Building A Circular Supply Chain

Building a circular
supply chain
Achieving resilient operations with the
circular economy
ELLEN MACARTHUR FOUNDATION | BUILDING A CIRCULAR SUPPLY CHAIN | 2
Table of contents
Foreword 4
Shining a spotlight on circular supply chains 6
Circular economy as a tool for supply chain leaders 7
Supply chain leaders as critical players in the circular economy transition 9
From linear to circular supply chains: creating a common understanding 12
Managing supply chains in a circular economy through the SCOR model 17
Making the shift: nine focus areas for circular supply chains 20
Glossary 36
Project team 37
Acknowledgments 38
About this paper About the Ellen MacArthur

Foundation
This paper highlights the fundamental contribution that supply chain professionals The Ellen MacArthur Foundation is an international charity developing and
can make to the transition to a circular economy. It aims to provide a general promoting the circular economy in order to tackle some of the biggest challenges
understanding of how the circular economy and supply chain management fields of our time, such as climate change, biodiversity loss, waste, and pollution. We work
are related to one another. By exploring the concept of a circular supply chain, with our network of private and public sector decision-makers, as well as academia,
the paper illustrates the role of supply chain professionals in operationalising to build capacity, explore collaborative opportunities, and design and develop
circular economy initiatives within their organisations, as well as the opportunities circular economy initiatives and solutions. Increasingly based on renewable energy,
and challenges they may encounter along the way. The paper also provides initial a circular economy is driven by design to eliminate waste, circulate products and
recommendations for and examples of companies overcoming some of these materials, and regenerate nature, to create resilience and prosperity for business,
challenges, based on the experiences of supply chain professionals involved in the environment, and people.
the research. Additional research into the real-life experiences of such professionals
Further information:
will be needed to gain a fuller understanding of the exact changes needed to their
www.ellenmacarthurfoundation.org
role, and the best practices they can deploy to effectively transition to circular
@circulareconomy
supply chains.
This paper has been developed in collaboration with the Circular Supply
Chain Network, a global community of supply chain professionals committed
to accelerating the transition to circular supply chains. The content has been
informed by a set of interviews conducted in the Spring of 2023, as well as insights
gathered from a working group series run with supply chain professionals from the
Foundation’s Network in June of 2023.
Foreword
A challenge worth solving
The necessity — and fragile nature — of our global supply chains were made clear The circular economy is built on the premise that the planet’s materials are not
during the COVID-19 pandemic. Never before had business leaders, government endless. Perhaps no one knows better than the supply chain professional about
officials, and the general public been so interested in the logistics and supply the ebbs and flows of material availability and the resulting effects on cost and
of materials and products. The disruptions of that specific period highlighted a downstream impacts on shortage or surplus.
fundamental error in the way our supply chains function; namely, the linear style
Even the best-prepared teams with the strongest partnerships and advanced
of take-make-waste, where materials are extracted from the earth, used to create
systems can only do so much against the array of disruptions from unforecasted
the product, and then disposed of after they’ve served their purpose. In the future,
events. Regardless of the cause, the result is a material one — literally. When
disruptions — from natural disasters, political unrest, and resource scarcity — are
disruption hits, the impact shows up in inventory: either too much or too little.
only expected to increase, and it’s imperative that supply chains are prepared to
meet that challenge. Circular supply chains offer a strategy to teams looking for new ways to
improve the reliability of supply.
We are honoured that this white paper, developed by the Ellen MacArthur
Foundation in collaboration with the Circular Supply Chain Network, leverages the Building a circular supply chain: Achieving resilient operations with the circular
Association for Supply Chain Management’s SCOR model as the framework for economy is a collaboration between the Ellen MacArthur Foundation and the
moving from a linear ‘source-make-deliver’ mindset to a circular one. As the authors Circular Supply Chain Network to articulate how supply chain leaders around the
make clear, building a circular economic model is the best way to develop resiliency: world are exploring circular operations — finding both successes and learnings.
ensuring our supply chains withstand and bounce back from inevitable shocks, Together, we lay out a foundational guide for supply chain leaders to use in their
whether it’s disease or disaster or war. But to make a circular economy functional, own explorations into circular operations, which includes the basic principles and
we need the expertise of supply chain professionals to dissociate consumption from approaches of a circular economy, the benefits of a circular economy to supply
waste, lower costs, and reduce greenhouse gas emissions. There will be challenges, chains, and the likely challenges leaders will encounter along the way.
from network design to financial limitations, but the research provides an action
The purpose of this document is to bring supply chain communities together
plan to address each obstacle as it comes.
around a common understanding of what circular economy means for supply
Supply chain professionals in partnership with sustainability and compliance chains, and vice versa, and provide practical examples. By doing so, supply
professionals must be proactive about making changes to the way our industry chain leaders can accelerate the transition to a circular economy.
functions — for the good of our livelihood and for the planet.
Deborah Dull
Abe Eshkenazi, CSCP, CPA, CAE Founder, Circular Supply Chain Network
Chief Executive Officer, Association for Supply Chain Management
Shining a spotlight
on circular
supply chains
Shining a spotlight on circular

supply chains
Our current economy is mostly linear: we take materials from the Earth, make The reasons for exploring the circular economy—supply chain nexus are twofold.
products from them, and eventually throw them away as waste – the process is First, a supply chain reconfiguration is urgently needed to help shape a more
wasteful and polluting. A circular economy, by contrast, proposes a different way resilient, net-positive future; the circular economy offers a toolkit for supply chain
of generating value by decoupling economic activity from the consumption professionals to achieve this. Second, to ensure the success of the circular economy
of finite resources. transition, the skills and knowledge of supply chain professionals will be crucially
required. This paper is aimed at inspiring and equipping supply chain professionals
Such a paradigm shift has implications for all aspects of business, including the
to begin exploring and acting upon the need for circular supply chains, to fully
often-overlooked role of supply chain teams.1 To date, discussions about and efforts
to transition to a circular economy have been predominantly focused on the role deploy the circular economy.
of circular business models and circular product design. However, as an increasing
number of organisations mature in their circular economy journey, the role of
circular supply chains in operationalising and scaling such initiatives is becoming
distinctly relevant. Supply chain professionals are responsible for the sourcing, he circular economy is based on three
T
movement, and transformation of the 100 billion tonnes of materials that enter the
global economy each year.2 With such oversight, they can be key players in scaling a principles, driven by design:
resilient and regenerative circular economy. • Eliminate waste and pollution
• Circulate products and materials (at their highest value)
• Regenerate nature
Underpinned by a transition to renewable energy and materials, the

circular economy is a resilient system that is good for business, people, and
the environment.
1
Montag, L. Circular Economy and Supply Chains: Definitions, Conceptualizations, and Research Agenda of the Circular Supply Chain Framework. Circ.Econ.Sust. 3, 35–75 (2023)
2
The World Bank, Squaring the Circle: Policies From Europe’s Circular Economy Transition, Washington DC (2022)
Circular economy as a tool for

supply chain leaders
Supply chain disruptions are exposing the vulnerabilities of traditional linear At the same time, expectations on supply chain leaders are growing. As
approaches. In today’s predominantly linear supply chain configurations, supply companies strive to reduce their environmental impact and increase resilience
chain leaders3 are recurrently having to respond to disruptions throughout their while also delivering lower costs and better performance for customers, many
networks, and are facing record inventory numbers from global bullwhip effects, are turning towards their supply chains. To future-proof businesses in light of the
and challenges in consistently securing inputs. These disruptions have notably been aforementioned shocks, the search for resilience is being spearheaded by supply
felt after recent events such as the COVID-19 pandemic, the Russian invasion of chain leaders: 93% want to increase supply chain resilience, and 44% are willing to
Ukraine, and other geopolitical or climate change-induced events. In their aftermath, sacrifice short-term savings for it.7 At the same time, as businesses seek to meet
the economic impacts are also consequential. As an example, in 2021, the Eurozone their climate targets, they are increasingly recognising the impact of their supply
lost EUR 112.7 billion or 0.9% of GDP to supply chain disruptions.4 In the future, chain or Scope 3 emissions. For a typical consumer goods company, the supply
the frequency and magnitude of these shocks are expected to increase, as climate chain accounts for more than 80% of greenhouse gas emissions on average.8 New
shocks and resource scarcity intensify. Just between 2002 and 2010, commodity pressures are adding on top of traditional priorities, highlighting the need for new
prices rose by nearly 150% – and finite materials will only become scarcer and their approaches to supply chains in order to remain competitive.
price more volatile in a resource-constrained world.5 If no action is taken, companies
The circular economy offers a framework for supply chain leaders and
can expect to lose almost half a year’s profit to supply chain disruptions over the
organisations to address core priorities, such as decarbonisation, while creating
course of a decade.6
the resilient supply chains of the future. As linear supply chains will struggle to
provide resilience to organisations in a resource-constrained environment, a new
approach will be required. Supply chain leaders can leverage the circular economy
to gradually decouple economic activity from the consumption of finite resources.
By doing so, the circular economy offers opportunities for supply chain leaders to
reduce their exposure to price volatility, increase material security and availability,
and support relocalisation efforts,9 while at the same time helping meet climate and
other environmental objectives.10
3
The decision makers working in a supply chain function; the title may vary per company and may resemble 8
McKinsey & Company, Bové, A. & Swartz, S., Starting at the source: Sustainability in supply chains
the following: Chief Supply Chain Officer, Chief Operations Officer, Head of Reverse Logistics, Head of (11th November 2016)
Procurement, Supply Chain Strategist, or similar. 9
Ellen MacArthur Foundation, Towards the circular economy Vol. 3: accelerating the scale-up across global
4
Accenture, From disruption to reinvention: The future of supply chains in Europe, (23rd May 2023) supply chains (2014)
5
Ellen MacArthur Foundation, Towards the circular economy Vol. 3: accelerating the scale-up across global 10
Ellen MacArthur Foundation, Completing the Picture: How the circular economy tackles climate change
supply chains (2014) (2021); Ellen MacArthur Foundation, The Nature Imperative: How the circular economy tackles biodiversity
6
McKinsey Global Institute, Risk, resilience, and rebalancing in global value chains (6th August 2020) loss (2021)
7
Ibid.
Figure 1. Examples of companies leveraging the

circular economy to address supply chain priorities
Increase resilience Reduce costs Reduce climate impact

Example Example Example
Through TerrePower, BBB Industries extends EV Rheaply enables organisations to make the most Volvo Cars is leveraging the circular economy to
battery life by prioritising maximum value-retention of assets that would otherwise remain idle, through achieve their climate ambitions. In 2022, the car
processes, such as reuse and remanufacturing. their re-commerce platform combining smart manufacturer was able to save over 4,800 tonnes
In doing so, the company aims to decouple the inventory management and connected nationwide of CO2 by remanufacturing over 33,000 parts.
electrification of the economy from finite raw material marketplaces. RUSH University Medical Center,
extraction, while also enabling them to secure a Rheaply customer, saved over USD 244,000
material supply, mitigate against material price by reusing just over 1,000 pieces of workplace
volatility, reduce external market dependency, and office furniture.
and support relocalisation efforts.
Supply chain leaders as critical players in the

circular economy transition
In order to deliver value in a circular economy, 3. Supply chain leaders are natural system thinkers.
They use their problem-solving and system-orchestrating skills to turn
companies will have to rethink their business models, high-level business strategies into daily operations, improve procedures,
product designs, and supply chains. Whilst all three and bridge siloed teams.12 This enables them to operationalise circular
economy ambitions and create the resilient, net-zero supply chains
elements are required for a successful deployment of of tomorrow.
the circular economy at a business level, the role of 4. Supply chain leaders have a seat in the boardroom.
circular supply chains in operationalising and scaling Supply chain leaders within organisations have risen to hold positions
of higher influence: 85 of S&P 500 companies now have a Chief Supply
such initiatives is becoming ever more apparent: Chain Officer (CSCO) or a similar role.13 With a mandate from top
management to deliver on organisational ambitions, like cost reductions,
1. Supply chain leaders manage materials flows. resilience improvements, or climate goals, supply chain leaders have an
Each year, 100 billion tonnes of materials are brought into the global extraordinary opportunity to drive change.14
economy.11 All of this is managed by supply chain leaders: purchased,
5. Supply chain leaders influence the wider system.
moved, processed, tracked, and invoiced. The skills, knowledge, and data
that supply chain leaders hold are crucial for the successful transition from Given their connections to other stakeholders, like suppliers, customers,
linear to circular supply chains. and policymakers, supply chain leaders influence decisions and behaviours
across the system and as such can play a catalysing role in advancing the
2. Supply chain leaders control an organisation’s working capital. circular economy transition.
Supply chain leaders control the majority of a company’s Cost of Goods
Sold (COGS); thereby they have financial leverage and decision-making
power over many of the foundational choices that determine material and
product circulation, from where to source materials to how to manage
production by-products and reverse flows.
11
The World Bank, Squaring the Circle: Policies From Europe’s Circular Economy Transition, Washington DC (2022)
12
Dull, D., Circular Supply Chain: 17 Common Questions (How Any Supply Chain Can Take the Next Step) (3rd September 2021); Jennings, E., The Rising Role of Chief Supply Chain Officer, Supply Chain Brain (11th June 2021)
13
Wahba P., From obscurity to superhero: Chief supply chain officer is now the toughest job in the C-suite, Fortune (10th November 2021)
14
McKinsey & Company, Henrich, J., Li, J., Mazuera, C. & Perez, F., Future-proofing the supply chain (14th June 2022)
The Butterfly diagram:

How material flows in the circular economy
Understanding the Butterfly diagram can help supply chain teams enter the circular Figure 2. The Butterfly diagram
economy discussion and see how this transition will impact their ways of working
today. This diagram describes the destination of materials and how they flow
through loops of value creation in the economy. Materials can broadly be circulated
in two cycles: the biological, and the technical cycle.
Materials that belong in the biological cycle are ones designed to return safely to
nature after use, such as food or compostable materials. These materials can be
easily decomposed and provide nutrients to the environment, completing a
natural cycle.
In contrast, materials that belong in the technical cycle are ones designed to be
used in long-lasting products. These materials can be reprocessed or redistributed
multiple times without losing their value or quality. Examples include metals,
plastics, and other materials that can be transformed into new products or
components through recycling or remanufacturing processes.
The loops in which these materials can be circulated in either cycle can be large or
small, and the size of the loop describes the amount of time, effort, energy, money,
and resources it takes to return that product or material to a value chain. The
smaller the loop, the more embedded value and energy can be retained – i.e. the
greater the economic and environmental benefit.
The loops of the Butterfly diagram are interconnected, symbolising the continuous
flow of materials within the circular economy. The arrows in the diagram represent
the movement of materials and products between different stages of the supply
chain, highlighting the importance of maintaining the value of materials and
minimising waste.
A circular supply chain follows these loop priorities, aiming to operate in the
smallest loop for as long as possible.
From linear to circular

supply chains:
Creating a common
understanding
From linear to circular supply chains:

Creating a common understanding
Traditional supply chains and their processes were configured to support linear
‘take-make-waste’ models. To transition to a circular economy where products and Supplier
materials can successfully be circulated within the economy – keeping them out
of landfill and the environment – supply chains will need to be rethought; from the
way networks are designed, to how inputs are procured, moved, and processed. Customer
Doing this in alignment with the material flows advocated by the circular economy
Information Circular inputsA
Butterfly diagram (see figure 2) will enable the design and management of supply Goods
chains oriented at eliminating waste and pollution, circulating products and
Money YOUR
materials at their highest value, and regenerating nature. UL
RC A
CI
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SB
A circular supply chain:15 R
P
R OCES
N
GA O Product
N I S AT I
• consists of a distributed and interconnected network of partners
• relies on multidirectional flows of information, goods, and money By-product
• delivers and captures value using circular inputs and processes
A
s econdary (i.e. non-virgin) and/or regeneratively grown products and materials that can be circulated within
the economy or safely returned to nature.
15
This definition builds on the Association for Supply Chain Management’s definition of supply chain: B
ctions done to inputs to allow their (re)introduction to the value chain and the retention of the maximum
a
“The network of suppliers that deliver products from raw materials to end customers through either an amount of their embedded value (i.e. maintenance, repair, refurbishing, remanufacturing, and, as a last
engineered or transactional flow of information, goods, and money.” resort, recycling).
A circular supply chain consists of a distributed and

interconnected network of partners
A circular supply chain is a highly connected and dynamic network based on
diverse local and global partnerships. Such partnerships can be created with current Supplier
suppliers and customers, or with industry peers or other system stakeholders
(like third parties) in order to best be able to circulate products and materials. In
circular supply chains, customers often become suppliers of the finished goods, Customer
components, and materials that they have purchased, which are then returned and
reprocessed for new value generation by the supply chain.
Circular supply chains can be more distributed than traditional networks, requiring a
YOUR
rebalance of the current geographical set-up of networks in order to effectively and
efficiently circulate products and materials, whilst building greater resilience and
OR
N
reducing emissions. In some instances, global networks may be able to better react
IO
AN T
G
ISA
to unforeseen disruptions to local supply chains by providing access to alternative
flows of circular inputs. In other cases, a network of local or regional partners might
be able to more easily and quickly respond to the demand for circular inputs and
processes, enabling cost-efficient and low-emissions circulation of products and
materials in local markets. This can minimise the over-reliance on long and opaque
networks that span across the globe and are more vulnerable to disruptions, instead
helping build resilience and reduce emissions from transport. Such is the case for
SOJO, a fashion-tech platform that provides emissions-free door-to-door repair and
alterations services to customers via an in-house tailoring studio in East London.
A circular supply chain relies on multidirectional flows of

information, goods, and money
To enable and optimise the circulation of products and materials at their highest
value, a circular supply chain requires large amounts of data to be exchanged
among partners. These exchanges will expand on existing flows – no longer
following the traditional linear, forward flows alone – but rather transform into
multidirectional ones as new partnerships and ways of engaging with other system
actors are formed. In Brazil, HP & Sinctronics partnered to create a reverse logistics
Information
ecosystem able to recover and create value out of HP’s end-of-use electronic Goods
equipment. As design decisions happen in HP, while reprocessing is carried out
Money
by Sinctronics, improvements in cross-company communication have been key in YOUR
allowing the most up-to-date knowledge on disassembly to be disseminated among
all relevant stakeholders.
OR
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ISA
The need for traceability and transparency along the circular supply chain will
increase the reliance on these types of multidirectional flows. This, in turn, will ease
the sourcing of circular inputs by helping identify where they are available, as well
as facilitating access to information on the material composition and quality of an
item. As a result, relevant stakeholders such as users or repair professionals, can use
this additional information to decide how to best keep the item, its components,
or materials in circulation at their highest value. Ultimately, this can enhance trust
among all partners, which can encourage more transformational collaboration
towards more ambitious circular supply chains.16
16
Chatham House & Barrie J., Supply chain traceability and transparency for a global circular economy (13th June 2023)
A circular supply chain delivers and captures value using

circular inputs and processes
Like in a linear supply chain, the goal of a circular supply chain is to deliver value.
However, the inputs and processes used in each, differ.
Circular supply chains use circular inputs, which refer to the products, components,
materials, and ingredients brought into a process or product that are either
secondary (i.e. non-virgin), and/or have been regeneratively produced (i.e. grown/
reared in ways that generate positive outcomes to nature), and that can be Circular inputsA
circulated within the economy and/or safely returned to nature. Dr. Bronners, for
example, after unsuccessfully searching for a regenerative source of palm oil for YOUR
years, decided to contract and support a network of over 700 smallholder farmers UL
RC A
CI
R
to transition to regenerative cultivation practices. In the US, Redwood Materials is
SB
creating a closed-loop, domestic battery recycling supply chain to decouple the R
P
R OCES
N
GA O Product
electrification of the economy from the extraction of finite critical raw materials. N I S AT I
Compared to the extraction of virgin finite raw materials used as inputs for a
linear supply chain, the use of circular inputs allows for material cost savings and
By-product
improved material security, while simultaneously reducing the environmental impact
caused by material extraction.
Circular supply chains also use circular processes, i.e. actions done to inputs in
order to allow their reintroduction to the value chain with the goal of retaining the
maximum amount of the inputs’ embedded value. Instead of discarding or replacing
products at the end of their first use phase or once they are damaged or obsolete,
circular supply chains leverage reuse, repair, remanufacturing, refurbishment, and, as
a last resort, recycling to keep products and materials in use for as long as possible
with minimal (re)processing.
A
s econdary (i.e. non-virgin) and/or regeneratively grown products and materials that can be circulated within
the economy or safely returned to nature.
B
ctions done to inputs to allow their (re)introduction to the value chain and the retention of the maximum
a
amount of their embedded value (i.e. maintenance, repair, refurbishing, remanufacturing, and, as a last
resort, recycling).
Furniture manufacturer Ahrend, for instance, has combined their product design
and supply chain capabilities for easy disassembly, repair and upgrades - designing
each product from the outset with these processes in mind, while also setting
up take-back systems with suppliers and opening a factory to carry out the
refurbishment. Such circular processes displace the need for new production and
material extraction, while enabling maximum retention of embedded value
(i.e. work and energy).
Rethinking inputs and processes can also minimise the generation of process
by-products. Once minimised, any leftover by-products are kept in circulation
within or across supply chains, to retain their embedded value within the economy,
while keeping them from ending up in landfill or the environment. For example, the
Western Cape Industrial Symbiosis Programme, Africa’s first industrial symbiosis
programme, connects companies so that they can identify and utilise unused or
residual resources from each other’s operations (materials, energy, water, assets,
logistics, and expertise). By rethinking by-product streams in this way, businesses
are able to generate new revenue streams and reduce operational costs, while
reducing the environmental impact of the supply chain.
Managing supply chains in a circular economy through the

SCOR model
Designing and managing circular supply chains Figure 3. SCOR model
requires a move from a linear ‘source-make-deliver’

mindset, to a circular one.
The circular supply chain outlined above suggests a transformation in the ways
in which supply chain professionals will approach their work. The Association for
Supply Chain Management’s SCOR model (see figure 3) showcases core supply
chain process areas and provides guidance on how to optimise them. In its latest
version, it has been adapted to reflect the shift in thinking from a linear supply chain
model to a more synchronous network. The model can be a useful tool to provide
a clearer appreciation of how the implications of a circular supply chain will be
reflected on specific supply chain teams and processes.
Orchestrate: In the circular supply chain, all ‘Orchestrate’ activities17 are assessed
and adjusted to ensure they can enable the successful building and management
of supply chains fit for a circular economy (see ‘Making the shift’ section below and
SCOR-DS OE13 Circular Supply Chain Management).
Plan: The planning element in a circular supply chain expands beyond demand
and supply, to include the reclaiming and circular processing (e.g. repair and
remanufacture) of existing items alongside planning new builds. Utilisation will
become a key metric for planners, as inventory turnovers may no longer be an
appropriate way to measure supply chain success in a model that seeks to decouple
revenue from production volumes.
17
I.e. the creation and management of “business rules and enterprise business planning; human resources; network design and technology; data analytics; contracts and agreements; regulations and compliance;
risk mitigation; environment, social, and governance initiatives;...performance management” as in Association for Supply Chain Management, The SCOR Digital Standard (SCOR DS),
https://www.ascm.org/corporate-solutions/standards-tools/scor-ds/
Order: As customers purchase circular products and services, attributes in the Fulfil: Fulfilment networks in circular supply chains are more heavily concentrated
‘Order’ process such as locations, payment methods, pricing, and other order towards the market where the item is being used, as keeping products and
elements may also be affected. Given circular supply chains look to minimise the materials in use with minimal processing is prioritised. In-market reuse, in particular,
need for processing inputs, items recovered in the ‘Return’ process and ready is a key consideration in a circular supply chain for these processes.
to go back to market (e.g. through reuse) may move to ‘Order’ without having a
Return: ‘Return’ becomes a critical process as more companies leverage reverse
‘Transform’ step in between.
flows to secure circular inputs. This will involve optimising the recovery of products,
Source: Circular supply chains will source circular inputs; i.e. products, components, components, and materials from customers back through to the supply chain, in
materials, and ingredients that are either secondary (i.e. non-virgin), and/or that order to be able to diagnose their condition, use them as inputs for the ‘Transform’
have been regeneratively produced and can be circulated within the economy process, and ultimately deliver them back to a customer.
or safely returned to nature. Hence, sourcing in a circular supply chain must
become more aligned with return processes and more attuned to looking for input
availability from the market (either from within a company’s own supply chain or
from other supply chains in the market). Many teams have already started to source
circular inputs, but more can be done to prioritise sourcing higher-value circular
inputs (e.g. finished goods) over lower-value ones (e.g. recycled materials).
Transform: In a circular supply chain, ‘Transform’ is aimed at keeping existing
products and materials in circulation at their highest value with as minimal
processing as possible. This is achieved by prioritising cleaning, maintenance, and
repair over remanufacturing, refurbishing, or, as a last resort, recycling. Material
intensity may be measured to optimise the amount of resources needed to process
and return an item to a value stream.
Making the shift:

Nine focus areas for
circular supply chains
Making the shift:

Nine focus areas for circular supply chains
As with any large organisational transformation, Figure 4. Nine focus areas for circular supply chains
supply chain leaders beginning to explore the design

and management of circular supply chains will esign
uct d 7. C
us
od to
encounter some internal and external challenges Pr m
er
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an
they need to solve to effectively make the transition.
en
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1. 2.
mo
ge
To help supply chain leaders plan ahead and make the transformation from linear
People and Network
me
ss
to circular as smooth as possible, the following section presents nine areas these Structure design
ine
nt
professionals will need to focus on to shift to circular supply chains, five of which
6. Bus
their departments can directly address, and four of which will require collaboration
with other internal and external stakeholders. Some initial recommendations for
effectively navigating each area will also be explored. 5. 3.
Metrics and Supplier
Performance engagement
management
4.
9. P
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Data and
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Quality
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5 4
tio F
n 8.
areas supply areas requiring

chain teams can collaboration
directly address with other teams
1. People and Structure
Key question: Recommendations:

Rethink and clarify the roles and responsibilities needed across supply chain
•
How might supply chain leaders develop organisational teams to enable circular supply chains. To effectively transform the processes
structures and equip their teams to enable them to successfully of a supply chain from linear to circular, all teams within the broader function
transition to circular supply chains? will need to be engaged. As such, defining clear roles and responsibilities for
how each sub-function (e.g. procurement, manufacturing, logistics) will have
Context: to adapt their ways of working will be crucial to ensure the efforts of every
Supply chain teams report challenges in finding enough time during their day team positively contribute towards successfully creating a circular supply
jobs to focus on transitioning processes and technologies in the ways needed to chain. New roles might also be needed to effectively drive circular supply
create a circular supply chain. There are also challenges around clarity of where chain transformation and operations. In fact, trends of reorganisation and
the ownership of realising circular supply chains sits, as well as varying degrees reconsideration of roles to enable circular supply chains are now starting to
of circular economy understanding across supply chain functions. When taken become visible in supply chains across different industries to try to address
together, the competition on time, gaps in knowledge, and lack of clarity around these issues.
ownership of the transformation make it difficult for supply chain teams to Develop circular economy knowledge and capabilities across internal supply
•
effectively transform their ways of working. chain teams. Upskilling supply chain professionals within organisations on key
concepts around the transition can be a great way to engage team members
on the topic, ensure that collaborations across teams and other partners in
the circular supply chain are more seamless as they can share a common
understanding, and help highlight the role each team can play in implementing
these changes within their organisations. Formal circular economy training
programmes, internal workshops, or attendance in conferences can all provide
avenues for this capability development, as can pilot projects. Similarly,
embedding circular economy language and considerations into the software,
frameworks, and metrics (see challenge 5) used by these teams can also be
effective in helping familiarise teams with the key concepts needed for the
transition, whilst also demonstrating the broad impacts of the transformation
on all relevant aspects of the teams’ current ways of working.
Case study: HP
The Challenge: The Benefits:

HP aims to be “the world’s most sustainable and just technology” company, with The expected outcomes of HP’s actions range from improved company culture
commitments like reaching 75% circularity for products and packaging by 2030,18 with a greater sense of purpose and belonging to increased employee engagement
reducing value chain GHG emissions by 50% by 2030, and achieving net zero by or an enhanced ability to attract and retain diverse talent within supply chain
2040.19 In order to fulfil this level of ambition, HP recognises the central role of functions. Additionally, the approach taken is aimed at ensuring that HP leads and
supply chain functions as well as the people and structure challenges that they meets the expectations of all stakeholders engaged in the supply chain, including
may face in the transition to a circular model. Those challenges include a varying customers, suppliers, and shareholders, whilst staying ahead of the curve in matters
circular economy understanding across functions, misaligned governance and role of regulatory and legal compliance, and reputation risk mitigation.
structures, or the competition for supply chain functions’ time to transition towards
Lessons Learned:
processes and technologies fit for a circular supply chain, all while maintaining
ongoing operations and delivering on the expectations of shareholders. • Align the circular supply chain strategy and actions with the wider company
circular economy strategy, to ensure all elements within the organisation
The Solution: (e.g. design, products and solutions offering, logistics, manufacturing, end-to-
In order to address the people and structure challenges associated with the end finance, organisational structure, and risk management) move in the
transition to a circular supply chain, HP is leveraging a multifaceted approach. same direction.
First and foremost, at an organisational level, HP has defined a clear vision and
• Acknowledge the importance of thorough risk assessment and mitigation
bold goals so that all teams can move in the same direction, including supply
strategies before embarking on the reorganisation.
chain functions. In order to translate the strategy into action, HP is creating new
organisations, like a whole new business unit focused on circular products (Renew • Capture learnings and provide spaces for
Solutions) that requires new supply chain infrastructure, capabilities, and processes, internal feedback to adjust strategy, goals,
and conducting changes in existing ones, such as consolidating supply chain and plans as the company moves and
functions focused on returns and take-back in just one team structure. Additionally, the macro-environment changes.
HP is working to establish clear and robust governance and role structures, with
adequate levels of responsibilities and accountability. To bridge the knowledge and
skills gap, the company is providing education and training on circular economy
principles, for instance, to ensure that supply chain functions working with vendors
and partners are equipped to set new requirements and commitments focused on
the circular economy.
18
Percentage of HP’s total annual product and packaging content, by weight, that will come from recycled and renewable materials
and reused products and parts by 2030.
19
Absolute reduction of Scope 1, 2, and 3 GHG emissions compared to 2019. Excludes non-HP paper consumed during product use.
2. Network design
Key question: etting up regional hubs to collect, sort, and process products and materials,
S
for example, can improve the efficiency of supply chain access to circular inputs,
How might supply chain leaders optimise network designs to help combat potential issues around cross-border legislation, including taxation,
enable cost-effective reverse flows of materials and products at that affect the movement of these products, and reduce overall emissions of
scale, while enabling the maximum retention of their the supply chain. When combined with new forms of network partnerships
embodied value? that enable decentralised processes, these localised operations can also offer
cost-effective, low-carbon solutions for supply chain leaders.
Context: Reimagine network partnerships and product and material-ownership

•
The shift to circular supply chains can surface new challenges for supply chain structures. The transition to circular supply chains will require new types
leaders around the management and location of the reverse logistics and processes of relationships and interactions between different external stakeholders.
needed to recover and reintroduce used or unwanted products and materials. Competitors might benefit from pooling together resources to create
This is because all key aspects of supply chain networks today – from the types decentralised hubs for taking back or reprocessing similar materials; the by-
of partnership and ownership structures to the systems, infrastructure and products of one client’s processes might provide valuable inputs into their
technologies that support them – are primarily built to optimise for forward, rather suppliers’ processes or the processes of organisations in completely different
than backward, flows of products and materials. As such, the process of capturing industries, such as is the case with Kalundborg Symbiosis. Ownership structures
the value of these items post their first use is challenging, since the network has for the infrastructure, processes, and materials, should also be carefully
not been designed for it. Nonetheless, these reverse logistics activities are vital considered and selected in the building of these new partnerships, in accordance
for enabling circular economy initiatives – such as product-as-a-service, take-back with what will deliver the most desired benefits. For example, supply chain
schemes, leasing or renting, and remanufacturing or recycling – all of which are leaders can decide to centralise (in the case of large, high-value, low-volume
increasingly demanded by customers, and thus will require the attention of supply products) or decentralise (in the case of small, lower-value, high-volume
chain leaders implementing circular supply chains. products) the take-back, and reprocessing systems (e.g. repair, remanufacture)
that enable circular supply chains to help them reach the desired scale of
Recommendations: operations. They can also consider whether to run these activities in-house or to
Optimise the geographical distribution of all network elements. Exploring
• outsource them to suppliers or third parties to ensure process cost-effectiveness,
different options for the location of supply chain activities and infrastructure and re-evaluate who should own the inventory as materials are recovered and
(such as plants, distribution centres, or repair centres) can unlock cost-effective circulated to enable these activities to be carried out most effectively. The
and low-carbon solutions for the sourcing of circular inputs. optimal choices for these circular supply chain network design decisions will
depend on the ambitions (e.g. cost-efficiency, resilience, carbon impact), existing
supply chain capabilities within the organisation and existing network, as well as
the circular business model and product design adopted, and can offer helpful
solutions to support the user.
Case study: CHEP

Currently, CHEP, the world’s largest global pallet pooling company, collects their By redesigning their network approach and eliminating the need for sending pallets
pallets after they have been used and inspects them at their service center, to in good condition back to service centres, CHEP hopes to reduce transportation
ensure quality and conduct any necessary repairs before putting them back in costs and associated emissions, as well as the energy consumption from their
circulation. Recently, they noticed that most of their pallets at collection sites are service centre.
in sufficiently good condition to avoid unnecessary inspections. Hence, the supply
chain design and optimisation team at CHEP asked themselves: What if we could Lessons Learned:
avoid the unnecessary flow of sending those pallets into the service centre • Critically analyse the network design to find opportunities for improvement
for inspection? and move closer to a circular supply chain.
The Solution: • Carefully select the partners with whom to collaborate in the circular
CHEP is exploring switching from the current ‘One-Way Trip’ approach to a supply chain.
‘Managed Recovery’ one. In the latter, the customer receives CHEP’s pooled (shared • Strive to increase the circularity and efficiency of the supply chain,
and reusable) pallets directly from distribution centres and retailers; sorts them without prioritising one over the other.
using CHEP quality standards; stores the pallets that pass the test; and returns the
rest to CHEP for repair before reuse. CHEP plans to leverage Flow Optimisation
software to identify potential opportunities for switching service offers from
‘One-Way Trip’ to ‘Managed Recovery’.
3. Supplier engagement

• E
stablish and communicate clear criteria and expectations for suppliers.
How might supply chain leaders engage with, support, Supply chain leaders can incorporate circular economy criteria (e.g. around
and incentivise suppliers to adopt circular economy practices sourcing durable, circular inputs) into procurement negotiations, proposals,
and standards? agreements, and supplier evaluations. To facilitate the cost-effective
circulation of products and materials, new processes, such as those around
Context: disassembly, can be incorporated into proposals or requests for proposals
Suppliers can either be a source of inspiration or a challenge for supply chain (RFPs) for suppliers that may be unfamiliar with such practices today. Creating
leaders looking to transition to circular supply chains. Suppliers have an essential standardised documentation within proposals that mandate processes like
role in ensuring the quality, availability and traceability of circular inputs (materials disassembly can also help drive the adoption of circular practices. This way all
and products), made all the more critical in the face of increasing pressure and relevant considerations to enable effective operation of circular supply chains
expectations from customers, policymakers and investors to demonstrate circular can be formally embedded into the ways in which supply chain partners operate,
performance. The level of power or influence an organisation has over its supplier ensuring that everyone’s activities contribute to the common goals. For example,
will impact how much, and in what ways, the former can encourage the latter in the Danone has established long-term contracts with dairy farmers, helping alleviate
transition to circular supply chains. short-term market volatility, thereby allowing them to adopt practices that can
support regenerative outcomes. Working with the planning team to use circular
inputs effectively should start from the S&OP (Sales and Operarations Planning)
process through production planning, as supply and demand will vary for
material that is scarcer in the current marketplace.
• Reward good performance and innovation. Use the clear circular economy
requirements set in the supplier qualification processes, as a way to select new
suppliers to work with. Explore opportunities for establishing reward systems
for current suppliers that demonstrate progress towards building circular
supply chains.
• Provide guidance and support for capacity building. At the same time as the
above, supply chain leaders can work together with suppliers, customers, and
policymakers to educate and upskill all relevant stakeholders on key concepts
and practices around the circular economy, to ease the adoption of circular
supply chains and support in the collective transition.
Case study: Flex-N-Gate & DS Smith

Flex-N-Gate, a leading manufacturer of high-quality parts for the automotive The total cost of ownership of this innovative solution was more attractive than
industry – and a long-term customer of DS Smith, an international packaging the previous one and reduced CO2 emissions, thanks to a maximised number of
company – wanted to optimise the space in the trucks that were used to transport products in the truck and the perfect protection of the goods (painted car bumpers
the car bumpers from their manufacturing facilities to the car assemblers. They that are sensitive to abrasion), avoiding the necessity to produce and deliver
made a request to DS Smith for a new type of packaging that would allow them to replacement products.
optimise the space in the trucks, and if possible, adhere to sustainability criteria. The
The special shape associated with centring devices and a customised pallet
cost was the key tender criteria with CO2 emissions reduction also playing a part.
also secure the load on each pallet by a perfect stability, delivering great safety
The Solution: conditions to all employees.
Due to their long-term partnership, DS Smith was able to work closely with key Lessons Learned:
people at Flex-N-Gate to innovate and validate the new packaging solution. They
• Write your tender based on the performance needs instead of items or materials.
created a new type of box with the optimal amount of material that made best use
This provides the opportunity to innovate without resorting to the usual and
of the space in the truck. The packaging is made out of a mix of recycled and
previously used solutions. The capabilities of the supplier (ability to innovate,
virgin cardboard and is 100% recyclable.
machinery available, quality control) will be key.
• Make sure that your supplier can work closely with the key people and teams
in your organisation to test and validate their new solution. That might be more
possible in long-term partnerships with established relationships and trust.
• As a supplier, make sure you have proper internal processes to allow the
information sharing to come up with the best solution. In the case of DS Smith,
they had the industrial design team set up to share relevant knowledge and
experience without prioritising one over the other.
The Circular Economy Procurement Framework can offer a useful starting point for
reimagining engagements with suppliers in a circular supply chain.
4. Data and Quality

Leverage emerging technologies such as blockchain, artificial intelligence,
•
How might supply chain leaders deploy adequate technological digital twins, or internet of things, to help increase visibility across the supply
solutions, or adapt existing ones, to support and facilitate circular chain, ensuring sourcing, quality, and design professionals have enough data
flows of information, materials, and products? to make adequate decisions around circular inputs. It is essential to have clear
information about the volume, material makeup, and any potential quality issues
Context: with secondary products or materials entering the supply chain as inputs to
The right kinds of technology systems and information flows can play an essential ensure their suitability for their intended use and to avoid waste. Implementing
role in helping circulate products and materials across the supply chain effectively. robust tracking and labelling systems (e.g. DPP) that provide comprehensive,
However, the existing ones today have often been designed and optimised for linear verifiable information about the origin, condition, and history of refurbished
processes and transactions, and as such may not support or facilitate or reused goods and components will create greater transparency to enable
circular activities, such as tracking, tracing, sharing, repairing, or recycling. informed decision-making, ease the access to circular inputs, and promote trust
within the circular supply chain. To meet the requirements set out by recent
legislation (e.g. UN 38.8, EU DPP), supply chain leaders can also work with a
variety of innovators that have entered the market as data and transparency
solution providers.
Case study: Niaga®

Niaga® is a solution provider enabling the transition to a circular economy by Niaga®’s DPP ensures that supply chain partners have access to product
helping manufacturing partners redesign and produce products such as carpets, component, material, and ingredient data and, as a result, can select the most
mattresses, and furniture panels fit for a circular economy. In their efforts to appropriate and energy efficient method to keep products and materials in
close the loop, they faced challenges posed by the current lack of data on the circulation at their highest possible value. As an example, in the Netherlands, where
ingredient composition of materials and products. The absence of this data means an Extended Producer Responsibility (EPR) system applies to mattresses, Niaga®’s
stakeholders like recycling organisations and sourcing professionals do not have innovation allows for mattress producers to bypass the modulated fee of EUR
enough information on the inputs coming into their operations to determine the 5–10 per mattress for waste disposal. This cost avoidance comes from the fact that
best way to keep them in circulation, which leads to lost value capture opportunities Niaga®-tagged mattresses can go to a separate stream where a recycler will process
as materials can get unnecessarily downcycled or discarded as waste. them taking into account their material composition and offer the outputs of the
process to a supplier as inputs for new mattress components.
The Solution:
To address this challenge, Niaga® developed a scannable discernible marking for Lessons Learned:
products to keep them in circulation in the economy at their highest value, giving • Leverage and test emerging technology like DPPs to improve issues relating to
them a return route and a digital product passport (DPP) that provides ingredient data transparency, material composition and quality, and the multidirectional
transparency. By scanning the Niaga® tab on a product, supply chain stakeholders, flow of information in a circular supply chain.
including customers, can access a landing page with factual, objective, measurable
• Whilst requiring effort from supply chain professionals at first, investing time and
information on product ingredients, components, provenance, and attributes like
efforts to bring more material ingredient transparency to the supply chain will
its CO2 footprint, recycled content, and recyclability.
provide a competitive advantage for early adopters as legislative requirements
come into place and supply chain partners, including OEMs, increase their
demand for ingredient transparency.
5. Metrics and Performance management
Key question: • Process outputs – Measure the amount of valuable process outputs
generated (including by-products) and track their destination, either as
How might supply chain leaders evaluate the performance of valuable resources in the economy or as waste and pollution in landfill or the
circular supply chains and create internal incentives that support environment. Examples of metrics to help this include: total weight of waste
the shift to circular supply chains? generated; generated waste diverted from disposal for reuse; generated
waste diverted from disposal for recycling; generated waste diverted from
Context: disposal for other recovery options; and generated waste directed to landfill.
Measuring circular supply chain success with the same metrics as those used for • Product utilisation – Assess the amount of time that products are in use
assessing linear supply chains, will not accurately capture the value and positive and generating value for the customer before requiring circular processing
impacts generated by the transition. For example, in the transition from sales- to extend the lifetime of the product, components, or materials (i.e. repair,
oriented linear business models to service-oriented circular business models, remanufacturing, refurbishment, or, ultimately, recycling). Examples of
inventory turnovers may no longer be an appropriate way to measure supply chain metrics to help indicate this include: time a product functions as required
health as the circular model seeks to decouple revenue from production volumes. until first failure (i.e. technical lifetime); time a product is used until
These challenges are also reflected in the performance management aspects of requirements of user(s) are no longer met (i.e. functional lifetime); functional
supply chain teams, as incentive systems built on linear metrics can discourage lifetime against technical lifetime (i.e. product utilisation).
supply chain professionals from transforming their ways of working to adopt circular Material intensity – Evaluate the decoupling of circular supply chain
•
supply chains. processes and value generation, from the consumption of resources like
Recommendations: materials, water, and energy. Examples of metrics to help achieve this include:
Rethink and align with sustainability and finance departments on the
• total weight or volume of inputs used against revenues.
performance indicators used to monitor, measure, and drive success in a Make annual performance evaluation and incentives, such as bonuses, of
•
circular supply chain. A few examples of performance attributes that can help supply chain teams contingent upon circular economy targets and key
supply chain professionals monitor the success of circular supply chains include: performance indicators (KPIs), and reward circular economy initiatives.
• ircular inputs – Quantify the amount of products, components, materials,
C This approach encourages and rewards behaviours that contribute to the
and ingredients brought into a process or product that are either secondary adoption of circular economy principles throughout the supply chain, and can
or have been regeneratively produced, in comparison to virgin and finite transform the circular economy from a passive consideration into an active
inputs. Examples of useful metrics to this end include: total weight or volume driver of employee behaviour.
of circular inputs used; total weight or volume of non-circular inputs used;
total weight or volume of circular inputs used against total weight or volume
of all inputs used.
Case study: CHEP

CHEP, the world’s largest global pallet pooling company, aims to become a Tracking circular KPIs has enabled supply chain teams to make data-driven
“nature-positive business” and to “pioneer regenerative supply chains” by 2025. decisions to optimise circular flows to generate more value with less virgin material
In order to do so, they had to rethink their measure of success at an organisational extraction and waste. Such a circular performance measurement system has proven
level as well as at a departmental level. This meant that supply chain teams had to crucial, for example, for the company’s Plant Network Optimisation of empty
look beyond traditional supply chain KPIs focused on cost and efficiency, to include product flows.
other measures of success in a circular supply chain and integrate them within
Lessons Learned:
the organisation’s incentives system.
• Develop circular metrics to measure, analyse, and find ways to progress on
The Solution: circular supply chain deployment and operationalisation.
CHEP created an Activity Based Costing (ABC) model to track circular flows and
• Tie supply chain employee incentives, like leadership performance bonuses, to
codify over 30 related KPIs like asset return rates and reverse logistics efficiency.
circular economy targets in order to embed circular economy thinking into
The model provides data to benchmark circular performance, identify improvement
day-to-day supply chain operations and drive cultural change.
areas, and rapidly test solutions. Amongst the 30 KPIs, there are three key metrics
to measure CHEP’s circular supply chain success: • Nominate circular economy champions in each function and country to ensure
the circular economy is embedded in the day-to-day operations and processes.
• Efficient Control Ratio, referring to how CHEP controls the pool vs blue
sky in units
• Flow Through Ratio, if those ratios are close to 100%, all the rest goes well
• Cycle Time, referring to how quickly items come back to be circulated again
Additionally, CHEP links organisational circular economy targets to employee

incentives through, for instance, tying bonuses to their Asset Productivity target,
which refers to how many assets are kept in circulation to prevent the need for new
products being injected.
6. Business models and Product design

Inform business model and product design process to ensure design for
•
How might supply chain leaders influence business models and a circular economy. Supply chain leaders can help improve the design of
product design to ensure the efficient and effective circulation of business models and products for a circular economy by engaging with relevant
materials and products in the supply chain? departments early on. For instance, they might connect with product design
around the main challenges when it comes to repairing or remanufacturing
Context: products, or with business units on the challenges for effectively incentivising
The effectiveness of operating circular supply chains can be hindered if the cost-efficient reverse flows through the business model set-up (e.g. product-
products and materials, and business models generating value from them, have as-a-service). By sharing their knowledge on the manufacturing technologies
not been designed with the circular economy in mind in the first place (e.g. to available today, as well as the landscape of network partners, supply chain
enable activities like remanufacturing, repair, or recycling). For example, whether leaders can help ensure the efforts of all these central teams – from product
a product has been designed for repairability, modularity, or disassembly, will and business model designers to supply chains – contribute towards a broader
influence the technical and financial viability of different circular processes (such organisation-wide transition to a circular economy.
as repair or remanufacture). Whilst these elements fall beyond the responsibilities •
Connect internal stakeholders with relevant teams in upstream and
of supply chain leaders, close collaboration with teams in charge of business model downstream partners. Supply chain leaders manage relationships with partners
and product design can ensure that all departments move in the same direction upstream and downstream. They can therefore connect relevant internal and
and products and materials get manufactured and circulated successfully at their external teams in order to improve the efficiency of designs and the processes
highest value in a cost-effective manner. conducted by partners in the supply chain. For example, in Brazil, HP &
Sinctronics partnered to create a reverse logistics ecosystem able to recover
and create value out of HP end-of-use electronic equipment. As design decisions
happen in HP, while reprocessing is carried out by Sinctronics, cross-company
communication allowes for the most up to date knowledge on disassembly
to be disseminated among all fields of expertise. It also enables Sinctronics to
share practical insights with HP, seeking to influence and enhance their design
decisions and identify new opportunities to create a closed-loop process
between manufacturing and recycling.
Case study: Philips

Philips, a global leader in healthcare technology, aims to generate 25% of revenue Choosing refurbished instead of brand new Lumeas reduces the carbon footprint
from circular products and solutions20 and is committed for 100% of products meet by 78%.22 Beyond the environmental gains, this model offered insights into product
the company’s EcoDesign principles (of which circularity is a key pillar). In pursuit of innovation through post-market surveillance, to enable improvements in areas such
these objectives, Philips introduced a rental model for its IPL Lumea, a hair removal as scratch resistance. Commercially, this initiative expanded market penetration
beauty device. by offering a broader consumer base access to high-end Lumea devices, including
those with tighter budgets, while simultaneously enhancing the rental business
However, this circular economy offering posed a new challenge for the company’s
model’s return on investment (ROI).
supply chain professionals: striking the delicate balance between high quality and
operational efficiency in collaboration with partners. Lumea devices, as personal Lessons Learned:
care products, demanded meticulous testing to ensure products could be rented
• Feedback loops between supply chain and innovation teams are key to making
out to new customers whilst meeting Philips’ rigorous refurbishment standardswith
product designs fit for a circular supply chain. In this case, the first Lumea
respect to functional, visual and hygienic requirements. Not a single hair or any
devices were not designed with refurbishment in mind. Through feedback
other form of contamination should remain on the device to ensure that second-life
loops between supply chains and innovation teams, the latest Lumea devices
products are #betterthannew.21 Yet, the Lumea wasn’t designed for refurbishment
are easier to dismantle, clean, and put back in circulation.
in the first place. Consequently, the yield rate for refurbishment, the availability of
refurbished products, and the return on investment were low. • Closer collaboration with network partners in their operations gives valuable
information on how to further improve.
The Solution:
• Keep it simple: start small, think big! the circular economy is embedded in
To address the new challenge, Philips’ supply chain teams decided to work closely
the day-to-day operations and processes.
with their network partners. They developed a comprehensive ten-step protocol
for approved partners that outlined procedures for inspecting, grading, sorting,
cleaning, testing, repackaging, relabelling, recording product data, and releasing
the refurbished Lumea devices. Furthermore, Philips provided the necessary test
equipment and training, and worked with partners to harvest quality controlled
parts, enhance forward-backwards compatibility, and exchange parts. The 20
Circular solutions include performance and access-based business models, upgrades, lifetime extension
collaboration involved Philips’ supplier quality engineers, who worked closely with services, refurbished, reconditioned and remanufactured products, components and -systems, and products
with recycled plastics content.
partners to ensure that high-quality standards were met and the refurbished devices 21
Better than New refers to Philips Refurbished Products being Guaranteed Philips Quality, 2 years Warranty,
could be rented out again. Lower Price, and Less Waste.
22
Based on LCA using ReCiPe2016 and ecoinvent3.6 database, for a refurbished Lumea S9000 compared to
a new one, assuming all accessories, adapter and packaging need replacement. In scope: product-, packaging
materials and Philips reverse logistics. Out of scope: chemicals and energy needed for reprocessing, inbound
parts and material transport.
7. Customer engagement

Work with marketing to provide incentives and convenience for customers
•
How might supply chain leaders ensure that customers return or end-users to return products and materials after their use phase. Explore
products into the supply chain for circulation after the use phase? different options relevant for the desired recoverable products, such as deposit
schemes, or sales discounts on new purchases when previously used items are
Context: returned. Use these incentives as ways to build trust and loyalty with customers
Supply chains will likely also face challenges in ensuring the return of products or end-users. Make sure to not only align the incentive system choice and user
from customers or end-users after the product use phase to help secure availability experience such that it generates value for the customers, but also so that it is
of circular inputs in the network. This product return and recovery is crucial for well suited for the network design and reverse logistics activities of the circular
enabling supply chains to capture the value and quality of products and materials, supply chain to maximise the effectiveness of the product circulation and
and reduce the need for virgin resources, so addressing it will be key in ensuring value capture.
the success of the supply chain transition. The common challenges around material
competition across industries provide an ever greater impetus for supply chains to
address material security.
8. Financial resources

• Align on circular economy ambitions and core priorities across Chief Supply
How might supply chain leaders mobilise adequate levels of Chain Officer, Chief Sustainability Officer, and Chief Financial Officer,
investment, support, and responsibility for the deployment of or equivalent roles, to ensure adequate resources are available for the
circular supply chain initiatives? deployment of circular supply chains. This will be crucial to ensure that supply
chain teams have the right level of support, sponsorship, guidance, resources,
Context: and accountability for trialling and scaling circular initiatives within and beyond
The transition to a circular economy will require investment in new supply chain the supply chain. For instance, when building reverse flow operations in-house,
infrastructure, both physical and digital, the costs of which, at the beginning might supply chain departments will have to invest in new technologies to enable
be relatively high before the desired scale of operations is reached. Accessing the circular supply chains (e.g. sorting, remanufacturing, recycling) across the
necessary capital might pose a challenge, as the way in which finance functions markets in which their organisations operate. For some products, such as EV
evaluate supply chain investments still largely responds to linear ways of measuring batteries in the automotive sector that retain a high value in the marketplace,
success (i.e. traditional ROI considerations). Building the case to secure appropriate the business case can be quite easily made. For other products, such as
investment will require a shift in mindset and measurement regarding the way that smaller vehicle components, it may be harder. Creating a compelling case that
supply chain and finance departments evaluate investments. Certain new metrics emphasises the benefits circular economy initiatives will deliver with regard to
will need to be added to ensure circular supply chain activities are appropriately supply chains teams’ goals and those of other key stakeholders (e.g. resilience,
assessed (see examples of new metrics in Focus area 5: Metrics and Performance cost-savings, carbon reductions, waste reduction, customer loyalty), as well as
management), timelines for expected return on investments (i.e. patient a plan on how the team(s) will achieve them, and the specific support needed
investments) will have to be elongated, and non-financial considerations (such as throughout the timeline will increase buy-in.
impacts on biodiversity and carbon emissions) should also be included
in these investment assessments.
Learn how to effectively communicate and present circular economy ideas
to internal stakeholders through the Make a circular economy pitch in your
organisation guide.
9. Policy and Legislation
Key question: Policymakers could also be encouraged to manage resources to preserve value
by reviewing and harmonising resource classifications and definitions in waste
How might supply chain leaders inform legislation that affects the legislation, and to make the economics work by aligning taxation and fee incentives,
movement and exchange of circular materials and products within such as EPR, with circular economy outcomes, to help supply chains capture and
and across borders? recirculate products and materials cost-effectively. Policy investments in innovation,
infrastructure, and skills by, for example, supporting blended finance solutions
Context: for building physical and digital infrastructure, could also support circular supply
chains, while collaboration for system change through building cross-border policy
Supply chain leaders, especially those operating across national and regional
alignment could help remove some of the barriers faced by supply chains today
borders, face the challenge of complying with fragmented and sometimes
in being able to move circular inputs across regions. These policy actions will be
conflicting legislation, including taxation, that affect the movement and exchange
most effective when underpinned by the establishment and adoption of common
of circular materials and products. This can create barriers or incentives for their
standards reflecting the principles and goals of the circular economy across
circular economy activities, such as reuse, repair, remanufacturing, recycling, and
industries and sectors.
sharing, in the current globalised and interconnected economy. The lack of common
standards and definitions for circular economy concepts, indicators, and metrics, •
Whilst a conducive legislative environment is developed, supply chains can
further exacerbate these challenges, by making it more difficult to align between turn legislative constraints into solutions to advance the circular economy.
companies, policymakers, and investors, on what supply chain activities should Supply chain leaders moving from linear to circular practices currently face
be sought after. legislative barriers that prevent them from, for example, moving used goods
across borders or recovering valuable materials from them. However, these
Recommendation: barriers can also be seen as opportunities to innovate and create new value
•
Engage with policymakers either directly, or indirectly by collaborating with by, for example, deploying infrastructure at local or regional levels to enable
internal public affairs departments or trade and industry associations, to material circulation. Instead of treating legislation as a blocker, supply chains
inform legislation. As those most familiar with the challenges posed by existing can use it as a constraint to model against different scenarios that might be
legislation, supply chain leaders can inform relevant stakeholders to help create possible. For example, if a used product cannot be transported through a border
a conducive and consistent environment for deploying and scaling circular because of a current classification that determines used goods as wastes, then
supply chains. For example, supply chains leaders, with the help of other relevant the supply chain can explore alternative options to circulate such products inside
parties, can advocate for policymakers to stimulate design for the circular the market where it is already located (e.g. through activities like repair, reuse,
economy by ensuring the sharing of information and tracking through product or refurbishment). This could reduce transportation costs and emissions, create
labels and digital product material passports, which could help in the sourcing of new jobs and skills, and increase customer loyalty and satisfaction.
circular inputs.
Glossary
Circular inputs: Products, components, materials, and ingredients brought into Renewable materials: Materials that are continually replenished at a rate equal
a process or product that are either secondary (i.e. non-virgin), and/or that have to or greater than the rate of depletion. Examples include: cotton, hemp, maize,
been regeneratively produced, and can be circulated within the economy or safely wood, wool, leather, and agricultural by-products. To fit in a circular economy such
returned to nature. materials must be regeneratively produced.
Circular processes: Actions done to inputs in order to allow their reintroduction Repair: Operation by which a faulty or broken product or component is returned to
to the value chain, and that retain the maximum amount of the inputs’ embedded a usable state to fulfil its intended use.
value (i.e. repair, remanufacturing, refurbishment, and, ultimately, recycling).
Reuse: The repeated use of a product or component for its intended purpose
Finite materials: Materials that are non-renewable on timescales relevant to the without significant modification.
economy, i.e. not geological timescales. Examples include: metals and minerals;
Reverse logistics: Supply chains dedicated to the flow of products and materials
fossil forms of carbon such as oil, coal, and natural gas; and sand, rocks, and stones.
away from a user and towards a supply chain for the purpose of maintenance,
Linear supply chains: Supply chains established and operated to flow materials from repair, reuse, refurbishment, remanufacture, recycling, or regenerating natural
the planet, through transformation, to a user, and ultimately to a disposal process systems.
(i.e. following a ‘take-make-waste’ material flow). Products and resources are given
Supply chain: The network of suppliers that deliver products from raw materials to
one lifetime to add value before becoming waste and/or pollution.
end customers through either an engineered or transactional flow of information,
Recycle: Transform a product or component into its basic materials or substances goods, and money.A
and reprocess them into new materials.
Supply chain leader: The decision-makers working in a supply chain function; the
Refurbish: Return a product to good working order. This can include repairing title may vary per company and may resemble the following: Chief Supply Chain
or replacing components, updating specifications, and improving cosmetic Officer, Chief Operations Officer, Head of Reverse Logistics, Head of Procurement,
appearance. Supply Chain Strategist, or similar.
Regenerative production: A means to provide food and materials in ways that Supply chain management: The design, planning, execution, control, and
support positive outcomes for nature, which include but are not limited to: healthy monitoring of supply chain activities with the objective of creating net value,
and stable soils, improved local biodiversity, improved air and water quality. building a competitive infrastructure, leveraging worldwide logistics, synchronising
supply with demand, and measuring performance globally.A
Remanufacture: Re-engineer products and components to as-new condition with
the same, or improved, level of performance as newly manufactured ones.
A
Association for Supply Chain Management, Supply Chain Dictionary, Chicago (2022)
Core project team
Ellen MacArthur Foundation Circular Supply Chain Network Ellen MacArthur Foundation contributors
Gaelle LeGelard Deborah Dull Lena Gravis
Lead, Network Activation Founder Development Manager, Editorial
Ilma Stankeviciute Sophia Passerini Joanna de Vries
Programme Manager, Learning Contributor Editorial Lead
Cindy Venho Ramatu Abdulkadir Emily Marsh
Project Manager, Contributor Design Researcher
Network Activation
Dennis Vegter Alex Hedley
Andres Oliva Lozano Contributor Senior Graphic Designer
Senior Research Analyst,
Brijesh Krishnan James Wrightson
Network Activation
Contributor Creative Lead
Laura Franco Henao
Anne Michelle Avolio Tansy Robertson-Fall
Project Manager, Learning
Contributor Senior Design Manager
Sushma Kittali-Weidner
Contributor
Gerald Jackson
Contributor
Dharesha Jhaveri
Contributor
Vivian Tai
Contributor
Acknowledgements
The Ellen MacArthur Foundation would like to thank the organisations who contributed
to the study for all their constructive input. DISCLAIMER
hilst care and attention have been exercised in
W
Association for Supply Chain Management Novo Nordisk
the preparation of the paper, relying on data and
BBB Industries Philips information believed to be reliable, the Foundation
CHEP, a Brambles company PVH makes no representations and provides no
warranties in relation to any aspect of the report
Flex Rajby Industries (including as to its accuracy, completeness or the
HP Rheaply suitability of any of its content for any purpose).
Products and services referred to in the report
H&M Group University of Exeter are provided by way of example only and are not
Jaguar-Land Rover University of Bradford endorsed by the Foundation. The Foundation is
not responsible for any third-party content
Kinaxis Volvo Cars referred to in the report nor any link to any
Niaga® third-party website, which is accessed at the
reader’s own risk.
either the Foundation nor any of its related
N
people and entities and their employees or
appointees shall be liable for any claims or losses
of any nature arising in connection with this
report or any information contained in it, including,
but not limited to, lost profits or punitive or
Please note that contribution to the study, or any part of it, or any reference to a third-party consequential damages.
organisation within the study, does not indicate any kind of partnership or agency between
the contributors and the Foundation, nor an endorsement by that contributor or third party
of the study’s conclusionsor recommendations.

Building A Circular Supply Chain

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Building a circular

Shining a spotlight on circular supply chains 6

Circular economy as a tool for supply chain leaders 7

Supply chain leaders as critical players in the circular economy transition 9

From linear to circular supply chains: creating a common understanding 12

Managing supply chains in a circular economy through the SCOR model 17

About this paper About the Ellen MacArthur

Shining a spotlight on circular

Underpinned by a transition to renewable energy and materials, the

Circular economy as a tool for

Figure 1. Examples of companies leveraging the

Increase resilience Reduce costs Reduce climate impact

Supply chain leaders as critical players in the

The Butterfly diagram:

From linear to circular

From linear to circular supply chains:

A circular supply chain consists of a distributed and

A circular supply chain relies on multidirectional flows of

A circular supply chain delivers and captures value using

Managing supply chains in a circular economy through the

requires a move from a linear ‘source-make-deliver’

Making the shift:

Making the shift:

supply chain leaders beginning to explore the design

areas supply areas requiring

1. People and Structure

Key question: Recommendations:

The Challenge: The Benefits:

Context: Reimagine network partnerships and product and material-ownership

Case study: CHEP

The Challenge: The Benefits:

Key question: Recommendations:

Case study: Flex-N-Gate & DS Smith

The Challenge: The Benefits:

4. Data and Quality

Key question: Recommendations:

Case study: Niaga®

The Challenge: The Benefits:

5. Metrics and Performance management

Case study: CHEP

The Challenge: The Benefits:

Additionally, CHEP links organisational circular economy targets to employee

6. Business models and Product design

Key question: Recommendations:

Case study: Philips

The Challenge: The Benefits:

Key question: Recommendations:

Key question: Recommendations:

9. Policy and Legislation

Core project team

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Underpinned by a transition to renewable energy and materials, the