Corporate giants collaborating to jump-start the circular economy
The idea of a “circular economy” has been around since at least the 1970’s—at root, it’s a Recycle Everything vision—but it’s taken on new life in recent years as sustainability efforts have matured within governments, corporations, and academia. Now, as the EU begins to codify the concept and corporate titans collaborate to fund a rapid ramp-up of recycling capabilities, the linear economy (manufacture-use-trash) may become a thing of the past.
Joel Makower of GreenBiz.com summarizes the concept succinctly:
The term has no official definition, but at its core, the circular economy is about “keeping the molecules in play.” In such a system, products are made primarily from benign and nontoxic ingredients — “nutrients” that can be returned safely to soil or water or, in the case of more durable components, placed back into service again and again. Toxic ingredients are not verboten; they can be used as needed in products or processes so long as they, too, are continuously cycled back into productive use and kept out of the waste stream. And, of course, as much of this as possible should be powered by renewable energy.
That all sounds like a generations-old greenie dream, but in the past couple of years, it’s gained adherents among corporate giants looking to capture some of the lost value in their products and packaging materials—one accounting found $11 billion of value in trashed U.S. packaging materials alone (see image above). The 2015 World Economic Forum’s annual conclave in Davos, Switzerland, affirmed its commitment to a 2-year-old initiative called Toward a Circular Economy, which will work with policy makers and the financial community to spotlight and scale current circular economy efforts, especially in the developing world. Makower’s valuable overview continues:
That such conversations are happening in unlikely places underscores the potential magnitude of the shift underway. Among the founding members of the Circular Economy 100 created by the Ellen MacArthur Foundation are Cisco, Coca-Cola, Dell, Google, IKEA, Lexmark, Michelin, Philips, Ricoh, Unilever and Vodafone. Granted, membership does not mean any of these companies are close to developing truly circular models. But their engagement is a sign that the movement is being taken seriously by some of the world’s most iconic brands.
Big companies face a shortage of recycled materials, which they want to use both to save money and to satisfy consumer demand. One of the major problems with today’s recycling infrastructure, cobbled together over the past thirty years, is that most municipalities ship their recycled materials to distant, out of state recycling facilities. This leaves the reclaimed materials far afield from many industrial customers who’d like to use them, and greatly increases the overall cost of the recycling process. A better solution would be to have robust recycling facilities in every region.
One good example is in Tennessee, where Kimberly-Clark Corporation and General Motors need recycled materials for use in their manufacturing operations. Both of them are are also working hard to achieve zero waste goals and so likewise need robust recycling infrastructure to successfully divert their own recyclable materials from landfills. Another recent GreenBiz article details their response:
The Coalition to Accelerate Recovery in Tennessee (CART) recycling project is an example of circular economy collaboration at the local level. Tetra Pak, General Motors, Veolia, Kimberly-Clark, Tennessee Department of Environmental Control (TDEC), the Tennessee Environmental Council and local champions formed CART to identify gaps in priority material flows and identify solutions in Memphis and Nashville city-regions.
Let’s take a look at the many facets of a circular economy, each of which needs to be fleshed out in order to achieve the goal of truly capturing and redirecting the value of the materials in our products:
In 2014, nine of the world’s mega-companies joined together to begin grappling with these challenges; together they put $100 million in to the Closed Loop Fund. Co-founder Ron Gonen explained the need:
The problem is that cities, unlike Walmart, don’t have the up‑front capital to invest in the infrastructure, whether it be carts or a recycling facility, or to upgrade their recycling facilities to make them more advanced. You solve that by making the capital available to municipalities. And the good thing about that is that you’re actually unlocking a lot of value, so you don’t need to do grants. You can actually do this in the form of a zero-interest or low-interest loan, because you’ll be unlocking capital that they can then use to pay you back.
Here again we see one of the modern principles of sustainable business in action: marshaling corporate and investor dollars to create infrastructure build-out, innovative programs, and social/environmental benefits that, until recently, were left to the public sector or to non-profits. How many of us would have foreseen the day when Colgate Palmolive, Coca-Cola, Goldman Sachs, Johnson & Johnson, Keurig Green Mountain, PepsiCo and the PepsiCo Foundation, Procter & Gamble, Unilever and Walmart and the Walmart Foundation were spearheading an initiative like this?
The Closed Loop Fund began making investments in 2015. You can see a 2 minute intro video on their home page, and check out the first batch of projects here (spoiler: they include pilot projects to shift to single-stream recycling in two moderately-sized urban areas, and funding an upgrade that allows a Maryland recycling facility to take on #3-7 plastics).
While Closed Loop is a U.S. project, circular economy initiatives are even more mainstreamed in Europe, where the EU is finalizing a Circular Economy Strategy. Businesses there have also joined together to share best practices and push for better industrial system design. Later this month, over 2000 attendees will gather in London for Resource, “the leading conference-led exhibition that helps businesses take steps towards resource efficiency and the circular economy.”
Seen through the Resilient Investing lens, all this activity spreads across the four zones in the lower-right corner of our map. While it’s largely a reflection of the deepening of the Sustainable Global Economy imperative, with companies committing financial resources (Zone 8) to better stewardship of the tangible assets embedded in their products (Zone 5), it’s also very much an expression of the Evolutionary strategy, especially the new funding models (Zone 9) that are creating alternative financing channels for both municipalities and commercial recycling centers. And finally, a case could be made that moving more fully into a circular economy would be a radically evolutionary new model for our relationship with natural resources in general (Zone 6).