Thursday 18 February 2021 6:00 am

Could the 'circular economy' be the answer to post-Covid growth?

Jason Ash is the founder of YoungPlanet

January’s third lockdown and fallout from Brexit have added insult to the injuries inflicted in 2020, and Britain’s economic outlook hasn’t been looking very bright in recent weeks.

With the Chancellor continuing to pump money into relief schemes, with more desperately needed cash set to be announced in the March budget, those early pandemic conversations about the positive recalibration of our personal and economic priorities such a crisis might induce now seem a bit trite and naive.

But the depth of our current fiscal woes should not put paid to hopes for a better, more sustainable way of doing things. We must grasp every lever that has the potential to pull us out of the current quagmire. And the potential of the circular economy is a lever all businesses should be considering grasping. 

Read more: Shell says peak oil has passed as firm sets course for net zero by 2050

Typically considered a model of driving more sustainable consumption (which indeed it does), the circular economy also offers an opportunity to generate new economic value for businesses. Whilst reducing consumption and driving less reliance on material goods might not sound like a recipe for companies to get back on their feet, the circular economy is actually a financially savvy bandwagon to be jumping on. 

As the world gears up to go green (or, at least, greener), policymakers the world over are recalibrating regulation in order to incentivise low carbon operations. From subsidies and state aid, to tax incentives and venture funding, a raft of new legislation is being busied over by mandarins. At the same time, talks of carbon taxes are starting to look more likely and the pressure on waste intensive companies to change their ways is growing. 

Likewise, the world’s natural resources are wearing thin. Everything from precious minerals needed for our electronics through to the fuels which power our factories are becoming scarcer with every passing year. Enterprises that therefore fail to realign their supply chains and raison d’etre risk coming a cropper of the dual forces of regulatory disadvantage and rising prices for diminishing resource stocks. Looking ahead to what is set to be several years of painful economic recovery, now is the time to embrace a strategy which has long-term stability rather than grasps at short-term benefits. 

The circular economy can allow companies to tap into a range of financial benefits, as well as making themselves more attractive to increasingly ethical customers. The Ellen McArthur Foundation estimates that the fast moving consumer goods market could save up to $700 billion on materials alone by turning to circular models of production. 

Ikea, for example, has recently launched a buy-back scheme. Consumers can now trade in their old Ikea furniture for vouchers to spend in-store. The furniture behemoth can now spend less money on the resources needed to produce new furniture (materials, transport costs, labour costs, etc), and customers are redirected back into its stores, helping to boost profit and secure a boost to its environmental credentials.

Read more: European aviation lays out flight path to net zero by 2050

Asda is following suit. The supermarket giant launched its first sustainability store in Leeds last year, where consumers take their own packaging to fill up on items such as tea, coffee, rice, pasta and washing powder. A nice PR moment, sure. But also a way to experiment with what customers want and what measures can be rolled nationally – a particular opportunity to promote their own brand products, as well as reduce associated packaging costs. 

The circular economy model doesn’t just apply to products either, it can also transform economic ecosystems. In Milan, municipal trucks (powered by biodiesel) collect surplus food from households, commercial properties and schools, and transport it to an anaerobic digestion and composition plant. Once processed, biogas is injected into the local gas network and compost is used to fertilize farmland surrounding the city. For Milan’s city council, this banishes the cost of sourcing and buying fertilisers, whilst reducing the amount of organic waste that ends up in landfill.

All evidence suggests that adopting a circular economy model will not only benefit the environment, but the bottom line. Our economies will need to be weaned off mass consumption, whether they like it or not. Meaning the businesses that take this moment to get ahead of the curve and take advantage of the economic, brand and environmental benefits that circular models can bring, will be those who live to fight another decade. 

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.