How circular economies are shifting the logistics of sustainable business.
Drive in most major cities and you'll see countless abandoned loveseats, armchairs and other old furniture kicked to the curb, maybe even marked "free to good home." New York entrepreneur Alpay Koralturk saw an opportunity and set up Furnishare to collect unwanted furniture and lease it to someone who needs it.
Nearly nine out of 10 of sustainability executives surveyed believe that the circular economy would be important to their business two years from now.
Similar to the way Airbnb operates, the rental revenue is shared with those who donate their stuff, and a costly burden becomes an opportunity to profit. What's more, a product gets a new lease on life rather than ending up as landfill. In the United States alone, 11 million tons of furniture is wasted every year, and only 2 percent is recovered for recycling, reports a case study about Furnishare by The Ellen MacArthur Foundation.
Furnishare and companies like it are on the leading edge of an emerging business model called the circular economy, in which resources are kept in use for as long as possible, to get as much value out of those resources as possible and then, at the end of each service life, recover, regenerate or repurpose products and materials. It's an alternative to the classic make-use-dispose approach – and our "throwaway" society.
To stay ahead of the curve on trends like this, UPS collaborated with GreenBiz Group to conduct research into the circular economy and identify keys to success, and why it is predicted to take off in the next few years. In this article, Ed Rogers, UPS senior global director of sustainability, shares his thoughts.
According to our findings in the 2016 UPS/GreenBiz Growth of the Circular Economy study, nearly nine out of 10 (86 percent) of sustainability executives surveyed said they believed that the circular economy would be important to their business two years from now. That figure has nearly doubled from two years ago when 47 percent felt that way.
Rogers says both people and companies are increasingly aware of social and environmental sustainability issues. "Macro global trends driving greater interest in sustainability and the circular economy model include population growth of middle class consumers, resource scarcity, climate change, government regulation and zero-waste initiatives."
Nearly 50 percent of sustainability execs surveyed said their companies were doing something to implement circular economy principles, ranging from reclamation to refurbishing and reselling. "Household names" leading the shift include Interface and Patagonia; both are outspoken about sustainability and have used it to gain a competitive edge.
Rogers points to Nespresso as an example where UPS plays a role. "We add a convenience factor as part of their take-back program, where consumers can drop off prepaid recycling bags [for coffee capsules] at one of the 88,000 UPS drop-off locations or give them to any of our drivers."
Nespresso capsules are collected at consolidation facilities, where coffee grounds and aluminum capsules are separated, Rogers says. "The aluminum is melted down and used in new products, and the spent coffee grounds are composted into high-quality soil amendments that go to landscapers, garden centers, municipalities and homeowners."
How supply chain and logistics fit in
"Roughly 97 percent of business leaders polled in our study said logistics was important to a successful transition to a circular economy model," Rogers says. "You need a robust logistics system in place for moving and processing product along each step of its journey."
He recommends that supply chain professionals envision what they would like to happen to products after initial purchase and use, how things can be recovered or how the life of a product could be extended.
As in the Nepresso example, logistics companies can play a critical role in providing a convenient take-back model to boost consumer participation, Rogers says. "Both consumer and customer costs can be reduced through the use of backhauling, as well as load and route optimization," he says.
Rogers predicts technology will have a role as well. "The Internet of Things (IoT) is becoming pervasive as sensors are used across entire supply chains. Imagine items that can signal their readiness to be retrieved, making reverse logistics more dynamic."
The single greatest barrier to adopting circular economy principles, cited by 38 percent of survey respondents, is lack of a compelling business case. "There must be an attractive financial business case that fully accounts for the cost and complexity of logistics, recovery, repurposing and remanufacturing," Rogers says.
One example is in the technology sector, where there's a robust market for refurbished gear. The surveyed execs pointed to packaging, building materials, apparel and automotive as other industries likely to lead the shift toward a circular economy. "These industries often have take-back or closed-loop systems already in place," Rogers says.
A big role for smaller companies
Although a circular economy might seem like a big-company, corporate-citizen image builder, many smaller companies can help lead the charge, Rogers says, because they are nimble and can move more quickly.
"Smaller companies can use resources like the Ellen MacArthur Foundation to explore how they can modify their product design and material sourcing to capitalize on circular-economy opportunities," he says. "There are many opportunities for creative, entrepreneurial startups, like making new fashion from donated clothes, or refurbishing electronic devices to be reused when replaced by upgrades."
Maybe even renting out used furniture.
Download your own copy of "The Growth of the Circular Economy: A 2016 UPS/GreenBiz Research Study" or check out this infographic.
To learn more about how UPS applies circular strategy within its own operations, such as using renewable natural gas to power some of its trucks, visit here.