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Meet E4S: the academic venture spearheading the transition to a circular economy
At the Building Bridges 2022 conference in Geneva, Lombard Odier and Enterprise for Society (E4S) announced a landmark multi-year partnership to foster sustainable research, focussing on the transition to a circular economy. Jean-Pierre Danthine, the Co-managing Director of E4S, outlines E4S’s work and the importance of the new partnership.
Why was E4S founded?
E4S came from the realisation that as academics we were not doing enough to support society in facing its challenges. Academia is geared towards the very long-term, towards extending the frontier of knowledge. But we had the realisation that we could also put our competencies to better use for society right now. That’s the real starting point.
Our DNA is as business schools. We thought the challenges of society are such that we need to change the way we train business leaders. The key challenges we want to focus on are, naturally, the planet’s environmental limits; the issue of resilience – which is very relevant when we think about nature and regenerating nature; and also the issue of inclusion – because lack of inclusion and the growth of inequality can lead to society making very bad democratic choices.
We believe that technology will be essential to addressing society’s challenges. But when we cannot rely on technology, we need to rely on behavioural changes. So that’s why, at E4S, we have three institutions that come together. At EPFL (Swiss Federal Institute of Technology) we have the technology expertise. At IMD (International Institute for Management Development) and HEC (Faculty of Business and Economics at the University of Lausanne) we look right across the engine of the economy to the management of the corporate sector and organisations of all types. Because the changes have to come from the mainstream, not just be at the periphery. And we also open up to social sciences, because we need social sciences to better understand behaviour and the possibility of behavioural changes.
In addition to technology and the role of business and academia, are there any other levers that we have to pull in order to move towards a sustainable, regenerative economy?
There are two routes where we, at E4S, can go to the next level and activate change. One is to accompany start-ups in their path to sustainability. When we think about start-ups we think first about survival by any means, regardless of being sustainable. It’s very difficult for start-ups, so that’s why we have taken up the challenge to accompany them on the road to sustainability.
The other dimension that we believe is important is to be more creative in how we translate research into action. For instance, we are working on carbon capture. And we are envisaging the launch of a negative emissions fund, where we would finance carbon absorption activities. We are really trying to walk the walk and go all the way, which is different from a traditional research centre.
How do you define a circular economy?
We start with the planetary limits. Could I tell my children that I don’t care about the planetary limits? The answer is no. There is no moral, philosophical or economic justification to ignore the planetary limits as irrelevant. If we want to give the same chances to our children and grandchildren then we need to respect all planetary limits. That’s our starting point.
What our work shows is that if you start from that position then you need to bend the line of today’s linear economy. The circular economy is what follows from the necessity that we respect planetary boundaries. It’s not just something that’s nice to have. It’s absolutely imperative. So we need to work together in order to develop that knowledge and push the transition. That’s why we started to engage with the Lombard Odier team.
Read also: The CLIC® Chronicles: 10 ways to build a circular economy and the companies leading the way
Together with Lombard Odier you are embarking on a major research project about the transition to a circular economy. Can you describe the work you will be doing together?
The environmental benefits of the circular economy are clear – although not necessarily well measured. But it is still unclear which will be the first sectors to transition to the circular economy, or how much it will cost. Our project with Lombard Odier attempts to address this issue by proposing a methodology to evaluate the extra costs that circular business models entail. These extra costs are known as the circularity premium – we plan to analyse this across economic sectors with a focus on Switzerland and the European Union.
We plan to do this with the help of an open-source, demand-driven model called the EU Calculator (EUCalc), and we will use this calculator to analyse realistic scenarios where businesses use circular business models that respect the planetary boundaries. Thus, we will be able to estimate the related changes in carbon emission pathways and costs. The final goal of this analysis is to use these sector-specific pathways as benchmarks for the pathways of individual companies.
It’s sometimes argued that the circular economy will reduce manufacturing costs. You are exploring the possibility that a circular model could actually increase costs in certain areas. Why is it important to calculate this, and what does it mean for the transition?
In most domains today the circular economy is more expensive than the linear economy. And there are two reasons for that. One reason is that prices are wrong. Often the price of extracting new resources does not reflect the real cost to the environment. So if the prices are too low then you’re giving an advantage to the firms that extract new resources rather than recycling.
The second reason is that we have been used to these linear economy models since the Industrial Revolution, so we have exploited the associated economies of scale. The circular model is new, it’s not developed, so the economies of scale are ahead of us.
So the two things that we have to do are to see how we can make prices reflect the true cost of resources, and if we cannot do it we probably will have to bypass it through public intervention. A CO2 tax would be an example. And then the second thing is on the economies of scale, we probably will find ways – for example, subsidies – to finance the transition. This has to be thought through globally, systemically, and that’s the goal of our research jointly with Lombard Odier.
You identify agriculture and food systems as an essential sector that needs to change. What work are you doing in this area?
We believe that sustainable, resilient and inclusive food systems must incorporate the true cost of food from farm to fork. This includes the environmental, social and health costs.
Several methods have been proposed to achieve this, but they all focus too narrowly on either emissions and waste, or else on the social and health aspects. We are developing a true cost of food model that takes all these things into account. We believe this will help us move towards producing affordable, healthy food that respects the environment.
Read also: Soil: food’s forgotten superhero
Do you think consumers are the most important factor when it comes to this transition?
The question is where is the responsibility – is it investors, should it be business, should it be governments, should it be finance, should it be consumers?
It should be all of them. But consumers are very important. Why? Because in an economy, everything that is in demand is going to be produced. Whether it’s legal or illegal, whether it’s bad or good, it’s going to be produced. So as long as consumers want fossil fuels, for instance, fossil fuels will be produced.
But consumers can’t be alone. We need government. We need regulation. Our conviction at E4S is that we need to bring the government in a spirit of public-private partnership, because the private sector is best-placed to see when regulation is too costly, and when and where it can be drafted efficiently.
Firms are also vital, in many ways they help guide the choices of the consumer. Moreover, by adopting the public perspective voluntarily they can pre-empt policy interventions.
And what about investors? I think finance and investors must accompany firms in this transition by pushing them to be transparent, to provide the necessary information about their emissions, and, more generally, about their circularity trajectory. That is, to encourage them to develop a strategy towards being part of the circular economy. That’s what we are partnering with Lombard Odier to accelerate.
We are living in very challenging times from an economic standpoint. Do you think this is going to hinder the transition to a circular economy?
There are two challenges. One is the budgetary constraint for all decision-makers. Of course that is a negative, that’s clear. On the other hand, I think there is an awareness that things have to change radically. We see it with the need to adopt renewable energy, in Switzerland the current threats to supply are stimulating our willingness to change our energy mix.
So, there are these two sides. I suspect that in the very short-term it’s going to be negative, but soon it’s going to be a positive.
Are you optimistic?
I’m optimistic that we can do it. I think the most difficult point is whether we want to do it, as a society, whether the majority of the population can be persuaded to do it. Sometimes I’m pessimistic when I see the difficulty of really changing behaviour. But we can do it. I’m convinced of that.
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This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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