Investment in the Circular Economy is Gaining Traction with Supply Chain Leaders, Says Gartner

Seventy percent of supply chain leaders are planning to invest in the circular economy in the next 18 months, according to a recent survey by Gartner, Inc. However, only 12% of those have linked their digital and circular economy strategies so far.

Gartner defines the circular economy as an economic model that separates the ability to achieve economic growth from the consumption of natural resources. Those business models encourage continuous reuse of materials to minimize waste and the demand for additional natural resource consumption. The circular economy starts with good design, with end of life and raw material reuse in mind.

“The circular economy creates an ecosystem of materials,” said Sarah Watt, senior director analyst with the Gartner Supply Chain practice. “What was previously viewed as waste now has value.”

She notes, however, that those ecosystems are complex and include many interdependencies and feedback loops.

“Digital technology has the potential to provide visibility and enable improved decision making when it comes to raw materials and services,” says Watt. “Already, 35% of companies believe that digital technology will be a key enabler for their circular economy strategies, but very few are leveraging the technology for this purpose yet.”

Reverse Logistics Association's executive director Tony Sciarrotta told SCMR in an interview that the “digital transformation” of the circular economy is an area of global dimensions.

“This is particularly evident in the growing issues with e-commerce and processing of returns to reduce losses,” he says.

Gartner's Future of Supply Chain Survey gathered data from 1,374 respondents responsible for supply chain and related functions across a broad range of industries including high-tech, healthcare, retail and logistics.

According to Watt, only a few organizations are currently using blockchain. Still, 38% of respondents are planning to explore the use of blockchain for the circular economy in the next five years.

“For example, the technology can be used to give materials a single digital identity and to enable trade and pay-per-use,” says Watt. “Although we are yet to see scaled use cases of blockchain for the circular economy.”

The top four areas of the supply chain where digital technology is being applied are: delivery (46%), customer engagement (45%), manufacturing and remanufacturing (43%) and planning (43%). Only 27% of respondents are currently using digital technologies to improve reverse logistics, but 39% plan to do so within the next two years.

“The difference in emphasis between delivery and reverse logistics is intriguing,” Watt says. “On the one hand, we observe organizations using technology such as analytics and alternative vehicles to optimize their routes and reduce emissions. You can argue that those actions should be considered a sustainable practice rather than one that enables the outcomes of the circular economy.”

On the other hand, reclaiming materials at the end of life requires reverse logistics for pickup and return to either the organization or a third party.

“Our results show that, in the next two years, reverse logistics will garner the most attention. This indicates that companies are looking at how to take back products for reuse, refurbishment or recycling – an important step on the way to the circular economy,” concludes Watt.

Gartner clients can find more information in “Employ Digital Technology to Enable a Circular Economy.”

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