News headlines have been full of extreme events recently. Many consider these as a symptom of global warming – so is it time to reconsider the economic model that’s widely in place, revisit how cities are planned and reflect on current financial models? By Jovin Hurry
Finland, 20 September 2017. Back-to-back hurricanes have been rampaging through the Caribbean and the USA. Heatwaves worldwide have broken temperature records and wildfires continue to burn in many spots around the world.
Extreme heat has been labelled the hallmark of global warming. With average temperatures shifting upward, the hottest days are now even hotter, and very hot days have become more frequent. This string of natural events has brought new focus to a nagging question: do we need a new economic operating system to run the world?
In June 2017 over 1,500 participants from 105 countries gathered for the first-ever World Circular Economy Forum in Finland – and they tend to think a change is overdue. Indeed, the World Business Council for Sustainable Development (WBCSD) argues the circular economy is a US$4.5 trillion business opportunity.
New business models and technologies
The WBCSD describes the Circular Economy as: “ … a new way of looking at the relationships between markets, customers and natural resources, leveraging innovative new business models and disruptive technologies to transform the current ‘take-make-dispose’ economic model.”
During the Finland Forum, attendees discussed several business models designed to minimise the effects of climate change, or help companies move away from fossil based energy sources. These included a circular supplies model, that makes use of renewable energy and bio-based or fully recyclable inputs; a resource recovery model that removes, saves and re-utilises useful matter out of materials, by-products or waste; and a product life-extension model, that stretches product lifecycles by repairing, upgrading and reselling, as well as through innovation and product design.
Delegates further argued that technologies that could help implement the Circular Economy are digital, physical and biological technologies.
Digital technologies include the Internet of Things, which is the concept of connecting devices to one another over the internet, e.g. mobile phones to television sets to air conditioners, etc. According to the analyst firm Gartner, there will be over 26 billion connected devices by 2020, with connections being between people-people, people-things, and things-things.
Physical technologies include 3D printing, which is a manufacturing process whereby a digital model is turned into a solid three-dimensional physical object by adding material layer by layer.
Biological technologies include aeroponics, which is an indoor gardening practice in which plants are grown and nourished, not in nutrient-rich soil, but by suspending their root structures in air and periodically spraying them with a nutrient and water solution. This technology efficiently grows fruits and vegetables, without potting and repotting them.
All these technologies are being looked at in association with a major social movement happening at the moment – city expansion.
Circular cities in the loop
Last October 2016, in Quito, Ecuador’s capital, the UN’s Habitat III global summit looked at, among other things, the effect of an estimated two billion more people moving to cities in the next 20 years. The 45,000 people gathered at the Habitat III summit discussed the world’s urban agenda, and this in turn led to the issue of Circular Cities attracting much attention.
Delegates agreed that cities are like magnets, with the potential to take care of our most basic needs as well as the most intangible desires. It was acknowledged that the scale and speed of this global urbanisation, and the scarcity of means with which are available to respond to it, has no precedent in human history.
Dimitri Zenghelis, Acting Chief Economist for the Global Commission on the Economy and Climate and climate change expert noted that while earlier cities were driven by material transportation, they are now driven by knowledge, where the most urgent need is to understand the dynamics of innovation and investment. “A lot has to do with psychology, with expectations,” he noted, “… the language has now shifted from burden sharing to opportunity partaking.”
Topics discussed in this cities track at the Forum were wide-ranging, for example, future visions for dynamic cities that transit systemically into circular economies; strategies cities could adopt, e.g. procuring goods and services in a way which develops the market for circular goods and services; and closing material loops, i.e. diverting waste from landfills while producing and purchasing products with significant recycled content.
It was noted that several cities have already started embarking on this demanding yet exciting journey. New York City’s Zero Waste by 2030 re-labels the concept of ‘waste’, pushes for options other than the default disposal and pushes for extended producer responsibilities from its stakeholders.
Hans Bruyninckx, leader at the European Environment Agency, said that many European Union policies are being implemented in cities. These include city-level decoupling for better adaptation to climate change, i.e. the cities could economically grow without necessarily using more resources and exacerbating environmental problems. Also, while they report on fundamental systemic transitions, they also try to look at how to step away from existing basic models that have brought cities to their current stage. “It is not enough to have cycle lanes, you need a whole transportation system… with citizens involvement… in these living labs,” he said.
An example of this living lab is the city of London. As outlined a few days ago in the journal of the Chartered Institution for Wastes Management, the leading professional body for resource and waste professionals, the London Assembly Environment Committee has found that London’s waste could be reduced by as much as 60% if it adopts a circular economy model for its waste. The Mayor of London’s draft Environment Strategy has recognised the importance of the circular economy.
Although London is at the early stages of transitioning into a circular economy to reduce the amount of waste generated, minimise the depletion of natural resources and reduce its carbon emissions, it already shows potential to transform its economy and environment. Examples of growing circular economy projects in London that are impacting customers and environment are summaried in the report published by the London Committee.
They include OLIO, a food sharing app that has 250,000 members in London who have shared over 30,000 meals. When people share edible food waste, this reduces carbon emissions and helps fewer Londoners go hungry.
Additionally, the Met procured a circular economy service during their estate reduction programme two years ago, and within a year, the service has helped the Met to save over not only £300,000 but also significant carbon emissions.
Finally, using circular economy concepts, the developers at the Old Oak and Park Royal Mayoral Development Corporation are planning, designing buildings that are adaptable and flexible for changing uses, rather than the de-facto one fixed end use.
Financing: the economy of the future
If a shift to a global circular economy is to happen, then the financial sector would need to take a key role in enabling it. In fact, the principles of a circular economy can be incorporated in investment strategies and portfolios – and could even help reduce risks in an ever more volatile global market.
The Forum speakers argued that Multilateral Development Banks have a highly structured and regulated setting for investments; that common issues are about governance, long-term corporate strategy, disclosure of climate risks and human capital management. This means that influencing change can be in private conversations, from one decision maker to another. Investors can educate project bidders that projects have to be made attractive before they will green light funding.
Other speakers struck a realistic tone by mentioning that not many venture capitalists are cleantech focused; that in many situations, it is difficult to create bankable circular economy projects; and that not all companies need to be circular economy companies to work within it.
Additionally, much more investment is likely to be needed in circular economy projects to achieve the full potential of the movement. While resource productivity will create value for companies, they need to identify the value drivers in their sector in order to generate returns, be they financial, environmental or social, through their own evaluation lenses of risks and profitability.
Looking forward with moderated enthusiasm
The final conversations at the Forum left a feeling that much more needs to be done to minimise the current (unsustainable) global average footprint of 1.7 earths. Delegates were reminded that Earth Overshoot Day arrives earlier each year. In 1993, it fell on October 21, in 2003 on September 22, in 2015 on August 13, and this year on August 2.
However, despite the negative momentum, several avenues towards solution were proposed. Some of them were about strengthening international partnerships; bringing circularity mainstream; de-carbonising; de-coupling; and de-toxification, i.e reducing the amount of substances that create irritating and harmful effects to our environment.
Other suggestions were about re-looking at both design and end-of-pipe models for the linear take-make-dispose model; about the need to look at issues not in silos but in systems; and about using existing platforms to learn, share and collaborate.
Today, the path towards a more sustainable system seems long, yet possible. As Mari Pantsar, director of the Finland Innovation Fund SITRA and Chair of the World Circular Economy Forum, noted: “A circular economy is about using resources more efficiently and creating more value with what we have . . . and [it] offers large benefits for tackling the climate crisis, reducing waste and creating jobs.”
Summing up, she said that a shift to a circular economy is possible - if people have the fire in them. She received a massive round of applause for her optimism.