This year’s Responsible Business Forum 2019 zeroed in on a topic that’s become much of a buzzword: circularity. But what does being circular mean? Why should we aim for circular? And how do we even get there, anyway? We round up the top insights from the Forum to answer all these questions, and more.
A primer on the circular economy
If you’re new to this concept, here’s the 411 on what the circular economy means. (Alternatively, you can read this introduction to the circular economy that we previously published.) There are many definitions now that the term has become so popular. Still, one has emerged as the industry-wide standard: the circular economy as defined by the Ellen MacArthur Foundation. You might have heard of them from their various projects, Circular Economy 100, or the Jeans Redesign, if you’re more interested in the sustainable fashion side of things.
According to the Ellen MacArthur Foundation, the circular economy looks beyond the current take-make-waste extractive industrial model and its destructive ways of production and consumption. It aims to redefine growth, focusing on positive society-wide benefits. It also entails gradually decoupling economic activity from the use of finite resources. This means that eventually (if all goes according to plan) we will enjoy growth, without ravaging our planet and destroying the communities that protect it. This definition of the circular economy focuses on three principles: design out waste and pollution, keep products and materials in use and regenerate natural systems.
Now that you’re all caught up, here are the top insights about circularity from the Responsible Business Forum 2019.
WHY WE NEED CIRCULARITY
Going circular means a drastic cut in emissions worldwide.
Eva Gladek, Founder and Chief Officer of Metabolic, highlighted that we need to transform the global economy to a regenerative and circular one as soon as possible. “50-70% of emissions can be reduced worldwide if certain industries transition to a circular economy,” she said. She is referring to a 2015 report by The Club of Rome, a global think tank, which concluded that carbon emissions could be cut by a whopping 70% by 2030 if a key set of circular economy policy measures were to be adopted.
Such policy measures include strengthening existing policies in renewable energy, eco-design and emissions trading, establishing resource efficiency targets for materials that are soon-to-be scarce or that which environmental impacts of extraction are serious, making the circular economy a core part of EU climate policies, launching investments to support the circular economy, rethinking taxation and more.
All this points to how circularity and climate change are linked. (And therefore, if we want to have a decent shot at solving climate change, we can’t avoid circularity.)
Circularity has the potential to fix our food system.
According to a new UN report launched June this year, the world’s population will increase by 2 billion persons in the next 30 years, bringing us to a total of 9.7 billion people in the world by 2050. That’s a lot more people on the same-sized planet. Such a prediction has, unsurprisingly, sparked concern over how we’re going to be able to feed so many more mouths. Especially while more and more people are suffering from hunger—about one in every nine people globally are suffering from hunger today.
UN Assistant Secretary-General, Satya Tripathi, said that this is a stupid question. All we need to do is to close the loop on our food system. Tripathi is right: we lose or waste roughly a third of the food produced in the world for human consumption every year, according to the FAO. Consumers in rich countries waste almost as much food (222 million tonnes) as the entire net food production of sub-Saharan Africa (230 million tonnes). We need to make our food system circular and design out waste, to get to zero hunger. (Zero hunger, by the way, is the second goal of the UN SDGs.)
Image credits: Ellen MacArthur Foundation
HOW DO WE DO CIRCULARITY?
Circularity is an intentional, holistic approach.
Circularity involves rethinking whole systems and not just looking at individual parts. Why? Gladek explained this with the concept of “environmental burden-shifting”. Simply put, it means that if you reduce the environmental impact of one phase, you might increase the impact in another. This happens in environmental issues because many problems are interconnected. And hence, implementing solutions to isolated problems within the system, or effecting change with one principle alone, may result in unintended consequences in another area. Gladek says that “we cannot look at one little piece and try and optimise, but rather [we need to look at] redesigning the entire system.”
In cities, for example, cross-sector and cross-agency collaboration is essential and will help in the adoption of a holistic approach. Mengmeng Cui, Asia Business Development Director at Metabolic, suggested that cities should consider appointing someone (perhaps a department, committee, or working group) to oversee the different functions within the city and how these can move together towards circularity.
We need private finance to change fundamentally.
Finance plays a significant role within the entire system we’re trying to change, though we often leave it out of the conversation. Katherine Garrett-Cox, CEO of Gulf International Bank (UK), highlighted two big issues that private finance faces in this move towards a more circular world. The first being the mismatch of time horizons. “Private finance looks for returns over short time periods,” she said, even though going circular (and being more sustainable) means looking at the long term. The second is the lack of data and standards on circularity solutions. This means that “financiers [don’t have the numbers] to understand, [and] they [default to] assume [that the] risks are too high.”
To convince businesses to move, we need to explain to them the “business case” for going circular.
Private finance won’t shift alone, so businesses need to make moves too. But how do we make a business case for circularity? A few great lines of argument came from various speakers at the Forum. The first, from Rob Candelino, CEO of Unilever Thai Group of Companies: “You can’t have a healthy business on a sick planet.” (In fact, some people have gone even further to warn that human civilisation might collapse by 2050, but maybe that’s a bit too apocalyptic.) Businesses depend on a healthy economy, which depends on healthy people, which depends (you guessed it) on a healthy planet.
If that doesn’t work, then another great way to look at it is to reframe the conversation. Achar Agarwal, President of Kimberly-Clark Asia Pacific, pointed out that currently, “sustainability means “cost” to many leaders.” He suggested changing their mindsets to make sustainability part of business models instead of thinking about it as a cost.
Combining these two approaches, Candelino also said that we need to stop asking the question: what is the business case for sustainability? Instead, we should be looking at the opposite—what’s the business case for not going circular, or not being sustainable? “Ask yourself the opposite,” he said, “and the answer will be clear.” We couldn’t have said it better ourselves.
Image credits: Greenpeace
Technology won’t solve everything, and we can innovate in other ways too.
Sorry to burst your bubble, but techno-optimism isn’t the way to go. Kari Herlevi, Project Director of the circular economy area at Sitra, emphasised that “technology doesn’t solve everything. Innovation takes a long time. You need to change your habits [too].” This falls under behavioural innovation, he says, which is another kind of innovation. He also highlighted that business model innovation is very important, along with systemic innovation. To the latter, he suggested confidence building among citizens, perhaps through integrating the circular economy concept into the education curriculum.
To the former, Håken Nordkvist, Head of Sustainability Innovation of the IKEA Group, elaborated on how IKEA is testing out business model innovation. IKEA is moving from a linear way of doing business to a circular one. How? It’s trying out leasing- and subscription-based models and adding services like repair, refurbishment and upgrading, and in so doing, keeping products and materials in use for longer. Such models also shift ownership from the consumer to the business. With fewer people owning stuff, and with the stuff that is being made kept in the loop, it is also designing out waste.
Business model innovation is revolutionising other industries too. Where? The fashion industry is one good example. Instead of buying clothing, you can swap with The Fashion Pulpit, or rent with Rentadella. Now we’re just waiting on all other industries to embrace the business model revolution too.
Image credits: IKEA
There is a disconnect between nature and people.
According to Tripathi, this disconnection is driving the destruction of our world. The Forum, unfortunately, did not extensively discuss the third principle of the circular economy: regenerate natural systems. But Tripathi is right: because we are so far away from nature, we have begun to see nature as an entity to exploit. And so we need to return to it.
How? Robin Mitchell, Managing Director of The Biodiversity Consultancy, believes that everyone should be involved in the restoration. Businesses also need to start thinking beyond reducing waste and pollution and look towards regenerating the systems they are taking from. They need to move from a death-based or harvest-based mentality to a life-based economy, and this starts with thinking regeneratively.
OPERATIONALISING CIRCULAR: CASE STUDIES
Case study: the plastics economy
Jacob Duer, President and CEO of the Alliance to End Plastic Waste, pointed out that the conversation around plastics is misdirected because plastic is not exactly the problem; plastic waste is. Specifically, the lack of waste management. This translates into us wasting and devaluing plastics, as they pollute our ecosystems. According to the World Economic Forum, today, an incredible 95% of plastic packaging material value, or $80-120 billion annually, is lost to the economy after a short first use. Plastic is a high-value material that has become so pervasive in part because it is very useful. But to maximise the use and reduce the loss in value of this material, we have to close the loop. Duer said that we must talk circularity in the plastics economy.
A key question that came out of the many discussions around plastics during the Forum was: shouldn’t we try to reduce the use of plastic to begin with instead of closing the loop? (Similarly, isn’t the circularity approach ignoring the fact that we should be looking at reducing consumption instead of decoupling consumption and production from planetary destruction? This alludes to the age-old debate in environmental studies. This debate, to date, still has not been resolved.)
One way to answer this question is that approaches are not mutually exclusive. Navneet Chadha, Principal Operation Officer at the IFC World Bank Group, pointed out that recycling is not the best solution. Reducing and reusing is undoubtedly better. But that doesn’t mean that recycling should not happen either since there’s still a lot of plastic waste in our oceans that just isn’t going anywhere. Perhaps we should think about being collaborative and finding ways to synergise, rather than finding the “best” solution.
Case study: incorporating the informal sector in waste management
Closing the loop doesn’t always have to mean building new infrastructure. Siddarth Hande, CEO of Kabadiwalla Connect, a waste management company that is processing solutions for cities in the developing world, pointed out that there is existing infrastructure in developing countries. It’s just not in the way that you would expect. The informal sector is enormous, and in the case of urban India, waste management facilities exist everywhere; it just hasn’t been incorporated into conventional waste management systems yet. He envisions a future where the opportunities to close the loop in developing countries involves the informal sector.
It’s an approach that does not impose the circular economy on such countries but instead explores how the concept exists already and how to build on it. And this is how we should be thinking when working with developing countries.
Image credits: Sean Gallagher, for the Pulitzer Center
Case study: a story of Singapore
Throughout the Forum, many praised Singapore for being a stellar example of the circular economy. Temasek, through Ecosperity, is pouring investments into technological innovations that have circularity front and centre. JTC Corporation is engaging experts to work with companies on Jurong Island to operationalise and circularise waste streams. Singapore was also the first country to close its water loop. Through catchment reserves and water reclamation (among other solutions), Singapore uses every drop of water more than once. Singapore also manages its construction waste stream very well: it recycles 99% of construction waste. But optimising waste streams and supporting innovation is only a start. There is much more to do.
Like any other country, Singapore is not perfect. Singapore is still very much fossil-fuel-dependent. It still needs to ingrain circularity into its citizens’ consciousness. The conversation around circularity in Singapore is just beginning. And to really be a model of the circular economy, we need to talk about holistic and systemic change — the way we produce and consume needs to be circular too, and not just a few industries.
WHAT NOW: CONCLUDING REMARKS
Prasoon Kumar, Founder and CEO of billionBricks, said candidly: “We keep talking more than we’re doing.” This is true. These issues that we’re trying to solve have been around for decades. There are innovations happening, and consumers are asking for change, but “why aren’t businesses changing overnight?” Of course, he doesn’t mean this literally. What he’s probably getting at is that businesses know what they need to do. But they lack the will (political, economic, moral) to do it. The truth is they need to get moving. And they need to get moving now.
And businesses need to lead the way. They need to incorporate circularity into business models, mission statements and integrated into the entire value chain. Vincent Kneefell, Global Cities Lead at WWF, remarked: “Businesses need to participate in Extended Producer Responsibility. If [they’re] not, then [they’re] part of the problem.” Consumers need to shift too, but it would be wrong to pass on the burden of closing the loop entirely to the consumer. Businesses need to take responsibility for what they put out into the world, and what they destroy because of it.
What is the way forward? Collaboration, not conflict. Serina Ng, Head of Responsible and Inclusive Business, Deputy Head of Private Sector Department at Department for International Development, suggested thinking about who you don’t often work with. Seeking out people you haven’t been talking to and exploring new partnerships. And since circularity is a holistic approach, there is a need for all types of businesses to connect, which will only happen if new partnerships start happening in the most unexpected places.
