1 May 2015

Circular Economy: What comes next?

We face the end of the era of cheap oil and materials. With resources scarce, the focus is on changing the current model of economic growth linked to resource consumption.
At the current rate of growth and levels of resource intensity we will need three planets’ worth of resources by 2050 – with Europe alone already using resources that equal twice its actual land area. Economists, politicians and businesses alike have advocated that the best answer to these challenges lies in a change from a linear economy, which uses a “take-make-consume and dispose” (cradle-to-grave) approach to resources, to a circular economy which conserves scarce resources by giving an economic value to waste – turning waste into a resource (a ‘cradle-to-cradle’ approach).
In order to answer the challenge of resource efficiency the European Commission produced its communication entitled: “Towards a circular economy: a zero waste programme for Europe”. The sought after net impact of these proposals was to force a re-think in how products are designed and made at every stage of their life cycle in order to use as little overall resources as possible – including energy and water, and create the minimum amount of waste. This should encourage companies to change their business models and seek ways of retaining more of the value of the material, energy, and labor inputs that go into their products.
However, one of the Juncker Commission’s first acts was to scrap the package and promise to come back with a new, improved version. So what is needed to make the new Circular Economy package workable?
Increasing digitization presents one solution. Increasingly companies are able to remotely manage their products - reducing the risk of guaranteeing a product, and adding incentives to actively manage the life cycle of the product after it leaves the factory. This makes it easier for businesses to use existing assets, instead of increased resource consumption, to provide products or services.
Increasing digitization of data could also boost a circular economy, giving manufacturers access to the secondary raw materials (i.e. recycled primary materials) market.
Once new rules on waste are in place, a pertinent challenge will be to ensure that the waste produced in Europe, stays in Europe. If secondary raw materials are to be reintroduced as sources of value in the European economy, they must remain on the continent and not be disposed of via their illegal shipment to 3rd countries. In the context of international trade agreements, it will be important to recognize the role that waste will play in the European economy.
Finally, in the medium term there will need to be a perception shift amongst businesses and consumers. Established businesses must be encouraged to buy in to changing their business models, while there also needs to be an incentive for consumers to change their consumption patterns away from outright product ownership and towards a view of the product as a service – i.e. Car sharing rather than car ownership. Once the market in secondary raw materials is established, consumer demand for products created with these materials must be present – this will mean that efforts need to be made to improve the reputation of these secondary materials, making sure that producers understand they are as valid as primary materials.
This topic will be debated at the European Business Summit on 6th of May http://www.ebsummit.eu/programme

Related contacts :

James Carey
Account Executive, EU Public Affairs

email: james.carey@hkstrategies.com