Circular procurement strategies
The gatekeeper of the circular economy
Procurement sits at the gateway of the organization. Every decision made by a buyer ripples through the entire lifecycle of the asset. If procurement buys a non recyclable, glued together composite material, the waste management team has zero chance of recovering value from it ten years later.
Circular procurement involves explicitly purchasing for longevity, repairability, and eventual recovery. This aligns with global standards such as ISO 20400: Sustainable Procurement which guides organizations to consider the environmental and social impacts of their buying decisions. It moves the conversation from the purchase price to the sustainability of the system.
Buying services instead of products
One of the most effective circular strategies is the Product as a Service (PaaS) model. Instead of buying a lighting system, a company buys lumens from a provider like Signify. The provider retains ownership of the equipment and is responsible for maintenance and upgrades. This incentivizes the manufacturer to build robust, modular equipment that lasts rather than cheap disposable units because they are the ones paying for the repairs.
Total cost of ownership vs disposal cost
The hidden cost of disposal
Traditional procurement focuses on the purchase price. Smart procurement focuses on Total Cost of Ownership (TCO). However, even TCO models often ignore the End of Life costs. Disposal is rarely free. Hazardous waste disposal, secure data destruction, and transport to landfill can cost thousands of dollars per tonne.
The Total Cost of Usage (TCU) model
A more advanced metric is Total Cost of Usage (TCU) which factors in the recovery value. Consider two options. Option A is a cheap Brand X Pump costing $10,000 with zero resale value and a $500 disposal cost. The net cost is $10,500. Option B is a premium Brand Y Pump costing $12,000 with a resale value of $4,000. The net cost is $8,000.
Although Option B is 20% more expensive upfront, it is 24% cheaper in the long run. Procurement teams need to be trained to run these calculations and rewarded for long term value savings rather than short term budget variance.
Embedding resale into procurement decisions
The pre disposal plan
The best time to plan for resale is the day the asset is purchased. Forward thinking companies are now including buyback clauses in their Request for Proposals (RFP). They require the OEM to commit to buying back the equipment at a set percentage of the original price after a certain number of years. This guarantees a market for the used asset and shifts the risk of resale back to the manufacturer.
Standardization drives liquidity
Procurement can also increase resale value by standardizing equipment. If a company operates 10 plants and uses the same model of conveyor belt motor at all of them, they create a pool of interchangeable spares. This internal liquidity reduces the need for new purchases and makes the bulk resale of surplus units much more attractive to third party buyers.
Asset disposal as a strategic function
From trash to treasury
Historically, asset disposal was handled by the facility manager or the cleaning crew. It was viewed as a janitorial function. In the circular economy, asset disposal is a treasury function. The surplus assets sitting in the warehouse are essentially piles of cash.
Organizations need to elevate the role of the Asset Recovery Manager. This person should have a seat at the operations table and be measured on the revenue they generate from resale rather than just the volume of waste they clear. By professionalizing this function, companies can turn a cost center into a profit center.