Responsibility

How to make supply chains more circular

Imagine a world without waste. A place where repairing rather than replacing products is the norm. Where clothing is made from innovative materials, and consumer electronics are designed with refurbishment in mind. Imagine an economy where advanced recycling technologies and smart return solutions combine to create infinite loops of goods. This future is called circularity... and it’s already here.

The old way of making, selling, using, and dumping products (the linear economy) is now obsolete. With signs of climate change and environmental damage increasingly visible, the urgency of reducing greenhouse gas (GHG) emissions is clearer than ever. Embracing renewable energy sources and cutting carbon use are undoubtedly crucial steps that must be taken. But there is a missing piece: the transition to a closed-loop supply model (the circular economy). This holistic approach transforms one-directional supply chains into circular supply loops by optimizing production volumes, developing new product use models, and finding new end-of-life recycling solutions.

The potential payoffs are tremendous: Research shows that circularity can slash emissions by up to 40% and is more cost-effective than any other approach to decarbonizing the supply chain. And it also drives innovation and growth. So how can we enable and accelerate the transition to circular supply chains? Here’s the case for going circular in the fashion and consumer electronics industries.

The environmental impact of fashion and consumer electronics

The circular economy reimagines product design to turn the goods made, sold, and used today into tomorrow’s raw materials. Fashion and consumer electronics are ideal candidates for circularity because of their incredibly complex supply chains, which span continents and incorporate diverse suppliers across various levels. They are resource-intense industries that have made less progress with circularity than other industries, so they have a great deal of untapped potential. These two sectors also have a sizeable impact on climate change. Conservative estimates suggest that together they account for roughly 6% of annual global GHG emissions, twice as much as the aviation sector and almost the same amount as the entire EU.

4-8%

Estimated share of annual global GHG emissions by the fashion sector

60%

Projected emissions growth of the fashion and customer electronics sectors by 2030

70%

Carbon emissions from the fashion sector generated during production

80%

Carbon emissions from smartphones generated during production

Circular supply chains have huge potential to help reach net-zero

Conserving and recycling raw materials is a logical step for the fashion and consumer electronics industries since they generate most of their GHG emissions at the manufacturing stage. Over 70% of carbon emissions from fashion occur during production, while 80% of emissions from smartphones happen in this phase. Extending the lifetime of clothing and consumer electronics and putting their residual value back into the production cycle is critical to reducing their footprint. Ultimately, the longer a product holds value, the less frequently it will need to be replaced.

In a shift away from the old mantra of ‘reduce, reuse, recycle’, the circular economy demands a new paradigm of five Rs: reduce (making fewer new products and using less raw and virgin material in manufacturing), repair (fixing a malfunction or damage), resell (selling products that are still functional but no longer wanted or needed), refurbish (delivering an older functional product back to the manufacturer or a service provider for checking, cleaning and return to its original state), and recycle (extracting value from end-of-life products).

Reduce

Make fewer new products and using less raw and virgin material in manufacturing

Repair

Fix a malfunction or damage

Resell

Sell products that are still functional but no longer wanted or needed

Refurbish

Deliver an older functional product back to the manufacturer or a service provider for checking, cleaning and return to its original state

Recycle

Extract value from end-of-life products

Building blocks and enablers on the pathway to circular supply chains

Three main factors are enabling and accelerating the transition to circularity: consumer behavior, smart supply chains, and orchestration.

Consumers who make circular choices when shopping increase the number of goods put back into the loop and signal demand for circular products to manufacturers and brands. Attractive incentives, a conducive regulatory environment, and innovative logistics can help bridge the gap that sometimes exists between consumer intentions and actions.
Returning circular goods needs to be convenient for consumers. That’s why new supply models will be required to capture end-of-life products and unused items and keep them in the loop.
Logistics providers can leverage their expertise at every stage of the process, but their knowledge may be especially valuable when orchestrating increasingly complex circular supply chains. Deploying advanced technologies and tracking tools to ensure traceability will serve as the digital backbone in an environment of circular and multidirectional product flows.

Along with these three factors, a series of building blocks will pave the way to a circular economy, covering stages from the design process to end-of-life recycling.

Designing for success

Embracing circularity often means going back to the drawing board. Until now, clothing and consumer electronics have commonly been designed with ease of manufacturing in mind. The result: items made from a wide range of materials that are hard to disassemble. Today, some brands are opting for mono-material design – a technique that uses a single material to create a product – to facilitate recycling. In the future, companies might also choose to make products from innovative materials that are energy-efficient and easy to recycle.

Manufacturing for the future

Production processes inherently create waste, such as leftover materials and wastewater. To achieve circularity, producers must develop solutions that minimize such waste and maximize reuse, such as using wastewater to irrigate green areas. Another significant issue is overproduction, especially in the fashion industry, as approximately 20% of garments go unused. One solution: demand-driven manufacturing that combines zero-inventory practices with user-friendly tech solutions to personalize products.

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Optimizing delivery and return

In a perfect circular ecosystem, goods would be delivered and returned in reusable packaging and shared across players and industries. While this vision might seem utopian, logistics providers are already ideally positioned to establish this kind of convenient, cost-effective system for handling physical and data flows. They can also combine different types of return flows to maximize efficiency and build integrated platforms to manage new use concepts like product sharing, rental, or leasing. Companies can also support reverse logistics systems that seek to extend the value and life of consumer products through repair or resale. For instance, they could screen returned products to determine their suitability for refurbishment or recycling and perform minor repairs.

Keeping material in the loop

Extracting value from end-of-life products will be critical to keeping the circular economy moving. More end-of-life products need to be collected and pooled within formal channels to justify investing in sophisticated sorting and recycling technologies that can maximize resource recovery. Today, industry leaders are developing robots to disassemble smartphones and recover valuable materials more efficiently than traditional recycling processes. Elsewhere, state-of-the-art technology can predict e-waste flows for recycling and identify if products need to be recycled or resold to another user for a second or third life.

Circular supply chains: Collective action is needed

All of these steps will require concerted efforts. Adopting circular principles in the fashion and consumer electronics industries can dramatically advance the fight against climate change – and can be a rewarding proposition with additional benefits for all stakeholders.

To make this vision a reality, we need brands, manufacturers, governments, consumers, and logistics players to come together and each do their part. Their actions will not happen independently but will be inextricably linked in a mutually reinforcing loop – not unlike the supply loop we see in a circular economy.

As sellers develop and offer circular clothing and consumer electronics, consumers will opt to buy and return more sustainable products thanks to the conducive environment created by governments. Logistics providers can play an important role every step of the way, offering efficient and pioneering infrastructure capable of handling this new, more complex flow of goods.

Published: March 2022

Delivering on Circularity: Pathways for Fashion and Consumer Electronics

An examination of circularity’s potential to help the fashion and consumer electronics industries to reduce emissions and curb waste by helping to close the supply chain loop.

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