A circular economy enables us to restore natural ecosystems while still accelerating business and financial objectives. With 90% of CEOs seeing sustainability as important to success and 66% of consumers paying more for sustainable brands, the circular economy might be closer than we think—and it often starts in the supply chain.

Let’s look at a few examples. IKEA is on a journey to become more circular. Back in 2017, it developed its first designing for circularity guide, which helped define IKEA’s circular design. The results in the past few years have been impressive. In financial year 2019, the retail giant gave 47 million products a second life, 38 million products were resold through the as-is specialty shop, and more than 9 million products have been repacked back to the shelf.

In the Netherlands, Sweden, and Switzerland, IKEA is a trialing leasing-as-a-payment option and it is running a circularity campaign to encourage visitors to reuse, share, recycle, upcycle, and repair items, along with talks about circular principles in Russia.

It has also committed to enabling customers to obtain, care for, and pass on products in circular ways, while producing 100% circular products—and it is going to do this all by 2030. The ultimate goal is a zero-waste mindset and to become 100% circular—and yes this includes in the supply chain. The company aims to have all of the products be 100% circular from the beginning. As such it has conducted the External Feedstock Project, which led IKEA to identify the 32 high priority materials in woods, plastics, papers, metals, and textiles, which have the fullest circular capabilities.

Further, the four circular loops will enable IKEA to test and develop with partnerships throughout the value chain—including with customers. These four loops include: reuse, refurbish, remanufacture, and recycle.

Let’s look at another example. H&M Group recognizes two of the biggest challenges are climate change and resource depletion—both of which contribute to biodiversity loss and worsen human conditions. The fashion company recognizes this and aims to be climate positive by 2040. This is how it is going to do it in its value chain.

For one, it is creating products that are made to last, with the aim of using 100% recycled or sustainably sourced materials by 2030 and 30% recycled materials by 2025. It is also working with suppliers to reduce water consumption by 25% per unit produced by 2022.

The right modes of transport are key as well. H&M uses ships and trains to transport more than 90% of its products from suppliers to warehouses and has set standards to encourage the transport companies to reduce their social and environmental impact. Taking it a step further, it is also collaborating on solutions such as electric trucks and bicycles for last-mile delivery to customers. What’s more, it recognizes the importance of a healthy working environment. For example, 96% of the electricity used in stores, offices, and warehouses comes from renewable sources.

The last step of the value chain—the customer—is also key to its circular approaches. Washing and drying clothes accounts for 13% of a garment’s total carbon emissions over its lifecycle. Therefore, it is inspiring its customers to be conscious of the way they care for their clothes. For example, washing them at a lower temperature and hanging laundry to dry cuts energy use and saves money.

Here is the challenge, specifically in the supply chain. Accenture suggests people at the beginning of the supply chain have been left out of this circular economy. All too often, small producers who bear the backbreaking effort of following sustainable practices receive a mere sliver of the economic pie that sustainable goods yield. If faced with a choice between feeding their family and addressing environmental impact, there is no choice. Incentives are misaligned.

Enter Accenture’s digital identity capability, which generates a new kind of value. This connects the consumer to the initial producer so the consumer can reward good production practices and help realign financial incentives and support good business and environmental practices. Essentially it closes that loop from consumer to producer. Enterprises with a blockchain-enabled mechanism can enable customers to identify products, prove authenticity, and directly tip their farmer, as an example.

Technology can help us achieve this vision for the new supply chain that enables a circular economy. Some big companies are taking a step in this direction. Perhaps the future is circular.

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