Closing the loop for a clean and Green Pakistan

Fighting climate change through supply chains

Nature has taught mankind the circular model of sustainability. In the natural ecosystem, everything is reused or repurposed, supporting the zero-waste concept. The natural environment is the perfect example of a circular economic model, where everything, even after its lifetime, becomes a source for something else. However, human beings have not been able to successfully replicate this model resulting in global climate change, environmental degradation and resource shortages. According to a report by the United Nations Environmental Programme (UNEP) by the year 2060, global material use could reach 190 billion tonnes. The problem stems, in part, from designing the business model and products for obsolescence and waste generation. Globally, less than nine percent of the items produced are recycled, which means that worldwide 91 percent of all goods are discarded when they are perceived not to be of meaningful use.

At the heart of these environmental crises lies the unsustainable supply chain model being implemented across industries through which we are not just wasting away resources, but also throwing away the chance for a sustainable future. Only a root-and-branch transformation of the traditional supply chain model will enable sustainable corporate development. A green and sustainable pandemic recovery can be achieved through the implementation of a closed-loop supply chain model across various industries. In every economic sector, the circularity of inputs and outputs can achieve environmental, economic and social benefits.

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A closed-loop supply chain is an approach of connecting the endpoint of a forward supply chain to its starting point through a reverse process in order to create an environmentally and socially sustainable economic system. Once a product has been manufactured, shipped, and distributed through a reseller, the manufacturer works to encourage the product’s return once it’s no longer functional or needed by the customer. Reverse logistics are implemented so that the product is returned so it can either be repaired, resold or broken down for reuse in future products.

Developing economies like Pakistan are severely lagging behind in the adoption of the closed-loop supply chain model which results in the failure to develop a circular economic model in the country. A major impediment to the adoption of a closed-loop supply chain system is the high cost of capital required for designing and producing sustainable products, services and supply chain processes. In Pakistan, around 99 percent of businesses are SMEs that collectively contribute 40 percent to GDP and 26 percent to the exports from the manufacturing sector.

The Pakistan banking industry can play an important role in the development of closed-loop supply chain systems by providing green financing under the umbrella of Green Banking. It is important for developing countries like Pakistan to recover from the covid-19 pandemic in a way that does not stack up more on the country’s existing environmental problems, but rather it guides the economy towards a path of sustainable transformation through Green Supply Chain Management

The SMEs are the main drivers of job creation and the engines of a country’s economy. But the closed-loop supply chain system may be too capital intensive for the SMEs to adopt causing an integral part of the country’s economy to lag behind in the integration of this sustainable business ideology. Inadequate government support, low level of technical skills, lack of stakeholder interest and absence of successful case studies are other obstacles being faced in the adoption of closed-loop supply chain systems by organizations operating in Pakistan.

The Government of Pakistan needs to ensure that taxes and financial incentives drive all industries to adopt circular solutions such as closed-loop supply chain systems. Organizations can endure harm to the profitability stream if the cost-effectiveness of the supply chain partners is impacted due to environmental or socioeconomic issues

The green transformation of Pakistan’s supply chain industry can start with putting a price on carbon emissions to phase out environmentally hazardous supply chain practices and redirecting the supply chain industry towards a circular and regenerative model. Increased taxation can be used as a disincentive, for example by adding a tax to products that do not include recycled content.

Green Banking can play a critical role in the development of the closed-loop supply chain industry in Pakistan. The SBP can launch green financing schemes at low-interest rates to various eco-friendly supply-chain firms for developing closed-loop supply chain systems including green warehouses, green/electric vehicles, green logistics solutions, eco-friendly packaging, Electronic Warehouse Receipts, and so on.  A more efficient and eco-friendly package design could make it possible to ship more units in the same cargo space, lowering transport costs and reducing the greenhouse gas emissions of the supply chain. Supply chain companies can also implement load-planning software to not only make logistics planning easier but utilize cargo space more efficiently and reduce the number of trips required to transport the goods. The effective development of Pakistan’s closed-loop supply chain industry can also substantially contribute to the green transformation of the various CPEC projects.

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Shifting to circularity is a complicated task for an economy, requiring a whole-of-society approach. The role of governments, the private sector and financial institutions is of utmost importance if an effective and efficient closed-loop supply chain industry is to be developed in Pakistan. But we cannot forget the importance of labour organizations, scientific and educational bodies, media, households and civil society groups which can act as influencers in initiating the green transformation towards a closed-loop supply chain industry

A carefully managed transition to sustainable consumption and production, through a closed-loop supply chain system, will be critical in attaining the United Nations – Sustainable Development Goals (UN-SDGs), and achieving goals set in the Paris Agreement, and the various biodiversity and pollution agendas.

The Pakistan banking industry can play an important role in the development of closed-loop supply chain systems by providing green financing under the umbrella of Green Banking. It is important for developing countries like Pakistan to recover from the covid-19 pandemic in a way that does not stack up more on the country’s existing environmental problems, but rather it guides the economy towards a path of sustainable transformation through Green Supply Chain Management.

Syed Asim Ali Bukhari
The writer is pursuing his PhD in Green Banking from the Universiti Sains Malaysia (USM), Penang, Malaysia and can be reached at [email protected]

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