Supply chain shortages and associated economic inflation show few signs of letting up amid mounting social and governmental pressure on companies to report and reduce their supply chain emissions. But there are various strategies at the intersection of both these issues: circular economy models, responsible waste management, and preservation of natural capital.

Supply chain “constraints are not short-term and the underlying trend is that demand for goods is rising while supply is increasingly scarce," Gartner analyst Sarah Watt said. And chief supply chain officers (CSCOs) or executives managing the supply chain are also under pressure to increase transparency into sustainability-related supply chain metrics.

Gartner outlined the following strategies for enterprises and CSCOs to combat supply chain disruption while prioritizing environmental sustainability, starting with the same underlying principles behind the first introduction to sustainability many of us had: reduce, reuse, recycle.

Developing and implementing a circular economy strategy into all stages of a product's lifecycle reduces the environmental strain associated with the demand for raw materials while providing supply chain security.

Specifically, the circular economy model aims to keep raw materials in use at the highest quality for as long as possible. This allows for the decoupling of resource consumption from enterprise growth, Watt explained in an earlier interview with SDxCentral.

When such a decoupling occurs, enterprises reuse, recycle, or refurbish end-of-life products to provide material for new production. In a successful circularity model, enterprises no longer require increased amounts of virgin materials in tandem with their growth.

Company ownership of end-of-life materials, particularly if they consist of valuable raw material, is a vital aspect of circularity that often poses a challenge. Hardware vendors Cisco and Dell Technologies, for example, market product return programs to incentivize customers to return their end-of-life products.

When companies can close that loop, they can be more resilient to supply shortages. “Essentially some suppliers are using end-of-life materials as a hedge against inflation and availability concerns,” Watt explained.

Plus, a circular approach alters the relationship between enterprises and suppliers. “Our suppliers might then become more of our partners when it comes to processing these products or materials at end-of-life,” Watt told SDxCentral in an earlier interview. “And it fundamentally changes the power dynamics in that relationship to be more collaborative.”

As those relationships shift, however, “there has to be equity,” Watt added. “There has to be something in it both for the organization and the supplier. We cannot just rely on goodwill to make the circular economy work. We have to both have a positive environmental impact as well as there being a financial benefit for all parties involved in pulling a product around a circular loop.”

But before an enterprise develops a strategy for circular economy, it should deeply assess environmental, societal, and financial impacts of circularity at both a product and service level. Although a circular economy promises massive and wide-ranging benefits, it could also produce unintended consequences.

"CSCOs need to define the best candidates for circularity, or they may end up creating increased environmental burden rather than reducing it," Watt warned.

Shifting perspectives around waste is the second strategy Gartner recommends. With recent "changes in waste regulation, waste will be increasingly seen as a liability – when it could also be a resource," Watt explained.

Enterprises can realize this value by creating or building upon a partner ecosystem with waste contractors, suppliers, and innovators in the space.

Especially in the absence of a broader circular economy strategy, companies should incorporate waste streams into their supply chain strategy to effectively reuse waste materials, Gartner explained.

Preserving natural capital is another strategy that mitigates supply chain shortages and supports sustainable business practices. Natural capital, or the stocks of geology, soil, air, and water that we rely on for materials production, is crucial to a healthy supply chain.

While that seems simple enough, the issue is that natural capital is viewed as an externality and no one directly pays for its depletion, Watt said. Companies need to focus on reducing biodiversity loss, deforestation, and supporting regenerative agriculture efforts as a way to support a robust global supply chain.

“The risk today is that CSCOs are spending the feedstocks more quickly than they can regenerate, and supply chains must make sure that they don’t destroy the very base of their business,” Watt said.