Logistics of the Circular Economy

June 19, 2017
Barker, Tamara
Chief Sustainability Officer, UPS

The concept of circular economy—a regenerative business model where resources are in use as long as possible, in contrast to the current linear “take-use-dispose” model—is becoming a bigger part of the sustainability conversation. UPS wanted to know how much of this conversation was turning to action in business and was keen to learn how others saw logistics working with the circular economy. To answer this, UPS collaborated with GreenBiz to ask over 5,200 sustainability experts and business leaders where they stood with the circular economy, and where they predicted the future would lead.

Respondents reported that they saw the circular economy gaining traction: 85% believe that incorporating circular economy principles of materials reuse, waste reduction, and alternative material sourcing will be important in the next two years. Fifty-eight percent reported that they were exploring and implementing circular economy principles in their business now. The industries expected to adapt the easiest to circular economy were

  • Technology
  • Cardboard packaging
  • Building materials
  • Apparel
  • Automotive

While respondents reported exploring and adopting principles, they also shared data on the challenges they’ve faced in pursuit of the circular economy. Chief among those challenges—cited by 38% of respondents—is a strong business case. This business case is complex as adopting circular economy principles has to fully account for cost and complexity of logistics, disassembly, repurposing, remanufacturing, and more transitions for a company from the linear model. Compounding the business case, profit margins for all of the supply chain players in a circular economy must be equal to or better than what is possible with the linear model of “brand new” products being made to replace broken or obsolete items.

Shortly behind business case, the logistics costs to reclaim used goods (36%) were cited as a top barrier to circular economy practices. This answered important questions for UPS: Where is our opportunity to help, and what are companies’ pain points that we can provide our global logistics expertise to? Logistics in the circular economy were a key concern overall, with 97% of respondents reporting logistics are important to the transition from the linear economy model. The solution for the “first mile” of reclaiming products and materials for future use was a high concern, which can be complicated for logistics providers and companies to adjust supply chains and modify value chains for returns.

Overcoming complicated logistics challenges are the specialty of UPS’ global logistics experts, and we have already begun using our wide-ranging expertise to aid circular economy efforts. Two case studies of how the power of partnerships for the circular economy are:

  • TerraCycle: TerraCycle reuses, upcycles, and recycles waste instead of incinerating or sending to landfills. This moves waste from a linear system to a circular one, allowing it to keep cycling in the economy. UPS has been working with TerraCycle since they launched, providing an easy, seamless returns process. People just log on to TerraCycle’s website, print a return shipping label, and drop off at any UPS location—UPS Store, Access Point location, etc.—and UPS handles the rest.
  • Nespresso: Nespresso utilizes single-use coffee pods made from aluminum, an infinitely recyclable material. Nespresso found that its recycling options were complicated by inconsistent infrastructure around the United States. To expand the opportunities and increase convenience for customers, Nespresso partnered with UPS. Now, consumers are given prepaid return bags and can drop them off at any of the 88,000 UPS drop-off locations in 48 states or give them to any UPS driver. Through this partnership, Nespresso is able to reclaim more pods. The aluminum can then be used in new products, and coffee grounds are composted into high-quality soil amendments that go to landscapers, garden centers, municipalities, and homeowners.

UPS believes strongly in the power of partnerships, and the ability we have to solve problems together for business and the environment. By working together, we can find ways that are better for customers, the environment, and business all around.

To learn more about “The Growth of the Circular Economy” study and see the full report, visit ups.com/sustainability.