circular and fair business models

By Kevin Boon

Introduction

REAL Sustainability attended a webinar on 2 December 2020 entitled Avoiding Blindspots: Promoting Circular and Fair Business Models. It coincided with the launch of a report of the same name prepared by Circular Economy for the European Environmental Bureau and the Fair Trade Advocacy Office. The webinar was facilitated by Sergi Corbalan of Fair Trade Movement.

what is the circularity concept?

Anders Wijkman (Honorary President of the Club of Rome) provided background to the concept of the circular economy. Since 1950 there has been a huge rise in population, growth in economies and associated increase in material and energy demand. This has caused tension between the economy and planet to increase. This is driving impacts such as climate change. Around 60% of ecosystems are already degraded or used unsustainably and an estimated 33% of soils are moderately or highly degraded. Biodiversity loss is linked not just to nature but also impacts to food security, clean water and clean air.  The International Resource Panel estimates that 50% of global carbon emissions and 90% of biodiversity loss are related to the extraction and processing of materials, fossil fuels and food production. The production of cement, steel, aluminium and plastics make up almost 20% of global carbon emissions. Urbanisation is expected to be a major issue in terms of resource use. In the period 2011-2013, China used more cement than the U.S. used in the entire 20th century. There is also a similar growing trend for use of textiles.

Today’s production system is totally wasteful. Looking at Europe, we use materials on average only once.  Only 25% of material value is captured after the first-use cycle (for plastics this is only 8%). Reducing GHG by 20-30% is relatively easy. However, to bring about greater reductions, we need to address all major sectors – energy, infrastructure, basic materials, agriculture, textiles and electronics. Material use is crucially important and therefore so is the transition from a linear to a circular economy. The term circular economy is used as a metaphor for various issues including the use of renewables, resource efficiency and “closing the material loops”. It also means:

  • extending product life
  • recycling, reuse, re-manufacture, repair and maintenance
  • shifting from selling products to offering services
  • making better use of what’s already produced and
  • a sharing economy.

A circular economy has the benefit of providing more employment as it is more service-orientated. It has been calculated that, over a 20-year period, moving to a circular economy would reduce emissions by 50%. Despite its advantages, the circular economy has not really caught on. This is due to a number of reasons including:

  • resources being cheap and abundant
  • no cost being associated with externalities
  • no tax on nature
  • business models which favour both high throughput and products that do not last long.

However, things are changing. The EU recently launched a Circular Economy Action Plan. This is proposed to include:

  • a sustainable product policy framework
  • expands use of the Ecodesign Directive
  • Circular Electronics Initiative
  • new regulation for batteries
  • review of directives on packaging, plastics, microplastics and textiles
  • strategy for sustainable built environment.

Anders suggested a number of policies to promote circularity including shifting to a tax on nature, removing VAT on reused materials, requiring products and materials to be easy to reuse, requiring new products to contain a certain ratio of reused materials and a shift to public procurement.

promoting circular and fair business models

Natalia Papu of Circular Economy talked a little about the three types of circular business models considered in the report:

  • repair / maintenance
  • resale
  • product as a service (PAAS).

The report looked specifically at the sectors of textiles and electronics and considered examples in Europe.  The report looks at “blindspots” (environmental, social, market and governance) which are the risks embedded in the value chain that are either unaddressed or unknown and therefore may have an adverse impact on the environment, people or the business model itself.  For social and governance risks, these are not necessarily addressed by the circular model compared to the linear model. To ensure business models promoted are both circular and fair, they need to be aligned to overarching social and environmental sustainability principles such as SDGs and Fair Trade.

For the repair model, success relies on a focus on ability to repair which needs to be considered at the product design phase. For resale, product durability is important. PAAS is a collaborative consumption model.

moving forward

Tatiana Guedes from Junior Enterprises Europe talked about actions moving forward. Junior Enterprises seeks to bring about impact at three levels, academia, business and society. To promote young entrepreneurs to set up circular and fair business models across the EU, action is needed in terms of education, research, support, guidance, sharing and funding.

Jean-Pierre Schweitzer of the European Environmental Bureau talked about circular economy opportunities and “blindspots” and how entrepreneurs and the EU can overcome them. The project report is intended to start a debate on the circular economy and where this fits with broader sustainability issues. There is a focus on engaging civil society groups and other stakeholders sceptical of the circular economy, encourage entrepreneurs to define what sustainability means for new business models and explore EU policy opportunities.

The circular economy can contribute towards radically changing the current economic growth situation and helping us to live within planetary boundaries. Over-consumption is a key issue. In Europe many of our products are made overseas so we need to be taking account of consumption within supply chains. Research by IEP estimates that, for Europe to stay within planetary boundaries, consumption would have to be reduced by 80%. In terms of climate change, 45% of emissions are associated with products. The project also seeks to link environmental and resources issues with social issues such as income inequality and gender and racial inequalities.

The next steps proposed to follow on from the Circular Economy Action Plan are:

  • defining macro-level targets to reduce overall resource use
  • starting a high-level science-based dialogue about what keeping resource consumption within planetary boundaries really means
  • to stop talking about “beyond GDP” and actually take action.

The Sustainable Products Initiative seeks to make sustainable products, services and business models the norm. Next steps on this are:

  • the need to define what constitutes a sustainable product or service
  • a holistic approach covering key aspects such as circularity and material efficiency but also toxicity, due diligence etc.
  • develop ecodesign and other market entry requirements to implement this concept of sustainability to all products on the European market
  • focus on supporting value retention activities such as repair and reusing.

There needs to be work undertaken to ensure consumers receive trustworthy information on whether products are sustainable and ethical. Important in this context is transparency of information. Product passports are being discussed by policy makers as a vehicle for providing product information. Competition issues also need to be considered.  

To read the report

5fc4d55d42ec471380dfb8e6_20201130 – EEB – report web- 297x210mm.pdf (website-files.com)