Everything about the bottlenecks and success factors in circular purchasing in the TGTHR magazine
One of the keys to driving the transition towards a circular economy lies with the purchasing process. Buyers stimulate and create the demand for circularly produced goods and therefore take an important role in stimulating the circular economy. The big question is: What do you have to take into account? What are the possible bottlenecks that you may encounter? And what are factors that can make a circular procurement process a success?
Supply Value researched the bottlenecks and success factors in circular procurement and developed the CP4V model based on the results. The research was conducted on the basis of the qualitative research method and took place from July 2015 to December 2015. The respondents were selected on the basis of their knowledge of the circular economy and circular procurement (National government, PIANOo, Foundation Circular Economy, Suez, Interface etc.). A total of twenty interviews were conducted. Of these, six interviews were conducted with government agencies or semi-government agencies. In addition, both the purchasing side and the offering side have been illuminated.
Bottlenecks in circular purchasing
The research by Supply Value shows that the absence of internal support, the point that innovation takes time, the unfamiliarity of the subject and the complexity of checking promises are seen as the biggest bottlenecks.
- Absence of internal support (80%): If the management, the internal customer and / or the budget holder do not follow the circular principles, then the buyer has little support to make the process a success. The complete operational management of the purchasing organization will have to adapt to the circular economy.
- Refreshing takes time (75%): In addition, it appears that circular purchasing processes cost more time than traditional purchasing processes. That it takes more time is mainly due to the novelty and unfamiliarity. Everything that is new will initially take more time. However, if the processes are correct and one has mastered and remains transparent, a circular trajectory can ultimately go as fast as a linear trajectory.
- Unknown makes unloved (60%): The unfamiliarity ensures that organizations are still searching in the method of filling circularity. People have to do something new and new things often lead to resistance. It requires a new way of thinking, a culture change. Circular procurement is still relatively unknown, both to the requesting party and the offering party, and both still do not know how to handle this properly.
- Exercise control (60%): How can you check that suppliers do what they promise? How can you check whether the solution is really circular? There is a proliferation of certificates, which is the right one? Certificates can be a form of 'greenwashing'. It is best to visit organizations yourself and to ask critical questions.
- Financing (50%): Banks are traditionally equipped to finance classic, linear earnings models. They still hesitate (often often refuse) to finance circular ambitions. The market also does not want to pre-finance too much (the more pre-financing, the more expensive it becomes: spreading of risk). In addition, it also requires other payment methods of the organization (for example, not once, but spread, etc.).
- Sustainable is expensive? (45%): Sustainability has the stigma that it is expensive, especially for SMEs. This makes them less willing to see circularity as a possibility. We mainly look at the purchase price and the short term. One has to look at the total costs, and not just the investment costs. This requires long-term thinking. A well-running process often produces circular products that are just as expensive as, or even cheaper than, linear products.
- Issue of volume - who is the boss? (35%): Too small a volume creates a disproportionately high cost price, and ensures that suppliers do not always find it interesting enough to make the necessary investments. Volume is needed to make it interesting. On the other hand, pilots and small projects make it manageable to learn from it. Make it manageable, after which you can scale up.
Success factors in circular purchasing
In addition, the factors that need to be present in order to make circular procurement a success were examined. Conducting discussions with the market is seen as the biggest success factor. The presence of vision and support, cooperation and functional specification are also often mentioned.
- Discussions with the market and with the chain (85%): Circular procurement is a new, unexplored area for both the purchasing party and the supplier, which means that the chance of talking to each other or not understanding each other is great. Start the conversation with the market at the beginning to find out what is possible and how far they are with circularity. It is important to know how far the market is compared to your ambition.
- Vision, support and culture change (80%): In addition, vision and support must be present in order to make circular procurement a success. There must be 'business alignment': the organization must be aligned and be aware that the purchase is carried out in a different way. In addition to changing internal processes, a change in culture is often required. The complete operational management of the purchasing organization will have to adapt to the circular way of thinking.
- Collaboration (65%): Furthermore, in order for circular procurement to succeed, all parties in the chain must cooperate. Chain collaboration leads to a greater chance of innovation because parties exchange knowledge, enter into dialogue with each other and coordinate their processes.
- Functional specification (55%): Functional specification is a way to move the market with innovative ideas, because this form of request leaves room for the contractor to come up with a variety of solutions. Use is made of the knowledge, experience and inventiveness of market parties.
- Honesty and transparency (50%): Transparency is about openness, visibility and accessibility. Circular purchasing is new and unknown. Nobody knows what he wants exactly, and how it should look like. It is a learning process. You can learn by being open and honest with each other. The supplier must understand the fact that the purchasing organization does not yet know how to handle it, and the buying organization needs to understand the supplier's struggles.
- Asking questions (45%): Ask questions. Not only to the suppliers, but also to the internal customer. Let them think about circularity and whether it can be done differently. What are your real requirements? Also ask critical questions to suppliers. This gives a good idea of whether you understand each other and want the same.
- A healthy dose of guts and enthusiasm (40%): Enthusiastic and enthusiastic employees are crucial for the successful execution of a circular route. Enthusiasm stimulates to continue, enthusiastic employees can take a beating and keep full of problems.
- Be critical (20%): Being critical is necessary to be able to separate 'real information' from 'wrong information'. Do not take everything for granted and do not judge too quickly. There is now a lot of disinformation spread. Ask questions to your internal customer and supplier, and try to obtain the right information to make a decision. And dare to make mistakes, because you learn the most from mistakes.
In addition to taking bottlenecks and success factors into account, it is important to have at least some basic knowledge about the circular economy. Also make sure that you clarify definitions: what does 'circular purchasing', 'critical material' and 'upcycling' mean to you? And last but not least: just go do it! Dare to make mistakes, you learn from that. Leaders in business and government show that circular business models demonstrably lead to better performance. Just go try it, ask the question a bit differently, go into conversation with your suppliers and ask them what they do in the field of circularity. You have to start somewhere, and someone has to be the first. That is the case with everything. But once there is a proverbial sheep across the dam, more will follow. This creates a snowball that is getting bigger and that creates more opportunities and opportunities. Only one has to start ...
This article appeared earlier in the online magazine TGTHR, the Dutch platform for sustainable entrepreneurship.