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Can We Apply Circular Economy in the Logistics Industry?

A circular economy is about minimising waste by using it as a resource. It’s about using cycles to recover value and materials from used products instead of letting them end up in landfills. This is the future of zero waste and we need to get there as soon as possible if we still want to survive and thrive as a species.

In the logistics industry, we can apply that through what we call ‘reverse logistics’ – collecting products and materials at the end of their use or lifecycle. This process closes the loop, in contrast with the usual logistics where it’s a one-way street and nothing goes back to the source.

Can we apply circular economy in the logistics industry

This is a potentially huge opportunity for logistics companies. If we can apply reverse logistics and close the loop, it’s yet another way to add value and service the clients, while minimising waste and recovering what’s useful from it.

In several businesses and industries this is fast becoming the standard. For example, there’s a company that leases a floor covering service instead of selling carpets. It’s now all about utility (the service provided) rather than ownership. When clients subscribe to the floor covering service, they get a carpet they can use. It’s like the business leases the carpet and they’re in charge of its maintenance and repair. The result is that the carpets last longer and the worn out parts are instead repaired or replaced. This is in contrast with what we’re used to where worn out carpets just get disposed of and we buy a new one. There’s minimal waste in the process and clients get better value.

It’s similar to how chemical leasing work. Instead of selling chemicals, companies sell its function and performance. For example, the shift is from selling 10kg of a cleaning or degreasing chemical to selling 100 square metres of an area being cleaned. We sell the chemical’s function and performance instead of its quantity. The result is less waste because every kilogram or litre of chemical was used and there are no left overs. What is unused will go back to the chemical company and/or they can recover the used chemicals and convert it again to something useful. The principle of chemical leasing is already applied in many chemical products such as cleaning chemicals, powder coatings, detergents, lubricants, adhesives and catalysts (source: Chemical Leasing, supported by United Nations Industrial Development Organisation).

The overall idea here is to use waste as a resource. This results in minimal waste exiting the loop and getting the most value out of the product or material. It’s a circular process just like how nature works. For example, water is continuously used and recycled through evaporation, condensation and precipitation. It’s also how natural ecosystems and food webs work where nutrients continuously get used and recycled among the environment’s organic and inorganic components.

In the logistics industry, we can help enable and facilitate such circular processes. This goes beyond dealing with warranty and recall issues where we only receive the defective product. In circular economy as applied to logistics, the task is to acquire and recover the used goods and materials. In other words, we copy what nature does best in recovering ‘nutrients’ from what already exists.

Right now it seems there’s not a lot of news or updates about how the logistics industry can benefit from circular economy. After all, entire new business models must be created first and usually the logistics industry follows. It’s often an enabler and facilitator rather than an initiator. However, most industries could crash without the valuable support from the logistics sector.

How the logistics industry will benefit from circular economy

For businesses engaged in logistics, transport and warehousing, the circular economy is a huge opportunity, especially for first movers and early adopters. This first-mover advantage can help us get key customers and markets early on and then help shield us from competitors as we build a strong relationship with clients. Competitors might not be able to catch up, so the market can be cornered sooner rather than later.

Aside from surviving the competition and thriving in the industry, the circular economy can also help improve efficiency and synergy. The logistics sector is what connects several different suppliers and industries. This knowledge about their activities and synergy can help us better position ourselves about the trends and opportunities of the future. We can connect suppliers to producers and vice versa. We can also facilitate the use of waste as a resource by connecting those that produce waste and that those who need that waste in their processes.

In the logistics industry itself, our role is to enable circular processes to take place among different industries. We are engaged in production and waste can only be seen in transport and storage. As a result, there’s no waste to use as a resource. But we can help others achieve that through our logistics and transport capacities. As an enabler and facilitator of economic activities, we’re in a position to help companies and societies transition to a more circular economy.