Effective governance is key in accelerating the transition to a Circular Economy

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Anastasia Ellina
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A circular economy (CE) is one that uses resources efficiently for as long as possible, minimises waste and pollution, and regenerates natural systems. The concept of circularity has grown ever more popular as it is an invitation to rethink the way our economy works, re-evaluate our goals, and incorporate social and environmental parameters in our economic growth model.

The necessity to look at circular models arises from the fact that our present way of life has evidently become unsustainable. Given the current levels of resource use, it is estimated that we are using earth’s resources 1.8 times faster than our planet’s biocapacity can regenerate. In other words, in 1 year we use 1.8 earths! The use of materials has sharply risen in the last 50 years. Indicatively, between 1961 and 2017, wood consumption increased almost twofold, iron consumption fivefold, cement and aluminium almost thirteen-fold and plastic by almost twenty-six-fold. Consequently, rethinking the way we utilise available resources has become a necessity and not simply an opportunity.   

Our current linear economy model, otherwise called the “take-make-dispose” model, extracts and uses raw materials to produce goods, which are used by consumers and then discarded as waste. In a CE model, resources are used more efficiently and kept in a closed loop for as long as possible before being discarded. This can be achieved in several ways such as using more efficient methods of production, designing products that can easily be repaired (and therefore prolonging their life) or sharing of resources by renting instead of buying. Let’s look at a simple example of how a product can be maintained in closed loops for longer before being discarded as waste. A t-shirt that has reached the end of its life for one consumer may be sold/given to another consumer (reused), it could be re-designed to become more fashionable and hence prolong its use (remanufactured), it could be used to create another product such as pillow covers (repurposed) and as a last resort become waste to be recycled. However, one important component to achieving all the above is the design stage. It’s important to think about the end of life of a product before its beginning. A good design for circularity is one that is durable, pollutant free, recyclable, and easy to disassemble for reuse and repurposing. In the case of the t-shirt example, good quality materials will prolong its use, pure materials such as cotton will make it easier to be recycled, and the use of non-toxic/natural materials will reduce any harmful impacts on the environment and human health.

If you’ve heard the terms “reduce, reuse, recycle” before, which are waste related principles, then the CE concept encompasses even more ‘R’ words. The European Union is promoting a guiding framework for the CE called the “9 R’s”, which is the environmentally preferred hierarchical approach of using resources in closed loops. Starting from the most preferred to the least preferred option, the 9 R’s of the CE are: Refuse, Rethink, Reduce, Reuse, Repair, Refurbish, Remanufacture, Repurpose and Recycle. The 9 R’s is an easy-to-follow framework which can be used by different stakeholders, whether a consumer, business or governing body.

Over the past decade, significant progress has been accomplished in promoting circularity, especially in the technology and innovation sphere, where several projects have moved from pilot phase to commercially viable projects. For example, Algramo is a successful initiative to reduce plastic waste through the re-filling of reusable packaging. This practice has been adopted by several fast-moving consumer goods giants such as Unilever with the refilling of plastic detergent containers. Other successfully implemented ideas are the ‘product as a service’ concept. For example, ‘Signify’, formerly Phillips Lighting, is providing lighting as a service whereby they install, operate and maintain the lighting systems for a monthly service fee. Other important innovations include the use of online platforms for product sharing, renting or re-sale, new compostable packaging materials and products designed to be disassembled and recycled. Ideas and opportunities are endless, but are they bringing the desired impact?

The transformation of the economy to a circular one, will depend upon the upscaling and multiplication of these initiatives, together with changes in consumer behaviour. This is no easy task, and this is where governing bodies need to step up in the development and implementation of made to measure CE policies. A CE policy is about rethinking how an economy works, the relationships across value chains, and the development of synergies across sectors. The orchestration of these changes requires very good co-ordination and a multifaceted policy, spanning across different government departments and bodies. Effective governance will be the key in accelerating the transition to a CE, where the governing bodies act as facilitators, enablers, and promoters of this transformation.  

Countries leading the way in the CE shift are France, Finland, Germany, the Netherlands, China, Japan, and Chile. In the European Union, the EU Commission has given the impetus for the advancement of the circular economy. The Commission has been building on circular economy actions since 2015 and more recently in 2020 has adopted the new Circular Economy Action Plan aiming to accelerate the transition to a CE by introducing further legislative and non-legislative measures based on priority issues. Examples of such measures are: i) improve the durability, repairability, and ability to upgrade electrical and electronic equipment, ii) drive new business models in the textiles industry to promote reuse and recycling, and iii) implement measures for waste prevention and reduction.

Most member states have come up with a National CE strategy plan guided by the EU CE action plan. The strategies may differ among member states depending on the capabilities and economy characteristics. For instance, the Netherlands has focused more on the entrepreneurial angle such as circular business models and innovation in materials. Germany, being a heavily industrial economy, has taken an approach that looks more into material availability and flows.

Undoubtedly figuring the best way to enable the transition from a linear to a circular economy, is a complex problem requiring a good understanding of the current state of the economy, identification of focus areas, assignment of clear responsibilities to the different governing bodies and good co-ordination of the concurrent deployment of numerous instruments, from regulatory amendments and economic incentives to soft instruments such as educational programmes and knowledge sharing platforms.

The Netherlands has led the way in the EU since 2011 with the implementation of ‘The Green Deals’. The current CE strategy sets ambitious goals with the target to become 100% circular by 2050. Given the national goals, the city of Amsterdam has devised its own CE strategy for 2020-2025. Amsterdam’s CE plan is focusing on three value chains i) Food and organic waste streams, ii) Consumer goods and iii) the built environment. These focus areas were chosen due to their economic significance, impact on the environment and climate, and the opportunities for the city to effect change. The city has set several targets such as using 50% less raw materials by 2030, ensuring that 10% of the city’s procurement is ‘circular’ by 2022 and all city’s invitations to tender for the built environment are ‘circular’ by 2023. The long-term goal, in line with the national goal, is that the city of Amsterdam will be a 100% circular city by 2050.

One may argue that the Netherlands can afford to make big plans. They are ahead compared to other nations and at a more mature stage in their CE journey. Citizens are more aware and accepting of these changes and businesses are already embracing circular concepts. This adds to the likelihood of success of a CE strategy, and we cannot expect countries that are just starting this journey to be at the same level as the more experienced ones. Whichever the case, using the existing experience it is important to pinpoint the crucial elements for the success of a CE strategy.

In an extensive 2020 study[1] surveying 51 regions and examining existing literature, OECD developed a checklist of key governance considerations for cities and regions, in developing and implementing a CE strategy. There are three key clusters of governance principles: the promotion, facilitation and enablement of the CE.  

To promote a CE, cities and regions can:

a)     Establish a clear understanding of the roles and responsibilities of governing bodies and lead by example.

b)     Develop a CE strategy with clear goals and the actions to achieve them.

c)      Raise awareness about the benefits and ways to achieve a CE.

To facilitate a CE among the different stakeholders, cities and regions can:

a)     Implement effective multi-level governance, e.g., by strengthening co-ordination across different levels of government.

b)     Encourage “systems thinking” to improve policy making, e.g., by identifying synergies across policies and plans.

c)      Facilitate collaboration between public, not-for-profit organisations and private businesses.

d)     Adopt a functional approach whereby actions are implemented at the appropriate scale, e.g., by experimenting with pilot projects before implementing a new policy.

And lastly, to enable the transition to a CE, cities and regions can:

a)     Identify the necessary regulatory instruments, e.g., green public procurement.

b)     Mobilise financial resources effectively, e.g., through subsidised loans for companies following CE principles.

c)      Train different stakeholders with the skills required to transition to a CE.

d)     Support business innovation, e.g., by creating spaces for experimentation or promoting public-private partnerships.

e)     Collect data about the CE and create a methodology to assess the progress of a CE Strategy.

As mentioned previously, a CE strategy will differ for each country according to the level of maturity, the capabilities and the specific economy characteristics. National CE action plans or strategies will be a new concept for many nations, sometimes too ambitious or even difficult to understand. Whether a country has just started its CE journey, or it is way ahead, implementing these principles will establish a good foundation for effective governance required to accelerate the transition to a CE.  

[1] OECD (2020), The Circular Economy in Cities and Regions: Synthesis Report.