Circularity Development Program, Blog 5: Circular Sourcing and Procurement 

The fifth sprint of the Circularity Development Program focused on the circularity transformation by sourcing circular inputs and considering circularity in procurement practices. Specifically, it explored the landscape view on future material flows, benchmarked leading circular sourcing practices, and looked into circular procurement development in construction projects.

Circular sourcing in companies involves the shift toward more circular material flows—renewable, reused, or reusable materials that are resource-efficient and durable with the potential for multiple life cycles. Circular sourcing helps companies find answers to supply chain disruption and minimize the effects of climate change to create resilient supply chains. 

One objective of the sprint was to gain a deeper understanding of the future landscape of circular materials, including insights from companies like Konecranes and Ficher Lightning, which are actively pursuing more sustainable and circular material practices. Another goal was to understand if and how sourcing for circular materials differs from the company’s current sourcing process and define criteria and goals for circular sourcing.

Systemic challenges and solutions for circular sourcing

The transition into circular sourcing presents challenges that hinder its seamless integration into supply chains, with cost and availability of circular materials as primary determining factors. 

Circular materials, often derived from reused or recycled materials or side streams, can be more expensive than virgin ones because they need different, often immature processing technologies. Also, their availability is uncertain and unpredictable, with changeable quantities, qualities, and locations.

Moreover, uncertainty in the quality of materials makes it challenging for companies to ensure that the sourced materials meet the required standards, in durability, material mix, etc. Additionally, the absence of a CE marking poses a significant challenge, as companies engaged in circular sourcing may not receive adequate assurances that the circular stock would meet high (mandatory) safety, health, and environmental protection requirements by the EU.

A few crucial factors were identified to overcome the systemic challenges and fully exploit circular input in sourcing. 

  • Circular sourcing requires that products are designed to be easily disassembled, reused, remanufactured, or recycled and that they are designed to be modular. Without materials or products specifically designed for circularity, the effectiveness of circular sourcing initiatives may be compromised, limiting the range of available options. 

  • A close collaboration between sourcing and internal design teams is crucial for incorporating safe and available circular inputs. 

  • A collaborative approach for a circular supply chain is also needed across the value chain and creates new types of relationships: customers now become suppliers of used products.

  • Data on material specifications, availability, quantities and locations, and platforms to match the demand and supply of circular inputs play a pivotal role in the future in creating circular material flows.

Circular Procurement -  a Key Enabler of Circularity for Companies

Circular procurement is a strategic approach to the purchasing process that aligns with the principles of the circular economy. Unlike traditional procurement, which often focuses solely on the cost and functionality of products and services, circular procurement takes a broader view by considering the entire life cycle of goods, materials, or services. The aim is to minimize resource consumption, waste generation, and environmental impact throughout the product life cycle. Establishing a circular procurement strategy is a crucial enabler in an organization's circular transformation, and it requires companies to have new core competencies.

As a key function, procurement has the power to operationalize and scale circular initiatives. In other words, procurement teams can leverage their oversight to support circularity by incorporating circular criteria. These criteria guide the selection of products and materials in decision-making regarding what is being purchased. Such circularity criteria can be, for instance:

  • Prioritizing products and/or components designed for durability, disassembly, and repairability.

  • Favoring products that can be easily repaired, upgraded, and/or refurbished, extending their lifespan and reducing the frequency of replacements.

  • Prioritizing products with life-cycle analysis and valuing the ones with the lowest life-cycle impacts

  • Prioritizing products and materials with high recyclability and a significant percentage of recycled content

  • Assessing suppliers' commitment to responsible end-of-life management, including take-back programs, recycling initiatives, and proper disposal methods.


Future Actions and Adaptability

Driving circular procurement and sustainable sourcing practices requires a multitude of actions. A key measure is strengthening collaborative partnerships. This involves establishing deep connections with suppliers, customers, and other stakeholders to comprehend evolving expectations, share knowledge and best practices, and collectively innovate solutions. 

Additionally, companies need to define and implement a circular procurement strategy including key performance indicators (KPIs) to effectively measure the circularity performance of their procurement practices.

Go to the Circularity Development Program page

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