The circular economy is a system which regenerates itself in a closed loop. Products are used, recovered, repaired and used as input to more products and not disposed of as waste. Achieving, or at least getting closer to, this situation is a mission being pursued by most of the leading global manufacturers and retailers including LÓreal, Unilever, The Coca-Cola Company, Veolia and Dell.
Levi Strauss is an example of a clothing company that is successfully employing circular economy principles. Their vision is to find practical and creative ways to extend the life of jeans, repurpose them, and/or recover and reprocess the fibres into raw material for the next generation of Levi’s. Their stores accept old clothes and shoes of any brand, which the company collects and repurposes or recycles.
The circular economy presents unique challenges for ‘consumer packaged goods’ companies. The Coca-Cola Company produces more than 3,600 different beverage offerings, each requires some form of package in order to be safely delivered to consumers. Nearly all of their packaging has value as recycled material. The introduction of the recyclable PET bottle in the late 1970s and the development of the surrounding collection, sorting and recycling infrastructure has led to the creation of an industry standard.
Reverse logistics and the circular economy
Reverse logistics involves the collection of goods, transportation to a given location and sorting prior to remanufacturing, refurbishing, reusing or recycling or failing that, disposal. It plays an important role in the process of companies aiming to transition to a circular economy. Before setting up reverse flows, companies need to evaluate the supply chain within which the business operates. Companies may face hurdles such as complying with policies regulating the transport of waste as well as the unevenness of quality and quantity in return loads.
Consumers have grown increasingly comfortable with recycling. They also are used to returning goods, especially in ecommerce transactions. It's not unusual for customers to buy several similar products with the intent of returning a portion of the purchase – better known as ‘serial returners’. Companies can incentivise users to return end-of-use and end-of-life products by exchanging empty containers for new products. These empty containers are then reused or recycled into new ones.
Closing the loop
Businesses should evaluate their current returns operations and devise a suitable reverse logistics strategy. Companies wishing to improve their profitability need to give just as much thought into their reverse logistics as they do into their forward operations. This includes looking into the product design phase to make sure that products and materials can be reused, remanufactured, recycled, or repaired. Critical to an effective reverse logistics operation is clear ownership of the process. Reverse logistics involves many functions including transport, customer service, finance and warehousing. Organizations that dedicate resources to the function can reap great benefits.