How the circular economy could save our planet

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How the circular economy could save our planet

Bertrand Gacon - Head of Corporate Sustainability

Bertrand Gacon

Head of Corporate Sustainability

We need to devote more than one day

5 June is World Environment Day. Some will think that our (only) planet deserves better than this one day of the year that we devote to it. They're not wrong: the scientific world is constantly alerting us to the worrying state of our shared home. Pollution affects all environments and contaminates soil, air and water. Plastic is now so omnipresent that it not only pollutes our beaches and forests, but also penetrates the entire food chain. It can be found in every corner of the planet and even in the deepest part of our oceans, as sadly discovered by members of a recent expedition who, for the first time, went 11,000 metres below sea level. Man has even begun to pollute space, leaving a vast quantity of waste in orbit that cannot be disposed of.

Man has even begun to pollute space, leaving a vast quantity of waste in orbit that cannot be disposed of.

Threatening extinction

Biodiversity isn’t faring well either. Virtually all wildlife species have seen their populations decline massively (on average 40%) over the past 20 years, a frighteningly short time. None of the massive extinction phases that the earth has experienced to date have been accompanied by such rapid and widespread destruction of life. Today, humans and the livestock they raise for their own needs represent 96% of all land animals. Wildlife has been reduced to just 4% of living beings, and these populations are also suffering from a dramatic decrease in their habitats, breeding grounds and food sources.

None of the massive extinction phases that the Earth has experienced to date have accompanied by such rapid and widespread destruction of life.

Ultimately, climate change exacerbates all these problems and further disrupts the fragile balance that is already under enormous pressure. And despite COP21 and the Paris agreements, this trend has not yet been reversed. To make things worse, global CO2 emissions picked up again in 2018.


Perpetrator and victim

Human beings, who are largely responsible for this situation, are finally beginning to understand that they are also victims. This is not just about saving polar bears or orang-utans. The damage to our environment is such that it now directly threatens our health, food security, economic development and, consequently, the very stability of our political systems.


Production and consumption – a conundrum

So how can we reverse this trend at a time when global demographics and the economy continue to grow? A simple calculation shows that 3% global growth per year, which is more or less the trajectory we have been on since 2000, implies a doubling of our production in 25 years. How can we produce twice as much when we are already consuming far more resources than the planet is able to regenerate in one year?

How can we produce twice as much when we are already consuming far more resources than the planet is able to regenerate in one year?

The circular economy

For some, negative growth may seem to be the only rational way forward. It will undoubtedly be part of the solution. Sooner or later, we will have to break free from the ultra-consumerist model in which we have locked ourselves and relearn the virtues of being relatively frugal. And replace "more is better" with "less is better".

But there is another path that is more appealing than negative growth, a path that encourages innovation rather than recession. A path that involves completely rethinking our production model to decouple it completely (or as far as possible) from the extraction of new resources and production of waste. This model is well-known in the academic world and is already successfully practised today by pioneering companies that have shown that it is possible to rethink everything and produce differently.

This is known as the circular economy.

Behind this somewhat theoretical concept lies in fact a very concrete and profound transformation not only of our productive base, but also of the rationale of industrial production.

Sooner or later, we will have to break free from the ultra-consumerist model in which we have locked ourselves and relearn the virtues of being relatively frugal.

Going to waste?

Indeed, the consumer society that has emerged over the past century has been built around an entirely linear principle: extract-manufacture-dispose. Then repeat. Waste – and the pollution it causes – is an inseparable by-product of this form of production.

Each European citizen uses 15 tonnes of materials each year and generates 4.5 tonnes of waste. Worldwide, 322 million tonnes of plastic, 240 million tonnes of paper and 59 million tonnes of aluminium is produced every year, the vast majority of which is not recycled and ends up in landfills or in nature. Overall, more than 65 billion tonnes of materials were produced in 2010, a figure that is expected to rise to 80 billion in 2020. This is much more than the planet can sustainably provide and absorb in return.
 

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Worldwide, 322 million tonnes of plastic, 240 million tonnes of paper and 59 million tonnes of aluminium is produced every year, the vast majority of which is not recycled and ends up in landfills or in nature.

Protecting, reusing and rethinking our natural resources

The circular economy is based on a different logic: it aims to ensure that the natural resources used for the manufacturing of every product are fully recovered and re-injected into the economy without having to be extracted again. This involves several major changes:

  1. The notion of waste does not exist in the circular economy. Once the consumer good has reached the end of its life, the materials it contains are reused to build the same (or another) product again. Like nature, in which organic "waste" is actually the food that produces the next harvest.
     
  2. The circular economy is not just a question of recycling. It involves rethinking the design of the products themselves so that they can be dismantled and the different materials simply extracted once they reach the end of their life. Such "eco-design" currently generates a great deal of innovation and allows many companies to make substantial savings by reducing the number of components and assembly phases required. Adidas has created a sports shoe, the Parley, which is made of a single block of moulded plastic, that’s recast and remoulded to produce a new shoe.
     
  3. The circular economy also requires a rethinking of ownership models. The company must be made accountable for its product throughout its use cycle, thus it is responsible for collecting and recycling the products it has manufactured. The best way to do this is for the company to remain the owner of the property it sells us. The shoe you buy does not belong to you: you rent it for a given period of time. This system, which may seem surprising, actually has enormous benefits for the consumer and the planet. First, it helps establish an efficient recycling process, as the company has an economic interest in recovering the products it sells. It also guarantees quality and ensures there is no planned obsolescence. The company that sells you a dishwasher, for example, has every interest in making it work for as long as possible because in the event of a breakdown, it’s not you who will buy a new one, but the company that must replace it.
[The circular economy] aims to ensure that the natural resources used for the manufacturing of every product are fully recovered and re-injected into the economy without having to be extracted again.

A promising future

In the end, this new type of economy represents a huge economic opportunity for most industrial companies at a time when security of supply and the cost of raw materials are weighing on their results and prospects. The economic value of metals contained in electronic waste, for example, is USD 55 billion per year. In Europe alone, the potential savings associated with circularity range from USD 380 billion to USD 630 billion per year, depending on the scenarios.

[…] this new type of economy represents a huge economic opportunity for most industrial companies at a time when security of supply and the cost of raw materials are weighing on their results and prospects

Of course, the circular economy will not solve everything. It is never possible to recover and reuse 100% of materials. Nor does the circular economy fully resolve the issue of energy consumption, even if it eliminates a large part of the needs upstream of the production chain. But it holds the very concrete promise of a significant decoupling of production from the exploitation of natural resources. It means a world can be envisaged where 10 billion people can continue to eat, travel, live, support themselves, work and play without their development being at the expense of the environment on which we all depend so intimately. 

[The circular economy] holds the very concrete promise of a significant decoupling of production from the exploitation of natural resources.

Nature is the best example of a circular economy. The wisdom of millions of years of evolution shows us the way forward. It's time we listened to it.

More than just one day a year.

Important information

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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