The warning in the recent IPCC report was stark: reduce global warming to a maximum of 1.5 degrees above pre-industrial levels, or risk catastrophe. It is clear that this will require a dramatic replumbing of how economies and businesses worked.
After years of increasing alarm about the climate, this warning about global warming was no surprise. To business leaders who know how to recognize an opportunity when they see one, this call for a new way of doing business is something they have been increasingly aware of: building a New Climate Economy is now recognized as a €23 trillion opportunity.
One of the main elements of this is known as the circular economy. Instead of businesses bringing together inputs, selling their product, and then moving on to the next batch of inputs, circular economics involves recycling, repurposing, recovery and regeneration. It requires cleverer designs, more efficient use of materials, and a keener eye on what happens to a product when it heads out the door.
A circular business model might mean that a company is more involved in the life cycle of a product. Revenues will not just come from the initial sale to a consumer, but from other sources such as maintenance or recycling.
A circular business model can also involve cost cutting through simply using fewer inputs, whether materials or utilities such as water and power. Measurement is crucial for this. If you can measure what inputs and outputs a business has – from water use to food waste or non-recyclable materials – then you can change the production system, the product design or the business model itself.
My own organisation, the World Resources Institute, can help with this, as it specialises in research and developing system tools that allow organisations to measure what they are doing. For instance, our Greenhouse Gas Protocol helps companies manage their GHG emissions, in the process becoming more efficient, resilient and prosperous. If you measure, you can act.
Circular economics is about doing more with less, and it is also a concept that is spreading across the globe. In the end of October I returned from the World Circular Economy Forum in Yokohama, Japan, an event that was co-hosted by the Finnish Innovation Fund, SITRA. This visit to Asia confirmed three things to me:
- A circular economy is a global necessity. As the world’s population grows, and more are lifted out of poverty, they will want more things: a fridge, a car, a meat-based diet. The Business-As-Usual scenario from the UN International Resources Panel is that this will require three times as much resources by 2050, compared to now. This is simply not possible.
- The business case for the circular economy is irrefutable. Any company that does not think in a circular and sustainable way will not be future proof. Companies that adapt will have a competitive advantage, especially in the developing world where so many of those new consumers live; those that do not will struggle to secure scarce and costly resources, maintain their brands with a more environmentally-aware public, and run afoul of tighter legislation.
- Momentum is growing, with Finland and Europe in the forefront. This is a global discussion, and a global opportunity, but countries like Finland and the Netherlands are leading the way, whether through expertise or through the innovativeness of their companies.
Finland is in an excellent position to capitalize on this circular economic movement. As the case of Nokia demonstrates, Finnish businesses – like Dutch ones – need to innovate and think ahead to remain globally competitive, and that is why they are embracing the circular economy. It is part of, as we say in Dutch, de bakermat van (the cradle of) the circular economy. This is driven by both environmental awareness and the logic of the business case, and this will be the foundation of their success as the world moves inexorably towards a low-carbon economy.
Janneke de Vries
Director European Partnerships, WRI Europe