Why reducing waste is a solid business opportunity
Why reducing waste is a solid business opportunity
Waste is choking our land and our oceans – but a growing number of companies are turning rubbish to riches
A global switch to circular economy tools and processes is creating a major opportunity for investors, according to experts. Moving to production and consumption models that minimise waste could deliver up to $4.5tn in economic benefits by 2030, according to the World Economic Forum And the move is not seen as a fad but rather a fundamental adjustment to economic conditions in the 21st century.
“The economic models we are working on were created in the 19th or 18th centuries, when resources were seen as completely unlimited and the world population was mostly below 1.5bn,” says Bénédicte Mougeot, Head of Climate Equity at HSBC Asset Management. “We are not fully conscious of the multiple pressure points arising from the scarcity of resources. This scarcity is linked to population growth and overconsumption, especially in developed countries. We have already started to exceed nature’s boundaries.”
One of the most visible signposts of the overuse of global resources is climate change, which is largely caused by the unsustainable extraction and use of fossil fuels. But excessive consumption is creating resource challenges in many other areas. This year, Earth Overshoot Day – the date at which humanity is estimated to have used up the ecological resources that the Earth can generate in a year – fell on 28 July, marking one of the fastest rates of depletion ever2 and signalling a growing waste problem worldwide.
[2] www.overshootday.org/newsroom/past-earth-overshoot-days
The challenge now is reducing the amount of waste we create, reusing what we can and recycling the rest
“We all know that as a society we are consuming more than ever before, which of course leads to more waste,” says Tim Duret, Director of Sustainable Technology for UK and Ireland at Veolia, a benchmark company for ecological transformation. “The challenge now is reducing the amount of waste we create, reusing what we can and recycling the rest.”
New business models
To address this challenge, companies and consumers need to break away from business models that reward consumption. However, adopting circular business practices already makes sound business sense on multiple levels. Foremost among these is consumer pressure. In the face of mounting levels of waste, environmental degradation and climate impacts, consumers are increasingly demanding products that can be produced and used in a sustainable way.
“Failing to address demand for circular practices is now risky for businesses and could have an impact on a brand’s reputation,” says Mougeot. Reflecting this growing concern for the environment, businesses also face increasing regulatory pressure to reduce waste and increase circularity. But some experts argue regulations could still go much further.
“In many countries, the sorting of municipal solid waste is not mandatory at the household level, resulting in a stream of mixed residues that is often not well processed, and ends up in landfills, open dumps or being burnt,” says Henrique Pacini, Economic Affairs Officer at the United Nations Conference on Trade and Development. “This results in a heavy and cumulative toll on the environment, and a missed opportunity in the form of various materials and components that could have a second life in the economy.”
Dwindling resources
Ultimately, some of the biggest drivers for the adoption of circularity could come from a simple evaluation of resource economics. Because they limit waste in all its forms, circular business practices are generally seen as being linked to greater efficiency, which can help improve margins and profits. A lack of recycling is also a problem for companies and countries that used to ship their waste abroad, typically to China.
“With the Basel, Rotterdam and Stockholm conventions controlling trade of sensitive wastes, as well as the import restrictions for scrap materials adopted by China and others since 2016, shipping waste elsewhere became a difficult option for helping offload municipal infrastructures,” Pacini says. “I expect trade in waste to mostly be in pre-processed, certified-recycled secondary materials which are near or at par with virgin-grade materials, but those need a great deal of recycling infrastructure and value-addition before hitting a port. It’s far better to reduce overall waste production per person, which is the premise of circularity.”
As demand grows for recycled materials, so does the investment in domestic reprocessing infrastructure
On top of this, there is growing awareness of the challenges associated with exploiting dwindling resources, at a time when significant amounts of raw materials are being tied up in post-consumer waste. The World Bank estimates more than 2bn tonnes of solid municipal waste is generated worldwide a year. 3Recovering most of this for use as raw material could help reduce waste and resource depletion in one go. With recycling rates in the UK currently at around 45 per cent, there is still much that can be done in this area, creating a significant opportunity for investors.
“As demand grows for recycled materials, so does the investment in domestic reprocessing infrastructure,” says Veolia’s Tim Duret. “Closing the gap quickly depends on maintaining investor confidence to build more, but the prize is that the economic benefits of an expanding circular economy will be delivered close to home.”
[3] datatopics.worldbank.org/what-a-waste/trends_in_solid_waste_management.html
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Non contractual document, updated on 03/11/2022
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