Circular economy and the role of eco-innovation

Circular economy and the role of eco-innovation

The European Union is rich in skills and yet relatively poor in resources, importing six times more natural resources than it exports. With an expanding global middle class, the competition for resources is likely to impact our economy as well as the world’s environment. To address some of these issues, the European Commission organised a Circular Economy Stakeholder Conference on 25 June 2015, entitled ‘Closing the loop: circular economy – boosting business, reducing waste’.

The conference is part of the public consultation on an ambitious set of new circular economy proposals – covering green growth, resource efficiency and innovation – which the Commission will make before the end of 2015. The discussions ranged far wider than simply reducing waste and increasing recycling, often touching on the role of innovation in closing the loop earlier in product lifecycles, through eco-design, and in pioneering and incentivising new business models that use resources more effectively.

“The future is not in low-wage production,” said First Vice President of the European Commission, Frans Timmermans, in his opening address. “The future is providing services to our citizens in a long-term process,” he said, “and products that are used and re-used time and time again, so that you reduce the use of raw materials and don’t deplete the earth’s natural resources.”

“In Europe today, there are already over 4 million people working for eco-industries,” said Karmenu Vella, European Commissioner for the Environment and for Marine Policy, emphasising the successes the green economy has already achieved. “European Businesses supply a third of the global market for green technologies,” he said. “This market is worth a trillion Euros and is expected to double in under five years.”

Closing smaller loops

The circular economy will benefit all business, especially SMEs, said the Commissioner, and identified the use of incentives to stimulate the necessary innovation, from green public procurement to completing the single market. In particular, commercial opportunities may be found in providing services rather than manufacturing products. The new European Fund for Strategic Investments could support entrepreneurs and provide the right infrastructure for such innovation.

“There are many circles within a circular economy, not just one,” said Ellen MacArthur during her keynote speech on the Ellen MacArthur Foundation’s new report. We should keep assets as close to their original value as possible by re-using them within smaller loops, she said, through remanufacture, sharing and re-use models, before considering the recycling of their materials or recovering their energy through combustion.

Martin Stuchtey, of the Center for Business and Environment, McKinsey & Company, presented some of the report’s findings, including the potential for a circular economy approach to double the expected economic benefits from technological advances to €1.8 trillion by 2050 by addressing structural waste, closing loops, saving resources and from the extra societal value created.

He identified six ways to address waste and improve incentives: regenerate (repair), share (re-use), optimise (to find efficiency gains), loop (recycle), virtualise (use software on generic machines rather than manufacturing specialised machines) and exchange (replace traditional materials with recoverable, renewable or bio-based ones). All these measures can currently be seen contributing to some of the fastest-growing businesses in Europe.

There will be transition costs but they are surmountable, concluded Ellen MacArthur. The circular economy is already profitable and the fastest-growing companies tend to be in its vanguard. Building blocks of a new approach include learning, research and innovation, collaboration and trying new models through pilot initiatives at city, region, country and EU level.

The ‘resource revolution’

“We are at the dawn of the ‘resource revolution’,” said Thierry Mallet, Executive VP of Suez Environment, during the panel discussion that followed. He emphasised that innovation must be about new business models, not just technology.

Another panel member, Jeremy Wates, Secretary General of the European Environmental Bureau made the case for European-level action, to avoid a “patchwork” of national legislation, and for binding targets to reduce waste. But he also pointed out that small, specific measures – like the Ecodesign Directive – can contribute to big goals, such as cutting CO2 emissions.

The conference’s programme of parallel sessions debated specific topics: the session on production agreed there is no one-size-fits-all solution to product design, and that existing frameworks for ecodesign and green public procurement could improve material efficiency through requirements on reparability, durability and recyclability. When it comes to secondary use of raw materials, digital technology could provide online information about recyclable materials in products, keep track of stocks and flows, improve traceability and facilitate more transparent extended producer responsibility schemes.

Looking at the consumption phase, existing EU instruments such as ecodesign and the EU Ecolabel and Energy Label, could address durability and reparability. Innovation could improve access to spare parts, as well as repair services, information and manuals – and improved information on lifespan of products. Innovation could also help design for greater durability, recyclability of materials and constituent chemicals, and promote traceability of virgin and recycled materials. The session on research, innovation and investment recommended boosting innovation through an ambitious vision, standards, and market incentives – again referring to green public procurement.

During the closing session, H. Bruyninckx, Executive Director of the European Environment Agency pointed out that green industries have real potential for driving growth. In addition, Europe leads in R&D in renewables and other eco-innovations. “We can be the Silicon Valley of the circular economy,” he said.

Finally, in closing the conference, J. Katainen, Vice President of the European Commission, said that the circular economy is likely to be an economic megatrend similar to globalisation – it makes strategic sense for Europe to be a leader.