Written by Fabien Hammerer, 5REDO CTO.
Canada has obtained a month delay before the US leadership initiates the trade war it’s been edging toward. Canada’s response to initial threats would have levied tariffs on an initial wave of 30 billion dollars worth of products, including pulp and paper, appliances, and cosmetics. A subsequent wave, targeting 130 billion dollars in goods such as vehicles, steel, and aluminum, would have followed. Unsurprisingly, uncertainty is hard for economic agents to deal with and the next episode in only a few weeks is also set to send markets and supply chains into another spin.
The pressing question now is: how can businesses adapt not only to the immediate situation but also to the growing risks posed by political and economic uncertainty?
Last year, we published a blog article highlighting how businesses are increasingly exposed to environmental risks that disrupt supply chains and how circular procurement and circularity integration can act as a mitigating factor. At the time, discussing political risk might have seemed overly cautious, but reality has caught up. Today, a unilateral decision by the world’s largest market is destabilizing global supply chains.
Yet, our conclusion remains valid: circular procurement can serve as a robust strategy for mitigating risk, particularly in times like these. How so?
At their core, tariffs are market distortions designed to create artificial economic effects, such as balancing trade or protecting target industries. And like all market distortions, they create unintended opportunities. With the cost of goods and supplies from the US rising sharply, alternative material sources—previously considered too expensive—may now become viable. This includes secondary materials, or those derived from circular or biological sources. Organizations can use life cycle assessment and techno-economic assessment to evaluate the environmental and economic trade-offs of these alternative materials.
Canada’s circular economy is still in its infancy, with a circularity rate of just 6%. Each year, the country generates a staggering amount of discarded materials that are disposed of without a second life. In 2022, the federal government reported 36.5 million tonnes of solid waste, of which only 27% was diverted. This leaves a huge opportunity for companies to secure materials domestically and build more resilient business models.
While now may not be the time for a complete overhaul of your business model—implementing circular projects and circularity integration initiatives requires time, investment, and careful risk assessment—, this is certainly the moment to explore circular procurement opportunities and assess their long-term benefits in an era of environmental, economic, and political instability.
This is also a time for federal and provincial governments to step up support for circularity. Subsidies for research and development, tax incentives, and public-private partnerships are all avenues worth pursuing to unlock the potential of Canada’s domestic resources and accelerate the transition to a circular economy.
In these uncertain times, Canada has the chance to demonstrate its resilience. A thriving circular economy could become the cornerstone of this resilience, offering a sustainable foundation in the face of an increasingly uncertain trade relationship.