Week 6 summary

DONATO MASI: Good morning, everybody. My name is Donato Masi. And I am an assistant professor of supply chain management in the University of Warwick. My research is focused on sustainability. And I’ve been focusing both on the environmental and on the social side of sustainability. And recently I’ve been studying and making research on the circular economy, and in particular on the role of supply chains in the circular economy. So today I will answer some questions from my PhD student Mucahit. Hello, Mucahit.

MUCAHIT OZDEN: Hi, Donato, how are you today?

DONATO MASI: I’m fine. Do you want to introduce yourself and your research?

MUCAHIT OZDEN: Hello there, learners. Welcome to the last week of Supply Chain in Practice course. I’m Mucahit Ozden, and doing PhD in WMG. And my research interest is sustainability. And Donato Masi is my supervisor during the PhD.

DONATO MASI: So, Mucahit, do you have some questions related to the circular economy?

MUCAHIT OZDEN: Yes. Let’s start with this week’s key learning points, our, like, alternative strategies to manage product returns and the idea of circular economy, and the last section of the module this week, challenges learners to think about the future of supply chain. So I would like to start with a general question. From your perspective, how do you define circular economy?

DONATO MASI: OK, well good question, because there are several definitions of circular economy, both in the scientific literature and among practitioners. A very well-known definition is the definition of the Ellen MacArthur Foundation that defines the circular economy as an economic framework restorative and regenerative by intention and design. In simple words, the circular economy is about finding new ways of generating value while constantly creating flows with the resources that we already extracted, so without employing and using new resources.

MUCAHIT OZDEN: Mm-hm, good definition. And would you like to explain to us, why are we talking about circular economy 2.0 in these days?

DONATO MASI: Oh yes, interesting question. Well we talk about the circular economy 2.0 because initially, the focus of the circular economy was purely environmental. So the focus was trying to minimise waste, trying to minimise the consumption of resources, trying to minimise the amount of emissions. And progressively it was evident how the social side of sustainability had been neglected. So the circular economy 2.0 is the idea of incorporating also the social side of sustainability in this new economic framework, guaranteeing fairer working and living conditions for all the people involved in the economic framework.

MUCAHIT OZDEN: Um-hm. So as you said, circular economy was neglecting social side of sustainability. And now with the the circular economy 2.0, it also covers the social side of sustainability. And as you mentioned in the definition, there is a change in the economic framework, from linear to circular economy. And why organisations should change from linear to circular economy. What are the main benefits of this economic transformation?

DONATO MASI: Well, there are, let’s say, two types of benefits related to the circular economy. So the first class of benefits are the ones that regard directly the company and are related to the increase the resilience that a business model based on the principles of the circular economy implies. Indeed today, one of the key risks, one of the key risks that the company faces is the risk related to the access to raw materials needed to manufacture the goods. In fact, you know that today more and more companies are competing for the same raw materials. And the volatility of prices is increasingly high.

So getting access to these raw materials could be a challenge and having a business model based on the control of closed loop flows of materials is a, let’s say, an effective strategy to minimise this risk and so increase the resilience of the business with respect to the access to raw materials. Other benefits related to the, let’s say for the business, are for instance, the possibility of branding the company as a green company– and this is more and more important for the consumers– but also, the possibility of intercepting some of the trends of consumers that are progressively shifting from willing to purchase a goods to willing to purchase a service.

Because most of the business models based on the circular economy are based on the idea of getting access to a service. And so businesses that innovate their business model following this idea of access to a service can, let’s say, both comply with the principles of the circular economy and follow one of the trends of the consumers. But apart from these, let’s say, more business-related benefits of a circular economy, there are several benefits that are related to the protection of the environment, so benefits not only for the business, but for the whole society. Because, as we know, a circular economy implies a reduction of emissions, reduction of waste, reduction of the consumption of resources, and so on.

So I would say that there are these two big types of benefits, the business-related ones and the environmental-related ones. So it’s definitely worth trying to shift to a circular economy.

MUCAHIT OZDEN: In light of what you said, it’s obvious that transforming from linear to a circular economy is beneficial in terms of becoming more sustainable, for example, as you mentioned, reducing virgin material usage, and reducing the landfill and that kind of thing. But it seems that this transformation will happen in long term not in short term. So what are the main barriers that prevent us to make this shift quicker?

DONATO MASI: Oh, well, there are several barriers, so several barriers to the transition to a circular economy. And many of them depend on the fact that currently we are in a linear economy. And so most of the regulation, most of the infrastructure, most of the supply chains are designed on a linear economy. So in order to create a transition, in order to complete this transition to a circular economy, we should modify and innovate all of the regulations, all of the infrastructure, all the supply chains, and so on. Let’s think for this, just to make an example. If we think to regulation, it’s currently, it’s the taxes are much higher for labour than for materials.

So for companies in general, it’s much more convenient to use more virgin materials than to use more labour, because the labour implies very high taxes. So this is just an example. So if we want to make a transition, we should understand what are the elements of our economic framework that are set on a linear model and try to modify them in the direction of a circular economy model. Then apart from these, let’s say, structural barriers, there are some important barriers related to the behaviour of consumers. So for instance, consumers should become familiar with the idea of, for instance, purchasing refurbished goods, because the qualities, in most of the cases, is equivalent or higher than the quality of virgin products.

Consumers should not give too much importance to the packaging of the products that they purchase. They should pay attention to the way in which they recycle waste and so on. So these are currently the key barriers, in my opinion, that limit the transition to a circular economy.

MUCAHIT OZDEN: In your explanation, you mentioned a couple of stakeholders in your explanation, for example, regulations, role of governments, and some other organisations. Also I would like to look specifically from the perspective of people. Sustainability is a challenge for everyone. So what we as people can do to support circular economy? What is our role to overcome this challenge and shape the future of supply chain?

DONATO MASI: OK, well, we already mentioned some of the things that, let’s say, people and consumers could do in practice. So for instance, pick products in shops using less packaging; choose things such as refillable containers, for instance toothpaste, or shaving creams, and so on; in some cases, buy products that are guaranteed for life so that are supposed to last longer.

Other possible positive behaviours are prefer items that you can bring back to the shop after a first use. And this type of opportunities are more and more available in the market.

Let’s say also, having a cultural change in which it can be fashionable to use goods instead of consuming them, so getting away from this idea of ownership and the status related to ownership. And then all the things apart from, let’s say, our behaviour as consumers, all the things that we can do in terms of regeneration of waste, so for instance, separate the compostable waste from other types of waste or try to recycle when possible, and try to spread this idea as much as possible in the society among friends, among people that we know. Because this is a mechanism that is very effective in spreading new ideas.

MUCAHIT OZDEN: As I understand, our role is so significant in this challenge. So thank you very much for your time and informative inputs, Donato.

DONATO MASI: Thank you for this question, Mucahit.

MUCAHIT OZDEN: There with the summary of the Week 6 we have finished the Supply Chain in Practice course. I hope that you enjoyed and found it useful. Thanks a lot for your contribution as well. Thank you.

DONATO MASI: Goodbye.

MUCAHIT OZDEN: Goodbye.