Rebuilding supply chains in the age of tariffs
As Trump-era policies return with sharper edges, companies must rethink supply chains not for speed, but for resilience. ...
Supply chain
A circular model for sustainability Â
Companies need a new, holistic approach to sustainability if they are to head off criticism and accusations of greenwashing, says IMDâs Carlos Cordon.
Apple would not have expected everyone to love its new âMother Earthâ video, which it presented during its September 2023 launch event for the iPhone 15. The film, with a cast including Apple CEO Tim Cook and Oscar-winning actor Octavia Spencer, sought to profile the technology giantâs progress on making all its products carbon-neutral by 2030. Inevitably, critics of the worldâs largest company were anxious to point to areas where they believed Apple had not moved fast enough.Â
With customers, employees, regulators, and other stakeholders all pressing them to clean up their act, companies want to show they are responding. But doing so naturally prompts scrutiny of their perceived shortcomings â and can even result in accusations of greenwashing.Â
Apple, more than most, may feel a little hard done by. This, after all, is a company that has won praise from organizations such as Greenpeace for its policies and actions, particularly in respect of its supply chain. Nevertheless, itâs difficult to have too much sympathy for a company whose very business model is built on a fundamentally unsustainable premise. After all, to sell its iPhone 15, Apple must persuade owners of other recent, perfectly functioning â but now superseded â models that they need a new phone.Â
In the end, Apple, like most consumer companies, is a business on a mission to sell stuff. Indeed, itâs part of an electronics industry in which the concept of âplanned obsolescenceâ is inherent; that is, products are built to have a short lifecycle. Where businesses once sought to compete on reliability and durability, many now depend on a model of constant replacement.Â
Nor do cellphone manufacturers have a particularly good record on recycling and reuse. Every single year, around 150 million handsets end up in landfill sites worldwide. The GSMA, the industryâs trade association, has launched an initiative to develop a circular model for the cellphone industry, but it has a long way to go to achieve its aims.
A new model for sustainabilityÂ
How, then, do companies confront this sales versus sustainability dichotomy? The short answer is that they are going to have to explore new business models â and to address any operational challenges they bring.Â
One possibility is to embrace the subscription model, through which customers lease products for as long as they need them, rather than buying them outright. They receive ongoing access to the latest products and return unused products to the company to be recycled or upgraded.Â
In the enterprise sector, construction company Hilti is pioneering such an approach with a fleet-management service that allows customers to build their own customized toolkit, which they can lease for 36 or 48 months, paying a monthly fee. Hilti remains responsible for maintenance and, at the end of the lease period, if the customer renews, Hilti will upgrade the tools to the latest models. Returned equipment can be refurbished and upgraded, and then leased to other customers.Â
Could similar models be employed in the consumer sector? The answer is yes, but there are significant challenges to overcome, particularly from a supply chain perspective.Â
In fact, some companies are already experimenting in this regard. Swiss running-shoe company On, backed by tennis star Roger Federer, launched a $30-a-month subscription service in 2022. Customers get a new pair of the companyâs recyclable shoes every six months; the company takes each old worn-down pair back and makes new sneakers from them.Â
Scaling up this idea is not always straightforward. Consumer products giant Coca-Cola, for example, has ambitious targets of increasing the proportion of recycled plastic in its packaging. However, getting that plastic back from consumers isnât necessarily easy and Coke has warned its targets could prove difficult to achieve in some parts of the world. Â
Coca-Cola has ambitious targets of increasing the proportion of recycled plastic in its packaging. However, getting that plastic back from consumers isnât necessarily easy.
Interventions from policymakers, including national and municipal governments, can offer some support here. A growing number of European countries, for example, have introduced deposit return schemes. These mandate participation by companies selling certain products (soft drinks in plastic containers, for example), with consumers paying a small charge on each purchase, refundable when they return the bottle.Â
Where implemented efficiently, such schemes have driven up recycling. Nevertheless, the consumer goods companies participating in them must find ways to retrieve the plastic collected, often from disparate, widespread sources. That requires a supply chain and logistics infrastructure that are completely different to their conventional sourcing.Â
Deliver and returnÂ
With commitment, this can be achieved. NestlĂŠ, for example, has made significant efforts to increase recycling of its Nespresso pods. It has worked with local authorities to develop recycling facilities capable of processing the small aluminum capsules, using its delivery services to collect used pods. A new deal with the Royal Mail in the UK, for example, will enable customers to hand used pods to their post worker.Â
These are, of course, initiatives to promote recycling and reuse of product packaging, rather than the product itself. But it doesnât take a big leap of the imagination to see how the latter is possible, too.
Blended program
Creating value in the circular economy
From linear to circular â unlock sustainable business opportunities
Indeed, to return to the example of Apple, many cellphone users will remember when a subscription model was the norm. To encourage take-up, the telecoms networks have often subsidized the cost of mobile phones, enabling a customer to spread the cost of a handset over the duration of their contract. At the end of the contract, customers can typically switch to paying a lower ongoing monthly charge for line rental alone or return their phone in exchange for a newer model.Â
While sustainability goals did not drive the development of such models, they are much closer to the circular model businesses aspire to today. With infrastructure in place to ensure manufacturers can retrieve and refurbish these handsets â or, at least, recycle their constituent parts more effectively â this model could significantly reduce the need for virgin manufacturing. Â
Committing to such a model would offer Apple protection against accusations of greenwashing and allow it to present collateral such as the Mother Earth video with a straight face. Similar models could work well across many consumer-facing segments. Â
Companies need to think about the type of business they want to run and how they want to contribute to the type of world they want for the future. Then, they must develop the operating model to support that vision.Â
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