For centuries, industry has relied on a linear economy: make, use, and dispose. Today, the pressing need to reverse climate change has driven a new industrial revolution—a circular economy—aiming to keep resources in use for as long as possible before they are reduced, reused, or recycled responsibly.
Electrification has proven instrumental in establishing circular supply chains. Advances in battery and charger technology enable industrial equipment to run longer, with greater efficiency, and with drastically reduced emissions.
But for all the benefits electrification has unlocked, it’s also introduced new challenges.
At the Future of Electrification 2024 conference, these issues underwent rigorous examination by a qualified panel of industry experts. This article explores their key findings, outlining strategies for establishing circular supply chains in industrial and commercial sectors.
Watch the full session here:
The Role of Original Equipment Manufacturers (OEMs) in Circular Supply Chains
OEMs occupy a foundational position near the supply chain’s inception, often directly communicating with the suppliers responsible for sourcing raw materials. Decisions made at this juncture thus have cascading effects throughout the supply chain, highlighting the necessity for OEMs to thoroughly understand customer needs.
This can be broken down into two stages:
- Defining circularity – Transitioning from linear to circular supply chains represents a significant shift, and end customers may have different definitions of circular design. Clear communication is vital for OEMs to identify technical considerations that align with sustainable principles and customer expectations.
- Navigating regulations – Equally important is comprehension of the regulatory environment, which can range from local to international levels. OEMs must grasp the subtleties of these regulations to ensure compliance throughout the design and production processes.
With this comprehensive understanding, OEMs are better equipped to design components that reflect customer desires while adhering to regulatory demands, culminating in a sustainable product that supports the principles of a circular economy.
Circular Design Principles: Three Crucial Aspects
The familiar refrain of “reduce, reuse, recycle” presents unique complexities for industrial OEMs, where the applications of electrical machinery are highly specialized and cannot be simply repurposed or resold like everyday consumer items.
To that point, consider each of these aspects through the lens of an industrial application:
- Reduce – OEMs can often minimize waste throughout the manufacturing process. This starts with carefully selecting raw materials and extends through to production and transportation.
- Reuse – Emerging technology, such as digital product passports, promises to enable more efficient reuse and second-life applications of batteries.
- Recycle – Beyond traditional recycling, OEMs can innovate in how they reclaim waste products, such as repurposing waste heat from production processes into facility HVAC systems.
These principles offer a roadmap for OEMs to align their operations with Environmental, Social, and Governance (ESG) frameworks, driving more sustainable and responsible manufacturing practices.
Beyond Design: Strategic Circular Supply Chain Management
While stringent regulations promote the adoption of circularity, they also introduce a hidden danger to OEMs. An overload of initiatives, goals, and mandates often creates a pressing need for rapid development to market compliant machinery quickly.
This approach, while perhaps effective in a linear economy, falls short in a circular one. Considerations must extend beyond immediate design needs to those of the entire supply chain. Failure to do so can lead OEMs to expending even more time and money backtracking and correcting oversights.
The key to a successful transition lies in embedding Environmental, Social, and Governance (ESG) principles into the core of company culture. OEMs that integrate these values from the outset are better positioned to drive their initiatives forward, focusing on strategic deployment rather than just compliance.
Important considerations include:
- How will this design facilitate reduction, reuse, and recycling?
- What platform and architecture are necessary to support these goals?
- How will these efforts contribute to the creation of a circular economy?
Historically, company cultures have prioritized profitability above all. Circular economy principles are changing that. The most successful future partnerships among OEMs will likely be those that prioritize the broader ecosystem—because, in the long run, that is what drives a better bottom line.
Supplier Partnerships: A Critical Link in Circular Supply Chains
For OEMs, it’s essential to understand the implications that a circular economy introduces to suppliers. Whereas linear economy principles saw suppliers act merely as intermediaries between supply and demand, circularity redefines this role.
The focus has shifted towards ensuring transparency and traceability, crucial elements in a circular supply chain. Suppliers are now expected to provide detailed information for each product, including:
- Percentage of recyclable material
- Exact CO2 emissions
- Lifecycle environmental impact
OEMs must also brace for similar inquiries from their customer base—a unique challenge given the lack of standardized metrics for carbon neutrality.
The push for universally accepted regulations and key performance indicators (KPIs) is essential, potentially catalyzing governmental engagement and the establishment of clearer, global sustainability standards.
Electrification and Circularity: Pioneering Industrial Sustainability
Standing at the core of the circular transition is electrification.
In the United States, a global market leader, the government is funding development of new battery recycling methods. With advancements in battery traceability, the next decade is expected to see a significant rise in the implementation of second-life battery services.
Much of this shift is largely driven by geopolitical imperatives. Without reserves of cobalt and manganese to spare, existing lithium supplies in the US are not sufficient to meet demand. Recycling thus emerges as an imperative to meet future needs as electrification accelerates.
Yet circular economy innovations are not exclusive to the American market, nor should they be.
The COVID-19 pandemic exposed numerous supply chain vulnerabilities and interdependencies. For instance, conflict in a major helium-producing country unexpectedly affected vehicle production worldwide due to helium’s critical role in microchip manufacturing. This example highlights the unexpected, often-overlooked interconnections in global markets.
In contrast, adopting circular economy principles leads to:
- Increased conservation of resources
- A shift towards localized production systems
- Reduced reliance on distant suppliers
This approach enhances sustainability by reducing delivery emissions. It also strengthens the resilience of supply chains against global disruptions.
Driving a Sustainable, Electrified Future
While electrification represents a leap forward in achieving a circular economy, the journey is far from over. The learning curve is steep, and the change to a circular mindset is an ongoing process that is neither swift nor simple.
As regulatory compliance charters a path forward, it is up to OEMs to engineer this transition to an all-electric future.
Though the path is long and filled with challenges, pursuit of this transition is essential. Each step, no matter how challenging, contributes to a greener, more resilient world. By our concerted efforts today, we lay the foundation for a more sustainable tomorrow.
