Circular supply business models and resource recovery business models have similar goals. However, for circular supply models, traditional production inputs are replaced with bio-based, renewable, or recovered materials starting the restructuring process moving away from linear supply chains from rethinking design and material used.
What is circular supply?
Circular supply business models involve the replacement of traditional production inputs with bio-based, renewable, or recovered materials. Thus, it can be viewed as similar to the resource recovery business model. However, in circular supply models, the material recovery is considered at a much earlier stage of the product lifecycle with the goal to design away from the waste that would otherwise occur in the linear model (Lacy and Rutqvist, 2015; OECD, 2019). Two business model approaches, which cater to circular supply are cascading and repurposing and organic feedstock (Lüdeke- Freund et al., 2019).
In which context is circular supply useful?
The philosophy underlying the circular supply model is similar to the “cradle to cradle” product design. Cradle-to-cradle is now also an official certification system, including approx. 500 certified products (OECD, 2019). The business case of circular supply business models has the following advantages: First, if the traditional inputs or material is replaced by bio-based, renewable, or recovered material, products can be marketed as “green”. Second, supply chain or regulatory risk can be addressed by switching towards alternative material inputs (OECD, 2019). This is especially beneficial when it comes to environmental regulation or politically unstable regions. However, to make use of these benefits, secondary material should be locally derived.
One domain of particular interest is the waste-to-energy (WTE) supply chains illustrated by Pan et al. (2015) which simultaneously solve the dilemma of energy demand, waste management, and greenhouse gas emissions. Among the state-of-the-art WTE technologies are combustion, gasification and anaerobic digestion. However, technological, financial, institutional, and regulatory barriers need to be overcome (Pan et al., 2015). Strategies on implementing WTE supply chains could be (1) establishing policy and government responsibility, (2) internalizing externalities, social acceptance and investor mobilization, (3) providing economic incentives and price supports, and (4) setting up a comprehensive performance evaluation program (Pan et al., 2015).
What is important to keep in mind when aiming to build up a circular supply for your business?
To make use of circular supply models, there are two preconditions that need to be met, e.g., sufficient market demand, and willingness to pay for green products. However, companies need to be careful that the biobased, renewable, or recovered material inputs that are adopted are good substitutes for the traditional materials that they replace (OECD, 2019). As there is still a lack of existing models and circular supply infrastructures existing, Masi et al. (2017) identified three circular economy supply chain configurations, namely, eco-industrial parks, environmental or green supply chains, and closed-loop supply chains that can be adopted.