Procurement Opportunities In The Circular Economy

November 21, 2017 | News,

Procurement Opportunities In The Circular Economy

31 January 2017

Our Senior Consultant Andy Marsh describes how procurement can support the opportunities arising from the circular economy.

The procurement of goods and services is a key element in the whole circular economy concept (see previous blogs on the circular economy here). But most procurement processes and practices are based on the purchase of goods and services through a linear approach. End of life or re-use/recycling opportunities are rarely considered at the procurement stage unless the purchased item has an obvious residual value.

Moreover, when you look at many circular economy diagrams, the procurement function is often not shown, even though it will have a significant influence over the whole circular process (though we do include it in our version of the circular economy diagram, shown below). For example, decisions on whether to buy or lease, the decision to procure uniforms through a leasing contract, or to procure products with a recycled content, will have an influence on how the product is designed, made and used, and what happens at the end of its life.

circular economy diagram

The Anthesis circular economy diagram

What Does Circular Procurement Mean?

Circular procurement means considering the whole life of any product you buy – that it should be produced, used and processed in accordance with the principles of the circular economy. Understanding the products you purchase, the functions they provide and how they are disposed of, is key to working out how circular procurement can be embedded into organisations’ procurement processes.

The key requirement is considering the whole life cost of the item or service being purchased, not just the initial cost. This means that procurement must be involved at an early stage when the requirement is being defined and that circular economy principles should be used to assess options. Anthesis has worked with a number of organisations to help embed circular thinking and we typically encounter these barriers in the procurement area:

  • A focus on lowest purchase price rather than total cost of ownership
  • Limited awareness of the financial and environmental benefits of circular procurement
  • Lack of skills in, and understanding of, how to include circular thinking in the procurement process and properly review the products purchased and used
  • Insufficient time and resources to look at the raw materials used, design factors, measures to extend product life, and securing reuse and recycling options
  • Unwillingness to change procurement processes or suppliers

Other Requirements To Integrate Circular Procurement

It does take time and effort to embed circular procurement into an organisation, but these barriers and challenges can be overcome. It is a classic change management issue and the key is enabling the organisation to see the benefits, and focusing on changing behaviors and processes by providing adequate training. Once buyers, contract managers, suppliers and other stakeholders can understand the reasons behind circular thinking, they ultimately think more circularly themselves. And there’s no better time to begin embracing circular procurement either, as it’s a key way to mitigate procurement-related risks to your business, such as raw material scarcity.

Partnerships between buyers and suppliers are also fundamental in circular procurement in order to drive innovations with the aim of transforming from a linear purchasing model to a circular one. Buyers also have various tools and methods available to help with the process, including the use of output or performance based specifications. These specifications can be used in the tender process to encourage innovative solutions for the product’s function, or to completely change the procurement model, for example by changing to a leasing model. Circular procurement can also be measured during the contract phase through the use of SMART KPIs agreed by all involved in a partnership, and monitored and evaluated with the ultimate aim of helping each partner achieve each other’s goals.

Over the next year or two we will see some key development and drivers in the circular procurement area including the release, or widespread implementation, of:

  • BS 8001: Framework for implementing circular economy principles in organisations
  • ISO 20400: International standard for sustainable procurement
  • ISO 14001:2015 the new environmental management standard

These developments and further work in circular procurement will help organisations to see the value and determine how they can make the change to a circular process and way of thinking. This will require a long term strategy and buy-in from senior management in order to achieve the economic, social and environmental benefits that can be achieved through circular procurement.

So, a message to buyers wherever you may be – don’t be afraid to embrace the circular way of thinking for the products and services that you purchase and consider how things are sourced, created, used and disposed of.

We are working with diverse organisations to help them to implement circularity into their core business. This work broadly pans across public sector policy and trailblazer projects, and private sector innovation projects.

To find out more about how Anthesis can help you embrace circular procurement in your operations, email Andy.Marsh@anthesisgroup.com.

Download our Circular Economy PDF guide for embracing CE in your own business.