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The Emerging Circular Economy and Necessity of Reverse Logistics

The Emerging Circular Economy and Necessity of Reverse Logistics

by Chris Cloutier, Director of Sustainability, CoreCentric Solutions

Reverse Logistics Magazine, Edition 93

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Developing a circular economy is a growing movement aimed at reducing the environmental impact of products that are manufactured, sold and used. The reverse logistics industry is not only essential to the evolution of a circular economy, it has important lessons to offer this burgeoning movement.

Developing a circular economy is a growing movement aimed at reducing the environmental impact of products that are manufactured, sold and used. The reverse logistics industry is not only essential to the evolution of a circular economy, it has important lessons to offer this burgeoning movement.

As sustainability takes root in organizations around the world, they’re looking to develop more refined strategies to help them find new solutions for issues related to material consumption and disposition. Increasingly, the circular economy is emerging as the preferred strategy for many organizations – a fact that is being emphasized through a variety of medium including the February 2018 RLA meeting in Las Vegas and a recent edition of Reverse Logistics magazine, which included several articles on reverse logistics and the circular economy.

This article takes a somewhat different approach, looking more closely at some of the key principles of a circular economy and how reverse logistics is not only essential to its success, but how it can help accelerate and optimize the adoption and implementation of a circular economy.

The case for a circular economy
Currently, most commerce is predicated on a “take, make, dispose” model that extracts and uses natural resources in the manufacture of a product that is used and then commonly disposed of, thus the term “throwaway economy.”

Image 11: Illustration of Take, Make, Dispose

The circular economy looks to disrupt this model through the renewal and reuse of products. As explained by The Ellen McArthur Foundation, a circular economy “aims to redefine products and services to design waste out, while minimizing negative impacts.”2 At its core, a circular economy is based on three basic principles3:

• Design out waste and pollution
• Keep products and materials in use
• Regenerate natural systems

As with most disruptive activity, there is a significant financial opportunity – but also an equally compelling opportunity for the preservation of natural resources – in the adoption of a circular economy. In fact, the Ellen McArthur Foundation and the World Economic Forum reported in 2014 that the circular economy can generate $1T globally by 20254.

Not surprisingly, a circular system is more complex and requires significant innovation. The Ellen McArthur Foundation illustrates a circular economy as:

Image 2: Illustration of a Circular Economy

While a circular economy model is more dynamic and complex than the “take, make, dispose” model, it’s important to note that many of the essential elements of a circular economy already exist in one form or another. Moving forward, the challenge will be to not only optimize existing systems but also build new ones to recover and re-purpose more products and material.
One example is Extended Producer Responsibility (EPR), where product manufacturers are required by law to provide take-back processes at the end of a products’ life cycle. While this practice is more common in Europe, it does exist in the United States, particularly within the electronics industry. The circular economy approach takes the next step and encourages manufacturers to think about a “cradle to cradle” system where products or parts are refurbished whenever possible.

A recent white paper, “Circular Consumer Electronics: An Initial Exploration,” by Google and the Ellen McArthur Foundation imagines and explores a more robust circular system for consumer electronics. The report found that such a system should have four key elements:

• Electronic devices are loved for longer, by one user or by many
• Devices are a gateway to the cloud
• Customers get the service that’s right for them
• Products and components are cascaded6

The necessity of reverse systems in a circular economy
Reverse systems are an essential part of existing and new circular economy systems. The Ellen McArthur Foundation agrees, citing reverse cycles as a key building block in a circular economy. Specifically, they highlight the need for systems that capture and segment products at end-of-life with the intention of keeping salvageable materials and products in the circular system, allowing a higher level of material recovery and use.7

Reverse logistics done well directly addresses two of the three key principles laid out by the Ellen McArthur Foundation – design out waste and keep products and materials in use. In the illustration above, it is clear that reverse systems are a necessary component of any circular economy systems and are already helping achieve the first element identified in the “Circular Consumer Electronics” white paper – electronic devices are loved for longer, by one user or many.

As a sector, the reverse logistics industry has a unique opportunity to help inform and support a circular economy. To help meet the principle of designing out waste, reverse logistics provides feedback on product quality – including common failure modes – which can be critical in helping manufacturers lower product return rates by improving quality and performance in the development stage. Product designers start out looking to create a product that produces a certain outcome or meets certain specifications. An engineer analyzing product performance from failed products has an entirely different perspective – this forensics examination of the product can reveal systemic/design issues that regularly lead to failures and thus produce waste. By empowering the critical product functionality feedback loop, reverse logistics can help improve product performance, reduce waste, decrease returns and improve customer satisfaction. All leading to a healthier bottom line and stronger brand loyalty.

Additionally, reverse logistics help keep products and materials in use by working to maximize the number of products recovered, restored and re-used. Furthermore, reverse logistics companies have advanced material recovery systems for products that are not able to be recovered and re-sold for their original use. By providing efficient, effective “catch basins” for unwanted, damaged or returned products, the reverse logistics industry works to ensure that existing products and their component parts achieve the longest, most economically valuable life possible.
A closer examination of the circular economy illustration reveals that “collection” is the lynch-pin for multiple steps in the system, specifically Share; Maintain/Prolong, Reuse/Redistribute, Refurbish/Remanufacture and Recycle. While different reverse logistics firms have different capacities and capabilities, a look across the industry reveals that every reverse logistics firm contributes to one or more of these activities. In fact, this illustration neatly captures what the reverse logistics industry is already doing while highlighting the implicit challenge of continuing to grow these systems.

Finally, in looking at the four requirements for a circular consumer electronics system, reverse logistics will be necessary for products to be loved “by more than one user” and to ensure that “products and components are cascaded.”

While individuals can and do sell used consumer electronics, its not reasonable to expect this to be the primary way the goal is achieved. Rather, as demonstrated by multiple consumer electronics OEMs, such as Acer, Dell and HP, developing reverse systems that capture product and provide it a second (or third) life as a refurbished or remanufactured product is not only possible, but profitable.

However, to assure that products and components are cascaded – that is, they go from high-end new or lower-end used to recovered and recycled – reverse systems are critical to ensure proper collection and redistribution at every level to maximize the life of the product.

Lessons from reverse logistics
Reverse logistics firms have decades of experience in collecting, handling, triaging and bringing products back into the commerce stream. As an industry, the reverse logistics sector can help accelerate the adoption and optimization of a circular economy system by sharing the lessons learned – both successes and challenges – associated with:

• Collecting and aggregating products
• Analyzing and triaging returned products to determine if they should be cascaded for another use or broken down into its component parts
• Finding and maximizing value for cascaded products
• Maximizing recovery and value of component parts
• Marketing and messaging the value of refurbished and remanufactured products.

The Reverse Logistics Association (RLA) is a vital platform for this exchange. By bringing experienced reverse logistics professionals together with circular economy theorists and practitioners, the RLA can help assure critical topics are addressed and explored – making that information readily available to a larger audience.

Reverse logistics has a fundamental and essential role in the development of a circular economy. As an industry, there is an opportunity to engage and work with those developing circular economy practices to help inform and educate them on the important lessons we have learned – and continue to learn.

Chris Cloutier is the Director of Sustainability for CoreCentric Solutions. Mr. Cloutier has over 20 years’ experience in green and sustainability issues, including in-depth subject-matter expertise in waste and resource utilization and green energy and energy efficiency. Prior to joining CoreCentric Mr. Cloutier has worked for and consulted for, Best Buy, Sears Holding, Grainger, the US EPA, the US DOE, the DesignLights Consortium and Black & Decker, the States of California, Minnesota, Oregon, Washington and Wisconsin.
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