Reverse Logistics: Sustainability's Next Frontier?

Increasing need for impact measurement and valuation
Reverse Logistics: Sustainability's Next Frontier?
Publ. date 22 Jan 2020
With the rise of sustainability, reverse logistics is one of the next frontiers for retailers and manufacturers around the globe. In a 100% circular economy, the return flow is equal to the volume of the original transaction. According to Optoro, a UPS-backed service provider focused on eliminating waste from returns, the retail industry is far from achieving such circularity. In its Retailer Sustainability Research on 128 prominent U.S. and global retailers, the company found that less than 1/4 of the retailers analyzed were implementing programs and adopting initiatives to advance the circular economy and only 30% of retailers implemented product take-back or recycling programs for consumers.

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To effectively manage this stream of waste-that-is-to-become-raw-materials, more impact and valuation data is required. As an example: the stellar growth of food delivery apps in China is submerging the country with takeout containers, utensils and bags. And the country’s immature reverse logistics and recycling system isn’t ready for this growth. The bulk of this plastic ends up discarded, buried or burned with the rest of the trash, researchers and recyclers say.1 Scientists estimate that the online takeout business in China was responsible for 1.6 million tons of packaging waste in 2017, nine times more than two years before. This number includes 1.2 million tons of plastic containers, 175,000 tons of chopsticks, 164,000 tons of plastic bags and 44,000 tons of plastic spoons. But what is the environmental and social impact of these astonishing numbers?

European legislation accelerates move towards circular

But not just China’s reverse logistics systems are overloaded and lacking impact analysis. The EU’s Circular Economy Package (CEP) has brought new legislation to the European marketplace. According to the European Commission, the CEP should "help European businesses and consumers to make the transition to a stronger and more circular economy where resources are used in a more sustainable way."

With the fulfilment of this ambition, reverse logistics demands are set to skyrocket in the coming years for returned products as well as materials that were previously regarded as waste. Besides recycling targets for municipal waste, the CEP includes specific reduction targets for packaging waste, and member states are to set up separate collections of hazardous waste and textiles waste from consumers.

Return cycles spurred by e-commerce require new business models

As is the case in China, this predicted upswing of reverse logistics is amplified by the growth of e-commerce. Consider the substantial returns from online retailing: right now, an estimated 30% of e-commerce merchandise is returned, while the traditional retail return rate stands at about 10%.

Both the CEP and the digital transformation of retail present a clear conclusion: with the moving of goods flows from the traditional linear model to a regenerative circular one, reverse logistics is increasingly touted as an essential part of business success. This not only involves the development of new business models but also technologies and change processes to make those same business models work within the existing operations.

How to assess the maturity of your reverse logistics

In their report on reverse logistics,2 the Ellen MacArthur Foundation proposes five maturity levels considering project and process management stages, broadly used for continuous process improvement.

  • Initial; informal and ad hoc process
  • Managed; basic project management
  • Defined; standardized process
  • Qualitatively managed; measurable and controlled process
  • Optimizing; continuous process improvement  

On a more operational level, three main challenges for maturing reverse logistics, present themselves. First, availability of suitable load devices such as the containers at H&M for clothes and the specific Nespresso bags to return used capsules. Second, the predictability of quantity and quality of the resource waste stream to become a reliable feedstock for instance in the case of chemical recycling of end-of-life plastics. And last but not least: a demonstratable impact on society.

Still a long way to go in retail

Reverse logistics could be the next material topics for retailers around the world. According to Optoro, a UPS-backed service provider focused on eliminating waste from returns, the retail industry still has a long way to go. In its Retailer Sustainability Research on 128 prominent U.S. and global retailers, the company found that less than a quarter of the retailers analyzed were implementing programs and adopting initiatives to advance the circular economy, with or without set goals. And, only 30% of retailers had implemented product take-back or recycling programs for consumers, even without explicitly tying these programs to the circular economy. With the projected growth of waste and return flows this explains why reverse logistics is rapidly becoming one of the cornerstones of circular economy thinking.

Interested in more information on reverse logistics?

How prepared is your supply chain? In case you are interested in building a framework for impact measurement and valuation on reverse logistics, Finch & Beak can help you. Contact Jan van der Kaaij, Managing Partner, at jan@finchandbeak.com or +34 6 82 04 83 01 to find out more.

Sources:

1 NY Times (2019, 28 May) Food Delivery Apps Are Drowning China in Plastic.
2 Ellen MacArthur Foundation (2016), Waste not, want not. Capturing the value of the circular economy through reverse logistics.
Image: Flickr.com

About Jan van der Kaaij

Sustainability expert in strategy development, DJSI and sustainable innovation, with a hands-on approach and always committed to go for the max. | jan@finchandbeak.com 

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