Virtuous circle
Businesses that embrace the concept of the circular economy are coming up with more innovative ways to promote sustainability.
The ever- growing population coupled with lifestyle shifts have put our planet at risk as natural resources dwindle. Meanwhile, wasteful production and consumption behaviours have resulted in growing pollution and other environmental challenges. Southeast Asia is an especially challenging region as governments pursue high economic growth to reduce poverty and improve the quality of life of their citizens. Asean has emerged as a key manufacturing hub catering to surging global demand, resulting in shortages of resources. The vicious cycle of waste is becoming a threat to future wellbeing. That helps explain the growing interest in the concept of the circular economy, which seeks to maximise the use of natural resources to their full potential, reduce waste through recycling, and thus enhance the sustainability of the environment, communities as well as businesses. This new way of thinking marks a sharp contrast to the linear economy, which focuses on maximising economic returns with little regard to proper management and recovery of natural resources. Many products are made to be consumed and discarded without recycling or reusing. The circular economy consists of five business models: circular supply, using renewable and recyclable resource inputs; resource recovery by recovering and reusing waste materials, used products and manufacturing waste; product life extension through technological innovation and improved product design; sharing platforms by connecting a massive amount of users to efficiently access prod
ucts and services; products as services, by shifting the busi
ness model to providing services instead of only selling goods.
“The circular economy concept … defines trading, manufacturing and consumption behaviours. It allows the global economic system to make the most efficient use of nat
ural resources,” said Peter Bakker, president and CEO of the World Business Council for Sustainable Development (WBCSD).
“In order to make this concept widespread in the business community, we must start with instilling a conscience among management and employees to head toward the same goal.”
Speaking at the SD Symposium 2018 held by Thailand’s Siam Cement Group (SCG), Mr Bakker stressed that successful adoption of circular economy principles would promote the manufacturing of products and services using innovations that help to maximise the efficiency of resource use. This effectively helps to reduce the operating costs of companies from use of resources, thereby increasing their competitive advantage. The result could be growth opportunities worth US$4.5 trillion worldwide by 2030 based on figures from the CEO Guide to the Circular Economy, published by the WBCSD. As well, the circular economy can help reduce carbon emissions, leading to improved living conditions and realising the goals of the Paris Agreement on climate change as well as the United Nations Sustainable Development Goals, he added.
EUROPEAN PRACTICES
While Thailand and other countries in Asia have yet to actively pursue circular economy development, many organisations in Europe have begun to embrace the idea.
“(Businesses) began to examine the factors that contribute to the circular economy. Part of it is that they want to generate more revenues and cut costs on top of creating business value and minimising business risks,” said Kees Rade, the Netherlands’ ambassador to Thailand.
Public concern about global warming is very high in Europe compared with other regions, and this has compelled businesses to join the search for solutions. In Asia, flood
ing has become a major issue, and this could help turn the tide of public opinion here.
“What we see today in Antarctica is ice melting and the sea level rising by half a metre. Carbon dioxide levels reached 411 parts per million in May (compared with pre-industrial levels around 280ppm),” said Mr Rade. “Studies have found that if we continue to utilise resources on large- scale production like this, we put ourselves at risk of resource depletion.
“Although GDP growth is regarded as a good thing, it leads to a greater use of produc
tion resources, (which) will become depleted as there are limited amounts. Hence, we need to think about how to manage resources more efficiently.
“Global warming generates widespread global impacts and such concerns acceler
ate the urgency of the circular economy and sustainable development.
“What we need to do is to switch from a linear to a circular economy. Leftover high-quality raw materials should no longer be neglected.”
The government of the Netherlands, Mr Rade said, aims to establish complete recycling and utilisation of waste by 2050, with a plan to reduce the use of virgin materials by 50% by 2030. The key drivers are smart design with fewer resources, extended product life, and waste as raw material.
It is expected that by 2023, the circular economy in the Netherlands will have a market value of €7.3 billion and will generate 54,000 jobs.
Businesses will set pricing to indicate their real costs using “natural capital accounting” for assets including air and natural resources, since the circular economy can identify these hidden costs.
“We have ways to manage leftover waste as we can use various funds to provide assis
tance programmes,” the ambassador said. The goal is to set up a “practical recycling loop” to complement existing uses of waste for alternative energy or other purposes.
“The government’s role is vital and law enforcement must be strictly followed. The government must provide tax incentives and privileges to the private sector to motivate them to join the circular economy and promote the use of innovation in production,” he said, adding that collaboration at the international level is also needed.
“This is important, and it requires a consensus where everyone must earnestly cooperate at all levels and examine the outcomes needed to bring about the greatest effectiveness.”
In the Netherlands, he noted, consumers are now being charged for plastic bags. “It may seem a little thing. However, people think that it comes with a cost. It did indeed affect people’s mindset broadly nationwide. Convenience stores must launch a campaign to ban plastic bags which, at the end of the day, will change citizens’ habits.
“Similar to organic food trends, consumers become aware of better choices, and they are willing to pay for healthier products.”
BUSINESS CHALLENGES
A WBCSD study suggested that 97% of businesses believe the circular economy has become more significant than it was three years ago, and 93% agree it is vital for growth and success in the future.
The key drivers of growing awareness are external factors, such as customer concerns, regulations, laws and public opinion, while internal factors include management, sustainable development and organisational strategies.
When it comes to driving a circular economy, the study suggested that the first step is emphasising sustainable development. Second, management has to make it a priority. The third step is setting strategic directions and approaches, and the final step is developing understanding and adopting practices.
The transition begins with small steps and moves toward more substantial challenges. Eventually the entire organisation will
embrace circular economy principles in its business processes and integrate the model into its business units and organisational strategies, said Brendan Edgerton, circular economy director at the WBCSD.
At France-based Michelin, the world’s second largest tyre manufacturer after Bridgestone, the circular economy has been “embedded into the corporate DNA and strategies”, said Antoine Sautenet, diplomatic adviser with the group public affairs department for Asia.
The company has adopted the slogan “A Better Way Forward” to stress its commitment to sustainability in all business processes from material selection and production to the end-use stage, he said.
The company applies the 4R strategy — Reduce, Reuse, Renew and Recycle — and this results in extended product life cycles and reduced cost and waste.
With Michelin’s eco design, for example, tyres can be made lighter, more fuel-efficient, durable and offer long-lasting performance, he said, adding that recycling and reuse practices have been applied in production at all its plants for more than two decades.
“With the prospect of more than 2 billion vehicles in circulation by 2050, mobility must become safer, cleaner, more efficient and more pleasant,” said Dr Sautenet. “From design to endof-life, it is challenging for tyre manufacturers to offer products and services that use fewer resources and minimise negative externalities.”
Surendra Bade, country leader of Dupont Industrial Bioscience Thailand, said his company emphasises recyclability and renewability to achieve the highest resource efficiency.
DuPont began its shift to the circular economy by seeking more i nnovative ways t o use bio-materials. It has teamed up with a bioplastic manufacturer to create a new sustainable bio-based plastic. As well, its bio-based polymer technology consists of 27% recyclable materials.
“To overcome the challenges of implementing the circular economy, DuPont believes that innovation is key to growth,” Mr Bade said.
“It starts with creating the mindset shift to change consumer behaviour in product purchases. The collaborative efforts of all sectors will trigger the attention of everyone, without having to wait for the government to act. The private sector can lead the movement by motivating consumers to learn about the importance of eco-products.”
Roongrote Rangsiyopash, the president and CEO of SCG, one of the leading industrial conglomerates in Asean, said the problem of dwindling resources can be solved by preserving and using natural resources in the most efficient way.
Creating systems in which waste can re-enter the supply chain will lead to improved environmental and social sustainability, he said.
“SCG promotes building collaborative networks with parties in Thailand and beyond in order to build full circular economies,” said Mr Roongrote, adding that the group’s recent partnership with Dow (Thailand) would add value to plastic waste while enhancing knowledge and expertise in technology and research and development (R&D).
WBCSD’s Mr Bakker agreed, pointing out that collaboration is vital. “No one company can fix this problem alone.”
The circular economy, he noted, is essential for businesses to survive in the long run.
“You have to set a clear circular vision. And it starts with the CEO. You have to believe that sustainability will be crucial for the success of your economy,” he said.
“One thing I can assure you: your company will not be able to attract talent if you are not sustainably circular. Your consumers will always want to know what your product is made of. It will create massive opportunities and if not, massive regulations. So this is all about leadership.”
“What we need to do is switch from a linear to a circular economy. Leftover high-quality raw materials should no longer be neglected” KEES RADE Netherlands ambassador to Thailand