Recycling and circular economy – why buying second-hand can be a sensible strategy for procurement.
Cost pressure and scarcity of raw materials in some industries such as glass, metal processing and paper have already ensured many years ago that procurement and development have worked hand in hand to use marketable secondary raw materials in their products or to develop new products. Other industries have adopted this successful model and are still trying to establish it in the long term. Official pressure from the single deposit authorities have massively increased the recycling rate in PET, new machines have boosted the possibilities of concrete and asphalt recycling in the construction sector. And even if only a small part of the collected old furniture is reused in new wooden products (such as chipboard), these at least have the advantage of supposedly clean thermal energy generation. Even collections for old clothes, where it is commonly believed that these are brought to poor countries for resale, are now predominantly a raw material for insulation.
The eco movement has to do with procurement
Sustainability should be incorporated into many areas and its impact on the future. „Why should I be studying for a future that soon may be no more, when no one is doing anything to save that future?“ is Greta Thunberg’s guiding principle, to which many national and regional movements have adhered. Now everyone may have their own opinion about the movement, but it is undisputed that this enormous pressure will have consequences for the economy and thus also for procurement. These may be cost factors that are perhaps on the strategy list for many procurement departments today, such as the CO² Footprint or the CO² balance of the company and the products/materials used, which will influence the costs of the products via emissions trading or possible CO² tax (currently in discussion in Germany). But there is also an opportunity for procurement to break new ground.
Sustainability used for advertising – communication is crucial
The industries, which have opened up a new procurement market through recycling, will be able to use this in future for marketing purposes as well. Juice in a glass bottle not only promises more tasteful quality, but also the packaging itself as a glass bottle is sustainable, as 80% of it is transformed into a new bottle again. On the other hand, there are many supposedly cheaper packaging alternatives, from a PET bottle to a beverage carton, which also have a certain recycling content, but which is not perceived to the same extent by the customer. However, raw materials that can be reused with little effort (e.g. no melting of the glass but cleaning and refilling) are held in the highest esteem. This has existed in industry for a long time. A typical example is the Euro pallet compared to a disposable pallet as well as refillable packaging, which can be filled again and again.
Influence on companies – how procurement has to adapt
Whether the large customer movement towards a positive perception of a sustainable product with the willingness to pay a higher price takes place more strongly than a migration and social bashing for products that are not sustainable is difficult to predict today. In any case, this means that procurement will have to assess the sustainability of its procurement portfolio differently in the future and should reconsider its decision criteria. The transparency of its supply chain (up to the supplier of your supplier’s supplier) demanded by politics and society must also be created. Not only future decisions also decisions already made on the procurement strategy must be reassessed by aspects of sustainability. If in many industries a shift from global sourcing to climate-neutral local sourcing is only possible at extreme costs, the market for secondary raw materials may be a more cost-effective alternative.
Even when purchasing capital goods, the third market can be a sensible alternative under certain circumstances. Why to buy new office equipment and not just buy used equipment or even rent it? Can it make sense to buy a used conveyor belt instead of a new one?
Necessity of Supply Chain Thinking
To develop a sustainable product that is effective in the media, it is necessary to take a view that leaves the classic area of responsibility of procurement. The sustainable packaging of the product must also be discussed with product development and procurement should have researched sustainable packaging solutions in advance. Alternative materials and alternative suppliers that enable the path to sustainability should be proactively analyzed and tested.
The effects of a possible cycle, i.e. how my product and packaging will be reused later, should be considered. Even if they are only expendable parts of my product, they should be consciously considered by the procurement department. Otherwise unplanned ancillary supply costs will arise. To give one example: What are the logistical requirements for transport and storage if we offer free reprocessing of the old product when buying a new product to our customer?
Despite all the euphoria, the cultural aspects must not be neglected. If my secondary raw material is based on industrial disposal, this increases the chance of a high-quality raw material. However, if I am dependent on the public collection of my secondary raw material, I have to accept a reduction in quality. To cite a prominent example, the Germans are particularly proud of this: In large cities, up to 50 percent of „misthrows“ end up in the yellow bin, for example other waste instead of packaging. Sorting plants cannot do anything with this material. The faulty waste is sorted out and then usually incinerated.
To open up new procurement markets in the sense of secondary raw materials, an „out of the box“ approach is sufficient – if it is clear that the raw material required is not to be disposed, the questions of how it can be collected and in what form the material can and must be processed, need to be clarified. Taking these factors into account, what are pure marginal procurement costs? Can I realize and optimize collection and processing through cooperation with professional processors and specialists?
Have you ever heard of Social Plastic? Does your company already use secondary raw materials? Have you established sustainable packaging solutions? Do you know the supplier of your supplier? Do you manage your supply chain according to sustainable aspects? ADCONIA will be happy to support you on your way to sustainability! Eco is sexy!
Rainer den Ouden
Partner, ADCONIA GmbH
Consultant, ADCONIA GmbH