The Road to the Circular Economy

Companies are under pressure from regulations, investors, customers, and employees to reduce their carbon footprint and make the switch to a circular economy as more people become aware of the unsustainable nature of the linear economy.

How does logistics fit into the circular economy? Let’s examine how logistics will be essential in the journey to a more sustainable future starting from where we are right now.

In the current linear economy, the raw materials are mined and made into products that are disseminated, used, and then discarded. Unfortunately, this economic strategy has led to not only global warming but also contamination of our air, water, and land.

The Circular Economy

In the circular economy, products are created with sustainability in mind, used for as long as possible at their best value, and then recycled, reconditioned, or remanufactured instead of being thrown away.

These numerous “loops” inside the circular economy can either feed a totally new supply chain or the original supply chain for a product (such as refurbishing a phone) (such as using waste toner in paving material).

Logistics providers will continue to link trading partners in the future’s “supply loops,” just as the supply chain does in the linear model of today.

While the successful move toward circularity is undoubtedly a shared responsibility and effort, logistics players are the natural backbone, according to DHL’s “Delivering on Circularity” white paper. Logistics is all about effectively controlling the flow of goods, and circularity transforms the way materials and products move from a straight line to a regenerative circle.

The logistics sector is presented with both difficulties and opportunities as a result.

Transportation will be one of the first areas to be closely examined as many businesses pledge to lower and eventually eliminate their carbon footprint. As a result, companies will search for shipping options with smaller carbon footprints, both for short- and long-distance routes.

Furthermore, as products are designed with circularity in mind, traditional suppliers of today’s raw materials will be augmented or completely replaced by remanufactured, recycled, or even waste streams from processes in other industries. This presents opportunities for logistics providers to grow into other value-added services.

For example, an airport might choose to purchase carpet-as-a-service, similar to the way Schiphol Airport purchases lighting-as-a-service from Philips today. Carpet would be provided and replaced, with the used carpet being recycled and made into new carpet, rather than heading to landfill.

While a logistics partner would be key to the transportation of materials between the trading partners that make up this supply loop, they could also offer value-added services. After all, that carpet needs to be shredded before it can be recycled. But whether that service is provided by a logistics partner or a new local business that becomes part of the supply loop, remains to be seen.

The exchange of information between trading partners is just as important as the movement of materials. To cooperate across the supply cycle, technology providers must aid firms in finding one another and exchanging information. Similar to the logistics scenario, new start-ups will fill the void if established technology companies do not expand to satisfy supply loop demands.

The way business is conducted will change in the upcoming years from an unsustainable linear past to a collaborative circular future. Logistics has a unique chance to “push” circular concepts because it connects many customers and sectors. Offering value-added services, choosing delivery methods with lower carbon footprints, or using reusable exterior packaging—logistics will play a significant role in the global economy.