Skip to 0 minutes and 8 secondsSo welcome, dear learners, to the round out of week six. My name is Steven Day, and I'm your mentor for this week. I'm here with Dr. Donato Masi, who is Assistant Professor of Supply Chain at the University of Warwick. How are you, Donato? I'm fine, Steven. So we would like to take this time to talk about some themes that emerged from the discussions, and just to give a little bit of background knowledge on the circular economy and how it relates to supply chains. So the first question we would like to talk about is the situation, imagine you would be a Supply Chain Analyst or a Supply Chain Manager in a firm.
Skip to 0 minutes and 49 secondsAnd you would try to convince senior management to dedicate resources to implementing circular economy activities. Donato, how would you go about this? Well, there are several reasons that you should convince managers to implement activities and practises in line with the principles of the circular economy. The first key reason is regulation. Regulation is becoming increasingly stringent, in terms of waste, pollution, and consumption of resources. And this is for all the activities run by a supply chain manager. So the businesses able to run regulation into a source of competitive advantage will be the market leaders of the future. The second reason is that consumers behaviours are changing.
Skip to 1 minute and 34 secondsThe ownership-based business models are being replaced by alternative business models, based on leasing and sharing. The circular economy offers effective solutions, in line with these innovative business models. Consumers are also paying increasing attention to the environmental performance of firms. Being circular could imply being the leader in the green segments of the market. The third reason why a Supply Chain Manager should implement practises in line with the principles of the circular economy is the possibility of increasing the resiliency of supply chains; the volatility of prices of several raw materials; and the availability of some critical raw materials, such as the rare earth metals are urging for the control over material flows.
Skip to 2 minutes and 27 secondsA circular supply chain gives the company control of the material flows, and it gives the possibility of mitigating the risks related to the supply of critical raw materials. I think that these are the three key reasons that should convince a Supply Chain Manager. Yeah, that sounds very sound. So we talked about the perspective of the firm now, but the circular economy tries to improve the environmental perspective, give some kind of financial benefit to a company, and also expands the scope towards the society. In the discussions this week, we talked about how waste is exported overseas to be recycled, and that does not always happen according to environmental regulations, and we also talked a little bit about modern slavery.
Skip to 3 minutes and 23 secondsSo, the circular economy tries to achieve some kind of triple-win situation for environment, economics, and society. Is that not a little bit ambitious? Well, very good question, and I agree with you that the circular economy is very ambitious, because it thinks that having an impact on the three aspects of the triple bottom line. I think that it's not naive. And several studies show that practises aligned with the principles of the circular economy pay off, in some cases also in the short term. Consider, for instance, all the initiatives related to material efficiency and resource efficiency.
Skip to 4 minutes and 4 secondsThey can easily generate economic benefit, also in the short term, because if you cut the consumption of resources, you are cutting, at the same time, costs. Other practises aligned with the principles of the circular economy could imply benefits in the more long term. Consider, for instance, the case of a manufacturing plant. So there is a big investment that will play in the more long term. However, also in this case, the possibility of having a synergy between the economic and the environmental dimension has been proved. In my opinion, a key problem of the past is that the attempt of implementing a circular solution was done in a context that was essentially linear.
Skip to 4 minutes and 57 secondsSo they tried to implement a solution inspired by the idea of closing resource flows, in a context that was, essentially, the context of a linear economy. And so these solutions were not able to, let's say, exploit their full potential. In the new context of the circular economy, we will design an entire economic framework, restorative and regenerative by intention and design. And so the full potential of these solutions will be exploited. So I don't think it's naive. I think that circular economy is truly, truly our first opportunity of improving the social, the economic, and the environmental performance of firms. Mm-hmm, that does sound quite ambitious.
Skip to 5 minutes and 49 secondsIf you say in a circular economic framework you were saying that if you add on circular economy activities onto something in a linear economy, that wouldn't work very well. But if you talk about your circular economy framework, then how can we get to such a framework? Well, in a circular economy you introduce changes at different levels. There is, as you know from your PhD, there is the macro level of policymakers, the meso level of supply chains, and the micro level of companies and technologies. Well, introducing the right legislation, introducing, creating the right infrastructures, educating the people, educating consumers will create the conditions that make some of the tools that we've mentioned much more effective and much more profitable.
Skip to 6 minutes and 51 secondsConsider, for instance, one example could be the way in which we tax labour and materials. So if we make it convenient to use labour, rather than virgin materials, we'll have a shift to models that tend to optimise efficiency under the use of materials. Also, you want to make these models effective, you should promote this kind of change among consumers promoting the idea that, for instance, a refurbished product can be purchased without compromising quality, at the same time, educating customers in recycling, educating consumers in behaving accordingly to these principles.
Skip to 7 minutes and 41 secondsAll right, OK, then another question that's more related to supply chain management, one of the things we talked about in the discussions was the issue whether you should focus on product design, as in making a product that is highly efficient and so on. So how does supply chain management relate to that? Aren't the real gains-- the real environmental gains in the product design, and not in the logistics, and transport, and storage, and so on of supply chain management? Well, very good question. And actually, product design is one of the key activities that should be, let's say, adopted and properly tailored in the context of a circular economy.
Skip to 8 minutes and 34 secondsProduct design, in my opinion, plays a key role, but product design somehow only creates a potential for a good environmental and economic performance. It's supply chains that actually translate the potential of product design into an actual and real performance, since it's the supply chain at the end, to determine the way in which a product is produced, or they can create the condition for recycling a product that is potentially recyclable, because in theory, you could have products that are designed for recycling. But you do not have a supply chain supporting the recycling processes, and so it's an unexploited potential.
Skip to 9 minutes and 17 secondsAnd it's actually something that happened, because in the past we had examples of companies performing very well, in terms of product design, and not finding an equivalent supply chain able to make the most out of these product design processes. So I think that, again, here we have one of the principles of the circular economy. That is this idea of system thinking and holistic approach. So product design, and supply chain management, and supply chain design should be kind of aligned. So we should design together and in a aligned way, the supply chain and the product, in order to comply with the principles of the circular economy. Yeah, very good answer.
Skip to 10 minutes and 6 secondsThat brings us to our next question on the scale of the flows that we are talking about. So in the discussions, we talked about how electronic appliances are recycled and whether they should be exported to other countries, or whether they should be recycled more locally or regionally. So there are these different flows, circular flows, that are local, regional, or global. Which ones are better for the environment, would you say? Well, I think that it's widely acknowledged that the regional flow should be preferred. So you should not look in a narrow way at the transport cost, but I think that we should look broadly at the total landed cost of our products, both from an environmental and from an economic perspective.
Skip to 11 minutes and 4 secondsIf we look at products from this broader perspective of the total landed cost, we will realise that, for instance, the importance of economies of scales at the plant level is mitigated. And so we realise how many advantages we have, staying closer to customers, and operating closer to customers. So I would be in favour of regional flows. Staying local, being closer to customers, has so many advantages from the environmental and economic perspective, that the optic of a circular economy should be the first attempt. OK, so you don't want one big recycling plant somewhere in India or West Africa.
Skip to 11 minutes and 57 secondsWell, in some cases they are the unique sustainable solution in a specific market, or for a specific product, or for other specific conditions. But if we have a choice between regional and local, there is a kind of hierarchy among these different cycles, so the regional ones are the ones that should be preferred. It's like reusing or recycling. Which one is better? In some cases, you have no choice, but reuse should be preferred. Yeah, that makes sense, yeah. So coming to our last question that would be, in the UK we have the Ellen MacArthur Foundation, who works a lot on the circular economy. In academia, many of the published work is coming from China. Why, would you say, is that?
Skip to 12 minutes and 52 secondsWell, in China a key factor in promoting the adoption of the circular economy was regulation, for sure. So we had the government introducing a set of regulations that were, let's say, driving businesses in adopting solutions inspired by the principles of the circular economy. So let's say the studies were, OK, some of them driven by the interests of researchers, for sure. But regulation played a key role. In the UK well, the concept is very popular, as you said, because of some NGOs like the Ellen MacArthur Foundation, because of regulation that also, in Europe, is trying to promote the shift to circular economy.
Skip to 13 minutes and 51 secondsBut I would say that in the UK, we have a strong, let's say, tradition for research in some universities. And this strong tradition, when the circular economy became an important topic, led to several research group making research on this. I see. So to get a little bit more into the Chinese research, there's a common feature among that research that starts out with the catastrophic effects that Chinese industrialisation has had on the country's resources and environment, particularly air and water in the more populated east. It drove the circular economy regulation. Do you believe that the circular economy regulation can fully combat this environmental degradation that is happening in China? Is that a potential solution?
Skip to 15 minutes and 0 secondsWell for sure, it's an important step in the right direction, because it's about creating an entire economic framework, restorative and regenerative by intention and design. All the principles proven as effective in the protection of the environment are applied in the context of a circular economy. So it's for sure a step in the right direction. Then it's not the unique one, but it's for sure something in which it's convenient to invest. OK, yeah, then I thank you very much for this interview. Thank you for your interesting questions.
Week 6 summary
Please return here at the end of Week 6 for the round-up video for this final week of the course.
In this week we have seen how economic and environmental reasons urge for the reduction of waste and a better use of natural resources. There are already several solutions for these issues, such as recycling, refurbishing, and reusing product returns. These solutions are effective but only solve limited parts of the problem. A circular Economy aims at combining these solutions and at designing an entire economic framework that is restorative and regenerative by intention and design.
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