- The best way to build resilience against future pandemics and the impact of climate change is to move to a circular economy.
- Doing so could address 45% of global greenhouse gas emissions and provide a $4.5 trillion economic opportunity.
COVID-19 has created a human tragedy on a huge scale, with deep consequences for the global economy that will lead to an extended recession and long-term hardship.
This foreshadows the greater challenge we face in the years to come as the climate crisis escalates. Already, droughts, tornadoes and floods are threatening the lives and livelihoods of far too many people around the world, yet we are not doing nearly enough to deal with it.
As our thoughts move towards recovering from COVID-19, we must create a more resilient system that ensures the health and safety of all people. We must make sure that we are stronger in the face of the challenges to come. And we must do so without delay
The only way to do this is by re-imagining our relationship with the natural world. We need to entwine social, environmental and economic progress, and decouple economic growth from unsustainable consumption, while driving concrete and collective actions that speed up the adoption of the circular economy and realize systematic change.
Understanding the problem: the take, make, waste system
If we are to build a more resilient system, we must first understand what makes us so vulnerable. Our current linear economic model – in which economic growth is dependent on the endless extraction and use, or misuse, of natural resources – is pushing our planet to the brink.
Over 100 billion tons of resources flow into the economy each year, with the majority eventually lost as waste or emissions, causing lasting damage to the environment and leaving us vulnerable to the ever-worsening effects of the climate crisis.
Any disruption to this flow of resources into the economy also leaves us exposed to huge economic shocks, as has been made all too clear by COVID-19. Global shifts in the labour market, transport and consumer demand have led to wildly fluctuating commodity prices and widespread economic hardship.
With demand for resources expected to double by 2050, our exposure to both environmental and economic challenges will continue to grow.
A visualization of the circular economy in action
A vision for a more resilient world: a circular economy
We need a clear vision for an alternative future. A world in which we can breathe clean air; a world without the climate threats of droughts and floods. A world where resources are plentiful, with enough for all of us to earn a good livelihood. Our vision for the future is ambitious, but it is possible: a circular economy.
A circular economy is focused on designing out waste and pollution, keeping products and materials in use, and regenerating natural systems, so that we do not exhaust the resources of our planet.
Changing the way we make and use products can contribute to addressing 45% of global greenhouse gas emissions, making a critical contribution to mitigating the impending climate crisis. Reducing our reliance on scarce resources increases our economic resilience, and building a circular economy offers a $4.5 trillion economic opportunity by avoiding waste, making businesses more efficient, and creating new employment opportunities. By creating a circular economy we can create a stronger system and flatten or even reverse some of the trends that now threaten the existence of future generations.
1. Focus recovery stimulus on green and circular investment
As economic stimulus packages are introduced to support recovery from COVID-19, there is a huge opportunity to deepen our commitment and promote a circular economy as part of a green recovery. The priorities will be investing in renewable energy, protecting biodiversity and transforming agriculture, and funds should also be used to directly encourage circularity – for instance by investing or providing loan guarantees to circular economy start-ups that are driving solutions.
2. Create a policy framework for a circular economy
Governments play an important role in creating this vision. We need to see an ambitious and broad range of policies introduced to shift our relationship with natural resources and incentivize a move towards a circular economy. There should be subsidies for the re-use of materials, and taxes on waste.
Recycling should be enforced, with an associated investment in the recycling infrastructure needed to make this possible. Carbon pricing is crucial. Procurement should take into account the ‘total cost of ownership’. Single-use plastic should be banned outright.
An ever growing number of global businesses have made a clear call for the introduction of policies for a green recovery to support their own pledges to embed the SDGs in their ways of working, via initiatives such as the UN Global Compact.
What is a circular economy?
The global population is expected to reach close to 9 billion people by 2030 – inclusive of 3 billion new middle-class consumers.This places unprecedented pressure on natural resources to meet future consumer demand.
A circular economy is an industrial system that is restorative or regenerative by intention and design. It replaces the end-of-life concept with restoration, shifts towards the use of renewable energy, eliminates the use of toxic chemicals and aims for the elimination of waste through the superior design of materials, products, systems and business models.
Nothing that is made in a circular economy becomes waste, moving away from our current linear ‘take-make-dispose’ economy. The circular economy’s potential for innovation, job creation and economic development is huge: estimates indicate a trillion-dollar opportunity.
3. Pioneer the adoption of circular business models
Many companies are already shifting away from one-off transactions towards ongoing relationships with their customers. Sharing platforms are on the rise. Some companies are starting to take products back at the end of their economic life – this has the dual benefits of keeping scarce materials in use for as long as possible, while also reducing reliance on availability of raw materials and thus creating a business model that is more resilient against shocks.
The immediate crisis caused by COVID-19 is certainly putting pressure on many companies, but it is crucial that business leaders maintain their commitments to sustainability and circularity during any short-term impact. Long-term thinking is key, but actions make all the difference. When governments introduce measures like carbon pricing and border adjustment tariffs, the companies that are innovating and adjusting their business models will find themselves at a clear business advantage – as well as contributing to the better world we so desperately need.
4. Innovate to stimulate circularity
There are many opportunities for encouraging innovation to change our relationship with our ecosystem, by using new technologies that enable more circular business models. COVID-19 has seen a sudden and dramatic shift towards home working, remote healthcare, and digital virus-tracking, and we can take these lessons forward into the recovery.
We need to encourage the use of new, competitive technologies to reduce energy consumption, to harvest and re-use materials, scale the availability of green energy sources, expand lifecycles of products, and reduce waste. The technology breakthroughs are within reach; we just need to invest in and adopt them.
As we move towards recovery from COVID-19, we must embrace the future, and not postpone the inevitable by hanging on to the past. We must reject waste and adopt circularity. By leveraging all the knowledge, power and influence we have to push forward on these priorities we can build a circular economy. It will take deep collaboration between business, government and civil society, but the rewards will be well worth it; a stronger ecosystem that will be resilient for the decades to come, and a world where people and nature can live together in harmony.
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Steve Ovett, the famous British middle-distance athlete, won the 800-metres gold medal at the Moscow Olympics of 1980. Just a few days later, he was about to win a 5,000-metres race at London’s Crystal Palace. Known for his burst of acceleration on the home stretch, he had supreme confidence in his ability to out-sprint rivals. With the final 100 metres remaining,
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]Ovett waved to the crowd and raised a hand in triumph. But he had celebrated a bit too early. At the finishing line, Ireland’s John Treacy edged past Ovett. For those few moments, Ovett had lost his sense of reality and ignored the possibility of a negative event.
This analogy works well for the India story and our policy failures , including during the ongoing covid pandemic. While we have never been as well prepared or had significant successes in terms of growth stability as Ovett did in his illustrious running career, we tend to celebrate too early. Indeed, we have done so many times before.
It is as if we’re convinced that India is destined for greater heights, come what may, and so we never run through the finish line. Do we and our policymakers suffer from a collective optimism bias, which, as the Nobel Prize winner Daniel Kahneman once wrote, “may well be the most significant of the cognitive biases”? The optimism bias arises from mistaken beliefs which form expectations that are better than the reality. It makes us underestimate chances of a negative outcome and ignore warnings repeatedly.
The Indian economy had a dream run for five years from 2003-04 to 2007-08, with an average annual growth rate of around 9%. Many believed that India was on its way to clocking consistent double-digit growth and comparisons with China were rife. It was conveniently overlooked that this output expansion had come mainly came from a few sectors: automobiles, telecom and business services.
Indians were made to believe that we could sprint without high-quality education, healthcare, infrastructure or banking sectors, which form the backbone of any stable economy. The plan was to build them as we went along, but then in the euphoria of short-term success, it got lost.
India’s exports of goods grew from $20 billion in 1990-91 to over $310 billion in 2019-20. Looking at these absolute figures it would seem as if India has arrived on the world stage. However, India’s share of global trade has moved up only marginally. Even now, the country accounts for less than 2% of the world’s goods exports.
More importantly, hidden behind this performance was the role played by one sector that should have never made it to India’s list of exports—refined petroleum. The share of refined petroleum exports in India’s goods exports increased from 1.4% in 1996-97 to over 18% in 2011-12.
An import-intensive sector with low labour intensity, exports of refined petroleum zoomed because of the then policy regime of a retail price ceiling on petroleum products in the domestic market. While we have done well in the export of services, our share is still less than 4% of world exports.
India seemed to emerge from the 2008 global financial crisis relatively unscathed. But, a temporary demand push had played a role in the revival—the incomes of many households, both rural and urban, had shot up. Fiscal stimulus to the rural economy and implementation of the Sixth Pay Commission scales had led to the salaries of around 20% of organized-sector employees jumping up. We celebrated, but once again, neither did we resolve the crisis brewing elsewhere in India’s banking sector, nor did we improve our capacity for healthcare or quality education.
Employment saw little economy-wide growth in our boom years. Manufacturing jobs, if anything, shrank. But we continued to celebrate. Youth flocked to low-productivity service-sector jobs, such as those in hotels and restaurants, security and other services. The dependence on such jobs on one hand and high-skilled services on the other was bound to make Indian society more unequal.
And then, there is agriculture, an elephant in the room. If and when farm-sector reforms get implemented, celebrations would once again be premature. The vast majority of India’s farmers have small plots of land, and though these farms are at least as productive as larger ones, net absolute incomes from small plots can only be meagre.
A further rise in farm productivity and consequent increase in supply, if not matched by a demand rise, especially with access to export markets, would result in downward pressure on market prices for farm produce and a further decline in the net incomes of small farmers.
We should learn from what John Treacy did right. He didn’t give up, and pushed for the finish line like it was his only chance at winning. Treacy had years of long-distance practice. The same goes for our economy. A long grind is required to build up its base before we can win and celebrate. And Ovett did not blame anyone for his loss. We play the blame game. Everyone else, right from China and the US to ‘greedy corporates’, seems to be responsible for our failures.
We have lowered absolute poverty levels and had technology-based successes like Aadhaar and digital access to public services. But there are no short cuts to good quality and adequate healthcare and education services. We must remain optimistic but stay firmly away from the optimism bias.
In the end, it is not about how we start, but how we finish. The disastrous second wave of covid and our inability to manage it is a ghastly reminder of this fact.