What are the 10 steps to follow to execute an efficient circular economy approach?

Circular economy methodology for companies
June 21th, 2023
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For several years, a collective awareness has been growing in favour of the circular economy system. The goal: To dissociate economic growth from the consumption of resources. This has become one of the key concerns of circular procurement, with the idea of making "smart savings" and promoting sustainable development. To integrate this new economic model into their procurement policy, companies can follow 10 steps, inspired by an operational guide produced by circular economy experts[1]. This ranges from the launch of a dedicated strategy to the systematisation of this circular economy approach. 

1. Introduce a circular procurement strategy

To integrate a circular economy approach into the heart of their business model, companies must first build a dedicated strategy. This is done gradually, starting, for example, with the development of a circularity charter for the procurement function.

This document specifies the objectives, as well as the commitments that each organisation sets for itself, with regard to circular procurement. Buyers can then use this reference text to guide their decision-making and take action.

2. Communicate with all stakeholders

Because the circular economy is a complex issue, collaboration is key. The procurement function cannot initiate the circular transition alone as it involves all departments of the company. Buyers should therefore collaborate with their internal customers to rethink and challenge their needs and models.

It is also necessary to discuss with colleagues and even with the entire ecosystem more generally. Together, the idea is to understand the overall issues, share best practices and solutions.

3. Rethink your needs

From now on, buyers must examine each new economic need through the lens of circularity. This paradigm shift implies a real reflection on the technical and/or functional specifications. All possible options for more responsible economic production and consumption, using less energy while generating less waste, should be considered, in line with the principles of sustainable development.

These include:

  • Eco-designed products to reduce environmental impact;
  • Reused or recycled products to avoid wasting natural resources and delay the production of waste to limit the environmental impact;
  • Pay-per-use (PPU) to replace ownership;
  • Concentrated formulas to decrease water consumption;
  • Refillable products to reduce the use of new resources;
  • Etc.

4. Organise the end of life of products

To fully embrace the circular economy, it is also necessary to plan for the end of life of the purchased goods or services. It is up to buyers to think ahead about this, in order to initiate a virtuous circle and avoid turning to waste disposal too quickly.

Can the supplier agree to take back the product when it reaches the end of its life cycle? Can the product be repaired if it is broken? Is there an eco-organisation or any other organisation that can take care of its reuse or recycling?

5. Get to know the circular options on the market

Procurement departments need to be aware of the circular offers available on the market. To do this, they can:

  • Carry out benchmarking studies;
  • Join specialised networks that bring together professionals with an interest in the subject;
  • Conduct supplier sourcing;
  • Equip themselves with a collaborative platform that lists the various players on the market;
  • Etc.

Depending on the level of maturity of the market, they can then adapt their demand to the existing offer.

6. Promote innovation and collaboration in contracts

The circular economy approach must be reflected in contracts. As such, procurement departments can opt for several types of contracts:

  • The global performance contract imposes certain requirements on the construction, maintenance and operation of an asset;
  • The energy performance contract defines energy performance targets;
  • The product-service system (PSS) contract combines the acquisition of an asset with a service (rental, sharing, etc.);
  • A buy-back agreement commits the supplier to buy back the asset at the end of its life cycle.

7. Integrate the circular economy into specifications

As part of the drafting of specifications, the procurement departments formalise their circular economy approach. This concept should be noted in the document as early as possible and detailed later on.

It should be reflected in the subject matter of the agreement, the objectives, the technical and/or functional specifications, the conditions of implementation, etc. This can refer to characteristics relating to the production process or to any other stage in the life cycle of the goods or services in question.

8. Rely on circular criteria

When drawing up the specifications, environmental assessment criteria and their weighting must also be defined. These are the factors that determine the choice of partner at the end of the supplier sourcing process.

As part of a circular economy approach, procurement departments can prioritise circular criteria:

  • Eco-design of products;
  • Global integration of bio-based and recycled materials;
  • Repairability of products;
  • Reduced energy consumption during use;
  • Use of renewable energy;
  • Etc.

9. Manage commitments

In order to ensure that the circular commitments are met during the execution of the contract, the management phase is key. This involves making sure the team in charge of the contract is well informed of the desire to integrate the circular economy methodology into the deal and understands the issues at stake.

It is important to rely on factual data to lead the management. To do this, the team can set up monitoring and evaluation tools. The various stakeholders can then meet regularly to share the results, discuss and identify possible areas for improvement.

10. Deploy a systematic approach

Finally, it is essential to systematise the circular economy approach after an initial circular procurement project. This allows this paradigm shift to be fully integrated into the procurement policy in a sustainable way.

Once the first initiatives have been evaluated, the procurement departments will be able to learn from them with regard to the previously defined strategy. Buyers will then create a dashboard, readjust key performance indicators, measure the achievement of objectives, etc. They will then be ready to deepen their circular procurement approach and comply with current and future regulations.

Although presented in a linear way, these steps do not necessarily follow any particular order. It all depends on individual maturity levels on the issue. Ultimately, taking a step-by-step approach to the circular economy is key to its success. It is an exciting journey in which companies are continuously exploring, testing and learning.

[1] 10 steps to integrate the circular economy in your procurement, National Institute for Circular Economy and Observatory of Sustainable Procurement, Greater Paris, 2018