The Circular Supply Chain Guide

• Circular supply chains are transforming waste into value, extending the lifecycle of materials and minimizing the need for new feedstock.
• Forward-thinking companies implementing closed-loop supply chains are future-proofing their business by reducing manufacturing costs, opening new revenue streams, increasing resilience and securing their supply, and proving compliance with Extended Producer Responsibility regulations.
• Implementing traceability systems that digitally link every participant in the circular supply chain – to the waste-picker level – unlocks peak profitability, productivity, and sustainability.

Every year, over 2 billion tonnes of municipal solid waste is produced globally, with at least a third not disposed of in an environmentally safe way. Approximately 68% of this waste ends up in open dumps and landfills, contributing to around 1.6 billion tonnes of carbon dioxide equivalent greenhouse gas emissions (5% of global emissions). With global waste projected to increase to 3.4 billion tonnes by 2050, the prevailing take, make, and dispose model is evidently unsustainable for safeguarding people and our planet.

Enter the circular supply chain. 

Moving away from the conventional linear approach, which typically sees products ending their life in landfills, a circular or closed-loop supply chain seeks to reintegrate materials back into the production cycle. According to research conducted by the Ellen MacArthur Foundation, McKinsey & Company, and the World Economic Forum, adopting circular supply chains could generate over USD 1 trillion annually by 2025 and create 100,000 new jobs over the next five years.

In this comprehensive guide, we will unpack the critical components of closed-loop supply chains, unveil the business benefits, and unfold innovative solutions for optimization – so you can grow your business while contributing to the circular economy. Let’s dive in. 

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What is a circular or closed-loop supply chain?

“Innovative businesses drawing on circular-economy principles are finding ways to convert trash into income streams. By aggregating volumes substantial enough to justify business investment, they are able to create the infrastructure to organize and manage waste supply chains.” - McKinsey Sustainability

At its core, a circular supply chain is all about making less waste and using resources more wisely. It means doing everything we can to slow, close, and narrow material and energy loops. Rather than relying on a constant influx of new materials for products and packaging, companies are getting smart about reusing materials like plastic, metal, paper, cardboard, and glass. Plus, they're designing products in a way that they can be refurbished and resold, making sure everything gets a second chance or more at being useful.

So, is this concept just an idealistic dream, or does it hold up in the real world? The evidence speaks volumes: Yes, it does. Take, for example, Coca-Cola's innovative use of blockchain technology to streamline informal waste recycling networks in South Africa. Or Dow's integration of post-consumer recycled resin into their REVOLOOP^TM value chain, driving the circular economy forward in Colombia. These examples showcase how forward-thinking companies are not just dipping their toes but diving headfirst into the circular economy, witnessing significant gains. 

How to Build a Circular Supply Chain

Embracing a circular supply chain is a transformative journey that reshapes how businesses think about waste. Here are some key steps to getting started on the right foot: 

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1. Assessment & Planning: Start by taking a close look at your current supply chain to spot where most waste happens and where you could reuse materials. 
2. Business Model Innovation: Move away from selling products one time; consider leasing, repair services, or buy-back programs to keep products in circulation. Also, incorporate recycled materials in manufacturing new products and packaging. 
3. Design For Circularity: Create products meant to last longer, be repaired, or easily recycled, ensuring they can cycle back into use instead of becoming waste.
4. Supplier Collaboration: Work closely with your suppliers to ensure they're on board with your circular goals. Understand their challenges and work together to optimize processes for recycling and reuse.
5. Post-Consumer Waste Systems: Implement programs – such as partnering with a Producer Responsibility Organization (PRO) – to collect and recycle waste, keeping materials out of landfills as much as possible.
6. Digitally Connected Supplier Network: Use technology – like BanQu’s blockchain platform – to connect your direct and indirect suppliers, including informal waste collectors, for tracking and reporting purposes.

Business Benefits of Circular Supply Chains

“For a typical consumer goods company, the supply chain accounts for more than 80% of greenhouse gas emissions. By switching to a circular supply chain and decoupling operations from the consumption of natural resources, businesses have the opportunity to reduce their exposure to price volatility, increase material security, and help meet their environmental objectives.” - Andres Oliva Lozano, Senior Research Analyst at the Ellen MacArthur Foundation

Each step toward building a circular supply chain not only contributes to environmental sustainability but also opens up new opportunities for business growth, including:

Resource Efficiency & Cost Reduction

Circular supply chains minimize the need for sourcing new raw materials and cut down on waste, leading to significant cost savings in manufacturing. Research reveals that the adoption of circularity systems could save the fast-moving consumer goods sector up to USD 700 billion per annum in materials. This is about 20% of what the industry spends on materials input costs.

Greater Resilience & Supply Security

Supply chain professionals often struggle with volatile raw material prices. By incorporating recycled materials into your products, your company can sidestep sudden spikes in costs and stabilize your supply chain. Furthermore, using recycled content provides an alternative source of materials, offering a buffer against disruptions caused by natural disasters or geopolitical issues. Plus, through strategic sourcing, you can boost your supply of recyclables to access further revenue streams and grow your business. 

Product Differentiation & Competitive Advantage

Transitioning to a circular model drives innovation in product design, allowing you to differentiate yourself in the market. Studies show that adopting renewables could tackle 55% of the world's greenhouse gas emissions. By leading the way in circularity, you can cultivate a loyal customer base and enhance your brand's reputation among eco-conscious consumers. 

Extended Producer Responsibility Compliance

Extended Producer Responsibility (EPR) regulations mandate that producers fund the recycling process and transparently report their progress. By adopting closed-loop supply chains, companies globally are not only meeting EPR obligations but also steering clear of significant fines and protecting their brand reputation.

The Role of the Informal Sector in Circular Supply Chains

“By integrating waste picker cooperatives into the recycling ecosystem, we are democratizing the path towards a circular economy, leaving no one behind in our mission for a more sustainable future.” - Ashish Gadnis, CEO & Co-Founder of BanQu

In discussing the transformative impact of closed-loop supply chains, it's essential to shine a light on the often-overlooked heroes of circularity: the informal waste sector. This global network, consisting of around 15 million diligent waste collectors, is the backbone of recycling efforts. Informal waste pickers recover 58% of post-consumer materials worldwide from areas like urban streets, dumpsites, and landfills. Their hard work is even more pronounced regionally, such as Southeast Asia where these individuals reclaim an astounding 97% of PET bottles. 

However, despite their pivotal role in propelling us towards a circular economy, the contributions of these waste pickers are frequently invisible within the larger recycling ecosystem. This lack of recognition not only undermines their efforts but also introduces significant challenges in tracking the flow and impact of recycled materials. With the advent of global Extended Producer Responsibility (EPR) regulations, there's a pressing need to bridge this gap, ensuring that waste pickers are acknowledged and compensated fairly for their invaluable service.

The BanQu Difference

‍BanQu leverages blockchain technology to forge a digital link among all participants in the recycling value chain, from the waste pickers on the ground to recycling manufacturers. By recording transactions between buyers and sellers on its secure platform, BanQu tracks the origin, volume, quality, and chain of custody of recyclables. Doing so enables waste pickers to be seen in the value chain and gain digital financial identities – thanks to seamless cashless payments verified with SMS. This becomes a critical building block to formalizing the informal sector, so waste pickers can:

• Build a digital economic passport to access banks' preferential lending terms (i.e., better interest rates). 
• Reduce the risk and cost of holding cash, such as theft. 
• Spend their income on goods and services to increase their livelihoods, such as school fees, electricity, and housing. 
• Invest in resources to expand their reach and business opportunities. 

In turn, this creates a win-win scenario for brand owners and producers. By digitally integrating the informal waste sector into the value chain, they can secure a reliable and expanded supply of recyclables, fulfilling demand and paving the way for business growth.

How to Optimize Circular Supply Chains through Traceability

Before we dive into optimization strategies for circular supply chain, let’s illustrate a simplified example of the PET plastic recycling process:

• Waste Pickers: The journey begins with waste pickers, who play a critical role by retrieving PET bottles from a variety of locations including urban streets, dumpsites, rivers, and landfills. Their efforts initiate the plastic recycling process, making them indispensable to the supply chain.
• Buyback Centers: These centers act as the first checkpoint, where PET bottles collected by waste pickers are bought, bundled, and prepared for the next step. They serve as crucial intermediaries, ensuring the bottles are properly organized for further processing.
• Aggregators: At this stage, aggregators step in to purchase the bundled PET bottles from the buyback centers. Their task is to sort, consolidate, and bale the bottles, setting the stage for their transformation into recyclable material.
• Processors: This phase is where the actual plastic recycling process begins. PET bottles are ground into flakes, carefully sorted to eliminate any non-recyclable materials, and then washed and dried. The clean flakes are melted and extruded into strands of PET plastic, which are subsequently cut into small pellets, ready for manufacturing.
• Manufacturers: Finally, the PET pellets enter the manufacturing phase, where they are melted once more and molded into new packaging forms, according to the requirements of the purchasing brands. This closes the loop, turning used bottles into new packaging.

For a circular supply chain to reach its optimum level of efficiency and sustainability, it's essential to have a detailed understanding of the entire process—from the origin of materials to their final form. Many manufacturers and brand owners lose sight of the supply chain beyond the stages of aggregation or processing. Achieving complete traceability down to the source of recyclables is crucial to maximize productivity and profitability, as evidenced in the following sections: 

The PET Plastic Recycling Process (Without Source-Level Traceability)

Without traceability to the waste-picker level, the plastic recycling process is fraught with inefficiencies and uncertainties (see Figure 1), including: 

• Increased Contamination: Materials may be improperly sorted, contaminated, or mixed with non-recyclable plastics, leading to lower quality recycled products and higher processing costs. 
• Unreliable Supply: Without visibility into the amount of materials entering your value chain, it makes it difficult for your brand to make real-time, data driven decisions to align supply with manufacturing demand. 
• Revenue Loss: When the informal sector is disconnected from your value chain, you miss out on opportunities to expand your business – such as boosting the volume of recyclable materials collected to grow your supply.
• EPR Non-Compliance: EPR regulations are beginning to require PROs and producers to identify waste pickers in recycling value chains and pay them a service fee per kilogram of waste type collected. Without source-level traceability, you will be unable to prove these workers are paid fairly and report on material types and volumes accurately. 

The PET Plastic Recycling Process (With Complete Traceability)

Conversely, incorporating a traceability software for source-level visibility unlocks the untapped potential of your recycling value chain (see Figure 2), including: 

• High-Quality Recyclables: By tracking the journey of plastics from their origin, you can monitor contamination rates and identify inefficiencies to ensure the purity and quality of recycled materials.
• Stable & Reliable Supply: Formalizing the informal sector eliminates uncertainties and allows you to optimize processes – such as automating manual operations to enhance efficiency. With complete visibility, you can make real-time, data-driven decisions to meet manufacturing demand without disruption. 
• Business Growth & Expansion: Integrating waste pickers and buyback centers into your value chain creates opportunities for you to increase your supply of recyclables to grow your business. For example, you could provide targeted payment incentives to recyclers to increase collection volumes. 
• EPR Compliance: Leveraging an experienced traceability software built with the end-user in mind allows you to seamlessly provide service fees to waste pickers and track waste streams, so you can confidently report on and meet EPR targets. 

BanQu: Data Capture & Reporting for Circular Supply Chains

By closing the loop, we not only conserve resources but also open a new chapter of sustainable business growth and resilience. BanQu is a blockchain-based traceability software built from the ground-up, so you can track the journey of your recyclables from their geo-located origin to their conversion into new packaging. With BanQu, you can connect all supply chain actors – including waste pickers – to a secure and transparent system for tracking and reporting on the quantity and quality of materials and EPR metrics. Additionally, BanQu is system- and device-agnostic, so you can seamlessly integrate with digital payment providers for waste picker service fees. Are you ready to accelerate your circular supply chain? Schedule a call with our team today.