WEF: How Manufacturers can Scale Circular Supply Chains

While the strategic importance of a circular economy is now widely accepted in business, many organisations are finding it difficult to implement these models at scale.

A new report from The World Economic Forum (WEF), produced in collaboration with Bain & Company and the University of Cambridge, offers a roadmap for businesses to translate circularity ambitions into practical execution.

The report, Circular Transformation of Industries: The Art of Scaling Circular Supply Chains, investigates how companies can modify their approach to circularity to generate substantial economic value.

The conversation around circularity in supply chains has evolved from a question of its importance to a focus on how it can be implemented and scaled effectively.

According to a WEF survey of 491 executives across 10 industries, 95% stated that circularity would be important for their companies within the next three years.

Despite this enthusiasm, the report indicates that many firms continue to view circularity primarily as a sustainability or waste-reduction initiative. This perspective overlooks its potential to enhance business resilience, create new revenue streams and strengthen customer relationships.

"The circular economy is entering a strategic moment," says Thom Almeida, Lead of Circular Economic Systems at WEF.

"Circularity is no longer only about environmental sustainability; it is becoming central to how companies build resilience stay competitive and unlock new growth."

Overcoming key scaling challenges

The report identifies five primary challenges that leaders face when trying to scale circular operations.

A core issue is material returns. Circular models depend on retrieving used products, and companies are experimenting with incentive schemes to encourage this.

However, if the return process is inconvenient, consumer participation is likely to remain low. The unpredictable quality of returned goods can also lead to high assessment and repair costs.

To address this, some businesses are forming strategic partnerships, such as the joint venture between Renault and Suez called The Future is Neutral, which focuses on recovering end-of-life vehicles and recycling the materials.

Another challenge is the lack of consumer demand for second-hand goods. A global survey cited by WEF found that only 29% of consumers buy second-hand furniture and 35% purchase second-hand clothing.

To build trust, companies like Patagonia, with its Worn Wear programme, are using discounts and certifications to assure quality.

Developing infrastructure and navigating complexity

Effective circularity requires robust reverse logistics networks and a sophisticated digital infrastructure to forecast supply and demand. Some firms are using data to demonstrate the positive impact of circularity on customers. For example, Material Mapper tracks the origin and emissions savings of building materials to provide transparency.

Navigating the complex web of regulations for refurbished goods also presents a hurdle, as standards can vary significantly between countries. HP tackles this by ensuring its refurbished products meet the same stringent regulatory and documentation requirements as its new products.

Finally, bridging the skills gap is essential. Circular models demand new expertise and companies like Hitachi are creating specialised units to remanufacture components and ensure quality control.

Designing an efficient circular operating model

There is no single blueprint for a circular supply chain. Operations can be integrated with existing linear processes or established as separate entities.

According to the WEF survey, 56% of companies reported using hybrid supply chains where circular and linear operations are at least partially integrated.

This approach can provide dedicated infrastructure while maintaining flexibility. Partnerships are a common feature in successful circular models. The survey found that 80% of organisations outsource collection and dismantling.

"Circularity is becoming a defining element of business resilience and competitiveness; scaling it requires shared ambition and collaboration across industries," explains Kyriakos Triantafyllidis, Head of Growth and Strategy, Centre for Advanced Manufacturing and Supply Chains at WEF.

To achieve success, companies must define their focus and design their circular models for scale from the outset. As resources become more constrained, climate pressures intensify and costs increase, the need for efficient circularity grows.

Businesses that can successfully extend the life of their products and uncover the embedded value within them are positioned to achieve new levels of resilience and competitive advantage.