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Circular Economy: Strategizing ESG II


An economy achieving full circularity is an ideal. It enables stakeholders to aim high when setting their vision, priorities and strategies for inculcating circular practices within their industries and societies for a better future. Through circular practices and business models – reduce, replace, regenerate biomass, repair, refurbish, re-manufacture, reuse and recycle, product-as-service, and waste-to-energy – everything gets additional lifetimes, is reused as an input material, part or component, or energy source, or as a last resort, disposed of. The retained value in products and resources continue to create new business opportunities, income and jobs many times, and not only once as in a linear industrial system, where products usually end up in landfills at the end of their first life with negative impacts on health and the environment.

 

The goal of recovering as many resources as possible in a production process implies a change of mindset and the adoption of a new business model by the company, generating economic benefits that were not possible to achieve with the previous model. In addition, new economic and supply chain paradigms can generate a different relationship with the territory with greater corporate responsibility, generating positive externalities within the society in which the company is located and new development conditions for workers and for the industrial sector itself. The Circular Economy is thus an important building block to succeed in meeting the principles of sustainable development, with concrete application in most industrial supply chains, especially those with a high rate of resource waste and raw material consumption (mining, textiles, construction, packaging, electronics, to name a few).

 

THE RENEWAL OF MATTER 

As already anticipated, one of the most important goals of the circular economy is the protection and enhancement of the environment with a special focus on the renewal of matter. 

Renewal of matter refers to all optimizations in product planning and design, optimization of industrial and supply chain processes that manage to reduce consumption and use of raw materials during production/construction, use of recycled materials (END OF WASTE) or reconditioned goods, reduction of production waste, reduction of waste generated, and recycling of the same. 

 

ECONOMIC BENEFITS 

The circular economy presupposes a change in the business models that characterize most businesses worldwide from linear to circular production. 

This implies the adoption of new goals and tools right from the design phase (ECO-DESIGN), the reuse of recycled material in production (CIRCULAR GAP), the use of renewable energy or the redistribution of responsibilities within a supply chain (EPR).

 

CORPORATE RESPONSIBILITY 

The first two pillars stated above, cannot work without the company also paying attention to the social aspects of the circular economy. 

Every company must make itself a participant in the sustainable change of the area to which it belongs in order to respond to the problems and needs of the society in which it is located. New business models can generate value for certain categories of disadvantaged people, create new jobs, and generate economic and social integration opportunities that were previously unseen. 

The relationship with the territory can generate opportunities for INDUSTRIAL SYMBIOSIS and generate investment, as well as reduce the company’s ecological footprint by responding to problems that are not only local but of global interest (glocal), such as climate change or land consumption. Providing also for a BUSINESS ETHICS attentive to circular economy principles can help increase corporate welfare by increasing productivity and quality of work.

The transition to a circular economy could result in an additional US$ 4.5 trillion in global economic output by 2030. Moreover, in contrast to the current growth environment, India's circular economy development route might generate an annual value of US$ 218 billion (Rs 14 lakh crores) by 2030 and US$ 624 billion (Rs 40 lakh crores) by 2050. The implementation of a circular economy in India would require an enabling ecosystem that encourages the identification and adoption of new business models. Presently, 377 million people living in urban cities, produce approximately 55 million tonnes of Municipal Solid Waste (MSW) (like organic waste, recyclables like paper, plastic, wood, glass, etc.) per year, with these numbers expected to skyrocket to 125 million MT per year by 2031. Moreover, only 75-80% of the MSW gets collected; out of which only 22-28% is processed, and the rest is dumped in dump yards. MSW generation is projected to increase to 165 million tons by 2031, and further rise to 436 million tons by 2050.

By 2030, India is expected to be the world's third-largest economy, accounting for approximately 8.5% of the global GDP. The circular economy has the potential to fuel India's growth while also providing significant environmental benefits, making a sustainable and resilient framework. The recycled Polyethylene Terephthalate (PET) plastic industry in India is estimated to be worth around US$ 400-550 million, according to National Chemical Laboratory (NCL) and PET Packaging Association for Clean Environment (PACE). In India, PET is recycled at a rate of 90%, which is higher than in Japan (72%), Europe (48%), and the United States (31%). Thus, there are enormous opportunities for a circular economy in India. The country is likely to be:

·         Leading hub for technology and innovation: With its existing IT dominance and pool of tech talent, India is well-positioned to use digital technology to create innovative and cutting-edge circular businesses. This has the potential to accelerate India to the forefront of the global circular economy revolution.

·      Early success compared to global economies: India is one of the fastest developing economies and can easily take up opportunities to use circular methods of production, building sustainable designs. As mature economies have a linear lock-in and switching costs would be costly and time-taking. Therefore, as an emerging nation, India has a competitive advantage over mature economies.

·        Easy acceptance of circular products: Several circular aspects are ingrained in Indian mindsets like vehicle over-utilization and repair or extensive recovery and recycling of post-use materials at the household level. For instance, the average length of car ownership in India is 9-12 years, as compared to 7-8 years in the US. Thus, this widespread cultural acceptance makes India a larger marketplace.

·         Cost-centric Market: The cost of providing services to consumers will be cheaper for those who would take the circular path than that of the traditional take-make-waste model. Incorporating circular practices in India could result in US$ 624 billion in savings across construction, food and agriculture, and mobility by 2050. This will contribute to widespread adoption, particularly among India's cost-conscious consumers.

·         Supply Chain: Materials that are fully renewable, recyclable, or biodegradable and can be used across lifecycles. For example, switching from a fossil-fuel-based energy source to a renewable energy source. Companies can develop and market circular supplies such as renewable energy and recyclable materials through their upstream or downstream partners, or they can produce circular supplies for their operations. Some businesses are deploying technical nutrients, which are inputs such as metals and minerals that can be reused and recycled indefinitely if not contaminated or leaked along the value chain.

·         Recovery and Recycling: This model enables organizations to extract value from the waste stream (end-of-life products, waste products/by-products), effectively eliminating the concept of waste. Recycling, refurbishment, and restoration initiatives can help businesses recover value from end-of-life products. Businesses can also disassemble waste products to recover residual value in the form of valuable material. To aggregate waste streams at scale, the model frequently involves organizations to establish reverse supply chains. They can be transformed by recycling, upcycling (converting old products or materials into something more valuable), industrial symbiosis (sharing by-product resources among industries), downcycling (converting products to something of lesser value), and cradle-cradle design is then used to transform the same (disposed products are reprocessed without any resource loss).

·        Product Life Extension: Consumers discard products that they no longer value as they are broken, out of style, or no longer required. However, many of these products retain significant value by just being maintained, or improved through repairs, remanufacturing, or remarketing. Companies can act as industrial manufacturer which produces these goods with extended life cycles.

·         Sharing Platform: It aims to link two or more parties to increase net asset utilization through co-access. The model typically makes use of digital technologies to create new relationships and business opportunities for consumers, businesses, and microentrepreneurs who rent, share, swap, lend, or barter their idle goods. As a result, this business model offers consumers a new way to make and save money while also providing organizations with an asset-light business opportunity.

·    Product as a Service: Consumer behaviour is shifting toward an "access-over-ownership" mindset. This model requires manufacturers and retailers to bear the total cost of product ownership while providing it as a service to customers. Customers become more product users than product owners. It's a win-win situation for both companies and customers to derive a new revenue stream, while customers benefit from significant cost savings, exceptional performance & quality, and reduced risk of ownership.

 

One of the critical challenges here has been a lack of awareness and understanding of the circular economy among policymakers in the country. The circular economy requires a shift in the traditional linear economic model, which can be challenging to achieve without the right policies and regulations in place. For example, policies to incentivize repair and reuse, or regulations that mandate the use of recycled materials in certain products, can help drive the adoption of circular practices. However, such policies require a deep understanding of circular economy principles and their potential benefits. There is an immediate need to reorient the vantage of the policymakers which can incorporate the vision of a circular economy.

 

Another challenge is the lack of awareness and understanding among businesses and consumers. Many companies in India are still focused on the traditional linear economic model, which prioritizes short-term profits over long-term sustainability. Introduction of EPR policy has brought the recycling industry to forefront, but the focus needs to be shifted to minimizing the waste through other value propositions by businesses. Similarly, many consumers in India are not aware of the environmental impact of their consumption patterns, and hence they do not demand products that are designed for circularity. Businesses and consumers need to be educated about the benefits of the circular economy and how to implement circular practices.

 

Another critical challenge when it comes to achieving the vision of a circular economy is the lack of differentiation between circularity and recycling. The policies around waste management in India broadly focus on end-of-life waste management. Very few focus on reducing the waste and maintaining the value proposition of material and components through close and narrow loop systems. Businesses, policymakers and overarching strategies need to consider reuse, repair, refurbish and remanufacture models in their approach along with recycling. The absence of this is a major hurdle in the creation of a circular economy.

 

Downcycling is another key problem which poses a challenge to the vision of a circular economy. Downcycling refers to the process of recycling materials into products of lower value and quality compared to the original material. While downcycling does help in reducing the amount of waste generated, it also leads to a reduction in the quality and value of the recycled material, making it less desirable for reuse. The plastic recycling industry in India is still in its nascent stages, and downcycling is a common practice due to the lack of proper infrastructure and technology for recycling high-quality plastic products. Additionally, the high level of contamination in waste also makes it difficult to recycle materials into high-value products. 

 

In Conclusion

India's rapidly evolving market and high potential for development can provide a competitive advantage over mature economies. The aspirational long-term vision of a circular economy is based on the current strengths of the Indian market and the integration of diverse stakeholders that has the potential to pave the way for fast-tracked sustainable, and resilient prosperity. Circular economy advancements will not only improve urban and agricultural economies' resilience, but will also provide benefits such as climate mitigation, food, and water security, increased biodiversity, job creation, and empowerment of underprivileged communities.

Transitioning to a circular economy necessitates a comprehensive and systematic implementation of a roadmap. The net-zero future is such a significant necessity that it will affect every aspect of our daily lives. As a result, start-ups will have a plethora of opportunities, ranging from plant-based proteins and carbon emission trackers to electric vehicles and new battery technologies, involving waste management in the design phase to assist in closing the loop and contributing to a more sustainable.


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