Thematic Investing

 

Circular Economy: A new model of production and consumption   

April 2023 | 3 minute read | Marketing Communication   

Since the 1920s, the current linear economy model has been based on an ever-increasing extraction of natural resources, a growing production of standardised goods, an ever-increasing consumption and renewal of these goods, and at the end of their lifecycle it’s usually discarded as waste.

However, natural resources are limited, they need time to regenerate and become available again. Production of goods and land management represent 40% of CO2 emissions¹  making the linear economy model incompatible with the needs of our planet.

Faced with the environmental, economic, and social challenges represented by consumption and waste disposal along with the ever-rising cost of collecting and treating waste, a transition to a circular economy paradigm shift has become imperative.

If businesses also reduce their reliance on fossil fuels and instead derive their energy from renewable resources – like wind and solar – the impact of manufacturing on the environment can be lessened. This may help us reach net zero by 2050.

What is the circular economy and how can we make a difference?

A circular economy is built on principles whereby products are designed and built to be re-used, renovated, recovered, repaired or upgraded, and then recycled at the end of their life. By redesigning their product lines, businesses will be able to reduce their reliance on raw materials and the associated costs of extraction, gaining a competitive edge and helping to deliver sustainable long-term growth.

This requires a change in mindset, where businesses and sectors collaborate to benefit everyone in the loop, and even use waste from one sector as the raw material in another. In the catering and hospitality sector, for example, used cooking oil (UCO) cannot be recycled into the human or animal food chain, so much of the 250 million litres produced in the UK each year is thrown away. However, UCO can become one of the pillars of a circular economy, because it can easily be refined into sustainable biodiesel. And the UK produces enough waste oil annually to power more than a quarter of a million cars.²

Big producers like McDonald’s now send their waste oil to companies like Neste and Olleco, where they are transformed into high-quality biodiesel. The process is nearly 50% more economical than making biodiesel from crops, and it delivers an 88% reduction in greenhouse-gas emissions.

In South America in 2018, Coca-Cola introduced a re-usable Universal Bottle that customers could return to a shop when it was empty. The bottles are then collected, cleaned and refilled, reducing the company’s plastic waste by 90% and greenhouse-gas production by 47%.³

Crucially, the transformation from waste product to re-usable resource benefits everyone in the value chain and is much better for the environment.

The future is now

The World Economic Forum estimates that the circular economy could generate business opportunities worth $10 trillion annually and create nearly 400 million new jobs by 2030.⁴ If governments introduce new legislations and corporates and financial institutions integrate new constraints into their activities  we could all see  both financial and environmental benefits.

At the moment, we are using natural resources at unsustainable levels and emitting greenhouse gases that will raise global temperatures by more than the 1.5°C target outlined in the 2015 Paris Agreement.⁵ By re-using and recycling the products we manufacture, we can slow the rate at which we consume finite resources. This should help us tackle climate change and the loss in global biodiversity, as well as giving us a better chance of reaching net zero and safeguarding the planet for future generations.

Sources:

¹ https://research-center.amundi.com/article/wheels-circular-economy-go-round-and-round-ndeg1-time-circular-economy-has-come
² https://www.olleco.co.uk/sustainability/used-cooking-oil-recycling
³ https://ellenmacarthurfoundation.org/circular-examples/a-reusable-drinks-bottle-design-for-multiple-brands-universal-bottle
⁴ https://www.weforum.org/reports/new-nature-economy-report-ii-the-future-of-nature-and-business
⁵ https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement