The term ‘Circular Economy,’ has been gaining traction in Australia for some years, although sometimes relegated to the status of buzz-word, or less exciting op-shop clad relative of clean energy transition.
However, lately it seems Circular Economy is having its time in the sun.
One such sunny development is the exciting new paper by the Investor Group on Climate Change (IGCC), Regenerate & Restore: A circular economy discussion paper for investors.
In the paper, IGCC make the case that transitioning the energy system to renewable generation (intrinsic to circular economic activity) can address around 55 per cent of global emissions. However, addressing the remaining 45 per cent will require us to reduce the emissions profile of industry, agriculture, forestry, and other land use.
In short, the energy part can only get us so far.
We need to challenge our economies’ current modes of production and consumption if we hope to achieve net zero by 2050… and we need to start turning our minds to the Circular Economy.
The Circular approach is based on three key principles:
From a financial standpoint, PwC has valued the circular economy at around $1.9 trillion dollars in Australia over the next 20 years, with their Chief Economist noting that the linear economy is becoming increasingly unsustainable, and that there is a need for an alternative model for our economy.
For their part, the IGCC are advising investors to watch for five readily identifiable circular business models:
This increased investor and financial focus on Circular Economy is significant for the Australian business community, who need to keep pace with global trends toward circularity and understand their role in net zero transition.
This means moving toward closed loop systems which include recycling, reuse, rebuild and recovery principles to enable Australia to offer traceable premium green products and reduce reliance on imported goods and materials.
The good news is Australia does have a particular economic opportunity here.
Our country extracts and uses primary resources at double the OECD benchmark but generates only half the value of the OECD benchmark per kilogram of natural resources.
With around 90% of the resources in the global economy managed through linear, rather than circular practices, resource rich countries like Australia could unlock greater value through more efficient utilisation of materials.
While climate change is a severe risk to investment portfolios, funds under institutional investors’ management also represent a significant opportunity to capitalise climate solutions.
For that reason, investors can be seen to be at a crucial point in what is a decisive decade for climate change mitigation.
The significance of this decade is also something governments seem to be getting their heads around.
Globally, they are increasingly promoting clean energy, and circular economy transition through legislation and policy interventions to reduce emissions, promote sustainable prosperity, and better manage the environment.
While Australia is yet to formalise any kind of national circular economy strategy or plan, elements of circular economy are slowly making their way into policy, procurement, and regulatory activities, with more and more businesses being touched by these changes.
Given all of the above, it seems clear the business community should also be looking for these opportunities to satisfy governments, appeal to investors, and to meet financial and climate goals through sustainable business practices.
What is Circular Economy? The Ellen MacArthur Foundation
The Potential of Leasing as a Product Stewardship Strategy Leasing as a Product Stewardship Activity, Product Stewardship Centre of Excellence
Rachael Wilkinson joined the Ai Group Industry Development and Policy team in 2017. She is heavily involved with circular economy and waste issues, and also acts as a Senior Advisor in the Product Stewardship Centre of Excellence. Previously, she was an Advisor for the Fair Work Ombudsman.