Higher on the circular purchasing ladder with Circular Procurement for Value

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: how?
Supply Value has conducted research into circular procurement in practice, and has developed the Circular Procurement for Value (CP4V) model based on the results. The CP4V is a diagnostic model that shows you where your organization stands on the circular procurement ladder and what it takes to get a step further on this ladder to continually professionalize your circular purchasing activities.

Circular Procurement for Value (CP4V) model

The results from the research show that circular procurement can be applied in five consecutive steps (figure 1): from 0% circular procurement to 100% circularity in the chain. Step 0 means that an organization does not yet purchase circularly. In step 5, 100% circularity is in the chain. The chain is set to circularity and it is seen as the standard that automatically looks at circular solutions.

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Figure 1: Five consecutive steps in circular purchasing (Supply Value 2016)

Based on these five steps, the 'Circular Procurement for Value (CP4V) model' has been developed (figure 2). Organizations are in different stages of maturity with regard to circular procurement. The CP4V is a diagnostic model that shows you where your organization stands on the circular procurement ladder and what it takes to get a step further on this ladder to continually professionalize your circular purchasing activities. So what does every step mean for your organization? Which functions and roles are there? How do you further develop this? These types of questions are partly answered by the model and help an organization to move forward.

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Figure 2 - The Circular Procurement for value CP4V model

From 0 to 1: introduction of circular purchasing

Circular purchasing makes its introduction into the organization. To get from step 0 to step 1 someone will have to decide: we are going to start a circular procurement process. In most cases, this will be a buyer who has heard through via circular purchasing and has become enthusiastic about it and wants to apply it. The knowledge of circular purchasing therefore lies mainly with the buyer / purchasing department. Circular purchasing is incidental in this step, it is more of a coincidence that has no fixed structure behind it. There is no / limited support from the management. In this step, there is no formal policy for circular procurement, and no performance criteria have been formulated. The reason for starting Circular Procurement is mainly on the social level, with the idea of contributing something to society in the area of sustainability.

From 1 to 2: Management support

To get ahead in the professionalisation of circular procurement, the support of the management is necessary. If this is not the case, circular purchasing will remain a one-off or occasional, and will never anchor itself in the organization. An organization can only really take steps if there is management support and if responsibilities and goals are set. The knowledge is not only in the purchasing department, but also in management. In step 2 circular purchasing is included in the purchasing policy. There is support for circular procurement, budget is available and goals are formulated and monitored. In this step, these goals or KPIs are only drawn up for the purchasing department and the responsibility for achieving these KPIs lies with one or more employees.

From 2 to 3: Integration in organization

In order to move from step 2 to step 3, circular purchasing must be integrated into the organization. Circularity is included in organizational policy and it is borne by management and internal client. The entire organization embraces circularity, and it is no longer just a matter of purchasing, but it is cross-departmental. The knowledge about circular economy is spread throughout the organization and circular procurement is applied structurally. Purchasing no longer has to be the only driver, the internal customer sees the usefulness of circular procurement and asks for circular solutions (whether or not forced by management through policy). The motivation to start trajectories is no longer just socially, but also economically. The organization recognizes that circularity can contribute to the operating result. In addition to KPIs for the purchasing department, KPIs for the internal customer are also drawn up.

From 3 to 4: Directing over to supplier

In step 4, the control will increasingly come to the market. Suppliers increasingly offer circular solutions from themselves in their services / product range. Circular purchasing becomes a structural part of the purchasing department in cooperation with the chain partners, and circular purchasing is applied as much as possible. Knowledge of circular procurement lies with both the organization and the market, and the market uses this knowledge to increasingly offer circular solutions as standard. In addition to KPIs for the purchasing department and the internal customer, KPIs are also drawn up for the market.

From 4 to 5: Anchoring in the value chain

In step 5, there is 100% circularity in the chain. It is seen as the standard and is seen by both the organization and the market as the normal way of working and producing. The organization and the market run according to the principles of the circular economy. People no longer speak of purchasing processes, but of use trajectories with a beginning and perhaps an end. We work together in the long term, creating partnerships. This not only applies to short cyclical products (coffee cups), but also to long-cycle products (buildings). Being 'unburdened' will play an ever greater role in the future. They no longer want desks and cabinets, they want to be taken care of in the area of workspace, or meeting, or sitting. And preferably they want that with as little 'hassle' as possible.

Carmen3Carmen van Kruisbergen
Consultant - Supply Value