minimization of negative environmental impacts, shorter and compact supply chains, as well as enhanced customer insights. Common observed barriers to applying circular principles include the application of technology to advance circular economy activities, partnering with stakeholders and measuring the results of circular economy approaches.

“The circular economy represents systems-change; it is rare to be able to scale circular activities in isolation. Scalability will depend on overcoming the barriers. Technology will speed up activity, create visibility and automate decision-making. Partnerships can help to bridge knowledge gaps and create shared value. Measurement is essential to showing progress to stakeholders, maintaining buy-in and goodwill,” Watt said.

Procurement Critical for Scaling Circular Economy Models

“Scalability of the circular economy is going to rely on changing the ways of working," Watt said.

The survey showed that respondents are making changes to the supply chain including integrating circular economy products into the planning process (54%), adding new capabilities to existing manufacturing sites (42%), and adding new locations for repair/ remanufacturing and waste management which are company owned (36%). Looking out over the next three years, the focus will increase on procurement, with buyers being incentivized to purchase circular materials (41%).