It is high time for strengthening the transition to renewable energy sources and the circular model, which builds economic, natural, and social capital
Can we imagine of building capital from waste rather than reducing them? Can we imagine the concept "no resources have been lost in the making of any product?"
It is high time for strengthening the transition to renewable energy sources and the circular model, which builds economic, natural, and social capital. It is based on three principles – design out waste and pollution, keep products and materials in use and regenerate natural systems.
Before we further discuss the circular economy, we need to look back on the linear economy model.
Most companies today are operating within the linear economy model, which is based on the "take, make and dispose" model, for instance – a light bulb company takes resources like glass or metal to manufacture its products, the company makes the bulbs and sells it to the customer who uses it. Once the light bulb goes out, the consumer disposes of it.
It is likely that neither the company nor the customer will ever see it again. In this so-called linear economy model, to earn more money, the company attempts to purchase the components in the lowest possible cost so that it can sell as many bulbs as possible.
This model functions as if there are unlimited supplies of resources (i.e. metal or glass) on the earth which are realistically not true (CNBC, 2015).
However, this linear economic model (produce-use-dispose) is recognised by a far-reaching value chain and ample waste production, which linked with meager natural resource capital management, leads to severe environmental degradation and greenhouse gas emissions, which are at the core of the climate change issue.
Moreover, this exhaustion of resources and economic impact of climate change directly threatens the feasibility of businesses, which in future will have to fight harder for having access to primary resources.
That is why we are talking of the circular economy which treats the materials as finite. In the circular economy model, a company will not only reprocess products, but also preserve its ownership all along.
The model follows the process of "make, use and return." Most of you probably heard the name of a well-known apparel company H&M, one of the largest fashion retail chains in the world. It is working on a strategy to become 100% circular, the company collects all garments and fabrics and recycles them.
The company has been assembling 55,000 tons of fabric to reuse for new clothing since 2013. Some Governments in the European Union (EU) are getting committed to the idea of the circular economy too. For the purpose of making the supply chain more circular, the EU approved an action plan in 2015.
This incorporates everything from production to use or consumption, restore, manufacturing and management of waste. The point is not just the environmental benefit, but there could be an economic benefit too. There has been a shift towards the circular economy in the EU which could lead to a 12.5% additional increase in GDP by 2050, according to an Ellen MacArthur Foundation Report.
It also involves costs to move from a linear economy to a circular economy concept. Companies must redesign their supply chain and products so they can be used over and over again.
The manufacturer could face trouble regarding the logistics of disposal and recycling. In the UK, 22% of companies are trying to produce returned values for reuse, recycling, and renovating (Accenture Strategy 2017).
It has also been estimated that the cost of reuse, recycling, and renovating across Europe, could be as much as 108 billion dollars (Ellen MacArthur Foundation 2015).
For a developing country like us, moving from linear economy to a circular economy model is a tremendously intimidating task for some reasons.
First, we have the massive challenge of ensuring competence in the cities to guarantee safe and efficient system for household and industrial waste collection and treatment.
Second, our public spaces are often regarded to be the duty of the state, making the arbitrary littering our behavioral norm. Nevertheless, without the full co-operation from its citizen, no government can keep the public spaces clean. Therefore, the behavioral change has to be brought among the citizens.
In addition, we must address extreme resource constraints, capacity shortages and heavy burdens of poverty in order to shift to the circular economy model.
Cost is certainly one matter, but shifting the way of thinking of people regarding the adoption of this model is also another matter. That is why the government needs to realize and rethink the prospects of moving to the circular economy.
However, the actual blueprint of a circular economy is still in progress, and its prospects have not fully been explored. More research into value chains and the discipline of resource and energy economics are needed, which could turn the circular economy into a reality both in Bangladesh and abroad in the near future.
The author is research analyst at BIDS.