With the effects of cli­mate change, dwin­dling resources, and pop­u­la­tion growth — and their soci­etal con­se­quences — mate­ri­al­iz­ing as steadi­ly grow­ing real­i­ties, enter­pris­es must explore new oppor­tu­ni­ties to con­duct their oper­a­tions in a sus­tain­able, envi­ron­men­tal­ly friend­ly man­ner. But while pur­su­ing sus­tain­abil­i­ty can be com­pli­cat­ed, doing so can ulti­mate­ly ben­e­fit business. 

“At SAP, we believe there should be no trade-off between prof­itabil­i­ty and sus­tain­abil­i­ty,” Alex Karim, Sus­tain­abil­i­ty Prin­ci­pal at SAP, told atten­dees at a recent ASUG web­cast, titled ​“The Trans­form­ing Effect of Cir­cu­lar­i­ty on Busi­ness and Society.”

Focused specif­i­cal­ly on the top­ic of cir­cu­lar­i­ty — oth­er­wise known as the ​“cir­cu­lar econ­o­my” — the May 25 web­cast laid out var­i­ous ways in which this holis­tic busi­ness method can not only improve an orga­ni­za­tion’s sus­tain­abil­i­ty met­rics but also dri­ve busi­ness value. 

Karim also dis­cussed how SAP and its suite of sus­tain­abil­i­ty solu­tions enable cus­tomers to embrace cir­cu­lar­i­ty and become more intel­li­gent, sus­tain­able enter­pris­es. Here are three key insights:

Cir­cu­lar­i­ty 101

Karim spent much of the web­cast dis­sect­ing the prin­ci­ple of cir­cu­lar­i­ty, and how it can be applied to busi­ness in pro­duc­tive, suc­cess­ful ways. In sim­plest terms, cir­cu­lar­i­ty is about elim­i­nat­ing waste. Our cur­rent econ­o­my — which Karim not­ed is ​“lin­ear” — cre­ates an enor­mous amount of waste; there are obvi­ous exam­ples, such as plas­tics and food waste, but Karim also point­ed out that cloth­ing, chem­i­cals, and high tech indus­tries are also sus­cep­ti­ble to gen­er­at­ing waste. 

With only a finite amount of resources on Earth, cir­cu­lar­i­ty as a con­cept revolves around find­ing ways to reduce waste by reusing and recy­cling resources, as opposed to sim­ply dis­pos­ing of them. Accord­ing to Karim, cir­cu­lar­i­ty is a ​“whole new val­ue sys­tem.” Due to the mon­u­men­tal nature of its scope, cir­cu­lar­i­ty has mul­ti­ple stake­hold­ers in a business. 

“In a busi­ness for­mat, cir­cu­lar­i­ty affects every­one,” Karim said, before lay­ing out how prop­er­ly imple­ment­ing the con­cept neces­si­tates the involve­ment of employ­ees from the finance, man­u­fac­tur­ing, sales, mar­ket­ing, IT, pro­cure­ment, and sup­ply chain sec­tors of a business. 

Karim laid out three pil­lars every enter­prise needs to suc­cess­ful­ly tran­si­tion to a cir­cu­lar busi­ness mod­el: mon­i­tor, mea­sure, and act:

• Mon­i­tor­ing: Busi­ness lead­ers should under­stand the evolv­ing reg­u­la­tions their enter­prise must adhere to, along with any vol­un­tary agree­ments the orga­ni­za­tion has made pub­licly. For exam­ple, SAP set a goal to become car­bon neu­tral by 2023 and to reach net-zero emis­sions by 2030. Mon­i­tor­ing also means keep­ing a fin­ger on the pulse on mar­ket and soci­etal fac­tors. Today’s con­sumers demand more sus­tain­able oper­a­tions from companies. 
• Mea­sur­ing: Enter­pris­es must have a con­crete under­stand­ing of the mate­r­i­al flow nec­es­sary to pro­duce their prod­ucts — along with the impacts of those flows across the sup­ply chain. Relat­ed to this, com­pa­nies also must keep track of the mate­r­i­al com­po­si­tion of their products. 
• Act­ing: Com­pa­nies must inte­grate cir­cu­lar­i­ty into their busi­ness process­es, mak­ing it a core part of their organization.

Ben­e­fits of Circularity 

Cir­cu­lar­i­ty has sus­tain­abil­i­ty ben­e­fits. Track­ing the flow of mate­ri­als helps com­pa­nies to not con­sume too many finite, scarce resources — many of which are over-encum­bered by cur­rent mar­ket demand. Karim also stressed through­out the event that there are enor­mous busi­ness and finan­cial ben­e­fits to imple­ment­ing cir­cu­lar econ­o­my practices. 

From a finan­cial per­spec­tive, cir­cu­lar­i­ty — and the gen­er­al prac­tice of using less — brings to bear ​“a whole new class of busi­ness,” accord­ing to Karim, dri­ving effi­cien­cy across oper­a­tions. Addi­tion­al­ly, enter­pris­es embrac­ing cir­cu­lar­i­ty gain a com­pet­i­tive advan­tage by expand­ing their cus­tomer base, improv­ing cus­tomer rela­tion­ships, and increas­ing prof­itabil­i­ty. Grow­ing rev­enue streams, dri­ving down costs, and help­ing orga­ni­za­tions to main­tain com­pli­ance with emerg­ing laws and reg­u­la­tions, cir­cu­lar­i­ty dri­ves busi­ness val­ue in mul­ti­ple forms.

How SAP Helps Cus­tomers Tran­si­tion to Circularity 

In recent years, SAP has focused on enabling sus­tain­able oper­a­tions through its soft­ware offer­ings. Karim touched on spe­cif­ic ways SAP solu­tions can help cus­tomers embrace cir­cu­lar­i­ty and make it a key part of their business. 

Green­To­ken by SAP, a chain-of-cus­tody blockchain solu­tion, gives orga­ni­za­tions greater insight into man­ag­ing com­plex raw-mate­r­i­al sup­ply chains while pro­vid­ing cus­tomers with greater vis­i­bil­i­ty of mate­r­i­al sources. In doing so, it offers com­pa­nies new lev­els of trans­paren­cy in their sup­ply chains and incen­tivizes col­lec­tive action and inno­va­tion on the part of both com­pa­nies and their cus­tomers. East­man, in the midst of its own dig­i­tal trans­for­ma­tion jour­ney, is part­ner­ing with SAP to pilot the Green­To­ken technology.

Cir­cu­lar­i­ty is also enabled by SAP Respon­si­ble Design and Pro­duc­tion, a cloud solu­tion that cal­cu­lates extend­ed pro­duc­er respon­si­bil­i­ty (EPR) oblig­a­tions, plas­tic tax­es, and cor­po­rate com­mit­ments to opti­mize mate­r­i­al choic­es. With the soft­ware, cus­tomers can mon­i­tor the increas­ing needs of their busi­ness­es while com­ply­ing with reg­u­la­tions and vol­un­tary com­mit­ments. It also pro­vides them with a deep­er under­stand­ing of the impli­ca­tions of soci­etal demands on prod­uct and pack­ag­ing design. SAP Respon­si­ble Design and Pro­duc­tion gives cus­tomers the abil­i­ty to mea­sure the mate­ri­als con­sumed to make prod­ucts and pack­ag­ing. Final­ly, it gives cus­tomers the tools to act, pro­vid­ing action­able insights into how busi­ness­es can bet­ter elim­i­nate waste and reduce, reuse, and recy­cle materials. 

You can watch the full webi­nar and hear spe­cif­ic attendee ques­tions about inte­grat­ing cir­cu­lar­i­ty into busi­ness — and how SAP can help — by reg­is­ter­ing and watch­ing the webi­nar on-demand here.