Malaysia continues to be one of the fastest growing and developing countries though impacted by the Covid-19 pandemic.
Alongside India, Thailand, Indonesia and Vietnam, it is expected that Malaysia will be in the top 15 manufacturing countries by next year.
Nevertheless, the rapid development of manufacturing industries is always associated with environmental pollution and sustainability issues.
Hence, recent needs for sustainability are not solely based on financial performance, but also on environmental and social performance.
In simpler words, firms' focus on economic performance needs also to be accompanied by care about environmental and social performance.
Due to this, an alternative economic paradigm is being shaped and developed to capture the new forms of supply chains. This is the case for the circular economy (CE) paradigm, which is embracing the notion of restorative industrial systems.
The CE paradigm focuses on less (or if possible, zero) waste production at every life cycle of a product, where products are used in circularity (recycled, refurbished or remanufactured) after reacing the expected end-of-life.
CE has been identified as a topic of strategic importance due to its potential positive outcomes towards environmental and economic impacts.
Due to rapid industrialisation and technological advancement, products are also being manufactured and used in a prompt pace, resulting in a higher level of waste production.
To curb the issue, a cleaner production method (particularly remanufacturing), has become important and extremely vital.
This allows manufacturing firms to extract abandoned end-of-life products' residual value, and then minimise the production cost per unit of the product.
For example, Volkswagen remanufactures and reassembles its end-of-life cars' main components, such as engine and gear box, to extract their residual value. However, the original equipment manufacturers (OEMs) will still procure raw materials from their upstream suppliers for new models' production.
While the CE concept is ideal and practical in developed countries, small- and medium-sized enterprises (SMEs) are often bounded by limited funds to realise the closed-loop operations.
Nonetheless, as closed-loop initiatives are relatively new, leading firms (particularly the focal firms) should be able to engage with upstream and downstream stakeholders and address the needs of closed-loop, or reverse orientation, in the entire supply chain.
Furthermore, a leading firm that adopts CE and closed-loop orientation should attempt to establish shared goals with supply chain members (regardless of their positions in the supply networks, such as Tier-1, Tier-2 or Tier-3 suppliers), so that mutual benefit can be attained across the supply chain.
A leading firm should create a vision to improve sustainability and inspire supply chain members to work together to achieve the new supply chain orientation.
The urgency to have a comprehensive and holistic model of CE in Malaysia can be explained in threefold. First, the implementation of CE is significantly related to the United Nations' Sustainability Development Goals (SDGs). Specifically, SDG No. 12 strives to ensure sustainable consumption and production patterns.
Second, despite the nation's agenda in promoting green economy (Shared Prosperity Vision's Key Economic Growth Activity 12), the current CE roadmap introduced by the Science, Technology and Innovation Ministry (MOSTI) is still at its infancy, where it focuses only on plastic waste.
Third, the Eleventh Malaysia Plan (2016-2020) is also focusing on sustainable consumption and production (SDG No. 12). However, the initiative relies on government green procurement, green education, recycling, tourism, transport and built environment.
These initiatives can be extended in the next Malaysia Plan by looking into cleaner and sustainable production offered by CE. This approach allows the government to implement and realise the 10-10 MySTIE's Business and Financial Services, particularly related to the Smart Integrated Supply Chain initiative.
In line with this, ministries and government agencies should be able to articulate and regulate (if possible, with incentives such as tax reduction) this concept clearly to industry players so that it can be accepted as a common standard in the industries.
The writer is Head of Industry Network Centre and Senior Lecturer, Faculty of Business and Management, UiTM