Key drivers and implications of circular economy initiatives in global business

Simply put, a circular economy is one that is restorative and regenerative by design and that aims to keep products, components and materials at their highest utility and value at all times, distinguishing between technical and biological cycles. It can be broken down into three guiding principles:

1. preserving and enhancing natural capital by controlling finite stocks and balancing renewable resource flows;
2. optimizing resource yields by circulating products, components and materials in use at the highest utility at all times in technical and biological cycles; and
3. fostering system effectiveness by revealing and then designing out negative externalities.

According to the Ellen MacArthur Foundation, potential global savings from circular economy development are greater than $1 trillion. It is no surprise that more and more national and global companies are recognizing the importance of corporate responsibility and the weight it carries with internal and external stakeholders. While key drivers of corporate responsibility initiatives continue to force the hand of the global marketplace to take sustainable action, pressure also comes from legislation, an increased expectation of transparency and, more internally driven, risk management and health and safety assurance.

As a result, we’re seeing increased reporting and public initiatives to not only “do better” by the environment and our global resources but also to work more effectively toward the achievement of zero-waste across end-to-end supply chains. Reaching zero-waste would be the mark of a completely circular approach to supply chain management (SCM)—from sourcing raw materials to enhancing packaging materials with new technologies to make them more recyclable or to provide alternative value at the end of their lives to implementing reverse logistics programs.

In the traditional linear economy, achieving zero-waste is impossible: Raw materials are extracted continuously (about 10 tons per capita, annually), and regardless of manufacturing and distribution efficiencies, consumers’ end-use perception of the waste is what becomes discarded and then becomes a devalued commodity.

In the circular economy approach, however, success is achieved through a holistic view of the supply chain and highly effective SCM. This is where Havi specializes. We understand each step in the supply chain and how to optimize it for network efficiency as well as guiding it toward a zero-waste initiative through practices in the circular economy.

Breaking it down: the packaging supply chain

When sourcing raw materials, it’s important to keep end of life in mind, making sure you are being as useful as possible to eliminate waste. When it comes to food, for example, be sure to tap only resources that can be replenished, or ensure that your supply chain includes a program that returns reusable and valuable waste back to the resource where you sourced them. To do this, it’s advised to learn about and partner with the various strategic sourcing initiatives around the world.

For example, a growing initiative in the U.S. and globally has been zero net deforestation. More and more global companies that have realized the impact of their operations are partnering with organizations like the Forest Stewardship Council (FSC) to properly source and produce their paper-based products in a sustainable way, receiving FSC certification, which has become widely celebrated by internal and external stakeholders.

“As an estimated 3 billion middle-class citizens enter the global marketplace by 2030, waste reduction and the initiative to increase efficiencies and end-of-life opportunities through the circular economy becomes more of an expectation, while achieving zero-waste sets the benchmark to prepare for the future.” – Anthony DiIenno, Havi

When evaluating distribution, it’s critical to optimize efficiencies by looking at conversion costs environmentally and economically. Here it would be effective to partner with a team that has global logistics capabilities to maximize shipment weights and to reduce mileage to drive down costs and the negative impact on the environment via carbon emissions from train, ship, truck or air travel.

Packaging can be a catalyst for waste, and historically it tends to be discarded; however, packaging can be a catalyst for the circular economy. More companies are approaching packaging with an integrated and thoughtful understanding of its consumer benefits following the point of sale; packaging’s end-of-life opportunities also are becoming more evolved. Further contributing value to the integrated approach to packaging design from a user-experience perspective are critical new packaging and packaging material technologies that have been designed to reduce waste via lightweighting as well generating valuable end-of-life opportunities and solutions. Here are a few examples:

• polyethylene-free coatings – Consumers and brand owners are seeking sustainable packaging solutions with both a positive beginning and end of life. Plant and tree fibers offer an abundant, versatile renewable backbone for emerging sustainable materials. A couple of examples include microfibrillated cellulose and sustainable barrier coatings.
• specialized surfaces – As mentioned above, the package surface is an integral interaction point in the consumer product experience. Natural, water-based inks and surface-applied technologies can enhance that experience through improved performance, functionality and sensory appeal while also maintaining sustainability. These technologies include micropatterning and printed rectifying antennae.
• enabling convenient prepared foods – Novel packaging technologies and services enable food providers to meet the increasing consumer expectations for convenience, quality and satisfaction of prepared foods. Most innovative, we see examples in lightweight flexible insulation and digital reactive imaging.

Once the package reaches the disposal stage, we often see the greatest challenges in effectively reaching zero-waste. Even if the supply chain was managed effectively throughout, disposal is where regeneration needs to continue.

In recent years, material recovery facilities (MRFs) have become more advanced, using automated sorting technology to separate commodities/recyclables rather than manual lines of 30 people navigating trash on a conveyor belt.

That said, even with new technologies such as air flow, magnetic sorters and optical sorters, what will help more circular economy efforts reach zero-waste will be increased efficiencies and addressing current disconnects. One of the disconnects sits between packaging and recycling, and another sits between consumers and recycling. For example, one of the greatest challenges in MRF sorting is the multimaterial packaging. While each component may be recyclable on its own, the layers still need to be sorted to enable the recycling process.

Take the to-go coffee cup, for example. The packaging design team invested in creating a package that would optimize the product and customer experience while also properly sourcing materials. However, to-go cups are typically ultimately disposed with the lid, cup and sleeve intact, creating a nonrecyclable product. However, these components could easily be recycled if manually separated. Here also is a strained opportunity to educate consumers on popping the lid off the cup, pouring out any excess liquid and disposing accordingly.

Final thoughts

As an estimated 3 billion middle-class citizens enter the global marketplace by 2030, waste reduction and the initiative to increase efficiencies and end-of-life opportunities through the circular economy become more of an expectation, while achieving zero-waste sets the benchmark to prepare for the future.

Recognizing the need for a significant shift in a holistic SCM approach, as well as new, efficient and affordable MRF technologies to help curb packaging design initiatives and gaps in consumer/customer education, it is important to look ahead to the globalization of consumption of commodities. For some time, the global marketplace has recognized scrap exportation as a valuable end-of-life solution. With China remaining a leader in import agreements, India and other Asian countries have emerged as importers of more paper scrap material because of the inability to sustainably source from forests. On a global scale, it is important for companies to continue to recognize value in waste among emerging and diverse markets.

To manage and facilitate globally scaled projects, it remains critically important to ensure that companies are tapping into and partnering with the appropriate resources available. Having a third party manage the efficiencies and zero-waste steps in the supply chain not only helps to keep initiatives and communication streamlined across operational silos but also through turnover and across cultural barriers.

Anthony DiIenno is president of the Recycling and Waste Solutions division of Havi, which is headquartered in Downers Grove, Illinois.