Leveraging Procurement to Effectively Build Circular Economies

Sep 24, 2021 | Future of procurement

Stawan photo


Sep 24, 20213 min read

Procurement has a critical role in transitioning to a circular economy by supporting sustainability initiatives, reducing waste and costs, increasing customer satisfaction, and building sustainable relationships with suppliers. Procurement departments can prioritize sourcing from circular supply chains, design for recyclability, incentivize circular practices, promote closed-loop systems, and prioritize transparency and traceability.

As environmental awareness continues to grow in the world, more and more businesses and organizations are beginning to take notice of the advantages of transitioning to a circular economy. A circular economy is one that is focused on resource efficiency, stays away from unsustainable waste and pollution, and operates with the goal of sustainability in mind. Procurement is a key part of making this transition, and understanding its role in the circular economy can help create a more sustainable and resilient future. 

Harnessing the Power of Procurement to Support a Circular Economy 

Procurement has a critical role in the transition to a circular economy. It is a vital tool that can be used to support and accelerate the transition away from a linear economy that focuses on extraction, production, consumption, and disposal. Procurement departments can ensure that their purchases are in line with their organization’s sustainability initiatives and can help them balance cost and environmental impact. Examples include: 

  • Sourcing from circular supply chains: Procurement departments will prioritize sourcing materials and products from suppliers who have adopted circular business models. For example, a company might prioritize buying recycled paper from a supplier that has a closed-loop system for managing waste paper. 
  • Design for durability and recyclability: Procurement will encourage suppliers to design products with the end-of-life in mind. For example, a company might ask its suppliers to design packaging that is easy to recycle and made from recycled materials. 
  • Incentivizing circular practices: Procurement departments will establish contracts with suppliers that incentivize them to adopt circular practices. For example, a company might offer a bonus to suppliers who demonstrate a commitment to reducing waste or who adopt closed-loop systems for managing end-of-life products. 
  • Promoting closed-loop systems: Procurement will play a key role in promoting closed-loop systems for the management of waste and end-of-life products. For example, a company might work with suppliers to establish a program for collecting and repurposing end-of-life products, such as used batteries or old electronics. 
  • Transparency and traceability: Procurement departments will prioritize transparency and traceability in their supply chains. For example, a company might require its suppliers to disclose information about the origin of their materials and the methods they use to reduce waste and conserve resources. 

Creating a Sustainable Procurement Future 

In order for companies to truly move towards a circular economy, procurement departments must start to make sustainability a core part of their mission. Stakeholders must be made aware of the financial and environmental benefits associated with moving towards a more circular economy, and sustainable procurement must become an organizational priority. Companies should make an effort to align procurement goals with the organization’s sustainability efforts, as well as make sure that all purchasing decisions are made with sustainability in mind. 

The implementation of green procurement policies is also important. Companies should have clear policies on their efforts towards procuring ethically sourced materials, using energy-efficient suppliers and technologies, selecting products with features that reduce environmental impacts, switching to compostable packaging materials and biodegradable facility materials, and creating open communication with suppliers about sustainability progress. 

The Benefits of Circular Economy Procurement 

The benefits of utilizing procurement for the circular economy go beyond just making sure purchases align with sustainability initiatives. It has the potential to greatly reduce a company’s overall costs while also creating a more sustainable operations path. By reducing their reliance on single-use items and switching to more eco-friendly options, companies can realize immediate cost savings as well as a reduction in their carbon emissions. 

Furthermore, procurement-led sustainability efforts can result in increased customer satisfaction and loyalty, as many consumers today view sustainability as an important factor in their decisions. By purchasing products that are aligned with sustainability objectives, companies create a positive impression of their values while simultaneously gaining customer trust. 

In addition, circular economy procurement can help companies to build relationships with suppliers and vendors that are committed to sustainability. This can lead to better quality products and services, as well as more reliable supply chains. By investing in sustainable procurement, companies can ensure that their operations are more efficient and cost-effective in the long run. 

In conclusion, the future of procurement in the circular economy is focused on creating a closed-loop system where waste is minimized and resources are reused. Procurement will play a crucial role in this transition by sourcing materials and products from circular supply chains, establishing contracts that incentivize circular practices, promoting closed-loop systems, and prioritizing transparency and traceability. By adopting these practices, companies can help create a more sustainable future by reducing waste, conserving resources, and promoting economic growth that is decoupled from resource use. 

At FactWise, we are committed to building truly distinctive procurement software solutions that delight users and provide sustainable positive impact to the organizations we serve. We do this by providing transparency and insights to leaders (31% increase in governance), streamlining and automating processes to improve efficiency (20% increase in efficiency), and driving bottom-line impact by unlocking savings potential (25% cost reduction for direct spend).  

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


Show all

No comments to show

Suggested Articles



Privacy Policy

Terms & Conditions

©Copyright 2024. FactWise. All Rights Reserved.