Sustainable Manufacturing: Overcoming Challenges

September 8, 2026 • 7 minute read
Author: Phyllis Jackson, Senior Manager, US Marketing, UPS

Key Points

• Manufacturers cite costs, other priorities, and limited in-house staff and resources as the main challenges of implementing closed-loop systems.*
• Approximately 79% of manufacturing executives think circularity creates value, however, 80% still need to build circular supply chains.¹
• About 40% of manufacturers say they are exploring take-back programs and product-as-a-service.²

What is a Circular Economy and a Closed-Loop System?

A circular economy, also known as circularity, is an operational foundation where manufacturers prioritize reducing waste, increasing product durability and moving the supply chain away from dependence on raw materials. A closed-loop system is a production process where materials are recycled, reused or repurposed to help extend their life and reduce waste.

Challenges of Implementing Closed-Loop Systems

Moving from a linear system to a closed-loop system can provide many benefits for manufacturers, but change is not without challenges. Survey results from the “UPS Sustainability in Manufacturing Study” reveal that the biggest factors keeping businesses from implementing a closed-loop system are:

• Cost (62.6%)
• Other priorities (43.7%)
• Limited in-house staff and resources (34.8%)
• Lack of logistics partner (22.9%)*

However, many manufacturers say the effort is well worth it. Additional findings from UPS research, which are highlighted in the report “Sustainable Manufacturing: The Case for Closed-Loop Systems,” show that nearly half of manufacturers cited improved revenue (47.9%), while others cited reduced unit cost (39.1%) and a sufficient return on investment (33.4%) as business areas that were impacted for the better by implementing a closed-loop system.**

The path to circularity and more sustainable manufacturing can be manageable with strategic partners that help identify and quantify initiatives in three key areas: systemic (or end-to-end) change, improved product designs, and meeting customer expectations for shared values and sustainability.

“Achieving circularity isn’t an individual effort,” says Lorie Schlatterer, Manufacturing Strategic Lead, UPS. “A clear vision, strong communication and collaboration between stakeholders is a necessary foundation for overcoming closed-loop challenges.”

Implementing Systemic Change

It’s a big job to move from a linear system (where products are built, used and discarded) to a closed-loop system (where products are designed to find their way back into the manufacturing cycle). But research shows businesses see the value. According to UPS survey respondents:

• 44.5% said it took their business about one year to adapt their production lines for remanufacturing.***
• 50.4% said accommodating a closed-loop system required they change 26% to 50% of the production line.^†

The transition to a closed-loop system usually begins with a top-to-bottom analysis of material sourcing, production line equipment and processes, greenhouse gas emissions and chemical use, product design and, in some cases, business models.

Systemic change typically happens in iterative stages:

• Discovery: Understanding and embracing circular principles.
• Evaluation: Evaluating current sourcing, production and product lifecycle standards.
• Design: Designing products that emphasize longer lifecycles and easy disassembly for refurbishment or recycling.
• Make Changes: Implementing a new business model, such as product-as-a-service (PaaS), or launching initiatives like product take-back programs or company-run second-hand markets.
• Form Partnerships: Starting partnerships with supply chain stakeholders focused on circular manufacturing and governmental bodies that oversee sustainability compliance and regulation.
• Benchmark: Integrating innovative monitoring and benchmark tracking systems to ensure the loop stays closed and standards are met.

Improving Product Design

Flipping the manufacturing script to a closed-loop system means designing and building products to last as long as possible. Ideally, they should be easy to repair and take apart (also known as modular design) for future use or to recycle in other ways.

For example, toasters are typically one-piece appliances, and if a slot no longer heats, the entire toaster goes into the trash. A U.K. company came up with a circular solution by designing each toaster slot as an individual part. If a slot broke, consumers could send it back for a replacement and continue to use the other slots while they waited for the new part to arrive.³

The modular concept has made its way into other product categories, too. For example, modular laptop designs made it easier to remanufacture used laptops, which produces less than 6.4% of the carbon dioxide emissions that building a new laptop generates.⁴

Because circular manufacturing necessitates a reevaluation of product design, buy-in from research and development (R&D) is important. Consider increasing funding for R&D so the department has the resources it needs to explore new and innovative solutions to support circular manufacturing.

As your business researches circular design, you’ll likely gain invaluable knowledge about industry trends and how new tech can improve production, potentially giving you an edge over competitors.

Designing more durable and easily repairable products can also lead to greater customer satisfaction in terms of product quality and longevity, Schlatterer adds.

“If you’re in the market for the most reliable products, you’re going to buy the product you feel will have the longest lifespan,” Schlatterer says. “With circularity in mind, I’m more likely to buy a more expensive washer and dryer knowing there’s a good chance it’ll last 20 years rather than breaking down in just a few years like a lower-quality product would. It’s scenarios like this that show how implementing a closed-loop system can improve customer satisfaction and retention.”

Communicating Shared Values

Many clients and partners are drawn to businesses that demonstrate strong sustainability values. The move to circular manufacturing can be smoother with customer alignment, which means communicating changes in a way that resonates and inspires. This is why manufacturers should provide consistent, clear messaging around their circular practices and future goals.

That messaging should:

• Use simple language: Define or explain unfamiliar terms (“circular economy” and “closed-loop system”) and avoid jargon.
• Promote product circularity: Your product’s innovative design and emphasis on sustainability can be a selling point for retailers and consumers.
• Emphasize customer service and convenience: Show customers and partners how easy it is to work with you to recycle, reuse or repair your product. Convenience is a primary driver of participation.

“Manufacturers that can express their sustainability goals in simple language and offer convenience are well on their way to getting customer buy-in and loyalty,” Schlatterer says.

Partners Can Promote Closed-Loop Manufacturing

Businesses big and small have found ways to transform their manufacturing from take-make-waste to a constant loop of recycled production materials, reduced waste and longevity-focused product design. And often, that mission relied on finding the right partners.

Manufacturers that participated in the UPS study said their logistics partner helped them with sustainability analysis (38.7%), shipping route optimization (38.5%), and sustainable package design (38.3%).^††

UPS can support your journey to circularity by providing logistics expertise to help reduce shipping emissions and assist in connecting your company with partners specializing in manufacturing efficiency, optimization, and product transformation to drive progress toward achieving your initiatives.

“A move to a circular system spurs manufacturers to get more creative about how they reuse and recycle production materials,” Schlatterer says. “While those innovations primarily support closed-loop systems, they can also provide manufacturers with a competitive advantage.”

“UPS B2B Merchant Survey” Questions: *What are the three biggest factors keeping you from implementing a closed-loop system? **What part of your business has been most impacted for the better by the implementation of a closed-loop system? ***How long did it take for you to adapt your production line for remanufacturing? ^†What percentage of your production line did you change to accommodate a closed-loop system? ^††What role has your logistics partner played in your closed-loop initiatives?
This survey was distributed by a panel in an online format to 558 respondents in the U.S., with each respondent being compensated at an agreed rate for their time. Each survey took approximately 10 minutes to complete. Our survey ran December 1-14, 2025.

1 “79% of manufacturing executives say circularity creates signification value, yet only a fifth have built circular supply chains at scale — WEF and Bain & Co report,” Bain & Company, November 11, 2025.
2 “Circular Economy in the Manufacturing Sector,” Avvale, accessed January 10, 2026.
3 “Designing for a circular economy has more than one solution: Agency of Design,” Ellen MacArthur Foundation, accessed January 7, 2026.
4 “Scientific study finds remanufactured laptops produce only 6.34% of CO2 emissions in comparison to new,” Circular Computing, accessed January 7, 2026.

Individual results and options will vary. UPS makes no promises of any specific outcome in this document but instead provides only example outcomes based on certain UPS customer experiences.