The 10 steps to a circular economy

rethink sustainability

The 10 steps to a circular economy

What if one of the solutions to a sustainable future is within our reach? It is and it's called circularity – the economic principle of sharing, repairing, refurbishing, recycling, remanufacturing and reusing as much as possible to minimise waste and the extraction & creation of virgin materials.

Nature is our best example - apart from the energy we receive from sunlight, everything produced and consumed on earth is based on its own resources.

But for years our economy has been wasteful, idle, lopsided and dirty (WILD). We have inadvertently forgotten what nature has taught us and overexploited our resource endowment. Today, pollution contaminates our soil, air and water and is putting our health and biodiversity at risk.

Pollution contaminates our soil, air and water and is putting our health and biodiversity at risk

Time is of the essence. Even with the positive effect of the pandemic on reduced emissions, this summer is amongst the hottest since we've started to count. To stay below 1.5ºC of global warming, the Paris Agreement’s most ambitious target, we must  decrease greenhouse gas emissions by 7.6% annually until 2030 by transitioning to a Circular, Lean, Inclusive and Clean (CLIC™) economy that decouples economic growth from its environmental impact.

To fulfill the Circular aspect of this economic model, we support the 10R-strategy. This strategy focuses on every stage of the product life cycle, and offers growth opportunities for businesses and investors alike.

This strategy focuses on every stage of the product life cycle, and offers growth opportunities for businesses and investors alike

 

Discover the 10Rs and sustainable companies leading the change:


1. Refuse

We consume more than we need. Every year, we increase the goods we own by 25 billion tonnes – the equivalent of 93,000 Empire State Buildings. Much of this sits idle – cars lay dormant 92% of the time while offices are vacant for 58% of the year. We can change this by refusing to have such unnecessary and unsustainable products through solutions that maximise the usage of fewer goods.


2. Rethink

Every product and every system needs to be rethought with a focus on how to reduce its environmental impact. And the investment community is moving to help. SVB Financial Group, the holding company for Silicon Valley Bank, funds innovative startups and venture capitals working towards sustainable goals in industries such as mobility, finance, manufacturing and healthcare. By investing in innovative projects and supporting rethinkers, we can move faster to an eco-driven society.

By investing in innovative projects and supporting rethinkers, we can move faster to an eco-driven society

3. Reduce

The central idea of a circular economy is dematerialisation or “doing more with less”. To achieve this we need to use and manufacture products in smarter ways. Amongst many others, we have seen opportunities in carbon fibres, bio-plastics, bio-based chemicals, low-impact steel and aluminium processes that could benefit a range of industries. US company Eastman Chemicals, for example, offers smart solutions for everyday products. Last year, it began commercial-scale recycling for a range of waste plastics that would otherwise be put in landfill.


4. Reuse

To achieve zero-waste and reduce carbon emissions, we must look beyond the take-make-waste extractive industrial model. One area of concern is fast fashion, which is getting faster – consumers buy 60% more clothes than in 2000, but keep each garment half as long. However, consumers are also becoming more sustainability-conscious and the sharing economy is rising. Online marketplace Vinted is an example of this shift. Vinted offers a peer-to-peer service where users buy, sell and swap secondhand clothing. Now in 12 countries, the platform has passed a valuation of $1 billion, making it Lithuania's first tech unicorn.

One area of concern is fast fashion, which is getting faster – consumers buy 60% more clothes than in 2000, but keep each garment half as long

5. Repair

Planned obsolescence and a throwaway culture is a grim reality of today's society. Every year some 50 million tonnes of e-waste is discarded – heavier than all of the commercial airliners ever made. Against this, the “right to repair" movement is growing, demanding affordable repair solutions and better product manufacture. In October 2019, the EU adopted an eco-design law which means manufacturers of phones, tablets and laptops will be obliged to make their products easier to repair.

One company is leading by example. French Groupe SEB, a leading small appliances manufacturer, has made repairability one of the pillars of its sustainable development policy. It aims to extend product life cycles and to preserve rather than throw away.


6. Refurbish

Refurbishing is the process of restoring an old or discarded product and bringing it up to date to serve its initial function. Damaged components are replaced resulting in an overall update while the product looks brand new. Enhancing the refurbishment of products can decrease the need for new materials, resulting in a reduction of waste and carbon emissions. Two platforms specialized in e-waste, offer solutions: the French Black Market and the Austrian Refurbed.

Enhancing the refurbishment of products can decrease the need for new materials, resulting in a reduction of waste and carbon emissions

7. Remanufacture

Remanufacture, or reconditioning, involves refurbishing and re-using parts of a discarded product in a new product with the same function. Amongst the many areas in which items are remanufactured are aircraft components, engines, components, office furniture and medical equipment. Canon, for instance, has been remanufacturing devices with more than one function since 1992, echoing its ethos to maximise resource efficiency.


8. Repurpose

What if an old ladder could be turned into a brand new bookshelf? Upcycling – repurposing a discarded product into a new one with a different function – is a growing trend. And the fashion industry is leading the way. Swiss brand Freitag transforms used truck tarps into highly functional, iconic bags. Airline Lufthansa has launched its Lufthansa Upcycling Collection, working with renowned designers to upcycle parts of its Airbus A340-600 D-AIHO into a home and accessories collection.


9. Recycle

Today, only 9% of our used materials are recycled. Could we increase this number for less than it would cost to source the equivalent virgin materials? As public opinion moves increasingly against single use plastics, companies are looking to capitalise. For instance, in Australia, the cellulose used to bind roads together is made from paper, plastic and lids that were meant for landfill. And the UK has recently seen the launch of Loop, an online shopping service which delivers products in reusable packaging.

Today, only 9% of our used materials are recycled

10. Recover

What if waste wasn’t? Through anaerobic digestion, microorganisms can break down biodegradable waste into materials we can use to generate energy, as well as reduce pollution, water acidification and carbon emissions. Europe is a leader in the practice, with the biggest biomethane plant located in the Valdemingómez technological park in Madrid. While there are many benefits to this process, it is vital to ensure that bio-waste is sustainably sourced and is the last resort after all other “10R” options of the circular economy have been exhausted.


Riding the wave

A circular economy becomes closer as market forces come into play. As innovations and economies of scale improve, battery costs have fallen, precision agriculture has become more possible and the lease and repair of goods is cheaper than owning them.

More encouraging is the fact that the public are now becoming more attuned to the benefits of a sustainable world. Environmental awareness is growing – 60% of EU consumers would pay premiums for reduced plastic packaging and 40% of US consumers would substitute meat for plant-based alternatives.

60% of EU consumers would pay premiums for reduced plastic packaging and 40% of US consumers would substitute meat for plant-based alternatives

With nature-conscious regulation also moving in the right direction, we believe that conditions are constantly becoming more favourable to a circular economy, a lean solution in which natural capital will create massive growth opportunities.

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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