Supplier Chain to promote Circularity

Published on Friday, 22 April 2022

It is not possible to be Circular alone. By assuming this premise, the supply chain acquires a central role in the circularity strategy and encompasses all stages of the production chain.

Actions with large-scale impacts are also essential. It is necessary to include several actors, such as the private sector, government, academia, and society, to develop and review new production and consumption methods. In the industrial sector, one of the significant challenges to implementing such a process is the development of new business models that add value to the product/service and facilitate the transformation of inputs for new life cycles.

According to data from the National Confederation of Industries (CNI), 76% of Brazilian companies are already developing some circular economy initiative. Among the leading practices listed by respondents are process optimization (56.5%), use of circular inputs (37.1%), and resource recovery (24.1%).

Practices such as water reuse, material recycling, and reverse logistics are the country's main implementations. The same survey reveals that more than 88% of entrepreneurs rate the circular economy as necessary for the industry. The circular economy model, combined with technology, makes it possible to control finite resources and balance the renewables of companies, providing integrated, restorative, and regenerative industrial systems.

CNI built a proposal for a "Brazilian Industry's Strategic Roadmap for Circular Economy transition," with the participation of industrial federations, sectoral associations, and companies. The objective was to guide the shift to a circular economy model in Brazil. The document lists five lines of action that need to be worked on to accelerate the transition to a circular economy in Brazil:

  Public policies: Adequate tax treatment and regulation; sustainable public procurement; and employment generation.

  Education: Extensive educational campaigns; and Vocational training.

  Research, development, and innovation (R&D&I): Innovation in the design of products, services, and processes; Development of circularity metrics; and Partnership between the private sector and academia.

  Financing: Guidance for accessing resources and designing projects; and Expansion of financing lines for the circular economy.

  Market   (business environment):   Material in quantity and quality for recycling; Cooperation in a competitive environment; and Identity of the Brazilian industry as sustainable (circular).


Supply Chain

Such scenarios demonstrate that sustainable procurement goes far beyond the inputs chosen for its production. It is fundamental and challenging to ensure that the entire production chain respects, for example, human rights, the environment, ethics, and transparency. In other words, ESG practices and supplier management should not be limited to legal aspects but broaden the basis for actions of greater value and purpose. This gives rise to Innovability (Innovation allied to Sustainability), where, while contractors raise their circular purchasing standards, suppliers present new solutions and develop the market.







Sustainable Purchasing

The Brazilian Association of Technical Standards created the ABNT NBR ISO 20400 Cartilha ABNT NBR ISO 20400 for Sustainable Purchases. The objective is to assist Brazilian companies in deciding to be taken on their institutional purchases and improve the relationship with their suppliers. The proposal is that this work contributes to strengthening the Brazilian productive chains, generation of local employment, increase in innovation investments, and the consequent gain of competitiveness for the national industry.

By highlighting a series of activities to explain the concept of CE, it was found that each one represents a challenge for the suppression chain.

In this context, it is necessary to redefine production requirements and material cycles, considering the reduction, recovery, and recycling of materials and energy. To ensure this arrangement, managers must know the general context of global production and suppliers so that contracts comply with Circular Economics. The latter explains the growing demand for product life cycle assessments and circular design in company strategies and procurement requirements.



Involve suppliers

Corporate procurement policies have reflected the advancement of the circular economy and ESG standards. However, many concepts are relatively new and encounter technological barriers, among other complexities. Therefore, for these requirements to be successful and engage suppliers, a gradual maturation process must be taken into account and incentives for suppliers, supporting them to remain competitive in a fierce market.

An essential tool for this development is public procurement. Increasing the number of governmental communications that consider circularity concepts and, simultaneously, public policies reinforcing research and structure financing creates an enabling environment to strengthen the circular economy.

To conclude, CE results from an attitude or culture that all participants must develop: government, business, development institutions, and society; all involved have a relevant role in the process. The government and private sector should promote the integration of the objectives and impacts of the procurement approach throughout the procurement cycle, from design, delivery, use, and disposal (including reuse, repurposing, and recycling). Collaboration within organizations and the market is also essential to identify priority categories where supply and material chains can move from open or linear to circular or closed, reducing life cycle costs and impacts.



ENEL and its supplier network



When talking about product change, the first question that arises in organizations is price, not added value. To overcome this problem, Enel developed the K Factor for contracting. It is a bonus system for suppliers who, at the time of bidding, voluntarily commit to the Sustainability and circular economy requirements specially prepared for that contract (in addition to those already present in the technical specifications). With this, the impulse for the supply chain development is guaranteed, reinforcing the north of Circularity in a gradual movement.






Additionally, in 2021, a Working Group was created in Enel, Brazil, involving several areas to reinforce the Circular Materials Purchasing Strategy with concrete circular solutions. It began with a sample survey of around 65 supplier companies in the Distribution sector. The objective was to evaluate the profile concerning the level of experience in the circularity process. More than 30% of the companies were already involved in the circular economy, and the vast majority were open to building new paths together. This led to a deepening of internal action so that technical specifications reached suppliers, increasingly designed from the outset under the circular criteria, and intensified participation in the Market Bidding Days to raise awareness among suppliers and current circular business practices and models.

The transition process from linear to circular logic represents a significant challenge, however, by encouraging the analysis of innovation opportunities and business models and expanding the value proposition, a path that solidifies the supplier as a strategic partner in a value creation relationship.