How Circular Economy Fosters Resilient Global Supply Chains

"Everything what we are throwing away, cycles back to us: Through the air we breath, the water we drink, and the plants we eat. Nature already works in cycles. It is time to work WITH her - Inside our planetary boundaries!“ – Stefanie Horn (Director Technology Partnership & ESG Europe I Circular Economy Focus)

Circular Economy in a nutshell: Sustainability and Economic Growth at the same time

1.1. Our current mode of operandi: The “Take-Make-Waste” Economy

We are still living in a linear “take-make-waste” economy – meaning most of the stuff which we are buying – from clothing, cellphones, laptops to packaging-materials - are made from finite resources which are traveling upstream through complex value chains around the globe. Downstream – when the product transfers to the consumers, companies often “lose control”: At the end of their life cycle, products are most often thrown away and are not returning to the retailers and producers. Meaning those things are losing their value and waste is affecting the environment and biodiversity in a dramatic way.

Waste is a lost economic opportunity. For example, look at the electronic industry: According to the World Economy Forum, around 53,6 million metric tons of e-waste are produced every year worldwide – it is the fastest growing waste stream at 3 to 5 percent annual growth. The WEF estimates that 83% of e-waste is not being collected, meaning dramatic effects on the environment and people. And a huge, missed opportunity for the circular economy.

1.2. A Solution: The Circular Economy closes the loop & unlocks new revenue streams

The Circular Economy is about systemic change and new revenue streams: De-coupling economic growth from the consumption of finite resources – keeping them inside cycles at their highest value as long as possible. This saves energy, water, raw-materials and therefore costs in a significant way. Product design is crucial: According to the Ellen MacArthur Foundation, 80% of the environmental impact of a product is defined during the design phase. Therefore, a Circular Economy requires circular design principles, take-back systems, and “As a Service” business models – e.g. renting or leasing a car, cellphone, washing machine and even clothing instead of owning them.

A key principle is to regenerate nature – e.g. through stopping resource-depletion and biodegradable packaging and garments. A positive side-effect for the economy: Acting circular significantly reduces dependencies on scarce and expensive raw materials, supply chain disruptions, international logistics and emissions – the production becomes more local.

McKinsey estimates in a study that the Circular Economy could unlock a revenue opportunity of more than $1 trillion in Europe alone by 20250 – helping organizations to gain a competitive edge. Another McKinsey analysis estimates that consumer goods companies in Europe could access a value pool worth up to €500 billion by 2030 by shifting to circular business models. They claim that companies who commit themselves to environmental, social and governmental (ESG) metrics will become the leaders of the future. ESG metrics are essential facets of the Circular Economy: For instance, adhering to Human Rights and considering social matters such as fair payment, safety, proper healthcare and good work conditions inside global supply chains.

Legislation as a driver for innovation & new business models

Our European Public Affairs team witnesses a growing number of legislation related to Circular Economy – in the EU but also in other regions in the world such as Japan and the US. For instance:

• EU: ESPR - Ecodesign for Sustainable Product Regulation
• EU: Right to Repair Directive – fostering repair, offer replacement
• EU: Extended Product Responsibilities
• EU: CSRD - Corporate Sustainability Reporting Directive
• Germany: Supply Chain Act
• US: California Transparency in Supply Chain Act
• Japan: Environmental Conscious Product Design Guideline

We see legislation as a driver for innovation and new business opportunities since companies need to design new business models, products, and processes to be compliant AND competitive. It is also a great chance to unlock new revenue streams e.g. by saving energy and resources as well as leveraging new ones e.g. through by-product synergies – turning waste into valuable resources and products.

3. Insights from Fujitsu's Global Strategic Research Department

3.1. Main constrains the circularity market faces

According to our Global Strategic Research Department, when it comes to implementing a Circular Economy the market is mainly struggling with:

a) lack of standardized data – especially when it comes to efficient methods of data-sharing
b) lack of data integration – data gaps hinder decision making and comms
c) fragmented supply chains - auditability, product provenance and material tracking is needed
d) insufficient incentives for customers and users to portray sustainable behavior

3.2. DPP – Digital Product Passport as an answer and business driver

Our global strategic research team sees the DPP - Digital Product Passport - addressing most of the mentioned challenges and unlocks growth opportunities and new business models:

• Track-and-trace solutions and material passports for cross-industry transparency
• Data collection: resource consumption, emissions and waste generation
• Transforming supply chains for clean production schemes
• SaaS to create digital, transparent, and optimized resource recovery ecosystem to support self-driving supply chains, circular design, and manufacturing
• SaaS for excess inventory management to turn waste into profit
• Smart sensors to monitor waste levels for efficient collection
• Real-time, accurate inventory planning to reduce excess

A Trusted Advisor: How Fujitsu fosters Circular Economy & our broad Expertise

According to the 2024 Ecosystem Integration Global Market Report from the US based company Cleo, 97% of companies surveyed invested in supply chain technology in 2023 – 81% stated that their investment led to business improvement in less than 24 month.

Fujitsu is a world-class technology provider and holds a variety of Circular Economy and supply chain expertise across different business units: From our Track & Trust team focusing on blockchain-based solutions, delivery experts, several consulting units, Strategic Alliance Units, to our Public Affairs department. Our experts are collaborating inside a vibrant Global Sustainability Community which supports them to generate synergies and knowledge-sharing inside the company.

Fujitsu is engaged in several Circular Economy consortia and lighthouse projects such as Catena-X in the automotive industry and CIRPASS 2 – a EU project focusing on DPP for the electronics, textiles, tires and construction sectors. One of our reference-project is tex.tracer: Fujitsu built a supply chain transparency platform for the fashion industry which visualizes upstream and downstream supply-chain data. Brands, retailers and consumers can track their garment’s supply chain journey via a QR code. The vision of tex.tracer is to build a better fashion ecosystem which balances people, planet, & profit. The ultimate goal: Make the life cycle of clothing as long as possible – changing the textile industry for the better.

Fujitsu supports our customers and partners mainly through the following:
Consulting – finding a starting point, defining a strategy, unlocking new business models
Data services – strategy, collection, platforms, analytics & AI, predictive maintenance
Track & Trust – building blockchain & DPP solutions
Strategic Alliance – co-development and co-selling partnerships

Key take aways

1. 1. Make circularity a priority – invest in technology: to survive disruptions such as natural disasters, geopolitical tensions & pandemics. Foster resource security & biodiversity. Technology & data are key.
2. 2. Legislation – the foundation: Align global solutions with regional legislations such as ESPR – regulations permeate borders & the world meets inside global value chains.
3. 3. Circular Business Models & Design – the opportunity: Harvest new revenue streams & foster sustainability at the same time – innovation and circularity by design are key.
4. 4. Ecosystems & Positioning: Engage inside cross-industry eco-systems such as CIRPASS2 or Catena-X to be on the pulse of customer`s pains & needs.

At the end of the day, it is about building a world where we and the next generations can live safely as well as eat, breath and be healthy – collaborating with nature and regenerating her. The global economy has a huge part to play and the power to change things for the better.

Sources:

Fujitsu's Global Strategic Research Department - for more info reach out to Paul Sammons (Director Strategic Research) paul.sammons@fujitsu.com or globalstrategicresearch@fujitsu.com

https://www.weforum.org/stories/2023/03/the-enormous-opportunity-of-e-waste-recycling/
https://www.ellenmacarthurfoundation.org/news/an-introduction-to-circular-design
https://www.cleo.com/news-cleo-2024-ecosystem-integration-global-market-report
https://resources.cleo.com/integration-survey-2024
https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-circularity