Circular economy and logistics: no former without the latter?
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There are many ways of transforming your business, industry, or even your personal life into a more sustainable venture. There is the consumption side of things, such as using electric vehicles to drive to work, building solar panels on your office building, or making every ridesharing app car a zero-emissions one, with these being more primitive examples. Yet you can also make your daily activities greener by ensuring that materials that were manufactured would be reused as much as possible.
That is the basis of a circular economy: when raw materials are used as much as possible throughout their lifecycle, replacing the typical buy-consume-throw-out life cycle of a product. That means reusing materials by recycling them, whether to be used for their original purposes, or other uses, to keep creating value from the same material that was manufactured. After all, one of the main criticisms of electric vehicles, for example, is the emissions that are released into the environment throughout the manufacturing process of the batteries that power the cars, as well as the electricity that is sourced to power the cars.
“A major concern about electric vehicles is that the supply chain, including the mining and processing of raw materials and the manufacturing of batteries, is far from clean,” said Yale School of Environment (YSE) economics professor Ken Gillingham, who was part of the research team that studied “how green the electric vehicle industry actually is, focusing particularly on indirect emissions caused within the supply chains of the vehicle components and the fuels used to power electricity that charges the vehicles.”
“The surprising element was how much lower the emissions of electric vehicles were,” cast any doubts away Stephanie Weber, another member of the research team. “The supply chain for combustion vehicles is just so dirty that electric vehicles can’t surpass them, even when you factor in indirect emissions,” she added.
However, electric vehicles or mobility, in general, is not the only industry where a circular economy is possible, and perhaps even will become the name of the game moving forward. Clothing, manufacturing of electronic devices, even fuel production for Internal Combustion Engines (ICE) are some of the other examples where a circular economy would allow to utilize materials as much as possible before sending them to their resting beds.
The question is, how can logistics play a role in a circular economy, where every industry looks to utilize raw materials to the fullest?
Perhaps the most obvious one is for logistics companies themselves to reuse the already manufactured materials, using them to the fullest just before they no longer have any useful life left.
Hydrotreated Vegetable Oil (HVO), made from used feedstock, such as used cooking oil, tall oil, and fat, is one example. The alternative fuel can be used interchangeably with regular diesel on the newest Euro 6 standard diesel engine powered trucks, and not only it means that supplies that alternatively would have been thrown out are reused once again, but HVO is also one of the most efficient ways to reduce the emissions of road freight transportation currently available to logistics providers.
In the European Union (EU), according to a report by the European Topic Centre on Climate Change Mitigation and Energy (ETC/CME) from November 2020, waste vegetable or animal oils account for 18.8% of the feedstock of HVO production in the EU. “In the case of HVO, the majority is produced from other feedstocks (such as waste oils and fats, above 60 %) with a low GHG intensity (with and without ILUC), whereas the quantities produced from oil crops, which have a much higher GHG intensity, are much lower (around 35 %),” read the report by the ETC/CME.
Yet despite the benefits that HVO brings to the table, the fuel was barely used across the bloc in 2018, with only 0.7% of the total EU‘s fuel supply being the hydrotreated oil product. The main issue, of course, would be the increased cost purchase the product compared to regular diesel, with supply lagging as well, as the availability of the fuel is limited.
Nevertheless, HVO is a great example of how a material, which can have other primary uses (cooking food at a restaurant, for one), can be utilized until it is not physically present anymore, as it is used in the combustion process of a diesel engine.
Even the trucks themselves can become a part of a circular economy. While there is little alternative use for a truck other than it carrying a trailer, and goods, on the road, companies can put their best effort to guarantee that once its new vehicle is to be sold to a second-hand buyer, they are properly taken care of, namely to ensure their long-term usability. One example could be Girteka Logistics’ work with its subsidiary, ClassTrucks, whereby the two companies have partnered to sell off trucks to the second-hand market, emphasizing proper maintenance and care before a truck, that has been used by Girteka Logistics for the past couple of years, reaches its new owners. At the end of the day that not only ensures a great customer experience for the buyers but also means that the trucks are on the road for much longer, despite them not arriving directly from the factory.
Still, that is one of the main goals of a circular economy: to reuse and refurbish items to reduce the amount of raw material that needs to be produced, thus minimizing the potential emissions that the production process would release into the environment.
However, those are just some of the basic examples of how road transport companies are able to tap into the principles of a circular economy and reduce their emissions indirectly. The principle also allows traditional logistics providers to tap into new markets and explore new possibilities to carry various goods.
With the main idea behind a circulative economy being that no material is thrown away before it still has some useful properties left, new supply chain methods will have to be put into place to enable the materials to flow freely between manufacturing facilities and consumers.
“For example, courier, express and parcel services (CEP) already provide for the reverse logistics of distributed material flows today such as online rebuy systems for second-hand clothes or second-hand mobile phones,” noted a study by several authors from the Fraunhofer Institute for Material Flow and Logistics (Fraunhofer IML) located in Dortmund, Germany. The principle of reverse logistics is fairly simple – to move goods from the consumer back to either the manufacturer or the seller of the item, in order for it them to be refurbished or replaced, and then once again sent back to an end-consumer at the end of the supply chain.
While it sounds almost identical to a typical supply chain, the difference is that the items that are transported by trucks are in differentiating conditions, rather than just having been dusted off at a factory before being presented to a potential buyer.
The priorities for companies involved in the logistics of materials will be on how to make the currently established value chain networks less complex, as well as how the existing relationship between a supplier and a customer could potentially affect a circular economy.
“Companies are often afraid of the costs and organizational effort with respect to the difficulties assessing opportunities and risks associated with a new business model (for example from selling new products towards service-based models),” pointed out the Fraunhofer IML. As the Institute also indicated, additional hurdles to clear are the establishment or transition towards new business models, the development of recycling technologies and data exchanges, changes to how products are made, filling the gaps of knowledge, and figuring out how to adjust the market, namely on how to reduce the cost of recycling and reusing secondary materials.
Looking for ways to establish supply chains that adhere to a circular economy will not only be a matter of being able to reverse the direction between a supplier and the end-consumer but in the grand scheme of things, to provide a way to sort the items efficiently when the user sends back the items for recycling. While road freight transport is already involved in carrying goods that have reached the end of their useful lives, they are regulated under the ADR treaty, or it is officially known, the Agreement concerning the International Carriage of Dangerous Goods by Road, there is little experience when carrying and sorting goods that can still have a second life following their recycling.
“If used systematically and enhanced respectively, current logistics trends and developments in all fields of production and distribution of products can help supporting the transformation towards a Circular Economy. Vice versa, the potential of the Circular Economy will only be realized when adequate logistics solutions are used,” concluded the Fraunhofer IML.
SHARING IS THE NAME OF THE GAME
A circular economy, despite a fairly simple definition, can be broadened into a complex system where resources are shared amongst multiple stakeholders in order to reach the goals of the system – to reduce the impact on the environment.
For example, even the sharing of trailer capacity between multiple logistics providers would minimize inefficiencies in supply chains. If a customer, due to a variety of reasons, desperately needs to ship out their cargo, yet they do not have enough items to take up a whole trailer and are still willing to pay the price for a Full Truckload (FTL), it still results to an inefficiently used space in a trailer. As a result, more trucks than necessary could be needed to transport cargo, resulting in additional and avoidable emissions.
“A logistics service provider could, for example, rent out the empty space in a truck to a (smaller) company. Also, a truck that brings goods from a warehouse to the city on its way back could bring other goods from the city, such as waste. This is called ‘collaborative logistics’,” stated a report by LogiCE, a movement to combine experts from the fields of circular economy and logistics.
To be as efficient as possible with your assets, sharing economy is another system that could go hand-in-hand with a circular economy, changing the way that road transport’s most important resource – trucks – are used. Such platforms have taken off in other forms of services, namely the transportation of riders and accommodation, and have largely become the primary ways of booking a ride from point A to point B or finding a place to live when visiting a foreign city.
The road freight transport industry has also seen an influx of such platforms, offering shippers to directly connect with their transport partners and vice-versa, all done with a few buttons on a phone.
Adapting to a new economic model going forward might be another way to look at one of the most pressing issues that road freight transportation will continue facing in the near future – reducing the industry’s impact on the environment. However, the adaptation will rely on multiple parties, including end-consumers to whom logistics companies are delivering the goods, to be willing to make significant changes to fully transition to a circular economy, where the primary goal is to reduce the amount of waste that the lifecycle of a product generates, and in turn, reducing the overall impact on the environment.