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Circular Economy

What is circular procurement?

Procurement is an important mean to approach a circular economy. By demanding the right products you can set the market in motion and create more circular products. Circular procurement is more than just purchasing circularly designed products: it is also important to pay attention to their circular use. Below, the concept of total cost of ownership is explained, as well as 8 steps to circular procurement.

In many cases, long-term circularity leads to a financially more favourable scenario, in which the Total Cost of Ownership (TCO) or the Total Cost of Usership (TCU) is lower than in a traditional transaction model. One way to bridge this is to pay for the use of the products instead of purchasing the products or to settle the residual value of the product at the end of its useful life; a deposit (Pianoo, 2018).

Circular procurement in 8 steps

Copper8, in collaboration with Rijkswaterstaat, has drawn up a manual for circular procurement in Dutch. Below is a summary of the 8 steps covered in the book. Click below for the complete manual:

1. Circular procurement: Why and what?

In step 1 of the process of circular procurement you determine the working definition for the circular economy in relation to your purchasing issue. Only if you have a clear understanding of what circular purchasing means for your organisation, can you also find suppliers who want to contribute to achieving that goal. In addition, it is important to know how you can weigh up the options internally in order to arrive at a first circular purchasing pilot. Projects with a lower risk profile and a visible impact on a circular level are strong pilot projects to put circular procurement in your organisation on the map. Product groups with a limited complexity and lifespan are more suitable for circular procurement.

2. Internal organisation

Step 2 starts with filling in the ‘how’. By indicating the consequences of a circular procurement process, it is clear that circular procurement is more than just a one-off transaction. The cooperation between internal departments determines whether you can achieve a successful circular procurement process. Bridging internal interests and involving and informing stakeholders for a successful circular procurement process.

3. Demand formulation

Determine the functional demand and the way in which you formulate the demand. Start by identifying your needs; after all, not purchasing is the most concrete contribution to the circular economy. Then try not to formulate the solution in technical terms, but give room to the question so that the market parties can come up with solutions.

4. Multidisciplinary cooperation

Cooperation is an important means of achieving a circular economy and a circular project, but that is not self-evident. You often have to initiate cooperation as a client and this also applies to the cooperation between different chain partners. Therefore, take the role of the director in the tender procedure.

5. Tendering procedure

The tender procedure should reflect what you want to achieve with the tender; if you want to work together, you should reflect this with the procedure you choose. The procurement principles according to the European Commission provide a clear framework for both contracting parties and private parties. For circular procurement, we also add the principles of ‘cooperation’ and ‘innovation’. Give parties the opportunity to enter into a dialogue with both you, the client and each other.

6. Measuring and assessing circularity

Designing a circular selection and award framework is perhaps the most challenging step. While in the selection phase questions are about the provider, in the award phase they are about the offer. This step also looks at the assessment of qualitative questions and provides insight into the measurement and assessment of circularity. In any case, choose a workable format. Make sure that the market does not have to do a disproportionate amount of work to make circularity transparent. In addition, make sure that the final insight says enough about the level of circularity of a product and that a broader target group understands this as well.

7. Assurance

How do you safeguard your circular ambitions in the long term? Circular earning models can be a means to ensure circular use, by linking a financial incentive to circular performance. Performance can also be included in a contract as KPIs.

8. Contract management

In the case of a circular procurement process, don’t forget to give the contract management a good form as well. In fact, the tender is the start of the relationship between the client and the contractor; the cooperation itself only really takes shape during the term of the contract. Maintain the relationship and ensure that there are sufficient moments when the collaboration is evaluated.

For more specific tips, visit the Circular Purchasing Guide: https://wegwijzer.gdci.nl/en/