Circularity holds large potential for net-zero and the environment, says DHL paper

January 29, 2022: Circularity is a departure from the traditional produce-sell-use-waste paradigm toward one that significantly extends the “use” phase, adds new models to the “sell” phase, and turns waste into valuable inputs going back into the “produce” phase.

Put simply, it's a design for an ecosystem that builds on sustainability, visibility, and multidirectional flows and can help tackle both the climate crisis and other environmental challenges such as water use and waste generation.

Leading global logistics player DHL has recently published a new white paper “Delivering on Circularity”, which takes a hard look at how circular economies can help with these challenges. This report examines how logistics can enable consumer goods industries to tackle the climate crisis and other environmental challenges by helping to close the supply chain loop.

“Circularity is about the 5Rs: Reduce, Repair, Resell, Refurbish and Recycle. The transition toward a circular economy is built on the redesign of supply chains. Innovative logistics solutions can help drive circularity; they are a key enabler to facilitate both the physical and data flows. Especially when it comes to optimizing production volumes and materials, extending product life cycles, launching novel use models, or developing new solutions for end-of-life recycling,” says Katja Busch, Chief Commercial Officer at DHL.

Some key moves towards circularity as cited by the paper are:

Significant environmental impact of fashion and consumer electronics
The most significant impact on pushing for circularity might come from the fashion and consumer electronics industries.

Industry leaders are already actively participating in the paradigm shift toward circularity, announcing ambitious targets and launching a wide range of initiatives. The potential positive impact that circularity in these two industries can have is significant.

Around 20 percent of produced garments are never used, and smartphones are often exchanged after just two or three years. Both combined sectors contribute to more than six percent of the global Greenhouse gas (GHG) emissions.

To produce electronic devices, many non-renewable resources such as rare earth and metals are needed. In addition, the industries are responsible for substantial land use (more than the area of Germany and Switzerland combined), water consumption (equivalent to 40 percent of US citizens annual water consumption), and waste generation (equal to approximately 50 percent of Europeans’ annual waste). With 80 percent of emissions of an average fashion or consumer electronics item accruing during production, extending the product lifetime as much as possible is imperative.

In fact, as per the paper the global fashion and consumer electronics industries have a sizable impact on climate change. A conservative estimate for the fashion sector suggests that it is responsible for about 4 percent of annual global GHG emissions (up to 8 percent, according to other sources) and that the consumer electronics sector’s share of GHG emissions is approximately 2 percent.

Combined, these sectors represent twice the share of GHG emissions of the aviation industry (3 percent). For added perspective, fashion and consumer electronics’ combined 6 percent share of global GHG emissions is close to the overall emissions of the entire EU.

At current consumption levels and under current approaches to managing the life cycles of these products, emissions from these industries would grow by 60 percent until 2030 and account for around 20 percent of the UN GHG emissions target for 2030, which is set at half of today’s emissions.

Yet, if the world is going to achieve the UN’s target of limiting global warming to 1.5 degrees, industries not only have to stop their trajectories of increasing emissions, they must reverse them. Hence, action is needed in these sectors and transitioning toward circularity can be an important stepping stone toward the solution.

“The shift toward circular consumer behaviors is a critical driver of a successful transition to circularity. Consumer behaviors increase the number of goods that flow back into the cycle and signal demand to brands for circular products. And the trend towards more sustainable demand is growing,” says Carsten Lützenkirchen, Senior Vice President at DHL Customer Solutions & Innovation.

“Novel circular business models not only diversify product and service portfolios but have a positive effect on customer engagement. It is a classical win-win situation in which sustainability drives growth and innovation,” he adds.

Circularity holds immense potential for net-zero and the environment.
“The circular economy aims to reimagine the way that goods produced, sold, and used today are recycled into the raw materials of tomorrow. To realize the full potential of the concept and institutionalize the model, we need innovative solutions and technologies,” adds Katja Busch.

“Of course, it is more complex to set up supply chains for on-demand production or recycling cycles and to manage the massive data flow, but in order to jointly achieve our ambitious environmental targets, it needs to be addressed. We at DHL are looking forward to partnering with circularity’s stakeholders by serving as an enabler for the new physical and data flows within the supply loop,” she adds.

Along the product’s value chain, DHL identified three core enablers and ten building blocks that allow for a successful transition from supply chains to supply loops.

These range from innovative materials and design to on-demand production, smart product returns, reusable packaging, new use concepts and asset collection and recycling. Above all, circular consumer behavior must be incentivized.

Additionally, the paper cites that the supply chains must be redesigned, and visibility and orchestration enabled to make circularity feasible. A concerted effort among all players can make the transition toward circularity successful and rewarding. In terms of emission savings, circularity seems to be a comparably convenient and impactful way to reduce emissions.

Achieving 50 percent circularity saves as many GHG emissions as if all streaming users worldwide stopped watching video content for five years, cites the paper.

Collective stakeholder action is needed
The paper also cites that if all stakeholders take on their responsibilities and accelerate a mutually reinforcing loop, circularity can become a reality. While the successful transition toward circularity is undoubtedly a shared responsibility and effort, logistics players are the natural backbone.

Circularity changes the way materials and products move – from a straight line to a regenerative circle – and efficiently managing the flow of goods is what logistics is all about.