HomeResourcesCircular economySome companies are leading the way to a circular economy – government needs to ensure the rest follow

Some companies are leading the way to a circular economy – government needs to ensure the rest follow

An earlier version of this article was published on Guardian Sustainable Business.

The world is facing a resource crunch and businesses need leadership from government to encourage innovation around sustainable methods of production.

This week business secretary Vince Cable made a keynote speech on the subject to Green Alliance‘s conference on resource security, hosted in association with the CBI. He argued that price plays a major role in affecting supply and demand, but markets alone cannot tackle our resource risks, particularly given the damaging environmental externalities we need to take into account, and so we need to shape markets better.

As an example, he talked about the Waste Electrical and Electronic Equipment Directive, and committed the government to “taking a hard look” at how a system of greater individual producer responsibility might be introduced to increase the incentives for business to design products for easy recovery of valuable metals.

We welcome this commitment. Strategic leadership from government is needed to encourage businesses to address the long term, systemic risks to their business models and supply chains as the resource crunch deepens and, by doing so, stimulate innovation towards a more sustainable economy.

Leading examples
Some of the most radical and ambitious businesses have already been shaping their business models along circular lines. Carpet company Interface has reduced waste sent to landfill by 82% since 1996 (per unit of production). They identified through lifecycle analysis that raw materials, especially yarn, make up the majority of their products’ environmental impact, and are now using nylon from abandoned fishing nets, instead of producing new nylon. They also have the technology to recycle old carpet tiles into new ones.

But while the landfill tax is making dumping carpets more expensive, it’s still not enough. A ban on landfilling recyclable materials such as carpets would be better. The environmental impacts of managing waste are often overshadowed by carbon and water-intensive extraction of resources.

Not a burden
Another company that has radically streamlined the resources that go into its products is Kyocera. They make printers, copiers and scanners. By designing for significantly longer-life components, the company has been able to reduce the component parts of their cartridges from a usual 60 to about five, all of them easily recyclable. But procurement decisions, particularly in the public sector, are driven more by upfront than lifetime costs. They are also focussed on known products, so are likely to ignore a services-based approach. Tax incentives for companies offering better products or service-based alternatives, funded by levies on the worst products, would help to make this shift.

Julian Allwood and his team at Cambridge University argue in a new book that addressing the flows of steel and aluminium through the whole economy will be key to creating a sustainable material future. This is timely evidence for the potential a circular economy may have in dealing with resource scarcity.

In addition, a recent report by McKinsey estimates that better resource productivity across the four crunch categories of energy, materials, food and water could address up to 30% of total 2030 demand, amassing annual savings to society of $2.9tn (£1.8tn) a year.

The recent government rhetoric suggests that high environmental standards and regulation is unacceptably burdensome to all businesses. However, the examples of Interface and Kyocera and the conclusions of Julian Allwood and McKinsey indicate that this is not true. Encouraging more business innovation to build a sustainable future will require decisive leadership from government and a strong external framework. Hopefully Vince Cable’s speech will mark a turning point.