How procurement can accelerate the shift to a circular economy

By Point Advisory   May 14th, 2021

Planet Ark is proud to announce Point Advisory as the newest Technical Supporter of the ACE Hub. To celebrate, Point Advisory’s Senior Manager of Sustainable Procurement, Sujata Karandikar, and Manager of Sustainability Strategy and Engagement, Sarah Beattie-Smith, write about the role of procurement in a circular economy.

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As individuals, the choices we make about the goods and services we buy are an important way that we can help drive the transition to a circular economy. Whether it’s buying less and sharing more, choosing more sustainable packaging in the goods we consume, or opting to reuse instead of buying new, our purchasing decisions have power. 

The same is true for businesses across Australia. And increasingly, the business community is leading the way in developing the circular economy by leveraging that purchasing power through sustainable procurement practices. 

Recent examples include the commitment by ALDI to achieving zero waste to landfill in Australia by 2025 and the pioneering work of IKEA who are trialling a furniture buy-back service. Similarly, Coles has expanded trials of refills for products from laundry detergent to cereals in its supermarkets. 

These companies are supporting consumers to make more circular choices in their purchases, but they are also making important decisions in their own procurement operations. Achieving zero waste to landfill, for example, will require changes in the ways that ALDI deals with waste and recycling, but also in the procurement of seasonal produce and reused materials (such as turning broken pallets into garden mulch that will be sold in store). 

So as more and more companies seek to shift away from the take-make-dispose model of the old linear economy, how can procurement become key factor in accelerating the transition to a circular economy. 

Embracing the circular procurement hierarchy 

A circular economy future requires a complete shift in both what we buy and the way we buy; it requires circular procurement. In this future we will need procurement to go beyond purchasing quality goods and services at low cost, as these goods and services must also avoid social and environmental harms. Procurement teams will increasingly need to collaborate even more closely with suppliers and more closely with their business as a whole. And they will need to work with end-users to design out waste, extend product and component life and examine end-of-life recovery models.  

One way of thinking that could guide this shift in practice is the circular procurement ‘hierarchy’ which outlines four phases: reduce, reuse, recycle and recover. 

1. Reduce 

For procurement, reducing can be somewhat counter-intuitive as it is about re-examining needs at the outset. But this is where circular economy thinking starts — is there genuinely a need to purchase? Is there another way in which to fulfil internal customer requirements? Can existing products be repurposed, or their life extended to serve the same purpose? Does the need require products to be purchased or can it be provided as a service? 

This is where some of the more innovative circular business models come into play that challenge traditional concepts of ownership, including product-as-a-service, leasing agreements and shared ownership models. 

2. Reuse 

Product reuse (via repair and remanufacture) is part of the end-of-life consideration. While a product may not be fit-for-purpose for the organisation that bought it, it might still be repaired and reused by another entity. 

Supplier buy-back models like that initiated by IKEA are one example of this strategy in action. And it’s not a new concept — think of IT equipment, where products are refurbished by suppliers and re-enter the market. 

3. Recycle 

In many instances, a product at the end of its life may not be suitable for reuse but can be recycled into new products. To understand opportunities for recycling, procurement can introduce requirements in the product specifications requiring recycling, recyclability or disassembly options for products, or criteria in tenders.  

Interface, a global commercial flooring company and their offering ‘Re-Entry’ is a perfect example of this, where the company reclaims carpet at the end of its life to be remanufactured into new carpets again and again in a closed loop system. 

4. Recover 

Resource recovery requires procurement teams to embrace collaboration by working with suppliers, the business or third parties to identify mechanisms to recover waste. Waste can then be repurposed into other products — and you’d be surprised by what can be repurposed once recovered!   

Sustainable Salons is a social enterprise pioneering the circular movement in the salon industry that recovers hair from salon floors to make ‘hair booms’ which are then used to clean oil spills. 

Three things procurement teams can do today 

Implementing the circular procurement hierarchy is an ongoing journey for any business. But every journey begins with the first steps. Here are three things that procurement teams can do today to get started.  

1. Identify key impacts and opportunities 

Procurement is uniquely placed to understand the negative impacts of purchasing decisions, think about how to lessen these impacts and contribute to long-term behaviour change. Start by asking questions about a product’s impacts. Is virgin material use or the proportion of waste to landfill high? Is there an excess of packaging? Are products discarded before end-of-life or is the expected lifecycle of a product not being achieved? Identifying and quantifying these impacts is the first step in identifying opportunities and setting future goals and targets to reduce harm and realise benefits. 

2. Introduce green procurement criteria for suppliers 

Using green procurement criteria in product specifications, tenders and evaluation criteria is a practical way of putting circular economy principles into action. This criteria should be specific to the product and the broader outcomes procurement is looking to achieve, having understood impacts and opportunities. There is a plethora of example criteria to draw on, including the Australian Government’s Sustainable Procurement Guide, released in 2020. 

3. Collaborate and connect 

None of the companies mentioned above have achieved change on their own. Working closely with supply chain partners to understand and reduce resource impact, better understanding customer needs and expectations, and seeking expert support are all vital steps along the journey to a circular future. 

Collaborating for circular future 

At Point Advisory, we can see the future for procurement and it’s exciting! Through procurement, organisations have the ability to create tangible positive social and environmental outcomes and contribute to more healthy, equitable and sustainable communities. Embracing circular economy principles is one of the ways in which procurement can achieve these outcomes. 

Helping businesses apply these principles is one of the reasons we chose to become a Technical Supporter of Planet Ark’s Australian Circular Economy Hub, working alongside others to amplify our impact. Our team has a long history working within industry in procurement roles and as advisors on sustainable and ethical procurement projects, working on everything from detailed product Life Cycle Assessments to designing sustainable procurement strategies and policies. 

We are looking forward to sharing our knowledge and collaborating on practical solutions with our partners through the Hub — and making sure the future of procurement is circular. If you are interested in collaborating, get in touch via our website www.pointadvisory.com

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