KEY STEPS TO A CIRCULAR SUPPLY CHAIN 5 CHAIN
Get Ahead of the Circularity Curve By Mauro Erriquez, Senior Partner; Peter Spiller, Partner; and Johan Bengtsson, Partner, McKinsey & Company
Disruption in global trade and supply chains presents a critical opportunity for organizations to embed more circular business practices. The case for circularity is compelling: reuse, recycle, and reintroduce materials to reduce costs and boost performance. McKinsey research finds that $2.6 trillion worth of material in fast-moving consumer goods—80% of material value—is discarded. Another study estimates that a circular economy could unlock over $1 trillion in revenue in Europe alone by 2050. Companies that embrace environmental, social, and governance (ESG) metrics will also be better positioned to navigate regulatory changes, such as Europe’s Carbon Border Adjustment Mechanism (CBAM) and Emissions Trading Schemes (ETS 1 and 2). Sustainability rules may significantly raise input costs—another incentive to rethink resource use. One core challenge: Current systems are built for linear use of resources. Circularity, by contrast, aligns with strategic priorities such as resilience, efficiency, and carbon reduction. With geopolitical tensions and shifting trade dynamics, circularity offers real, practical benefits. Global businesses need new skills—and a renewed sense of purpose. Companies often overlook how purpose and engagement drive transformation. A North American heavy-equipment manufacturer, for example, saved $100 million and reduced CO 2 by 40,000 metric tons through carbon-focused workshops, which also gave employees a meaningful cause to support. Labor markets
By minimizing environmental impact and conserving resources eco-friendly packaging contributes to a sustainable supply chain.
5 EMPOWER AND ALIGN YOUR TEAMS
The biggest barrier to circularity is internal alignment. “If your
merchandising team is working toward markdowns, operations is focused on speed, and ESG is off to the side, it’s hard to execute,” Petit says. “Donations can feel messy without the right tools.” Circularity should be a cross- functional goal. “The best programs come from collaboration among operations, legal, finance, brand, marketing, and ESG,” Petit says. Holm agrees that understanding internal operations and fully committing to circularity are essential. “Materials can feel like the most challenging part of the supply chain,” he says. “People get lost or annoyed. Thinking of the supply chain not as a confusing mess of shiny objects but as a value-adding business model changes everything.” “Circularity is not just a green buzzword,” Holm adds. “In many ways, it’s a cost-efficient way to make the most of the materials you’ve already sourced. That’s the shift in thinking we’re working toward.” In the end, circularity doesn’t have to be complicated, especially when considered alongside its advantages. “If you have the right partners and a little buy-in, you can make a real impact, and track it,” Petit says. “What used to take months of manual work, we can now automate in minutes. That’s how we move from good intentions to real outcomes.” n
are tight, and Gen Z workers consistently cite “meaningful work” as a key factor in employment decisions. A focus on sustainability can help attract and retain talent. There’s no single entry point to circularity. Some organizations start
with a carbon lens, others with cost—but with the right teams and innovation, the two quickly align. One global automotive manufacturer used carbon targets to drive material innovation and redesign, ultimately doubling savings from earlier efforts. Circularity should be part of broader business transformation. Consider product returns: disassembly, reuse, and resale require redesign, clear guidance, and operational overhaul. It’s a mini-industrial revolution. Procurement, logistics, IT, and supply chain professionals are uniquely positioned to lead. They bring the technical and operational expertise needed for transformation. Circularity isn’t greenwashing—it’s essential for long-term success, competitiveness, and resilience.
30 Inbound Logistics • June 2025
Powered by FlippingBook