Are we ready for a circular economy? Can we afford not to be? Paul Levett, consultant and chair of LRS Consultancy, reports.
For people working in the world of resources and sustainability, phrases like ‘closing the recycling loop’, ‘life-cycle analysis’ and ‘cradle to cradle’ are second nature and have been increasingly used over the years. The ‘circular economy’ is a more recent term being promoted by high profile campaigners, like the Ellen MacArthur Foundation.
This concept is now a key international priority and is well documented in the EU Roadmap to Resource Efficiency, the Defra/BIS Sustainable Resource Action Plan and influential reports such as the CBI’s ‘Made to Last’.
The new millennium has witnessed a global economic crisis. At the same time, the World’s population continues to expand with over seven billion people now on the planet, rising to a predicted 8bn by 2027, according to the United Nations.
About a third of these people live in China and India in developing new cities, creating huge resource demands from an emerging middle-class population. This escalating demand and scale of consumption is leading to the depletion of the world’s natural resources, resulting in increases in commodity prices and political and social conflict arising from resource scarcity.
Increasingly, business leaders I meet are waking up to the fact that our methods of production and consumption and the way we use our resources must change. Businesses not yet reviewing the risks and sustainability associated with the resources used in their supply chains could find themselves in serious trouble in the future.
I believe there are four key areas that will be integral to building a circular economy: innovative product design and production; new business models responding to sustainability; improvements in materials treatment and technology to capture resources, and influencing actions that lead to changes in behaviour.
Innovation in sustainable product design will help manufacturers select materials that are optimal for their products’ use, reuse and recycling. Products must become more durable to last generations and, where appropriate, producers must start looking at modularising and standardising them for easier disassembly and enabling purer material flows.
New business models need to be developed that include producers and retailers changing from selling to ‘users’ rather than ‘consumers’, providing services rather than products and giving access rather than ownership to items and goods.
Most large businesses have developed considered sustainability objectives with the subject now a regular item on the board room agenda. Recently, we have seen several sustainability strategies, such as Unilever’s Sustainable Living Plan, M&S’s Plan A and Sainsbury’s 20 by 20. It’s no longer just about corporate responsibility, there are fundamental business reasons behind this, as profits are at risk if they can’t access materials needed to make their products in time.
According to a survey earlier in 2012, undertaken by the UK manufacturers organisation the EEF, the most significant risk to their business plan was a shortage of raw materials. This risk is pervasive, with the same proportion across all sizes of company and industry sectors seeing this threat.
To generate the circular economy, we need to combat resource wastage. New collection systems will need to be designed to preserve the quality of materials, whilst being easy-to-use and cost-effective. We also need innovative companies to develop new technology that will optimise the quantity and quality of materials that can be extracted from waste streams.
Repeated use of products and materials will stimulate markets for reuse, refurbishing and remanufacturing. Products will be made from less materials, but in some cases will require more labour to repurpose them, bringing with it jobs that stimulate our economy.
Above all, cultural and behavioural change is needed among consumers, business and our industry. We will need to bring together appropriate technologies, producers, waste management companies and local authorities; and understand how to fit the different pieces of a progressive new economy together.
Innovation is greater at times of desperation; now the UK has entered a double-dip recession during a global economic crisis, I hope this will give the impetus required to develop each area of a circular economy. But for change to scale quickly, government needs to facilitate business with regulation, taxation and certification, then business will work out how to do it.
Paul Levett, chair of LRS Consultancy