Tag Archives: supply chain

What goes around comes around: how the circular economy can reduce waste and address climate change

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This week, the crucial COP26 summit gets under way in Glasgow. The meeting will bring together government leaders, climate experts and campaigners with the aim of agreeing coordinated action to tackle global climate change.

The discussions will be wide-ranging, covering major themes such as deforestation, renewable power generation, and electrification of transport. But although it might not hit the headlines, there’s another issue that could play a critical role in meeting climate change goals: the circular economy.

Producing, consuming and disposing of the products we use in our everyday lives accounts for nearly half of all greenhouse gas emissions. Cutting those emissions means upending the conventional “take-make-consume-dispose” model of growth, and designing waste out of our economy altogether.

In advance of the COP26 meeting, The Economist magazine hosted a webinar which focused on the potential of the circular economy for emissions reduction.

The challenges of going circular

Introducing the event, Vijay Vaitheeswaran, The Economist’s global energy and climate innovation editor, explained that the essence of the circular economy is about keeping materials in circulation and maintaining their utility. But how much of a Utopian dream is this, and what are the practical challenges that need to be overcome if this elegant theory is to become a reality?

In response, Federico Merlo, managing director of member relations and circular economy for the World Business Council for Sustainable Development, explained that, while changing business models to extend the life cycle of products would not be easy, the economic benefits of using and wasting fewer materials should drive business in the direction of the circular economy.

Jim McLelland, Sustainable Futurist at SustMeme, was concerned about possible resistance from consumers in changing their behaviour. Because many people equate consumption with ‘shopping’, they don’t consider the emissions generated during the journey of materials from design to finished product. This could result in friction in the transition to the circular economy.

But Kai Karolin Hüppe, sustainability & circular economy lead for Arthur D. Little management consultants, suggested consumers were becoming more curious about how the materials that made their products came to be in them. And once they know the impact of consumption, people can make informed buying decisions. 

She went on to explain how this is getting easier, thanks to new tools from the Greenhouse Gas Protocol and the Science Based Targets  initiatives, which can help to identify, measure and manage emissions throughout material life cycles. When the Kraft food company mapped out the sources of its own emissions, it discovered that over 90% were not directly generated by the business, but by indirect sources, such as suppliers and distributors.

Making plastic circular

In recent years, there has been much greater awareness about the environmental damage caused by plastic. One of the world’s biggest plastics manufacturers is Dow, and the company’s commercial vice president for packaging and specialist plastics took part in the webinar to outline how it’s addressing the issue.

Marco ten Bruggencate explained that, while Dow is taking sustainability seriously, the company needs to go much faster. Doing this means making sure the whole production process is addressed, from the way factories are powered to the use of renewable feedstocks to make bio based plastics. And now, Dow is looking at how to make plastics part of the circular economy by making sure that valuable waste is looped back into new packaging structures.

Raising awareness

Education has a vital role to play in the circular economy, and Jim McLelland highlighted an initiative that is providing the construction industry with greater understanding of sustainability issues.  The Supply Chain Sustainability School is funded by major construction contractors, and provides free access to training for suppliers and subcontractors in a range of disciplines, including common standards for sustainability. Jim noted that construction is responsible for 38% of global emissions, and a typical supply chain involves large numbers of materials and many microbusinesses in different countries and regions. The collective approach offered by The Supply Chain Sustainability School is an important contribution to a sustainable built environment.

Reversing the trend

Jim is one of the authors of the Circularity Gap Report, an annual progress report on the journey to a global circular economy. The first report, published in 2018, established that the world was only 9.1% circular. But the most recent report put the figure at 8.6% circularity.

It appears that the world is going in the wrong direction, but there are now signs that businesses are moving forward with their own ideas.

The packaging sector, for example, is exploring digital technologies that could drive a truly circular economy – such as blockchain to help with tracking material flows, and digital watermarking to enable better sorting of packaging waste.

And achieving circularity doesn’t mean a company has to completely rethink its business model. Global sportswear giant Nike was able to reduce the waste generated by one of its running shoes by 80% simply by talking to their supply chain.

Final thoughts

COP26 has been described as world’s last best chance to get runaway climate change under control. For all of us, the stakes could hardly be higher. Failure to limit global temperature increases to well below 2 degrees Celsius risks greater pressures on water and food supplies, increased hunger and poverty and more frequent flooding, storms and heatwaves that threaten plant, animal, and human life.

Yet if we were able to double the current 8.6% global circularity figure to achieve 17% circularity, that move alone would achieve the targets on global warming set out by the Paris COP meeting in 2015.

Whatever the outcome of the talks in Glasgow, it should now be clear that the circular economy is a vital element in fostering low-carbon growth. And it might even tip the balance in the battle against global warming.

Further reading on waste management from The Knowledge Exchange blog

Image: The Scottish Events Campus in Glasgow: location for COP26. Photo by Stephen O’Donnell on Unsplash

‘Workshop of the world’ … Is British manufacturing a thing of the past?

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Image of old industrial plant.

Image: Till Krech via Flickr under a Creative Commons Licence.

By Steven McGinty

In the 19th century, Britain was heralded as the ‘workshop of the world’, producing everything from locomotives to extraordinary handicrafts. By the 20th century, the United States was the predominant manufacturing power, but Britain had become a specialist in manufacturing.  In recent history, economic growth has been led by the service sector, particularly from financial services in the City of London.

This change in the economy has led to a lot of debate. In fact, this was cited as one of the main drivers of inequality by the Scottish Trades Union Congress (STUC) at a recent seminar I attended. However, does this mean Britain should return to its industrial roots, or should it focus on the provision of services, which has been seen as key to recent economic successes?

The Chancellor, George Osborne, certainly thinks there’s a place for manufacturing. In March 2014, he emphasised that his Budget was focused on boosting UK manufacturing and rebalancing the economy across the regions. The Budget included some high profiles measures, including the introduction of £7 billion of funding to cut energy bills for manufacturers, as well as compensation of £1 billion for energy intensive manufacturers.

A recent House of Commons Library statistical release provides some interesting insights into the UK manufacturing sector. It reports that economic output has decreased from 30% in the 1970s to 10% in 2012 and that manufacturing was badly affected during the recession, falling 14.5% between the first quarter of 2008 and the third quarter of 2009. The manufacturing workforce has also reduced from 5.6 million in 1982 to 2.6 million in 2014.

However, an Office for National Statistics (ONS) report provides some signs of optimism. It found that, since 1948, productivity in the manufacturing sector has increased gradually by 2.8% each year, compared to 1.4% in the service sector. The report suggests that the UK manufacturing sector has benefited more from information and communications technology (ICT) than the services sector and the more integrated global economy.

These factors have contributed to a shift from low-value manufacturing, where the focus was on low costs and low skilled workers, to high-value manufacturing, where workers provide value to the production process with their knowledge and expertise.

Interesting trends have also started to develop. For instance, Civitas has produced a report into ‘onshoring’ or ‘reshoring’, a practice that involves firms bringing back production that they had previously sent overseas. Firms are taking this approach for a number of reasons, some of which are related to the difficulties of offshoring such as language barriers, whereas others are looking more at the positives of domestic production, such as improved quality control, as well as an increase in a brand’s appeal by its connection to having products manufactured in countries such as the UK. Examples of onshoring including General Motors, who are currently investing £125 million in a domestic supply chain in the UK.

The report also highlighted that there are still barriers to onshoring. For example, less flexible workforces, although this is deemed to be changing in the United States as trade unions are becoming more flexible.

We have also seen the rise of ‘phoenix industries’. These are groups of firms that use similar technologies and have emerged in traditional industrial areas, typically developing sophisticated components for use in a range of industries. This idea was discussed in a recent article in the Cambridge Journal of Regions, Economy and Society. It focused on a case study of the West Midlands, an area which has been seen as the ‘heartland’ of the automotive industry.  The article emphasised the importance of Jaguar Land Rover (JLR), the niche/luxury car manufacturer, for providing opportunities for smaller more innovative companies in their supply chain. Yet, the article also highlights that getting access to funding is key for these companies to develop their prototypes. This lack of funding for small firms was identified as a weakness of the UK sector.

So, is British manufacturing a thing of the past? The answer is most likely no. However, the shape of the manufacturing industry and the role it has to play as part of the overall economy has still to be determined. This will depend on a number of factors including future government policy, particularly addressing issues such as access to capital and shortages of skills, as well as the overall global economy, most notably the ability of the Eurozone to recover from its current economic downturn.

 

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