Food & Beverage Industry: The Promise of a Circular Economy
Contributed by Gaurav Sharma, Lead of Circularity Consulting Practice, Schneider Electric
As Circularity Consulting Practice lead, Gaurav leads the delivery of Schneider Electric’s Circular Economy consulting capabilities to our customers, supporting them to meet their business and sustainability goals, using a circular economy as a lever.
As the public demands more actions to be taken from the industry to accelerate the shift into a more sustainable economic model, the Food & Beverage sector faces immense pressure due to its proximity to consumers’ daily lives. As significant contributors to environmental degradation, waste generation, and resource depletion, industries are under increasing pressure to disclose their practices to the public. In the face of such challenges, the circular economy offers promising solutions by adopting a system-wide approach to transforming the way to produce, consume, and dispose of Food & Beverage. In this article, the concept of the circular economy will be explored, its key benefits, and how a circular economy can be applied to the Food & Beverage industry.
What is a Circular Economy?
As defined by the nonprofit organization Ellen MacArthur Foundation, the circular economy is a “framework for an economy that is restorative and regenerative by design.”
The concept challenges the idea that corporate practices must be wasteful. Instead, it seeks to embed principles in business that design out waste and pollution, keep products and materials in use, and regenerate natural systems. By adopting these principles, the circular economy aims to create a more sustainable and resilient system that benefits both the environment and the economy. When effectively implemented in business operations, circularity creates an innovative way of doing business, which can improve both sustainability and profitability.
To implement these principles, there are three key steps to consider taking:
-
Understand the drivers for circularity
-
Have a thorough examination of the value chain
-
Build an ecosystem of partners
Step 1. Understand the drivers for circularity
Firstly, it is crucial to understand where the pressure points lie. At Schneider Electric, the analysis of circularity drivers is approached through a framework known as the "4Cs."
- Critical Materials: The shortage or instability of raw materials often affects the internal commodity prices, thus reflecting the costs of business operations. The circulation of material could alleviate the pressure and increase the resilience of the supply chain.
- Customers: Growing pressure from consumers has prompted companies to act on circularity. This often comes from public awareness of topics such as pollution, biodiversity, among others.
- Climate: Setting climate and sustainability goals has been a public demonstration of corporates’ commitment to participating in the transition to a more sustainable economy. For companies who already measure their greenhouse gas (GHG) emissions, deep diving into their Scope 3 footprint also enables them to identify the most significant impact categories where circularity could play a part. Small and medium-sized companies are also concerned in this regard, as their stakeholders are taking action to engage upstream and downstream in decarbonization and other sustainable practices.
- Compliance: More legislation, such as the EU’s CEAP 2.0, is set up to require companies to increase focus on the environmental impact of their operations. Voluntary disclosure frameworks are also including circularity as part of their criteria.
Step 2. Have a thorough examination of the value chain
Secondly, an end-to-end examination of the value chain will enable companies to obtain a holistic view of how materials flow. The Circular Economy focuses on the flow of solid materials, from the upstream sourcing, to the manufacturing stage, until the end of life of products.
The circular system diagram, designed by the Ellen MacArthur Foundation (Figure 1), illustrates two distinct streams of materials: biological and technical. These streams demonstrate the different approaches to keeping materials in circulation. For technical materials, processes such as reuse, repair, remanufacture, and recycling keeps materials in the loop. Whereas, in the biological cycle, the nutrients from biodegradable materials can be utilized in ways such as composting or animal feed to remain in the circular economy, before they are returned to the Earth to regenerate nature.
Moreover, this value chain perspective helps companies identify the waste generated along their product’s lifecycle. This idea corresponds with the waste hierarchy proposed by the EU’s Waste Framework Directive (Figure 2), where waste is defined and can be treated in a preferred order of five steps: waste prevention, reuse, recycle, recovery and disposal.
Step 3. Build an ecosystem of partners
The idea of the ecosystem is even more relevant and applicable for companies on their way to kickstart their circular journey. To enable the circular economy, companies must reach out to suppliers, customers, other upstream as well as downstream stakeholders, and perhaps even neighboring companies to share knowledge and resources. The circular economy is not a zero-sum game; there is much value to be gained by sharing knowledge and collaborating. In addition, there are many more layers to consider when establishing these critical partner ecosystems.
For example, Schneider Electric’s EcoDesign expertise, as seen in the whitepaper, “How Standardization for Ecodesign and Circular Economy Contributes to Sustainability” could benefit OEM companies who aim to design out waste and increase efficiency. Obsolete components could also be repaired and refurbished by specialized partners to extend the lifespan of products, or further become materials of other partners’ new products.
To realize the potential of going circular, building an ecosystem with different stakeholders playing complementary roles is crucial for accelerating the transition toward a more resilient and circular economic system.
Implementing Circularity in the Food & Beverage Industry
There are several ways for the Food & Beverage industry to adopt circular economy principles. Analyzing the four drivers of circularity would assist in the prioritization of tasks. There are several examples from which to draw insights: From a Critical Material perspective, bakeries are subjected to be affected by the supply of wheat and the prices of plastic pallets for packaging. From a Customer perspective, the industry has been facing pressure due to public discussion on the issue of food waste, single-use plastic and plastic packaging. From a Climate perspective, sourcing and waste-related practices directly affect the scope 3 emissions. From a Compliance perspective, the UK will be banning single-use plastic following the EU’s restrictions on single-use plastic started in 2021. Also, the EU Environmental Delegated Act has included Food & Beverage manufacturing to be eligible for qualifying as sustainable under the EU taxonomy.
After a review of these factors to further understand drivers for circularity, depending on the maturity and readiness of the business, the following ideas can serve as a beneficial start:
- Sustainable Sourcing and Production
Sourcing raw materials from sustainable and regenerative sources is a crucial first step in implementing the circular economy. This could be done by engaging suppliers to evaluate the environmental impact of their products, in ways such as using renewable energy sources, promoting sustainable agricultural practices, and minimizing water and energy consumption during production. By implementing conscious supplier engagement, the industry can reduce its environmental impact from a carbon perspective, as well as a resource perspective and consequently, contribute to the regeneration of natural systems.
- Sustainable Packaging Solutions
Packaging plays a significant role in the Food & Beverage industry, as it is essential for conserving the health properties of food. It also plays important roles in terms of waste generation and resource consumption. By adopting sustainable packaging solutions, such as biodegradable materials, recycled materials, reusable containers, and minimalistic designs, companies can reduce waste and promote the efficient use of resources.
- Waste Reduction and Valorization
For the Food & Beverage sector, an evident topic to tackle when discussing waste is the food waste generated along the value chain. Examples of utilizing biowastes such as fruit skins and eggshells as animal feed, compost, biogas or even ingredients for other businesses are no longer headline news. But further questions remain – such as: how to achieve zero waste to landfill? Is there potential for industrial symbiosis? What kind of opportunities exist for transitioning waste into biofuel? To answer these questions adequately and explore the business potential in waste streams, it requires an advance thorough evaluation along the business value chain.
Going Further: a promising path forward
In implementing circular economy principles within the Food & Beverage industry, it is crucial to begin with a comprehensive assessment of the business's maturity and readiness to determine the most appropriate starting point for adopting circular practices. Whether it is sustainable sourcing and production, sustainable packaging solutions, or waste reduction and valorization, each topic should be approached through a careful evaluation of existing processes and opportunities for improvement.
The circular economy offers a promising path toward more sustainable industries, especially for the Food & Beverage sector. By adopting circular principles, companies can reduce waste, improve resource efficiency, drive innovation, and create new economic opportunities. As consumers become increasingly aware of the environmental impact of their choices, the Food & Beverage industry must embrace the circular economy to remain competitive and contribute to a more sustainable future.
Schneider Electric has extensive experience in implementing circularity practices throughout its value chain and has been recognized for its progress. This experience is channeled in the Circularity Consulting Practice, in which real-world understandings are applied to help companies identify and capture the value of the circular economy throughout their value chain.