Circular Economy: Cross-Sector Convergence

Circular economy as a catalyst for global environmental commitments

A circular economy is one of the key catalysts for global efforts towards reducing the dependency on natural resources and the associated environmental impacts. A ‘circularity’-led model of the economy necessitates that governments, industries and the populace make a systemic transition to a restorative or regenerative design of growth and operations. This requires that ‘resource usage’ in products or services is prolonged, ensuring optimal value capture of the same and resulting in efficiencies in processes and systems. Further, it is important that waste is seen as by-products or co-products of anthropogenic or industrial activities, and such waste is eliminated or managed through superior design of materials, products, services, systems and business operating models.

A transitional shift to a circular economy is necessary across the resource lifecycle – right from resource extraction to processing, and from conversion into products and utilisation by consumers to disposal at the end of usage. Owing to the involvement of various stakeholders and levels of complexity, this shift hinges on significant cross-sectoral collaboration. This blog discusses the pressing need for stakeholders to espouse individual ambitions towards a universal agenda on circularity.

Global economies working together on transitioning from linear to circular economies

Major economies worldwide have prioritised the circular agenda. For example, the Netherlands has targeted to become a fully circular economy by 2050.¹ The Dutch P4G platform² (Partnering for Green Growth and the Global Goals 2030) is a multi-country, multi-corporate partnership aimed at accelerating pioneering market-based collaboration to build sustainable and resilient economies, with a focus on circular economies. In India, NITI Aayog is playing a pivotal role in the country’s transition to a circular economy, and the Government of India has identified 11 focus areas for this circular transition.³ Several inter-ministry and multi-stakeholder committees are working on facilitating the country’s journey from a linear to a circular economy.

India’s draft National Resource Policy (NREP), 2019,⁴ guided by the principles of collaboration towards reducing the consumption of key virgin resources to sustainable levels with resource efficiency, along with creating greater values with circular approaches. Along with mitigating negative environmental externalities, circularity would also facilitate ‘Atmanirbharata’, both for the country and its businesses, with reduced dependency on import of critical commodities and raw materials. Studies predict that a circular economy led model of growth in India may result in a yearly benefit of at least USD 624 billion by the year 2050.⁵ This cost benefit would mostly be accounted for by the reduced cost of providing the same levels of utilities to citizens compared to the current linear development model.

Why converge on circularity?

Innovative circularity-oriented systems and processes provide corporates with greater opportunities for profit through material cost savings and reduced environmental impacts. For example, studies, indicate that material demand in the internal combustion engine vehicles (ICEVs) sector may increase from 14 million tonnes in 2018 to possibly more than 100 million tonnes by 2030. India has high import dependency for many of these materials. For example, the country is almost 100% dependent on imports lithium, cobalt and rare earths elements to meet its ICEV requirements. A circular economy approach that involves recycling end-of-life vehicles and extracting the necessary critical elements for recirculation into the production value-chain will reduce dependency on virgin rare earths elements and hence improve product operation margins. Further such an approach would prevent the negative environmental impacts caused by the extraction and refining of these materials.

Effective realisation of such circular opportunities would necessitate intra-and inter-sector symbiosis and collaborations, including those between major players anchoring small-and medium-scale firms in their respective sectors.

Challenge to circular economy

High Transition Costs
Upfront Investment
Product Pricing
Measurement of Growth
Economic Viability

Lack of awareness and sense of urgency
Resistance to change
Information gap
Capacity and skill

Deep rooted linear mindset
Complicated or inflexible regulatory structures
Limited integrated action and/or leadership

Designed to dispose
Planned obsolescence
Lack of information exchange
Lack of metrics to measure circularity

As the transition to a circular economy, whether for a firm or for a region, is dependent on various factors, while focused efforts are necessary to promote and increase the scale of circular innovations and interventions. Such a scaled reconfiguration of the economy or a business model demands cross-stakeholder collaborations at every stage. These partnerships and associations for circularity are necessary at multiple levels – designing business models, operationalising supply chains, developing associated infrastructure, boosting research, formulating conducive policies and making available much-needed finance.

Given the several regulations, and multiple levels of stakeholders involved, a shift towards a circular mode of business may seem complex for some industrial sectors. In particular, financial implications such as high transition costs or upfront investments may deter corporates from taking the necessary leap. Further, as circular models are fairly new, it may take time and effort for corporates to understand and implement aspects such as upgrading of systems from a linear to a circular approach; understanding the recycle, refurbish or alternative resource market and associated product pricing; technical integration of processes; and ensuring quality of recycled or secondary raw material and investment needed by industries to procure quality by-products or co-products.

This is where collaborations and convergence is necessary between key stakeholders including the industries, government, communities, academia and relevant industry associations. These partnerships may be, led by continuous experience sharing and, knowledge transfer leading to accelerated transition to circular economy. While the government needs to ensure conducive policy and incentive support to strengthen the ecosystem, industries need to strategize their transition and align themselves with the objectives/vision of the government and the respective sector in general. Here, industry associations play an important role in bringing the industry and government together at platforms for discussion and decision making. The community, being the ‘end consumer’, also needs to be made aware of circularity principles and their role in enabling a holistic transition to the circular economy in society.

Call to action

Adopting circularity has become imperative for businesses given eventualities like indiscriminate resource extraction, volatile geopolitics, climate change or sensitivities in the supply chain, which may result in acute resource scarcity or price fluctuations. Moreover, while western markets are cognisant of sustainability, Indian consumers are gradually becoming aware and demanding that businesses be more responsible in consuming and managing resources. While evaluating the benefits of integrating a circular approach into their business, organisations across sectors are exploring symbiotic circularity strategies that can add value to their business and propel their growth through convergence and collaboration.⁹ These strategies may vary depending on the ambitions of an organisation, the size of its business, sectoral focus, maturity of the ecosystem to support its objectives, among other drivers.

Conclusion

The circular ecosystem in India is largely at a nascent stage. Hence, industries may find it difficult to identify partners to collaborate with and effectively transition into a circular business model without a robust strategy and planning. Pioneer organisations are overcoming the challenges in this transformation through an experimental approach as well as through bold investments, commitments and alliances. In the process, such organisations, with the support of cross-sector collaborations, shall emerge as the first movers, and are bound to gain valuable experience and pave the way for informed decision making for sustainable circular growth. While corporates need to work within their industry for cross-learning, they also need to support academia in order to facilitate innovation that is necessary to make this transition. Further, industry needs to work with the government, which is already pursuing India’s circular economy transition as a priority. Finally, there is a need for the government and the industry to encourage and mainstream society on circular approaches to consumption and services. This will ultimately help in setting the businesses and the country on the path to becoming a circular economy.