The Essential Role of Logistics in a Growing Circular Economy
Guest Blog by Tamara Barker, UPS
In today’s world, the basic model for the production of goods is linear: natural resources are extracted and turned into products that are used for a limited time. While some of these products are recycled, most eventually end up in the world’s landfills. This model is becoming increasingly unsustainable and expensive for businesses. Commodity prices rose more than 150 percent between 2002 and 2010 and an additional three billion middle-class consumers are expected to enter the global market by 2030. This unprecedented demand for goods and services coupled with increasing resource scarcity and price volatility is causing companies to move from a traditional “take-make-dispose” model to a more circular strategy. Beyond the cost, there is increasing awareness of the impact of the linear model on the well-being of the planet, and a growing sense of urgency as we see the ultimate ramifications on society and the environment.
I believe this shift will only be possible through collaboration across multiple industries and business segments. Companies will need to commit to examine the inner workings of their manufacturing process and supply chains to identify areas for improvement. Increasingly, more companies are looking for help in implementing viable, sustainable solutions across their operations. According to a recent study by GreenBiz and UPS, nearly nine out of ten sustainability executives believe the circular economy will be important to their business two years from now, yet they believe one of the largest barriers is the logistical costs associated with implementing real change. As a global provider of transportation and logistics services, UPS is acutely aware of how intelligent logistics plays a critical role in the circular economy. This is why it is important to invest in creating lasting solutions that will help revolutionize the global economy and allow businesses to move toward building more sustainable, circular supply chains.
Closing the Loop with Innovative Logistic Solutions
In recent years, I’ve seen companies like Dell, Patagonia and TerraCycle focus their sustainability efforts on implementing seamless take-back programs that make use of turnkey packaging, pickup services and pre-paid return labels. With approximately 97 percent of business leaders listing logistics as important to transitioning to a circular economy, partnering with intelligent logistic providers will be crucial for companies to implement cost-effective circular strategies. UPS teamed up with Nespresso to help the company ensure their single-serve coffee capsules are properly recycled. Nespresso offers pre-paid recycling bags for consumers to mail back used capsules by dropping them off at one of the 88,000 UPS drop-off locations across the U.S., or by giving them to any UPS driver. The aluminum from the capsules is then melted down and used in new products, and coffee grounds are composted into high-quality soil amendments that go to landscapers, garden centers, municipalities and homeowners. This is one example of many where partnerships are critical to closing the loop.
While partnerships are key, businesses also need to examine their own supply chain and operations to identify areas where they can make improvement. UPS has a long-standing commitment to investing in innovation and technological advances to make our fleet designs more sustainable. By using renewable natural gas (RNG), UPS is using biomethane (that would otherwise be released into the atmosphere as a greenhouse gas) which has been refined into a fuel to power our fleets. Today, UPS operates one of the largest private alternative fuel and advanced technology fleets in the U.S., with more than 7,200 vehicles. We achieved our goal of driving 1 billion miles in our alternative vehicles one year earlier than planned, and we continue to test different fuels and technologies in our “Rolling Laboratory” as we seek to meet the growing demand for deliveries.
The Future of the Circular Economy
I recently had the opportunity to participate on a panel at GreenBiz VERGE 2016 with Tom Szaky, CEO of TerraCycle and Kevin Zweier, VP of Transportation Practice at Chainalytics, to discuss trends shaping the future of the circular economy. In addition to the critical role of logistics, major takeaways from the collaborative discussions included:
Tailoring the Solution. Companies trying to implement circular strategies face a “first mile” challenge when it comes to reusing products and resources for future use. Each product in a company’s supply chain must be analyzed based on its unique characteristics from raw material to end-of-life. Circular planning must then be used to determine whether reclaimed products and resources should be transported back to a central hub facility or dealt with on a local level.
Education is Key. To help build mainstream acceptance and support for a realized circular economy, governments and businesses alike should prioritize educating consumers about circular principles, including which products can be reused, recycled or upgraded. By helping customers make easy decisions when they are done using a product, we can ensure valuable materials don’t end up in landfills.
We All Have a Role to Play. While companies are investing in innovative partnerships and creating more sustainable solutions, there is also a need for customers and consumers to take advantage of these offerings so that these investments can be supported by a strong business case.
One of the most common misconceptions I have seen people have about the circular economy is that it will be impossible to achieve. I believe that when companies invest and collaborate to implement “smarter” supply chains and give others an opportunity to participate, the notion of a circular economy can certainly be realized.