Aligning the Circular Economy and Sustainable Development

The circular economy has gained increasing prominence amongst policymakers as an innovative approach to sustainable development. Many countries have included circular economy commitments in their national development plans and climate programmes. In Europe, the new Circular Economy Action Plan;has been promoted as a central pillar of the EU’s European Green Deal. In Latin America, several governments including Colombia, Chile, Ecuador, Peru and Uruguay - have developed dedicated circular economy roadmaps and strategies. At a local and regional level, City of Mayors and local governments have embraced circular economy programmes with an increasing number of municipalities promoting ambitious targets to become minimal or zero waste cities in the near future.

The COVID-19 pandemic has brought attention to the underlying vulnerabilities and limitations of existing linear supply chains including a dependency on unrestricted access to raw materials, insecure employment and poor working conditions, and an overreliance on overconsumption and underutilisation. As conversations move to consider how to ‘build back better’ the circular economy has the potential to promote an economy that is distributed, diverse, and inclusive. 

Central to definitions of a circular economy is the concept of an industrial system that is restorative and regenerative by design. The Ellen MacArthur Foundation has outlined three underlying principles to guide the transition from a linear take-make-waste system to one that is circular: 1. Design out waste and pollution, 2. Keep products and materials in use, 3. Regenerate natural systems.

The UN Economic and Social Council has identified the circular economy as “a tool which presents solutions to some of the world’s most pressing crosscutting sustainable development challenges”. The circular economy has been highlighted as holding particular promise for achieving many of the economic and environmental focused SDGs:  including SDG 7 on energy, SDG 8 on economic growth, SDG 11 on sustainable cities, SDG 12 on sustainable consumption and production, SDG 13 on climate change, SDG 14 on oceans, and SDG 15 on life on land. However, circular economy’s primary focus on materials, the economy and the environment has led some commentators to question the social foundations of the model.^[1]

As governments and businesses move to accelerate the transition to a circular economy, it is important to ensure that the circular economy approach continues to raise the level of ambition so that it can be effective in combining economic opportunity with benefits to wider society and the environment. There are four areas of policy innovation that illustrate both the opportunities and challenges for those looking to embed the circular economy as a tool to promote sustainable development.

 

1.     Green and Circular Jobs:

The ILO have estimated that  almost 6 million jobs could be created by moving away from an extract-manufacture-use-discard model and embracing the recycling, reuse, remanufacture, rental and longer durability of goods. Notably, this transition will involve the reallocation of employment from the mining and manufacturing sectors to waste management (recycling) and services (repair, rent). The ILO Greening with Jobs report emphasises that this transition will require support for workers, industries and regions from which employment opportunities are displaced. However, a roadmap for this transition is yet to be developed and the social consequences will need to be fully considered.^[2] The Circular Jobs Initiative is a knowledge centre coordinated by Circle Economy that aims to ensure the transition to the circular economy is positive for work and workers. In a recent report on Jobs and Skills in the Circular Economy they define three core pillars for a positive transition to circularity for work and workers: skilling and re-skilling of the workforce;  good quality jobs that are fairly paid; an inclusive labour market that provides opportunities for people in precarious work. A positive transition to the circular economy presents “an opportunity to redefine work, rebalance power and reimagine the way we use and value resources—including labour”.

 

2.     Building Resilient Ecosystems:

A recent report by Circle Economy argues that, “applying resilience thinking to shape the transition towards circularity may be the optimal approach to ensure this new economic paradigm creates positive value for both society and planet”. Long-term resilience within a circular economy model relies on “a thriving ecosystem of enterprises from small to large, retaining and then circulating enough of the value created so that businesses and their employees can participate fully in the wider economy”. This ecosystem approach to resilience is particularly relevant for the global fashion industry. For instance, in India it is the estimated 70% of the apparel units are in the micro, small, and medium sector. A systems-thinking approach to resilience would involve a shift in supply chain management practices to move beyond a focus on Tier 1 and Tier 2 factories in order to consider fabric mills, raw materials and the often invisible role of homeworkers.  Although this would add many layers of complexity, it may also reveal new areas of underutilised supply chain value.

 

3.     Digital Enabled Circular Economy:

UNCTAD’s recent Digital Economy Report highlights the significant potential of new technologies in realising the Sustainable Development Goals, but also warns that we cannot take positive outcomes for granted. The process of digitalization is transforming value chains and opening up new channels for value addition and broader structural change. The circular economy is already shaping new business models based on opportunities emerging from digital disruption.According to the World Economic Forum, the digital economy has enabled circular business models to innovate with new processes, new communication channels and new operational efficiencies that begin to decouple resource use from economic growth. However, there is a need to refocus on employment conditions within the digital economy - particularly for the tens of millions of digital platform workers whose work is often characterised by low pay, precarity and poor working conditions. Digital technology also has the potential to significantly increase supply chain transparency. In particular, tracking and tracing technologies hold the promise of making data openly accessible. Potentially these systems can enable customers to access the latest supply chain information about their products on their smartphone. However, for this to be a genuinely disruptive technology this data needs to reach not only consumers - but also civil society actors and trade unions. And there is still considerable work required to close the digital divide, where more than half the world has limited or no access to the Internet. 

 

4.     Circularity Metrics:

Quantifying the circularity of products and services is crucial in designing policies and business strategies, and prioritising evidence-based sustainable solutions.^[3] There are now a range of initiatives designed to measure different dimensions of circularity, at an organisational, regional and national level. Launched at the World Economic Forum in January 2019 by Circle Economy, the Circularity Gap Report provides an annual global circularity metric that measures the state of the world economy and identifies key levers to transition to global circularity. The Circularity Gap Report 2020 finds that the global circularity gap is widening, “Today, the global economy is only 8.6% circular - just two years ago it was 9.1%”.  This negative trend is explained by three underlying trends: high rates of extraction; ongoing stock build up; and, increasing (but still low) levels of end of use processing and cycling. In order encourage company-level reporting on progress towards circular economy transitions, the Ellen MacArthur Foundation launched a new tool - Circulytics. The aim was to go beyond measuring products and material flows to provide companies with a comprehensive picture of their circularity across all operations. Circulytics is designed to inform business strategy, allowing users to see where they lie in relation to their industry, and compare progress towards circularity. Launched in January 2020, Circulytics Version 1.0 was used by over 600 companies and Circulytics 2.0 is due to be launching shortly.

 

Future Pathways for Sustainable Development

Circular economy’s contribution to sustainable development will inevitably be defined alongside, and potentially in competition with, other big ideas such as Just Transition, Stakeholder Capitalism and Doughnut Economics. The ability of the circular economy to deliver on its vision for an economy that is resilient, innovative and transparent will depend on its continued success in building global partnerships with businesses, governments and civil society.