Presentation slides in Euroma Sustainability Forum 2017
Abstract: The Circular Economy concept drives innovative practices and business models targeting sustainable economic growth while increasing resource efficiency. In supply chain management literature, sustainability has been framed frequently with economic performance as main goal rather than sustainability. Our research aims at bringing together supply chain research and industrial cases inspired on circular economy. Our selected industrial cases are companies performing new ways of creating value from previously wasted materials. Our results indicate that there are significant challenges in the structure and processes of today’s supply chains. Yet, there are ways to overcome these, including close collaboration within the supply chain.
Supply chain implications and challenges for new business models within the Circular Economy
VTT TECHNICAL RESEARCH CENTRE OF FINLAND LTD
Supply chain implications and
challenges for new business models
within the Circular Economy
Outi Kettunen and Anna Aminoff
VTT Technical Research Center of Finland
University of Cambridge
Euroma Sustainability Forum 2017
Our research aims at bringing together supply
chain research and industrial cases inspired on
Our research question is: What are the supply
chain impacts of new circular business models
focusing on creating value from waste?
As we move forward, we need to spend more time studying the
presently small number of supply chains that are trying new
things that do not fit expected patterns.
In addition, we have to be open to studying small organizations, start-ups,
various types of nonprofit and social purpose organizations and businesses
because these under-studied organizations could be sources of inspiration
for how to do things differently.
Research in these spaces could help identify what
the business models of truly sustainable supply
chains might look like.
A novel way to look at waste is to recognize waste
management as a recovery of resources. This approach
turns waste management to resource value
The Circular Economy, SCM and business models
The CE can be defined as a regenerative system in which resource input and
waste, emission, and energy leakage are minimised by slowing, closing, and
narrowing material and energy loops. This can be achieved through long-lasting
design, maintenance, repair, reuse, remanufacturing, refurbishing, and recycling.
CE implications to supply chains and the research needs:
Research related to reverse loops is growing, but is still in a much more immature
state than forward SCM.
Research on sustainable supply chains mainly studies existing unsustainable supply
chains to determine what they are doing to become less unsustainable.
SSC research is also mostly conducted from the perspective of a focal firm and
overlooks other members of the chain.
CE implications to BM’s: New actors are emerging, e.g. “scavengers” and
“decomposers”. Scavengers collect the waste resources within companies or in
other points of the chain and redistribute them into the system to reuse or recycle.
Decomposers transform or recycle waste resources into new materials.
Our conceptual Framework
Supply chain management
Supply chain partner selection
Supply chain partner
The framework is built on supply chain management frameworks (Soni and
Kodali, 2013; Carter et al., 2015) and sustainable supply chain categories and
practices (Beske and Seuring, 2014).
Case research design
Field Construction and waste management. Cross industry: battery waste separation
technologies, waste processing, production
of fertilizers for cultivation.
Business model Construction waste treatment and
production of paving stones out of
secondary raw material.
Used alkaline battery treatment, processing
certain parts of the waste into a liquid
fertilizer and selling the fertilizer. Later on
also selling the processing technology.
The current phase in
Implementation. Increasing volumes can
create SCM challenges for e.g. transport
Development and set up
Head of production, Head of R&D, Head
of Sales, Chairman of board, Logistics
Chairman of the board
No of interviews 2 2
Interviews length 1-2 hours 1-2 hours
SCM challenges in business models focusing in creating
value out of waste. Implementing new CE business models and turning them into
profitable businesses poses risks for the company and sets challenges to the SCM.
Partners and stakeholders are required to adapt to the new models to create win-win situations.
Logistics management: New CE business models are without a reference system. The
stakeholders have to be ready to learn new ways of operating, and new partners and actors
might be needed.
There are various spots in the supply chain that do not support the CE business models, e.g.
storage possibilities of waste and secondary raw material.
Risk management: investing into logistics, in addition to investing into product development,
technology and manufacturing facilities, without certainty of consumer acceptance and volumes,
contains high risks for an SME or a start-up.
High volumes and low value of transported material, variation in the input material flow as well as
seasonal variation both in supply and demand.
Regulatory issues for temporary storing of waste.
Tracking and tracing for origin and condition of the waste material, storage and transportation
conditions of waste material, processed secondary raw material and the final products.
Distribution logistics is challenging due to e.g. multi channels and seasonal variation.
Overcoming SCM challenges of business models
creating value out of waste
Strategic and tactical level:
Environmental issues are clearly visible in strategy.
Owning a little as possible.
Pursuit to make the supply chains lean, as it is possible when building them from scratch.
Both companies utilize local suppliers and partners when possible. Waste is processed
close to the origin and close to the production of the final product.
Aiming for long lasting partnerships and mutual trust, and acquiring also key knowledge
through partnerships. Close cooperation with key partners is important to ensure pull
instead of a push mode. In future the case companies see collaboration even with
competitors necessary in order to improve efficiency. Competitors could share e.g.
warehousing space and truck capacity.
Digitalisation could be better utilized in SCM, e.g. ordering the transportation; telling the
transport companies when there is free capacity to receive waste without queuing; tracking
materials along the chain e.g. for waste origin and conditions.
Logistics challenges are addressed also by keeping several roles in the supply chain for
the focal company itself, at least in the set up and implementation phases of the CE
This paper contributes to SSC literature by exploring industrial cases built on CE
concepts by the lenses of SCM.
We apply our framework to industrial cases built on novel circular business
models focusing on creating value from waste. Both cases represent innovative
small organizations with strong sustainability strategy, and are new actors in
supply chains, “scavengers” and “decomposers”.
Tight integration, regular information sharing, local partners, collaboration,
coordination and trust among supply chain partners are required.
There are significant challenges in the structure and processes of today’s supply
chains. The stakeholders need to be willing to learn new ways of operating. CE
business models set new requirements for logistics infrastructure and regulation.
There is a need to use digitalization in the supply chain.