SUSTAINABLE SUPPLY

CHAINS
POINTS TO DISCUSS
Supply chains
Sustainability issues

Circular economy
Origins, focus
Links with supply chains

What supply chains can do to achieve circular economy

Reverse logistics
Extensions of SC activities beyond core/ traditional activities

Conclusions
SUPPLY CHAINS
Sequence of processes involved
in the production and
distribution of a commodity

All stages & functions involved

in
fulfilling a customer request
Focus: Cost &
Managing the flows Quality
WHAT IS SUSTAINABILITY
The integration of environmental health, social equity and economic vitality in order
to create thriving, healthy, diverse and resilient communities for this generation and
generations to come. The practice of sustainability recognizes how these issues are
interconnected and requires a systems approach and an acknowledgement of
complexity
UCLA Sustainability Committee

Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs
UN World Commission on Environment and Development
WHAT IS SUSTAINABILITY
Sustainable practices support ecological,
human, and economic health and vitality
Sustainability presumes that resources
are finite, and should be
used conservatively and wisely with a
view to long-term priorities and
consequences of the ways in which
resources are used
In simplest terms, sustainability is about
our children and our grandchildren, and
the world we will leave them
WHY SUSTAINABILITY

Limited Natural Climate Change

Resources
WHY SUSTAINABILITY
India ranked lowest in Environmental Performance Index (EPI) 2022 as least
environmentally sustainable country among 180 countries assessed
as per a report by Yale Center for Environmental Law & Policy, Yale University, Center for
International Earth Science Information Network, Columbia University and McCall MacBain
Foundation

Government of India has been working tirelessly towards the 2030 Sustainable
Development goals (SDGs)
Needs investment of at least $2.64 trillion to meet the SDGs, as per a report by Standard Chartered
SDG Investment Map
WHY BUSINESSES SHOULD THINK
OF SUSTAINABILITY
Government Regulations Stop Nestlé buying palm oil from
companies that destroy rainforests
Questions on origin of a company’s
product
Consumers, shareholders, employees,
government and NGOs demanding details about
systems and sources that deliver goods

Demand
Use environment friendly materials
Move manufacturing near end markets to
reduce emissions from transportation

Product sourcing
BUSINESSES SUSTAINABILITY
ISSUES EXAMPLES
Product Quality & Safety Environmental Ethics
impacts

Recall of toys In early 2000s, Apparel and retail

in 2007 for customers like Nike and Marks & Apple’s major Chinese supplier
presence of Spencer started asking about Suicides of workers in 2010
lead environmental & social
performance

Other concerns:
Product authenticity & transparency across supply chain
complexity & risk increases for global supply chains
IMPROVING SUSTAINABILITY –
WHAT MAY BE DONE?
Aim Ways

• Cost effective • Incremental

• Agile change
• Responsive • Take a holistic
• Secure approach to
• Sustainable sustainability –
Making broad
• Innovative structural change
Changes had been happening for some time but recent situation made the changes
imperative
TRADITIONAL VS CIRCULAR
SUPPLY CHAINS
Traditional Circular

Making and distributing to end customer What happens after the product reaches end
customer
CIRCULAR SUPPLY CHAINS
Circular supply chains
taking back used products from the market and in various ways turning them into new
products
Make manufacturing industry sustainable

Concept is closely related to concept of

Circular economy
 LINEAR VS CIRCULAR
ECONOMY

Focus on eliminating waste

Natural resources are taken, transformed into
products and get disposed of • Composting biodegradable waste
• Reuse, remanufacture, recycle
non-biodegradable waste
• Cutting off use of chemicals (to help regenerate
natural systems)
• Depending on renewable energy
WHY CIRCULAR ECONOMY
Since the industrial revolution, the linear economy model has dominated our society,
but is increasingly becoming unsustainable
Today, businesses and societies understand that
our earth has finite resources and
we are reaching planetary boundaries

Disposal or dispersion of wastes, generated from a linear economy-based production

system, continues to contaminate our ecosystems
Shrinking life span of products
99% of items consumers purchase becomes trash within the first six months of purchasing
CIRCULAR ECONOMY
An economic model aimed at the efficient use of resources through
waste minimization
long-term value retention
reduction of primary resources and
closed loops of products, product parts, and materials within the boundaries of environmental
protection and socio-economic benefits

Circular economy model aims to

close the gap between production and natural ecosystems’ cycles – on which humans ultimately
depend upon

Can lead to sustainable development while reducing or eliminating the negative

consequences of environmental degradation and resource depletion
CIRCULAR ECONOMY
DEFINITIONS
“A circular economy is an industrial system that is restorative or regenerative by
intention and design
It replaces the end-of-life concept with
restoration
shifts towards the use of renewable energy
eliminates the use of toxic chemicals, which impair reuse and return to the biosphere
and aims for the elimination of waste through the superior design of materials,
products, systems, and business models”
World Economic Forum
CIRCULAR ECONOMY
Provides
a model for more sustainable production and consumption
an opportunity for economic, social, and environmental sustainability
Aims to
design out waste and pollution
keep products and materials in use
regenerate natural systems
For example, Amazon is creating CE loops through various industry partnerships in
efforts to minimize waste, increase recycling, and provide options for its customers
to reuse, repair, and recycle their products, thereby sending less material to the
landfill and more back into the circular production system
CIRCULAR ECONOMY
Slows, narrows and provides closed loops at each stage of production such
that
the extraction of new resources for production is avoided
and landfilling or dispersion of generated wastes are minimized or prevented

Circular Economy-based production and consumption system focuses on

retaining the utility and value of products, components and materials

Through the application of multiple principles like

refusing-to-use, reducing consumption, reusing, repairing, refurbishing, remanufacturing,
recovering, recycling, reclaiming and regenerating energy from waste streams
CRADLE TO CRADLE DESIGN
Proposed by
Prof. Dr. Michael Braungart, William McDonough and the scientists of EPEA Internationale
Umweltforschung in Hamburg
Cradle to Cradle® is a registered trademark of McDonough Braungart Design Chemistry
Cradle to Cradle CertifiedCM is a certification mark for the Cradle to Cradle Products Innovation
Institute

Cradle to Cradle design

the design and production of products of all types in such a way that at the end of their life, they
can be truly recycled (upcycled), imitating nature’s cycle with everything either recycled or
returned to the earth, directly or indirectly through food, as a completely safe, nontoxic and
biodegradable nutrient
presents a vision for materials that benefit society with safe materials, water and energy and which
eliminate waste
CRADLE TO CRADLE DESIGN
CRADLE TO CRADLE DESIGN
Design concept inspired by nature
The waste materials in an old product become the food for a new product , the earth or animal, or
become fuel

Products are composed of

either materials that biodegrade and become food for biological cycles
or technical materials that stay in closed-loop technical cycles, continually circulating as valuable
nutrients for industry

Equivalent to true sustainability

through the biological or technical components used, all products become sustainable as nothing
becomes waste which cannot be reused
CRADLE TO CRADLE DESIGN
In technical cycle
materials are not used up during use, but instead should be seen as service products
Materials in products designed for technical cycle can be reprocessed to allow them to be used in a
new product
man-made materials, substances hazardous to the environment and rare metals used for example in
electronics

In biological cycle
products are consumed during, or after use
biologically-based biodegradable raw materials obtained from nature cycle in the system
Materials are returned to the biosphere in the form of compost or other nutrients, from which new
materials can be created
Some products for the biological cycle can be reprocessed in technical cycles several times, before
finally returning to the biosphere, as is the case with paper recycling
CRADLE TO CRADLE DESIGN –
EXAMPLE BIOLOGICAL CYCLE
CRADLE TO CRADLE DESIGN –
EXAMPLE TECHNICAL CYCLE
Tyres
Biodegradable tyres – Abrasion
particle enter environment

Sell tyres as a service

- pay-per-kilometer
increasing usage

End Life – Alternative use e.g. Road

Return to construction material (Modified
Manufacturer Bitumen)
CRADLE TO CRADLE DESIGN
The principles suggest that
by assuming the planet as a closed system, the amount of resources depleted in a period is
equal to the amount of waste generated in the same period
seeks to continually sustain the circulation of resources and energy within a closed system
(the planet)
reducing the need for new raw material inputs into production systems
concerned with the reduction (or the delay) of unintended negative impacts on the
environment due to cradle-to- grave material flow
CIRCULAR ECONOMY &
SUPPLY CHAINS
Green and sustainable supply chain management practices have been
developed
trying to integrate environmental concerns into organizations by reducing unintended
negative consequences on the environment of production and consumption processes

In parallel to this, the circular economy discourse has been propagated in the
industrial ecology literature and practice
supports environmental sustainability by emphasizing the idea of transforming products in
such a way that there are workable relationships between ecological systems and economic
growth
not just concerned with the reduction of the use of the environment as a sink for residuals
but rather with the creation of self-sustaining production systems in which materials are
used over and over again
CIRCULAR ECONOMY &
SUPPLY CHAINS
Early contributors to the design of circular supply chains designed an integrated
supply chain model in which product returns from the end-user undergo a recovery
operation (such as re-use, repair, remanufacture or recycling)
hence products are integrated back into the forward supply chain

Environmental dimension of SCM aims to minimize the negative consequences for

the environment during the supply chain processes
CE paradigm
pushes the boundaries of environmental sustainability by
advocating a more holistic objective of a production system that is both Restorative and regenerative
by design
entails minimization of resource usage, waste, emission, and energy leakages by narrowing, slowing
and closing material and energy loops
CIRCULAR ECONOMY &
SUPPLY CHAINS
Circular economy paradigm has provided a framework by means of which
businesses operating within the same supply network (and beyond) can engage with
sustainability activities, enabling best practices to be adopted
A number of companies have embraced these concepts also as a mechanism for
collective problem solving
SCM has adopted some of the CE practices such as reverse logistics and the
‘Reduce, Recycle and Reuse’ but the fundamental difference between the SSCM and
CE lies in the intent
CIRCULAR ECONOMY &
SUPPLY CHAINS
CE is an idealist philosophy that targets a regenerative production system that continually
sustains the circulation of resources and energy within a closed system, therefore, reducing
the need for new raw materials and inputs into the production system
While a prefect circularity is practically impossible, the CE principles represent a more
effective approach in balancing the interplay of environmental protection and economic
growth
Similarly, some SCM practices implement the CE restorative principle partially and in a
more reactive way
For example, the Reduce, Recycle and Reuse objective is to recover the material with an
emphasis on the reduction of supply chain’s environmental footprint whereas the restorative
principle of a CE production system also aims to repair previous damage by promoting the
use of more environmentally friendly materials
CIRCULAR ECONOMY &
SUPPLY CHAINS
In this context the concept of Reverse Supply Chain Management/ Reverse Logistics
has been developed as an adaptation of circular economy principles to supply chain
management
A reverse supply chain includes activities dealing with product design, operations
and end- of-life management in order to maximize value creation over the entire life
cycle through value recovery of after-use products either by the original product
manufacturer or by a third party
REVERSE LOGISTICS
Dealing with waste generated after end of useful life of product
Find second hand user
Maruti True Value
Reconfigure, remanufacture, redesign, recycle, cannibalization & disposal

Well organized in some industries

Recycling glass bottles of soft drinks
Reuse paper

Recall due to defects

Mattel toys had to pay $2.3 million in civil penalties for violating a federal lead paint ban & recall
millions of its Barbie, Dora and other popular-branded toys in 2007
Nokia had to recall and replace 46 million faulty batteries in 2007
REVERSE LOGISTICS
Involves
Processing returned merchandize
from the point of consumption to the point of origin for recapturing value or
proper disposal

32
REVERSE LOGISTICS
ACTIVITIES
❑Handling of returned merchandise
Damage
Seasonal inventory
Resell via outlet
Salvage of outdated products

❑Find second hand user

❑Recycling and reuse
Material reuse
Remanufacturing / refurbishing

❑Hazardous materials disposition

33
REVERSE SUPPLY CHAINS
Open-loop supply chains
involve materials recovered by parties other than the original producers who are capable of reusing
these materials or products

Closed-loop supply chains

deal with the practice of taking back products from customers and returning them to the original
manufacturer for the recovery of added value by reusing the whole product or part of it

Because of the benefits of reverse supply chains, manufacturing industries have been
placing, recently, a lot more emphasis on achieving
Sustainable production by shifting from end-of-pipe solutions to a focus on whole life cycle
assessments and integrated environmental strategies and management systems
ISSUES IN REVERSE CHAINS
Extending the supply chain to include issues such as remanufacturing, recycling and
refurbishing
adds additional level of complexity to existing supply chain design
a new set of potential strategic and operational issues
which in turn can increase costs, at least in the short term

Two basic problems gives rise to these issues

the uncertainty associated with the recovery process with regards to quality, quantity, and timing of returned
products, containers, pallets and packaging
the collection and transportation of these products, containers, pallets and packaging

Increased costs can reflect the transfer of external costs from society to supply chain
partners
Sustainability opens a larger set of opportunities for improvement that may require
short-term investment
ISSUES
A focus on reverse supply chains is a step towards the
Reuse,
broader adoption and development of sustainability,
since the supply chain considers the product from Recycle,
initial processing of raw materials to delivery to the Return
customer Customers and
Sourcing
product use
However, sustainability also must integrate issues and
flows that extend beyond the core of supply chain
management
product design
manufacturing by-products Value
Transformation
by-products produced during product use Proposition
product life extension
product end-of-life Delivery
recovery processes at end-of-life
Major issues at each step
• Renewable Resource
• Fair trade practices
Sourcing
• Damage to the environment from Toxic Substances & GHG Emissions

• Sustainable practices and processes

Transformation • Fair Labour Practices

• Transportation
• Facilities location and layout
Delivery • Inventory
• GHG Emissions
• Pay more and Feel good factor
Value
• Snowball effect
Proposition • Marketing and PR

• Energy efficiency
Customers and
• Use of green energy
product use • Customer education

• Can the product be returned to the OEM?

Reuse, Recycle,
• Can the product be reused in a different form?
Return • Can the product be efficiently recycled?
BEYOND CORE SCM
Product design
Techniques such as life cycle assessment are used to assist in the determination of how to design a
product to minimize its environmental impact over its useable life and afterwards
This field at the interface of engineering, product design and engineering considers resource depletion
as well as environmental impacts

Manufacturing by-products
Consideration of the extended supply chain includes the reduction and elimination of by-products
through cleaner process technologies and quality and lean production techniques
From the industrial ecology literature and increasingly considered by manufacturers is the use of
by-products of manufacturing such as the use of waste heat for conditioning space or the use of food
waste
This is a function of both process design and continuous improvement activities
BEYOND CORE SCM
Product life extension
Any time a company makes it easier for you to continue to use a product that you’ve already
purchased, they are also engaging in this model
Remanufactured parts, Secondhand stores and online marketplaces, Updating software instead of
hardware
There are a variety of techniques that are used to extend the life of products
Through the extension of product life, the depletion of resources through the production of new
product is avoided
Works against the design for obsolescence typical in a consumption oriented society & increases
value created by an individual product
The challenge for the provider of the product is to develop offerings that allow for them to capture
more of the product value
BEYOND CORE SCM
Product end-of-life
The disposition of the product at the end of its life relies to a great extent on actions taken at
earlier stages
The initial product design has great influence on the degree to which a product can be
reused, remanufactured, recycled, incinerated or disposed of
For example,
the high lead content in cathode ray tube and electronics products results in complications for disposal due to the
toxicity of lead
In the case of electronics, phase-out of lead use in solders : Tin–silver–copper solder offers a safer solder than
the lead–tin alloy
While in the case of cathode ray tubes, some jurisdictions have introduced special regulations to divert these
products from municipal landfills with the intent of integrating the lead into new products
PRODUCT END OF LIFE
Reuse
After a product ends its life with one customers, if it is still functional it is reused by
another user directly without involvement by the manufacturer.

Service / repair
After a product ends its life due to defect, it is repaired either by the vendor or a third party.
This will usually require spare parts

Refurbish
After a product is ends it’s life either due to a user no longer needs the product or defect, it
is returned to the vendor, manufacturer or 3rd party, which systematically processes the
product by restoring it to near new condition, possibly using spare parts. The product itself
however is the same
PRODUCT END OF LIFE
Remanufacturing
After a product is ends it’s life either due to a user no longer needs the product or defect, it
is returned to the manufacturer. Here it is demanufactured i.e. disassembled, and the useful
components are reclaimed and stocked and defect components are recycled. The reclaimed
components are then used in combination with virgin components for assembling products,
possibly in new configurations, according to customer demand.

Recycling
Products are disassembled or shredded for recycling the materials for manufacturing new
components. Typically handled by a 3rd party
Incineration or landfilling: These are open loop supply chains as the materials in the
products are lost and energy will need to be spent on extracting new materials for new
products
BEYOND CORE SCM
Policies that have been developed with the intent of producing more environmentally
favorable modes of product end-of-life disposal have to-date resulted in more storage
of product and less redeployment of parts and materials into new products than
intended
Desired outcomes not only require changes in the process associated with the
development of environmental policies, regulations, incentives and disincentives; but
also the related operational aspects: forecasting, logistics, processing and other
operations related functions
To date substantial research has focused on the capture of value remaining in
products at the end of a products life through recovery processes at end-of-life
copiers, steel by-products, reusable packaging
OFFSETTING CARBON
EMISSION FOOTPRINTS
Carbon price
places a price on greenhouse gas (GHG) emissions
gives an economic incentive for lowering emission levels and GHG emission producers
have the option of either reducing their emissions to avoid paying a high price or continue
emitting and pay for it
expected to encourage shifting of investments towards cleaner technology options as the
relative cost of using carbon-intensive technology will be higher
aims to shift the burden for the damage back to those who are responsible for it
widely seen as the most cost-effective and flexible way to reduce harmful emissions and
mitigate climate change challenges by increasing investment and innovation in clean
technology
OFFSETTING CARBON
EMISSION FOOTPRINTS

Carbon credits
a tradable permit or certificate that provides the holder the right to emit one ton of carbon dioxide or
an equivalent any GHG – it’s essentially an offset for producers of such gases
used by companies to compensate for their carbon emissions, by either adhering to emission
allowances or contributing to sustainable projects
can be traded on both private and public markets
Current rules of trading allow the international transfer of credits

Two types of credits

Voluntary Emissions Reduction (VER)
Certified Emissions Reduction (CER)
OFFSETTING CARBON
EMISSION FOOTPRINTS
Carbon financing
an innovative funding tool that allows companies wishing to offset their own emissions to buy carbon
credits earned from sustainable projects
allows to channel funds to sustainable development projects that may bring sustainable energy
solutions to people living in developing countries
CONCLUDING REMARKS
Addressing sustainability issues are important
Any sudden disruption in global chains makes it difficult to maintain sustainable operations,
so more focus needs to be on local sourcing and production
Circular economy concept is idealistic
Cradle to cradle design aims to eliminate waste by making all outputs feed into the input
cycle which is difficult, particularly for technical cycle
Supply chains, integrated with product design and life cycle assessment, strives to achieve
the circular flow of materials
Not all industries can make zero waste and zero carbon emissions – carbon pricing and
trading enables maintaining overall global environmental sustainability
More focused research essential for developing bio-degradable non-harmful end or
by-products across industries