Strategies to overcome barriers to the circular economy

(The author is a Professor of Management and Economics, formerly at IIBM (RBI) Guwahati. He can be contacted at m.bibhas@gmail.com)

Dr. Boidurjo Rick Mukhopadhyay

(The author, international award-winning development and management economist, formerly a Gold Medalist in Economics at Gauhati University)

We have a waste problem. Globally, we generate about 1.3 billion tonnes of trash per year, leading to environmental atrocities like ocean plastic pollution and related tensions as countries search for new places to stash their trash. The UN International Resources Panel projects that our use of natural resources will double by 2050. A study by OECD shows that the flow of materials through acquisition, transportation, processing, use and disposal accounts for about 50 per cent of greenhouse gas emissions. In the living world, there is no landfill, instead, materials simply flow. The waste of one species is food for another. Things grow, fade in time, and nutrients safely return to the soil. We, humans, however, do 'Take, Make, Dispose of'. With increasing existing and new needs, we eat into the finite set of resources and therefore - more and more waste, less and fewer resources available. Therefore, going forward and while embracing circular economy practices, businesses and society need to extract unsustainable quantities of natural resources to match consumption levels. The question is how our waste could build capital rather than reduce it?

In 2021, the European Parliament defined the circular economy as "a model of production and consumption, which involves sharing, leasing, reusing, repairing, refurbishing and recycling existing materials and products as long as possible. In this way, the life cycle of products is extended." Three components that could be picked up from this fairly spot-on definition of circular economy is how we could a) Reduce waste to a minimum, b) After a product reaches the end of its life cycle, the raw materials could be disassembled and kept within the economy wherever possible in order to be able to use them again, thereby creating further value.

'Make, Use, Return' Model

The central idea around the circular economy is to move towards a more 'Make, Use, Return' model, and marrying resourcefulness, design thinking for products built to last and recyclable, retrieving raw materials, and change in ownership models. In 2015, the Ellen MacArthur Foundation demonstrated that a circular economy could boost Europe's resource productivity by 3 per cent by 2030, generating cost savings of €600 billion a year.

Three examples, a) Clothing businesses have actively taken steps towards embracing circular economy practices, while some firms in the apparels industry have formed coalitions to promote nontoxic chemicals, improve cotton farming, others are developing standards for garments that are reused or recycled. There is great scope in investing in the development of new fibres that lower the environmental effects of production. B) Recovering the material value of bottles, from mixed recyclables or bottle-to-bottle recycling, could lead to a much higher payout. Metals, meanwhile, are commonly extracted from tires in open backyard fires—at great cost to both human health and the environment. Aggregating tires for use as industrial fuel could increase their value almost tenfold while crumbling them to make road-paving material yields even more. C) Dell has incorporated recycled plastics into its products, using the world's largest takeback program of used electronics. Their cloud service lines provide customers with computing capabilities while eliminating the need for physical assets, reducing costs and carbon footprints. All these practices, as mentioned above, can help companies extract additional value from leakages or waste in the production process.

B) Barriers to Circularity

A study by the World Resources Institute (WRI) identifies certain operational barriers in the functioning of the circular economy. The mindset change is a big challenge, for example, we use 20 times as much plastic as we did 50 years ago. Despite there being a strong push from the market to use linen bags to grocery stores and other shopping, it has not taken up at the scale that it should have been now. Shoppers still prefer single-use plastic bags and packages that subsequently ends up at the bottom of the ocean. Consumer choices matter as much as the stringent regulatory push on this matter. Another aspect related to this is how we understand the 'expiry date' of a product in the food sector. Expiration date labels are to protect the consumer, but does not guarantee how food is stored— e.g., the date label on eggs in India may be labelled for pantry storage but will last longer when refrigerated. So, while the expiry date could mean that a food is no longer edible, it may still be safe to eat while not necessarily meeting the manufacturer's quality standards. This is currently being addressed in several markets.

Waste management and recycling infrastructure differ from country to country, which is another difficult thing to control. For example, studies project that there could be more plastics than fish in the ocean by 2050 and this problem is more severe in certain countries like China, Indonesia, Thailand and the Philippines amongst some others over countries that have actively invested in waste management and recycling facilities to keep plastic out of our natural spaces. There are certain limitations in how plastics are sorted by chemical composition and cleaned of additives. Better technology can maintain quality and purity so that product manufacturers are willing to use recycled plastics. Once there is some economic value in it, companies and users will be more inclined in acting more responsibly. This is an area where nations can work together during international conferences to work on partnerships and share R&D amongst other possible measures.

While the world population is projected to be 9.5 billion by 2050, with far fewer living in poverty than today. Emerging countries such as the BRICs (Brazil, Russia, India, China, South Africa) have an expansive middle class —with more purchasing power. The clothing and apparel sector needs to lessen its environmental externalities by using non-toxic dyes and recycling cloth scraps. As discussed earlier, the 'rental and resale' model has to work over fast fashion preferences which leave far more waste. With the increasing rise in demand for electric cars, if lithium-ion battery manufacturers designed their products with similar mixtures of chemicals that would allow more processed recycling possibilities.

C) Strategies for Circularity: 'Cradle to Cradle' and not 'Cradle to Grave'

A Harvard study reviewed the manufacturing sector, the clothing and furnishing in particular, and provided an understanding of the different strategies that embeds a functioning circularity in this sector. Firstly, the study suggests that companies should consider leasing products instead of selling them, in this case, they can retain the continuity or circularity on an ongoing basis. From a stakeholder perspective, this also means that the companies remain responsible for the products after the consumers are finished with them. Xerox, for example, over the years has followed this model where they leased their printers and photocopiers to corporate clients rather than selling. Clearly, it also entails ongoing after-sales and repair costs but is still more sustainable than replacing the devices after their life cycle ends. Similarly, robes used at graduation ceremonies, companies have been renting them to grandaunts instead of selling them. The company 'rent the runway' also rents designer clothes for one-off events which also boosts their brand value given the nature of the business since the apparel sector has evidently large amounts of waste contribution every year.

Secondly, also follows from the first one in principle – companies designing products that would have a longer product life cycle. A longer life span of a product would mean there will be fewer repeat purchases and at the same time, companies can leverage 'durability' as a competitive advantage over their rivals. This can also give them access to new markets and also price their products higher given the premium or differentiation nature of their offering. For example, Bosch Power Tools extends the life of its used tools by remanufacturing them, this enables them to compete with new products from cheaper competitors.

Thirdly, companies can embed the recycling aspect during the product development stages and planning process. The idea here is to make sure that the product planning stages have considered maximum recoverability of the materials used in the new products. For example, Adidas partners with Parley, the latter makes textile thread using plastic waste from which Adidas manufactures its shoes and apparel. The end result is less plastic at the bottom of the ocean.

D) Role of the State and also Users

In a world where 1000 litres of water get used up to make a pair of jeans, some choices are controllable, do we still want more plastic remains than fish in the world's oceans? Do we continue to ceaselessly release nitrates and phosphates leaching from fertilised fields? An innovative public-private partnership where companies, investors, governments, academia could each offer the intellectual, financial, and operational assets to strategically solve big problems that they couldn't solve alone. So, a set of focused government policies that provide essential protections, foster innovation and risk-taking by the private sector to advance circular solutions is the need of this hour.