Topic:

Comparing linear and circular supply chains: A case study from the construction industry

Background

In the last decades, green and sustainable supply chain management practices have been
developed in efforts to try and reduce the negative consequences of production and
consumption processes on the environment. In parallel to this, the circular economy discourse
has been propagated in the industrial ecology and production economics literature and, lately,
in business and practice. The ideals of circular economy principles suggest that the frontiers
of environmental sustainability can be pushed by emphasising the idea of transforming
products in such a way that there are workable relationships between ecological systems and
economic growth. An integration of circular economy principles within sustainable supply
chain management can provide clear advantages from an environmental point view despite
some external supply chain influences and scenarios.

Supply chain management allows the design and management of flows of products,
information and financial resources throughout complex production systems. Within this
context, thanks to the ever-growing consciousness within the society about the environment,
sustainability has become a key priority in the design and operation of supply chains. Over
the years, there are many variations in the definition and terminologies used to describe
sustainable or green supply chain management; however, in general, principles of green and
sustainable supply chain management concepts are largely aligned to a utilitarian
environmentalist perspective, where the integration of environmental concerns in
organisations are conducted by minimising material flows or by reducing negative impacts of
production and consumption processes. Within this context, green supply chain management
practices ensure that green and environmental objectives are aligned with operational supply
chain objectives. Moreover, recent studies have clearly shown the interconnection between
supply chain strategies and their environmental consequences, hence underlining the
fundamental importance of aligning an organisation's supply chain with its environmental
targets. The measuring and benchmarking of companies' environmental performance with
respect to the supply chain remains a challenging proposition. Difficulties may arise due to a
number of factors such as the complexities of the supply chains as well as non-standardised
data and geographical differences
Circular economy is defined as an economic paradigm where resources are kept in use as
long as possible, with maximum value extracted from them; the paradigm has its conceptual
root in industrial ecology, emphasising the benefits of recycling waste materials and by-
products. The principles of circular economy thus extend the boundary of green supply chain
management by devising methodologies to continuously sustain the circulation of resources
within a quasi-closed system. This consequently reduces the need for virgin materials for
economic activities. This economic paradigm is opposed to the current linear take-make-
dispose resource model that generates significant amount of waste. At a micro-level, the
implementation of circular economy practices would push for the design of circular or
reverse supply chains, enabling products at the end of their life cycle to re-enter the supply
chain as a production input through recycling, re-usage or remanufacturing.

Reverse Supply Chain Management has been defined as a series of activities that are required
in order to retrieve a used product from a customer and either dispose of it or reuse it. In
general, companies that have been most successful with their reverse supply chains are those
that are able to better coordinate their reverse and forward supply chains, creating a closed-
loop system, hence maximising value creation over the entire life cycle of the product.
However, it shall also be noted that reverse supply chains can also be open-loop where
materials are recovered by parties other than the original producers and used in the
production of different products. The idealistic paradigm of the circular economy might also
be its Achilles’ heel; some have argued that in the European context, mainly dominated by
free-market and neo-liberal ideologies, companies are already capturing most of the
economically attractive opportunities to recycle, remanufacture and reuse. This leads them to
claim that reaching higher levels of circularity may involve an economic cost that Europe
cannot cope with, especially as companies are already struggling with high resource prices.
Hence, policy interventions are also required along.

Problems

Over the past few decades, individual and corporate entities have become increasingly aware
of the greater role they need to play in preserving natural resources. It has also been
established that economic and production systems cannot be separated from the environment,
with contemporary ecological economic theory emphasising the increasing impacts of human
activities on nature. Within this context, the requirement to take a holistic view of the whole
product supply chain is a fundamental step for establishing sustainable production systems.
Interestingly, the concepts of green and sustainable supply chain management have been
developed in parallel to the circular economy discourse, which has been propagated in the
industrial ecology literature and practice for a long time. In fact, sustainable supply chain
management seeks to integrate environmental concerns into organisations by minimizing
materials’ flows or by reducing unintended negative consequences of production and
consumption processes.

On the other hand, circular economy pushes the frontiers of environmental sustainability by
emphasising the idea of implementing production systems in which materials are used over
and over again, in such a way to achieve workable relationships between ecological systems
and economic growth. Finding ways to align sustainable supply chain strategies to circular
economy principles, and understanding full environmental and economic implications for this
has therefore become important if the boundaries of environmental sustainability are to be
pushed, especially in energy and materials intensive industries.

Solutions

It is important to understand the environmental implications of utilising sustainable

alternatives in various contexts and applications. The increasing understanding and adoption
of environmental paradigms such as the circular economy requires a holistic assessment
approach in which environmental impacts are brought into one consistent framework,
regardless of whether these impacts have occurred or will occur.

The use of Life-Cycle Assessment enables the estimation of the cumulative environmental
impacts resulting from all stages in the product life cycle. Management strategies
increasingly include usage of LCA for identifying environmental impacts and inefficiencies
in resource use throughout the lifecycle of a product. Traditional LCA methodologies, also
known as process LCA, work by creating a system boundary dictated by the aims of the study
and account for individual impact assessments within the system. As value judgements
involve several steps - for instance, different choices of boundaries and related truncation
errors- different approaches might lead to different results. This has led to this methodology
being described as incomplete, primarily because it is not possible to account for the
theoretically infinite number of inputs of every complex product supply chains into the LCA
system.

The availability of LCA on insulation products will enable well-informed decisions to be

made by key stakeholders in the construction industry, taking into account the full
consequences and benefits of their construction material selection. Producers of insulation
products and other construction materials may also re-evaluate their supply chain and place
greater emphasis on the sustainability of their products and supply chains. Nevertheless, LCA
remains a useful indicator of the environmental impacts associated with a product's life cycle
and can be a basis for eco-labelling requested by consumers, non-governmental organisations
(NGOs) and national as well as international authorities. In addition, LCA can be a decision
support tool that helps businesses to ensure that their choices are environmentally sound.

As insulation material manufacturers have little or no control on the country's electricity mix,
another potentially feasible approach that can be considered in efforts to reduce carbon
emissions from the electricity is by commissioning micro-renewable generation schemes. The
potential of adopting a more closed-loop supply chain through the recycling of end-of-life
insulation materials can also be explored. This can initially complement the existing input of
waste cotton material before potentially being developed further to become another major
source of input material. As regards supply chain, some major stone wool insulation
manufacturers are already exploring the potential of adopting a closed-loop circular supply
chain by utilising their own waste insulation material as production inputs for new materials.
Some of these companies have even developed reverse logistics mechanisms to propel the
concept forward within their organisations. The availability of such closed-loop processes
could significantly modify the results of the assessment of the environmental impacts.

The analysis also shows that reducing the frequency of collection from containers will reduce
the total emissions from the life cycle. The result of the analysis shows that reducing the
frequency of collection to once in a week reduces the total emissions by 5.03% compared to
the base scenario and reducing the collection frequency to once in two weeks reduces the
total emissions by 4.13% from the base scenario. This is achieved through reduced total
transport distance, as well as the utilisation of lorries with bigger capacity, which evidently
exhibits lower emissions intensity. Reducing the frequency of collection from containers
located all over the country means that the manufacturer will need to allocate bigger storage
facilities to store a bigger amount of clothes for a longer period. This will ensure a steady
supply of material input for the next stages of manufacturing.

The renewable energy scheme that gives the highest amount of reduction in emissions for
both the supply chains is hydro-electricity. Although the findings imply that hydro electricity
generation may help to significantly reduce the supply chain carbon emissions of both
products, the feasibility of commissioning such scheme at a micro-level needs to be
investigated further. Running a hydroelectric generation scheme involves harnessing the
energy from flowing water to generate electricity, which may only be feasible if the
production facilities are located near flowing water sources such as river streams.
Consequently, the impact to the local environment, particularly fish and the river ecosystem
need to be carefully assessed prior to any construction of such schemes.

Summary

In the last decades, green and sustainable supply chain management practices have been
developed, trying to reduce negative consequences of production and consumption processes
on the environment. In parallel to this, the circular economy discourse has been propagated in
the industrial ecology literature and practice. Circular economy pushes the frontiers of
environmental sustainability by emphasising the idea of transforming products in such a way
that there are workable relationships between ecological systems and economic growth.

The analysis therefore establishes that re-locating production facilities can potentially enable
manufacturers of both products to reduce the carbon emissions from their supply chains.
However, this will require a significant supply chain re-design with substantial capital
investment. The case for changing the electricity mix is even stronger for stone wool
manufacturers as the emissions reduction will be more significant. The production facility, on
the other hand is already operating in a country where the electricity mix from the grid is
exhibiting very low emissions intensity, being among the lowest in Europe.

The results from this research indicated that the insulation material produced within a circular
supply chain exhibits lower total carbon emissions within its production life cycle compared
to stone wool insulation material which typically follows a linear supply chain route in its
production life cycle. Supply chain carbon mapping showed that the use of chemicals in the
treatment of both types of insulation products contributed to significant proportions of the
total life cycle carbon emissions of both products. The results also show that transport
elements dominate a larger proportion of the total emissions of the circular supply chain
compared to the linear one. This is mainly due to the clothing collection phase further
upstream of supply chain, which is transport intensive. Qualitative discussion resulting from
an interview with industry stakeholders however questioned the economic viability of the
circular supply chain. One of the limitations of the research is the reliance on secondary data
for the undertaking of the process LCA exercise. Another limitation in this study lies in the
traditional process LCA methodology itself. As discussed, its restricted system boundary is
an issue that needs to be addressed in order to increase the accuracy of the environmental
impact assessment. In terms of future researches, more environmental indicators should be
considered in order to perform a much more robust comparison between a linear and circular
supply chain system. Apart from the Global Warming Potential (GWP), the measurement of
other categories such as land and water usage and ozone depletion may provide more holistic
overviews of the environmental impact associated with the supply chains. In addition, the
bottom-up process LCA methodology used in this research could be integrated together with
the top-down environmental input-output methodology to develop a hybrid LCA framework.
This will effectively resolve the complexity issue associated with LCA as discussed in the
literature review of this research. Also, attention will be devoted to the cited economic
implications, in many cases representing the main challenge for the implementation of
circular economy initiatives.