The circular economy is one of the major considerations in today’s world. Many companies, regardless of their sector, would like to integrate it into their strategy in order to address and punctuate an ecological transition. This model, which sets out to rationalise the use of natural resources (raw materials, energy, water) and reduce the production of waste, is a tremendous lever for innovation, value creation, and competitiveness for many businesses. Decision makers in procurement have a major role to play in this dynamic and view it as a priority. To integrate the circular economy into their activities, procurement departments can follow three major steps which focus, each in turn on the definition of the strategy, adjustment of sourcing, and contract management.
Define your circular procurement strategy
The starting point of this approach is to apply the circular economy implementation to a company’s procurement strategy. This might take the form of a circular economy charter, for example. This should include objectives and commitments, as well as procedures for monitoring their implementation. This allows everyone involved to have a general defining framework to refer to.
Procurement departments are then able to identify opportunities and establish their priorities. When initiating the implementation of this strategy, buyers tend to focus their action plan on indirect purchases. These categories of purchases do indeed have a significant impact on the environment, but circular economy solutions are available on the market at no extra cost. These might include recycled paper, reused furniture or refurbished computer equipment, for instance.
In this respect, procurement departments must work hand in hand with internal customers to apply circular economy implementation to (re)defining their needs while taking into account all stages of product life cycles. Together, they must then ask themselves the right questions:
- Is there a way to choose options not based on ownership (leasing, sharing, etc.)?
- Is there a way to include criteria relating to the circular economy (used or refurbished products, repairable with spare parts availability, rechargeable, the outcome of an eco-design approach, etc.)?
- What about product end of life?
3 types of circular procurement models
In its guide entitled, "Public Procurement for a Circular Economy," the European Commission distinguishes several practical approaches to circular economy implementation for different markets. They are classified into three major levels.
This level covers contractual methods. For example, this can take the form of an equipment lease (rather than a sale) agreement or a take-back agreement by the supplier to manage the end of life of the product (reuse, refurbishment, recycling, etc.).
This concerns how suppliers integrate the circular economy into their own systems and processes. This includes product design, component repairability, product reuse, etc.
In this case, it concerns the technical specifications of the product (recyclable or recycled materials, etc.).
Whether within the public or private sector, it is important to define your circular strategy through these three levels in order to adopt an in-depth approach.
Integrate the circular economy into sourcing
Following this preparatory phase, which sets in motion the transition to the circular economy, procurement departments should consult fellow leaders in the market. It is actually important to engage in dialogue with suppliers upstream in the relevant sectors to prepare them for competition, to adapt the criteria to their capacities, identify new opportunities, or even anticipate risk factors.
At the same time, companies should formalise their circular procurement approach into written procedures and be as concise as possible with their potential suppliers. This is the best way for them to deliver a response which meets their expectations. This is why circular economy implementation must be clear from how each section is drafted: the title, the objectives, the scope of the contract and the clauses which detail how the project is run. All through this process, interaction with vying candidates should continue to clarify any points which need explaining, but also to guide future suppliers on improving what they have to offer based on the circular economy.
Lastly, procurement departments should evaluate each supplier and what they have to offer. Service providers who meet the technical specifications can then be subject to circular economy selection criteria which should be weighted according to previously established objectives.
Monitor circular economy commitments
Once the contract has been put in place, it is essential to ensure that commitments to a circular economy made by the various stakeholders are managed properly. As a first step, the team responsible for managing this contract needs to be informed of the context and should fully grasp the challenges behind these commitments. This is how it can ensure proper performance of the contract and continued motivation of the various people involved.
Procurement departments could for instance set up a monitoring and evaluation system. At the same time, the various stakeholders have every interest in planning regular discussion meetings during which the predefined objectives and key performance indicators can be reviewed to identify any potential adjustments required.
This last phase of continuous performance management requires open and transparent collaboration with the service provider. By building a relationship of trust, both parties can avoid difficulties and resolve any problems encountered during the contract in order to guarantee the creation of mutual value.
Above all, integrating the circular economy into sustainable procurement policies demands an agile and collaborative approach. Once several circular economy procurement projects have been carried out successfully, companies can then improve their circular economy strategy by deploying a truly systematic approach. Based on a comprehensive review and proven methodology, the procurement function can implement a sustainable circular economy procurement policy which meets today’s social and environmental demands