Trend analysis: Circular procurement & buyer requirements — where the value pools are (and who captures them)

Global circular procurement spend reached $430 billion in 2024, representing 8.3% of total B2B procurement, yet only 23% of buyers have established measurement frameworks capable of verifying circular claims (World Economic Forum, 2025). This gap between stated circular ambitions and operational capability creates both risk—greenwashing exposure—and opportunity—for organizations establishing credible circular supply chain verification.

Why It Matters

Procurement decisions lock in 60-80% of product lifecycle environmental impacts before design is finalized (McKinsey, 2024). For investors evaluating portfolio companies, circular procurement capabilities serve as leading indicators of Scope 3 emissions reduction potential and transition plan credibility. Organizations without robust circular supplier requirements face dual risks: regulatory non-compliance as Extended Producer Responsibility (EPR) schemes expand, and stranded supply chain assets as linear material sources face depletion or carbon pricing pressure.

In emerging markets, circular procurement presents particular complexity. Supply chains often involve informal sector recyclers lacking documentation, quality variability in secondary materials, and limited traceability infrastructure. Yet these markets also offer significant opportunity—secondary material availability often exceeds that in developed economies, labor costs favor repair and refurbishment operations, and growing domestic manufacturing creates demand for localized circular material flows.

Value capture in circular procurement concentrates among: (1) traceability and verification platforms extracting per-transaction or subscription fees, (2) certified secondary material suppliers commanding 5-15% premiums for documented circularity, (3) standards bodies and certification organizations charging assessment and licensing fees, and (4) advisory firms providing supplier capability building and audit services. First-mover buyers establishing supplier requirements effectively shape market standards—creating advantaged access to constrained circular material supplies.

Key Concepts

Circular Procurement Specifications

Beyond recycled content minimums, sophisticated circular procurement integrates: material passport requirements documenting full ingredient composition, design for disassembly specifications enabling end-of-life recovery, take-back obligations written into supplier contracts, and lifecycle carbon footprint thresholds verified through third-party assessment. The EU Corporate Sustainability Due Diligence Directive (CSDDD) requires companies to identify and address adverse impacts across value chains—including resource depletion and waste generation—making circular procurement a compliance necessity.

Traceability and Chain of Custody

Mass balance approaches (tracking circular material proportions through supply chains without physical segregation) face credibility challenges. The ISCC PLUS certification system provides chain of custody verification for recycled and bio-based content, now covering 5,000+ supply chain actors globally. Blockchain-based traceability platforms from providers like Circulor and Everledger enable material-specific tracking from source through manufacturing, though implementation complexity limits adoption to high-value material streams.

Secondary Material Quality Standards

Recycled materials often exhibit property variation exceeding virgin material specifications. Plastics recyclers report 15-40% batch-to-batch variability in mechanical properties (European Plastics Recyclers, 2024). Standards development bodies including ASTM, ISO, and CEN have published 40+ secondary material quality specifications since 2020, but harmonization remains incomplete. Procurement teams must specify acceptable property ranges rather than simple "recycled content" percentages.

Supplier Capability Building

Circular procurement success depends on supplier ecosystem development. Large buyers including IKEA, Unilever, and BMW operate supplier development programs providing technical assistance, financing access, and offtake commitments to build circular material supply. These investments create mutual dependency—suppliers developing circular capabilities primarily for one buyer face switching costs, while buyers secure preferential access to constrained supplies.

Sector-Specific KPIs

Metric	Conventional Procurement	Circular Procurement	Transition Indicator
Recycled content (by spend)	5-12%	25-60%	3-5x increase
Supplier circularity assessments completed	0-5% of base	40-80% of base	Full coverage target
Circular criteria in RFPs	Ad hoc mentions	Weighted 15-30% of score	Systematic integration
Secondary material price premium accepted	0%	5-20%	Economic validation
Take-back clause inclusion	Rare	70%+ of contracts	Contractual standard
Supplier decarbonization alignment	Voluntary only	Required SBTi commitment	Hard requirement
Traceability to material source	<10% of spend	50-90% of spend	Documentation maturity

What's Working

BMW's Secondary Materials Expansion

BMW's 2024 circular procurement strategy demonstrates emerging-market integration. The company committed to 50% recycled thermoplastics and 50% recycled aluminum in new vehicles by 2030. Crucially, BMW invested €150M in supplier capability building across emerging market suppliers—establishing closed-loop aluminum recycling with partners in South Africa, secondary plastic processing in Thailand, and battery recycling infrastructure in China. Their iFactory sustainability assessment evaluates supplier circularity alongside traditional quality and cost metrics, with circular performance weighted at 20% of total supplier scoring. In 2024, BMW achieved 29% recycled content in new vehicles (up from 21% in 2022) while maintaining quality specifications (BMW Sustainability Report, 2024).

Philips' Circularity Requirements in Healthcare Procurement

Philips extended circular requirements to its own procurement, mandating that 25% of purchased components come from recycled or refurbished sources by 2025. Their supplier sustainability program includes circularity scorecards tracking: design for disassembly compliance, recycled material usage, take-back program participation, and end-of-life processing capabilities. Non-compliant suppliers face graduated consequences from improvement plans through contract non-renewal. In 2024, Philips reported that 18% of procurement spend met circular criteria—representing €2.1B annually (Philips Annual Report, 2024).

African Circular Economy Alliance Procurement Pilots

The African Circular Economy Alliance (ACEA), comprising 10 African governments, launched coordinated green public procurement pilots in 2024. These programs mandate recycled content in government construction materials (minimum 20% recycled aggregate, 15% recycled steel) and preferential scoring for circular economy service providers in waste management contracts. Early results from Rwanda and South Africa show local recycling industry revenue increasing 35% year-over-year as predictable government demand catalyzed private investment in secondary material processing.

What's Not Working

Measurement Theater and Unverifiable Claims

Despite circular procurement policies, verification remains weak. A 2024 investigation by the Changing Markets Foundation found that 47% of "recycled content" claims in packaging could not be substantiated through chain of custody documentation. Mass balance approaches without physical segregation enable dilution of circular material claims—a product might claim "30% recycled content" based on corporate-level mass balance despite individual units containing zero recycled material.

Specification Misalignment with Secondary Material Availability

Procurement specifications often reflect virgin material performance rather than secondary material capabilities. A 2024 survey by Material Economics found that 68% of corporate circular procurement targets were unachievable given current secondary material supply and quality. Organizations set aspirational recycled content targets without mapping supplier capabilities, creating compliance gaps or forcing specification waivers that undermine circular intent.

Emerging Market Supply Chain Opacity

Informal sector recyclers in emerging markets—handling 50-80% of recyclable material flows in many regions—lack the documentation, quality control, and traceability systems required by multinational procurement policies. Well-intentioned circular procurement requirements can inadvertently exclude these suppliers, pushing material toward less efficient formal channels while undermining livelihoods. The International Labour Organization estimates 15 million informal waste workers globally would be affected by procurement formalization requirements.

Key Players

Established Leaders

Unilever – Committed to halving virgin plastic use by 2025, with circular procurement specifications across 60,000+ suppliers. Their Partner with Purpose program builds supplier circular capabilities in emerging markets.
IKEA – Targets 100% circular design by 2030, with procurement specifications requiring Design for Disassembly compliance. Operates material recovery operations across 30+ markets.
Apple – Closed-loop material goals drive procurement of recycled aluminum (100% in select products), cobalt (certified recycled in all batteries by 2025), and rare earths. Supplier Clean Energy Program includes circularity requirements.
Walmart – Project Gigaton engages 4,500+ suppliers on emissions reduction including circular material substitution, with $500M+ in supplier investment facilitation.

Emerging Startups

Circulor – UK-based supply chain traceability platform tracking materials from mine to manufacturer. Deployed across EV battery and fashion supply chains, processing 50M+ traceability events annually.
Rheaply – Asset exchange platform enabling B2B circular procurement, operating $200M+ in reused assets across enterprise customers.
Sourceful – AI-powered sustainable packaging sourcing platform, matching buyers with certified circular suppliers across 40+ countries.
Recykal – Indian circular economy platform connecting waste generators with recyclers, processing 2M+ tonnes annually across 25 Indian states.

Key Investors & Funders

Circulate Capital – $200M+ deployed in circular economy infrastructure across South and Southeast Asia, focusing on plastics value chain.
IFC (World Bank) – $1.5B committed to circular economy investments in emerging markets through 2030, including supplier financing for circular transitions.
WRAP – UK charity operating circular economy programs with £50M+ annual budget, including supplier development and procurement guidance.
Climate Fund for Africa – €50M facility supporting circular economy transitions across African supply chains.

Real-World Examples

Nestlé's rPET Procurement in Africa: Nestlé committed to 25% recycled PET in water bottles across African markets by 2025. Achieving this required building recycling infrastructure where none existed—Nestlé invested $15M in collection systems and processing facilities across Kenya, Nigeria, and South Africa in partnership with local governments and informal sector organizations. The program created 3,000+ collection jobs while securing Nestlé's circular material supply. By Q3 2024, 18% recycled content was achieved at cost parity with virgin PET.
Fairphone's Conflict-Free Circular Supply Chain: Dutch smartphone maker Fairphone demonstrates circular procurement at product level. Their devices contain recycled aluminum (100%), recycled plastics (50%+), and fair-trade gold, with full supply chain traceability to mine or recycler. Modular design enables component-level repair, and Fairphone operates take-back programs achieving 30% product recovery. Despite premium pricing (€699+), sales grew 40% in 2024 as enterprise buyers adopted Fairphone for sustainable IT procurement.
H&M's Circular Denim Sourcing Challenges: H&M's 2024 circular denim initiative targeted 20% recycled cotton content across jeanswear. However, post-consumer cotton recycling yields 30-50% shorter fiber lengths than virgin cotton, requiring blending with virgin or synthetic fibers to maintain durability specifications. H&M's initial recycled content claims were revised downward after lifecycle analysis revealed that polyester blending—required for garment durability—increased overall environmental footprint. The case illustrates specification-reality gaps in circular procurement.

Action Checklist

Map current procurement spend against circular opportunity areas—identify top 10 categories representing 80%+ of material flows
Establish circular procurement specifications with quantified recycled content thresholds and verification requirements
Conduct supplier capability assessments across strategic suppliers (top 50 by spend) for circular material provision
Integrate circularity weighting (15-25% minimum) into supplier scoring matrices for new RFPs
Develop secondary material quality specifications aligned with actual supply capabilities—not aspirational targets
Build supplier development programs for emerging market partners lacking circular documentation infrastructure
Implement traceability requirements with chain of custody verification for material claims

FAQ

Q: How do we verify circular claims from suppliers in emerging markets with limited documentation? A: Three approaches show effectiveness: (1) Physical audits with material tracking through processing facilities—expensive but high confidence. (2) Mass balance certification through ISCC PLUS or equivalent schemes—provides chain of custody without physical segregation. (3) Blockchain-based traceability platforms like Circulor or Everledger that create immutable records at material source, though these require supplier onboarding investment. For high-risk claims, combine approaches—require certification plus periodic physical audit verification.

Q: What premium should we accept for verified circular materials? A: Market data shows 5-20% premiums for certified recycled content depending on material category and supply constraints. Recycled aluminum commands 5-10% premium, recycled plastics 10-25%, and recycled textiles 15-35%. However, carbon pricing trajectory suggests these premiums will compress—at €100/tonne CO2 (EU ETS trajectory), recycled aluminum becomes cost-competitive with primary production. Organizations should model "green premium payback" based on avoided carbon costs and regulatory compliance value.

Q: How do CSDDD requirements affect circular procurement obligations? A: The Corporate Sustainability Due Diligence Directive requires companies to identify and mitigate adverse environmental impacts across value chains—explicitly including resource depletion and waste generation. This creates mandatory due diligence for circular material sourcing: organizations must assess supplier practices regarding material efficiency, waste management, and circular economy transitions. Non-compliance triggers remediation obligations and potential liability. Circular procurement becomes risk management rather than voluntary sustainability.

Q: Should we require suppliers to have Science Based Targets as a circular procurement criterion? A: SBTi commitment correlates with circular economy progress—companies pursuing science-based decarbonization typically invest in material efficiency and circular material substitution. However, requiring SBTi commitment may exclude emerging market suppliers lacking resources for target-setting processes. A graduated approach works better: require emissions disclosure and reduction trajectory for all strategic suppliers, encourage SBTi commitment for tier-1 suppliers, and provide technical assistance for target-setting to emerging market partners.

Q: How do we handle specification conflicts between circular content and performance requirements? A: Document specification trade-offs explicitly. For each circular material target, identify: (a) required property modifications (e.g., tensile strength, color consistency), (b) acceptable property ranges versus virgin specifications, (c) product categories where property modifications are acceptable, and (d) minimum viable recycled content given property constraints. This prevents procurement teams from setting targets that engineering cannot meet—the primary source of circular procurement program failures.

Sources

World Economic Forum. (2025). Circular Economy Procurement: Global Market Report. WEF.
McKinsey & Company. (2024). Procurement's Role in Net-Zero Transitions. McKinsey Sustainability.
European Plastics Recyclers. (2024). Secondary Plastics Quality Standards Assessment. Plastics Recyclers Europe.
BMW Group. (2024). Sustainability Report 2024. BMW AG.
Philips. (2024). Annual Report 2024. Koninklijke Philips N.V.
Changing Markets Foundation. (2024). Talking Trash: The Corporate Playbook of False Recycling Solutions. Changing Markets.
Material Economics. (2024). Circular Procurement Targets vs. Reality. Material Economics.
International Labour Organization. (2024). Informal Waste Workers in Global Value Chains. ILO.